How to do a Break-even Analysis

By Jon Miles
Marketing Plan Success

A break-even analysis is used to determine the volume of sales necessary for a business to "break even" or have its sales revenue equal to its costs. In order to conduct this type of analysis you will need to know the estimated monthly fixed costs, average revenue per unit, and the average variable cost per unit. This information will be used to determine the breakeven volume and revenue.

This type of analysis is very useful in a marketing plan. It can be used to determine pricing for your product if you already know the projected sales volume. The break-even analysis can also be used to set goals and objectives in your marketing plan.

The break-even volume is found by dividing your Fixed Costs by the difference between the Price and the Variable Costs. For example, if your Fixed Costs were $500,000, your Price was $25, and your Variable Costs were $15, your Break-even Volume would be 50,000 units. That means that you would need to sell 50,000 units of your product in order to pay your Fixed Costs. Anything sold over the 50,000 units would be profits.

How Marketing Plan Success can help:

The Excel Template included with Marketing Plan Success will calculate the Break-even Units and Revenue automatically for you when you enter the Fixed Costs, Variable Costs, and Revenue/Unit in the Break-even Template. It will also create a graph showing of your Break-even analysis and add this information automatically to your Marketing Plan. Download the Marketing Plan Success Demo >>>

Marketing Plan Outline:

• Situation Analysis
• Market Analysis
• Competitive Analysis
• Historical Results
• Macroenvironment
• SWOT Analysis
• Marketing Objectives
• Marketing Strategy
• Marketing Mix
• Action Plan
• Financial Information
• Break-even Analysis
• Sales Forecast
• Marketing Budget
• Implementation & Controls

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