Do You Know About Break Even Sales?

Our client recently opened a shop retailing fashion bits & pieces. I thought if I was in my client's shoes, what would be the most important indicator of financial performance I can easily obtain week-to-week? I would want to know if I am on track or off track – easily and routinely.

I reckon the key indicator is break even sales. What minimum sales must I make each week just to cover my costs? Armed with that info I can then make better purchasing decisions, pricing decisions, look at selling skills, review marketing strategies and so on.

How do I calculate what break even sales is? Just Google for the answer. In our case we had the client's financial data in Finverso (https://www.finverso.com) that auto calculates break even; among other indicators. All we then needed to do was to divide by the number of weeks' trading and bingo – a weekly break even sales target was revealed. This target will be reviewed on a quarterly basis and reveal to our client whether their business is on track or off track.

Article reproduced with the kind permission of Matt Heemstra.

Matt is a director of Cain Ellsworth & Co. LLP, USA.

For over fifteen years he has worked with small and mid-sized businesses, helping them to envision their future and then make it happen.

Matt heads up Growth & Profit Solutions (GPS), a division of Cain Ellsworth.