S12 E25-28 (OWNING YOUR NUMBERS) - ESTABLISHING BREAKEVEN WITH WILLIAM EASTMAN

Did Your Know?

• 20% of all startups fail in the first year
• 50% fail after 5 years
• 33% fail after 10 years

​All because they couldn't reach and sustain breakeven. Without an accurate picture of BE they couldn't effectively market and sell beacuse didn't know how much to sell at what price.

Managing Cash Flow starts with establishing a baseline for business operations - what is the bare minimum required to sustain you over time? Given the current state of the business, how much revenue is required to pay all bills on time over a defined period - a week, a month, a quarter.

Chapter Objective
Given the basics of financial reporting, you will determine the breakeven point in your business and create marketing and sales goals.

EPISODE 25: Summary - (support podcast)
If you run a business that sells units, the goal is to determine how many must be sold at a set price. On the other hand, if you sell services, basically time, then it is how many hours must be sold at a set price. That is the basic formula, and it becomes complicated when you have multiple product and service lines.

Here you need to estimate what percentage of revenue each line will contribute and using historical data is the safest place to start. Today's show won't get that complicated. If you can do the basics in today's show notes, you'll be fine.

IMPORTANT SUPPORT IS NOW AVAILABLE - Tuesday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: willing in difficult times, recession proofing your business, owning your numbers, breakeven, breakeven anaylsis, IBGR, IBGR Network, William Eastman

EPISODE 26: The Product Formula by Unit - (support podcast)
The easiest of the calculations, it is the determination of the number of units that need to be produced that will take you to breakeven - you made no money and lost none. Look at like a child's see-saw - where is the balance point the two ends - revenue and cost.

One area this affects is sales forecasting. It provides a baseline for sales targets of a specific period of time; a year, a quarter, a month, or week.

Topics:

• Unit Breakeven = Total Fixed Costs / (Price per Unit - Total Variable Costs)
  • Total Fixed Costs: Sum of all Non Variable Costs (rent, leases, utilities, etc.)
  • Price per Unit: Total Revenue from Sales / Number of Units Produced
  • Total Variable Costs: Sum of all Non Fixed Costs associated with the Unit (materials, labor, commissions, marketing, etc.)

IMPORTANT SUPPORT IS NOW AVAILABLE - Tuesday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: willing in difficult times, recession proofing your business, owning your numbers, breakeven, breakeven anaylsis, IBGR, IBGR Network, William Eastman

EPISODE 27: The Formula by Product & Service Lines - (support podcast)
Computing by line is a little more sophisticated. It means you sum the total of all the products or services within a specific line. For example, you have a line of lawn mowers sold at your Home & Garden Center. You are trying to determine how many in total you need to sell to breakeven and will help to decide if this is a product line you should carry in the future.

The same is true for services. Like a HVAC company selling several different types of service contracts for the heating / ac units you sell and install. It will answer how many do you have to sell to breakeven?

Topics:

• ​The Product Formula by Product Line: Product Line BE = Product Line Fixed Costs / (Price - Product Line Variable Costs)
• The Service Formula by Service Line: Service Line = Service Line Fixed Costs / (Price per Hour - Service Line Variable Costs)

IMPORTANT SUPPORT IS NOW AVAILABLE - Tuesday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: willing in difficult times, recession proofing your business, owning your numbers, breakeven, breakeven anaylsis, IBGR, IBGR Network, William Eastman

EPISODE 28: The Service Formula by Hours - (support podcast)
What if you run a service based company where you don't sell things, you sell time like coaching? You have the added problem of not being to sell lost time - like last week. If you sell products, a promotion will work to get rid of excess inventory. When you sell time, there is no promotion for selling last week.

When you compute breakeven for hours, go for a yearly number, then break it down into smaller units. What does not sell to make break even in the first month has to be added to the remaining 11 months, etc.

Topics:​​

• The Service Formula by Hours: Hour BE = Total Fixed Costs / Margin Contribution by Hour

​​IMPORTANT SUPPORT IS NOW AVAILABLE - Tuesday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: willing in difficult times, recession proofing your business, owning your numbers, breakeven, breakeven anaylsis, IBGR, IBGR Network, William Eastman