How to calculate one of the most important values in your business?

Your monthly break-even Point.

In a current economic downturn, we can only grow stronger and, with the right tools – become well-equipped for the future.

Calculating how much money you need to cover your business expenses is straightforward.

1. Calculate your Gross Profit Margin ratio:

Gross profit/Sale x 100%

Gross profit = sale – costs of sales (materials, labour, sub-contract, direct costs only!)

2. Calculate your monthly overheads: Admin costs such as rent, heat, light, rates, insurance, admin wages, Directors’ salaries, telephone, contract hires, cleaning, training, non-direct fuel etc.

3. Calculate your break-even point: percentage as a decimal

example: gross profit margin 25% (decimal that is 0.25)
overheads per month: £ 12 000

Break-even point: £ 12 000/0.25 = £ 48 000

The minimum monthly sale per month to cover £12 000 of overheads is £ 48 000. That is the minimum sale to cover the monthly costs with a gross profit margin of 25%.

Be in control always and know your figures. Contact us today if you need help.

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