In business accounting, breaking even is the point where the amount of costs are equal to the amount of revenue a company brings in. This creates a breakeven point where there are no profits or losses to report. At this point in a business, a return is usually expected, giving a positive spin to finding break even point analysis important to many accountants. This type of analysis helps to determine necessary costs and amounts of production for products.

Performing break even analysis for a business can be difficult, especially if there are a lot of cost factors to consider. A background in finance is essential to perform this task, but there are many breakeven analysis education and training opportunities, including:

1. Online tools and resources that provide tips on finding breakeven point.

2. Training that provides a in-depth look at the way to analyze costs to determine a break even point.

3. Seminars and workshops led by industry professionals.

Action Steps
The best contacts and resources to help you get it done

Learn about break even basics from online tools and resources

If you have a background in accounting or finance, using online resources as a self-guided study option is simple and inexpensive. There are many resources online from organizations and experts that provide you with tips on how to perform breakeven analysis, break even calculators, and strategies that will work with many different businesses.

I recommend: Business Tools provides a broad overview of breakeven analysis, complete with examples. Case Western Reserve University provides a breakeven analysis calculator that determines the break even point by using fix costs and price per unit costs.

Take courses to learn more on the analysis of breakeven point

If resources that explain the analysis of breaking even are not enough, there are also many classes available for both financial experts and for those who are still learning the ropes. With training courses you can learn specific skills to calculate breakeven points, analyze the results, and use this information to help a business plan its financial future.

I recommend: California State University provides breakeven analysis courses for all of its entrepreneurial concentrations. TANRO provides an online course that provides breakeven point simulations to teach analysis techniques.

Learn breakeven basics and advanced skills through industry seminars and events

For those that are already familiar with breakeven analysis, seminars can help to provide new techniques to this concept. Seminars can also help you network with other industry professionals and to see what the latest news is for the industry.

I recommend: Credit Guru provides a budgeting seminar for accountants and small business owners that provides training on many accounting topics, including break even analysis. Survival Ware provides cash flow seminars to small business owners, which is a topics directly related to the results from breakeven analysis of any business budget.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Performing breakeven analysis is a relatively simple task, but interpreting the information is the part that is vital to businesses. Many training courses will provide not only the math part, but the interpretation system as well.

Breakeven analysis is a tool used to calculate the number of products you will need to sell to breakeven or recover the variable and fixed costs associated with creating your product. In addition to the fixed and variable costs associated with production, breaking even is highly dependent upon the product’s price per unit and project sales of the product.

Not only is performing break even analysis useful in identifying the point at which you can start to generate a profit, but it is also helpful in identifying appropriate price points and production budgets for your product. Consider the following resources to help you perform a break even analysis for your business:

1. Talk to an accountant about breakeven analysis.

2. Get Internet assistance in finding the breakeven point for your business.

3. Evaluate usefulness of accounting software to conduct analysis of breakeven point.

Action Steps
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Get break even basics

Turning a profit is the goal of most business owners. A breakeven analysis is a great tool to help you forecast profits based on possible product costs and unit prices. Finding break even point is a key factor in most business plans because without the analysis it is difficult to identify how you can attain profitability.

I recommend: JustAnswer offers an online forum in which you can post questions on finding break even point and receive responses from accountants, financial planners and other finance experts. Fiducial has accounting experts who advise business owners on a range of accounting topics including breakeven analysis.

Use online breakeven analysis calculators

Breakeven analysis is a widely used accounting formula. Break even calculators can be used to perform what if scenarios and help you evaluate how previous year fixed and variable costs and unit prices has affected or will affect your current year break even point. You can find various online resources to help you quickly determine your company breakeven point.

I recommend: Case Western Reserve University offers an interactive online breakeven analysis calculator. KJE Computer Solutions has an online break even analysis calculator designed to help you quickly learn the number of units you will need to produce to reach a profit.

Download accounting software for breakeven analysis

Break even analysis software provides businesses with detailed instructions on how to obtain breakeven point and analyze their progress in attaining a profit. Breakeven point software includes easy-to-follow reports doe novice to intermediate users.

I recommend: DIY Management Consulting sells a break-even analysis tool designed to help businesses in performing break even analysis. downloadsoftware4free.com offers a downloadable break-even analysis tool specially designed for small business owners.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  It is a good idea to perform two break even analyses. One breakeven analysis should use per-unit sales and costs assumptions while the other analysis should use break even figures derived from actual sales and profits forecasts.

A break-even analysis helps business owners calculate the amount of product they must sell at a given price in order to break even, or cover all their costs. Having a break-even analysis performed, or performing it yourself, can also help you find better price points for various production costs.

A break-even analysis can be a complicated process. The following terms will help you as a business owner figure out what is involved in the process of performing a break-even analysis.

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Variable cost

Variable costs change with the number of units you produce, or sell; the more units produced, the higher the variable cost. Basic materials and wages are all examples of variable costs. You must calculate variable costs to figure out the break-even point..

I recommend: AccountingCoach.com offers accounting definitions and tutorials for everyday individuals, including the topic of break-even points.

Fixed cost

You must also determine fixed costs when calculating the breakeven point. These costs remain the same no matter how much labor or materials are used to produce the units. The number of units produced do not affect the fixed costs of the business. Location expenses, equipment costs and salaries are all examples of fixed costs.

I recommend: The Weatherhead School of Management offers a breakeven calculator, and explains how fixed costs are used to calculate the breakeven point.

Contribution margin or variable profit

The contribution margin is the variable profit produced by each unit. This margin is calculated by subtracting the average variable cost from the price per unit.

I recommend: Bean Counter has a tutorial that explains the contribution margin method of calculating the break-even point, and offers examples.

Sensitive profit and sensitivity analysis

A sensitivity analysis examines the profit levels above and below the break-even point. The greater the proportion of fixed costs, the more sensitive the profit is. A sensitive profit is when a slight adjustment in sales has a big impact the profit.

I recommend: Business Tools explains sensitivity analysis in detail.

Projected sales or expected unit sales

The total income realistically expected from unit sales during a specific period of time are your projected sales. If your business is just starting out, there are ways to research average projected sales. This information is key to calculating a realistic break-even point.

I recommend: Nolo explains how a break-even analysis starts with market research to determine projected sales..

Margin of safety

The margin of safety is used to represent how well a business is performing. It calculates the exact amount a business has gained or lost in reference to the break-even point.

I recommend: The Management and Accounting Web has a chapter that discusses cost volume profit analysis.

Finding break even point of a product or service is an essential tool in choosing the best price per unit of a product and also helping to determine projected sales. Break even analysis can used for a number of different applications. Its basic function is to determine when a product or service will be profitable. This analysis can be applied to many other applications to determine a future forecast in sales, set a unit price and to target the best strategic options for the company.

Once the break-even figures are determined, the company can then use this information for other financial projections. The most common break even analysis applications and uses are:

1. Determining the point of profitability;

2. Finding the break even point for unit pricing;

3. Using the analysis information to choose the best company strategy.

Action Steps
The best contacts and resources to help you get it done

Use break even analysis to determine the profitability of a product or service

Many things should be considered when finding the break even point for a product's profitability. A company's goal is to be profitable as quickly as possible, so it is more effective for a company to run the numbers through a set of break even points to determine where the company will have the optimal chance of making a profit.

I recommend: Harvard Business School provides a break even analysis toolkit that includes information and analysis tools to determine the break even point of any product or service. Business Tools provides a guide and calculator to perform basic break even analysis.

Use the analysis of break even point to set unit prices

Performing break even analysis can also lead to the numbers that will help determine a set price per unit. This is calculated by leaving the cost per unit as the variable in a break even analysis equation. The most effective unit price will bring quick profitability to the company without the company spending too much for production and marketing of the product.

I recommend: Bradley University provides information on all of the equations to determine break even analysis, including determining the break even cost, break even number of units and for setting the unit price. Bean Counter explains the relationships between cost, volume and profits in break even analysis.

Use the breaking even analysis to determine the best strategic options

Another use for break even analysis is to use the information from the analysis to help determine the company's financial strategy. If a company's profitability is determined by the success of one or more products, using the break even point for each product will provide a timeline for the company. This can be used to choose a better overall financial strategy that fits the projected costs and profits.

I recommend: The Weatherhead School of Management provides information on break even analysis and how to use this analysis to help make strategic decisions. All Business provides a guide to use break even analysis for making business decisions and choosing the best strategies.