Do you know when do you start to make money in your business?
Your breakeven point is the point where the cost of producing a product or service equals the revenue generated by the sales of that product or service. In a nutshell, it tells you how much work you need to do before you start to make money.
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It’s important to note that the breakeven number is not simply covering the overheads (fixed costs) of the business. If you only look at overheads, you fail to factor in the incremental variable costs for each additional sale, which is why we have to divide by gross profit percentage which works with cost of goods sold (COGS), typically variable in nature.
How to calculate your gross profit margin percentage:
Gross profit is total sales minus the COGS. The gross profit margin percentage is calculated by first subtracting COGS from the total sales expressed as a percentage. This figure is then divided by total sales, to calculate the gross profit margin in percentage terms.
If you would like to find out more about managing the all-important numbers in your business, book your complimentary coaching session today.
