What a Break-Even Analysis Tells You

Nolo:

A break-even analysis shows you the amount of revenue you’ll need to bring in to cover your expenses, before you make even a dime of profit. If you can attain and surpass your break-even point — that is, if you can easily bring in more than the amount of sales revenue you’ll need to meet your expenses — then your business stands a good chance of making money.

Many experienced entrepreneurs use a break-even analysis as a primary screening tool for new business ventures. They won’t write a complete business plan unless their break-even forecast shows that their projected sales revenue far exceeds their costs of doing business. The good news is that a break-even analysis is part of every business plan, so if you start by doing a break-even analysis now, you’ll have already started work on your business plan.

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