The break-even point is determined. Break-even point: formula how to calculate what the graph shows

The famous economist A.D. Sheremet divided the process of determining the break-even point of an organization into three stages.

Stage 1. The process of collecting data that will be needed in order to carry out the analysis. Estimating production volumes, profits and expenses.

Stage 2. Calculation of the volume of fixed and variable expenses. Finding two indicators: the break-even point and the so-called safety zone - a position in which the risks of production becoming unprofitable are significantly reduced.

Stage 3. Conducting an assessment of the required level of production or sales that can guarantee the financial stability of a given organization.

Once the break-even point has been determined, the organization is required not only to exceed it, but to try to go as far into the safety zone as possible.

The break-even point for sales or production is usually calculated using this formula, which is suitable for most cases:

P ∙ X = FC + VC (X),

• P is the price at which the product is sold to the buyer. Accordingly, it applies to specific products. If we are talking about a group of goods, then with a large degree of error you can use average price, that is, the quotient of the sum of all prices;
• X is the quantity of goods required to reach the sales break-even point. Measured in kilograms, pieces, packages, liters, etc. depending on the nature of the product;
• FC - fixed costs;
• VC (X) - variable costs.

The costs that the organization actually incurred must be equal to the amount of revenue received as a result of this activity. To put it more simply: costs equal revenues.

If we look at the formula in more detail, we get the following:

This formula for calculating the break-even point of an enterprise is the basis from which further calculations are based.

For example, it is necessary to calculate the price that needs to be charged in order to reach this very break-even point, based on the current sales situation.

The threshold price required to reach the break-even point can be calculated using the following formula:

P = (FC+VC (X)) / X,

where VC (X) is the product's target sales volume multiplied by its unit cost.

The following situation can be used to illustrate this method.

There is a project according to which there is a product with a cost of five rubles. According to forecasts, the monthly demand for it will be about 200 pieces, but with the condition that the price will not exceed 19 rubles.

The main question in this regard is whether the break-even point will be reached when selling such a product. To find out, it is necessary to carry out the appropriate calculations based on the estimated amount of fixed costs of 1,500 rubles.

Minimum price = (1500 + 5 ∙ 200)/200 = 12.5 rubles.

What happened in the end? According to the calculation results, the acceptable price is 12.5 rubles, which is significantly lower than 19 rubles.

This means that the company will not reduce its income to the break-even point if it charges the required price to the goods, and therefore selling such goods is worthwhile.

This is a calculation of the volume of production that will bring profit to the company. This approach is used when we know the following data:

• maximum demand price among consumers;
• fixed costs of production and accompanying operations.

The break-even point is calculated under these conditions using the following method:

X = FC / (P − VC),

• VC - cost per unit of production;
• P - unit price of manufactured products;

Let's say a company sells apples. The cost of a kilogram of apples will be 25 rubles, fixed growing costs will be 1,500 rubles, and the market price will be 50 rubles.

1500 / (50 – 25) = 60 units.

Accordingly, in order to find revenue, you will need to multiply the received quantity (or other volume, depending on the nature of the product) by the price.

Often, calculating the break-even point is much more difficult. For example, this is not easy in the field of trade, where, firstly, it is difficult to calculate any cost per unit of goods, and, secondly, it will be difficult to find average figures, given the breadth of the range.

In this regard, the target profitability of services is usually used in calculations instead of cost indicators.

If we are talking about the service industry, then the break-even point is found using the target profitability of the work.

What is profitability? In sales, this term means the ratio of price and cost of production, that is, a certain rate of profit that the selling organization wants to receive, in other words, a markup.

In the service sector, this can be the amount that is obtained from the total profit for services rendered, if the costs of materials and bonuses for employees are subtracted from it. It should be emphasized that we are not talking about salary, since it belongs to the category of fixed costs.

So, based on profitability, you can find the break-even point using the formula:

S=FC/R,

• S - revenue from sales (services) for a certain period;
• R - target profitability of sales (services);
• FC - fixed costs of the project.

The best way to represent the break-even point is to graphically display the ratio of revenues to costs and where they are predicted to become equal to each other. The x-axis (X) shows the estimated production volume, and the y-axis (Y) shows the cost.

Gross costs are the sum of fixed and variable costs.

The break-even point is the intersection of the blue and yellow lines (revenue and gross costs).

In this graph, the break-even point corresponds to 40% of the enterprise's operating capacity. This means that by working at half capacity, the organization will ensure its viability. By increasing the load, it will begin to make a profit.

As you can see, the graphical representation of the break-even point does not cause any difficulties in compiling or interpreting the information.

The only requirement is the availability of reliable data on production volumes.

In this regard, such a schedule can be drawn up without the involvement of specialists on your own without much difficulty.

Fixed costs (FC)- that is, those costs that do not change depending on the needs of production. Most shining example- rent and wages, taxes and much more.

Variable Costs (AVC)- that is, those expenses that depend on the needs of production. For example, this may include the cost of raw materials, their delivery, payment for consumed resources, bonuses for production volumes.

Unit price (MR)- that is, the cost of a finished product, a released product (of course, not just one, but their sum).

The second step requires calculating how changes in profit margins will occur in connection with production trends. This will allow you to calculate the volume of sales that accounts for the break-even point.

First, you need to create another table based on the sample.

Then enter the appropriate formula into each column:

• in the column “Fixed costs”: =C3;
• in the “Variable costs” column: =A10*$C$4;
• in the “Total costs” column: =B10+C10;
• in the “Income” column: =A10*$C$5;
• in the column “Marginal income”: =E10−C10;
• in the “Net profit” column: =E10−C10−B10.

Now you can analyze the result. As you can see, starting from the eighth batch of products, the profit indicator takes a positive value. This means that the break-even point occurs when sales exceed 560 rubles.

Break-even point for a specific product with a clear understanding of the others.

Finding the value of the output of a specific product (Qb) is essential here. Let's say that this particular issue generates revenue TR0 and requires costs VC0.

In this case, the product output capable of guaranteeing the break-even point can be found using the formula:

To obtain the break-even point you can use deep absorption costing, based on the fact that each product requires certain fixed production costs:

A significant drawback of this approach is that the costs are taken arbitrarily, which means that the break-even points obtained as a result of such a calculation will be an equally arbitrary and unreliable indicator.

The break-even point can be calculated based on fixed proportions of output. This can be illustrated by the following situation.

If a company produces, for example, two types of goods in a ratio of 1 to 2 and adds 100 rubles to the cost of each of them, then the marginal profit from the sale of a unit of the first product and two others will be 200 rubles (100 rubles for a unit of the first and 100 rubles for a set of two others). In total we have 200 rubles for full set of three products. How many of these sets will be needed to, for example, cover the cost of 1000 rubles? Five. To calculate, you simply need to divide the fixed costs by the contribution margin: 10,000 sets. The general formula for the break-even point based on kits is:

The break-even point can be obtained using developed Direct Costing.

At first glance, these break-even points are similar to those obtained by applying the margin method. Those costs that cannot be divided cannot be distributed between goods based on any ratios and balances. The method does not provide for this.

In order to calculate financial costs, the following step is used.

Hello! Today we’ll talk about the break-even point and how to calculate it.

Any person who decides first of all thinks about making a profit. When running a business, there are production costs - these are all the costs of manufacturing and marketing products. They are subtracted from the total sales revenue in monetary terms, obtaining a positive (profit) or negative (loss) result. For the successful functioning of an enterprise, it is necessary to know the boundary of the transition of revenue into profit. This is the break-even point.

What is the break-even point

The volume of production at which all income received can only cover total costs - this is the break-even point(from English break-even point - point of critical volume).

That is, this is the minimum amount of revenue in monetary terms or the volume of products produced and sold in quantitative terms, which only compensates for all production costs.

Reaching this point means that the company is not operating at a loss, but is not yet making a profit. The result of the activity is zero. With each subsequent unit of goods sold, the company makes a profit. Other names for this term: profitability threshold, critical production volume.

Why do you need to know the break-even point?

The value of this indicator is important for assessing the current financial condition of the enterprise, as well as for economic planning for the future. The break-even point allows you to:

• Determine the feasibility of expanding production, dealer network, mastering new technologies and types of products;
• Assess solvency and financial stability, which is important for company owners, investors and creditors;
• Monitor changes in indicators over time and identify bottlenecks in the production process;
• Calculate and plan a sales plan;
• Determine the acceptable amount of revenue reduction or the number of units sold so as not to go to a loss;
• Calculate the impact of changes in price, production costs and sales volume on the financial result.

What data is needed to calculate the break-even point

To correctly calculate the indicator, you need to understand the difference between fixed and variable costs.

And also know the following information:

1. Price of 1 unit of products or services (P);
2. The volume of products produced and sold (in the classical calculation model) in physical terms (Q);
3. Revenue from products sold (B). To calculate the threshold in physical terms, this indicator is not necessary;
4. Fixed costs (Fc.) are production costs that do not depend on the volume of production. They do not change for a long time.

These include:

• Salaries and insurance premiums of engineering and technical workers and management personnel;
• Rent for buildings, structures;
• Tax deductions;
• Depreciation deductions;
• Payments on loans, leases and other obligations.

5. Variable costs(Zper) are production costs that increase or decrease depending on the increase or decrease in the production of goods or the volume of services provided. The value of the indicator can vary widely, instantly responding to any changes in the company’s activities.

These costs include:

• Cost of raw materials, components, spare parts, semi-finished products;
• Salaries and insurance contributions of key production workers and personnel working on piecework;
• Electricity, fuels and lubricants (fuels and lubricants), fuel;
• Fare.

The division of all costs into fixed and variable is conditional and is used in the classical model for calculating the break-even point. The specifics of a number of economic entities imply a more precise allocation of costs into separate types according to economic meaning.

In particular, production costs may additionally be:

1. Conditionally permanent. For example, warehouse rent is a fixed component, while the costs of storing and moving inventory are a variable component;
2. Conditional variables. For example, the payment for depreciation (wear and tear) of capital equipment is a constant value, and the cost of planned and routine repairs is a variable value.

Cost accounting systems at different enterprises differ (for example, standard costing, direct costing, variable costing, etc.). There is a division of variable costs into individual ones for each product, a division of fixed costs into fixed and individual ones for each product, etc.

This article will examine in detail the classic model for calculating the break-even point for one product, and also provide an example of calculation with several types of goods.

Formula for calculating the indicator

Using the mathematical method, the break-even point (abbr. BEP) is calculated both in monetary and in kind terms. It all depends on the characteristics of a particular enterprise. When calculating according to the classical model involving one product (or several - then average data are taken), assumptions are taken into account for a number of factors:

1. Fixed costs within a given production volume remain unchanged (this level is called relevant). This also applies to variable costs and prices;
2. Product output and the cost of finished products increase or decrease linearly (directly proportional);
3. Production capacity is constant over a given calculation interval;
4. The product range does not change;
5. The effect of inventory size is insignificant. That is, the amount of work in progress has minor fluctuations and all produced products are released to the buyer.

This economic indicator should not be confused with the payback period of the project. It shows the time (months, years) after which the company will begin to make a profit from its investments.

Break-even point in monetary terms

The calculation formula will show the minimum amount of revenue that will cover all costs. The profit will be zero.

Calculated as follows:

In the denominator, the difference between revenue and variable costs is the contribution margin (MR). It can also be calculated for 1 unit of production, knowing that revenue is equal to the product of price and volume:

B = P*Q,

MD for 1 unit. = P — Zper. for 1 unit

To determine the break-even point using another formula, find the marginal income coefficient (Kmd):

The final value in both formulas will be the same.

Break-even point in physical terms

The calculation formula will show the minimum sales volume to cover all production costs with zero profit. Calculated as follows:

Each subsequent unit of goods sold above this critical volume will bring profit to the enterprise.

With a known value of VERNAT. VERDEN can be calculated:

VERDEN. = VERNAT. *P

How to calculate break-even point in Excel

In the Microsoft program Office Excel Calculating the break-even point is very convenient. It is easy to set the required formulas between all the data and build a table.

Table compilation procedure

First, you need to create cost and price indicators. Let's assume that fixed costs are 180 rubles, variable costs are 60 rubles, and the price for 1 unit of goods is 100 rubles.

The value in the columns will be as follows:

• We fill out the production volume ourselves, in our case we will take the interval from 0 to 20 pieces;
• Fixed costs =$D$3;
• Variable costs =A9*$D$4;
• Gross (total) costs = B9 + C9;
• Revenue (income) =A9*$D$5;
• Marginal income = E9-C9;
• Net profit (loss) = E9-C9-B9.

These formulas in the cells must be carried out throughout the entire column. After filling in the values ​​for production volume, the table will take the following form:

Starting from the 5th unit of production, net profit became positive. Before this, revenue did not cover the total (total) production costs. The profit in this case is equal to 20 rubles, that is, formally this is not quite the correct break-even point. The exact value of volume at zero profit can be calculated:

That is, the break-even point is mathematically calculated at a production volume of 4.5 units. However, the economist takes into account 5 pieces. and the revenue value is 480 rubles. is considered the break-even point, since it produces and sells 4.5 pcs. product is not possible.

Let's add 2 more columns to the table with the calculation of the safety margin (margin of safety, margin of safety) in monetary terms and in percentages (KB den. and KB%). This indicator indicates the possible amount of reduction in revenue or production volume to the break-even point. That is, how far the enterprise is from the critical volume.

Calculated using the formulas:

• Vactual (plan) – actual or planned revenue;
• VTB – revenue at the break-even point.

IN in this example the actual revenue value is taken. When planning sales volume and profit, they use the value of planned revenue to calculate the required safety margin. In the table, these columns will be calculated as follows:

• Safety edge in rub. = E9-$E$14;
• Safety edge in % = H10/E10*100 (calculation is carried out starting from a production volume of 1 piece, since division by zero is prohibited).

A safety margin value above 30% is considered a safe limit. In our example, production and sale of 8 pcs. goods and more means a stable financial position of the company.

The final table will look like:

Algorithm for constructing a graph

For clarity, let's build a graph. Select Insert/Scatter Plot. The data range includes gross (total) costs, revenue, and net profit. On the horizontal axis there will be production volume in pcs. (it is selected from the values ​​of the first column), and along the vertical – the sum of costs and revenue. The result will be three slanted lines.

The intersection of revenue and gross costs is the break-even point. It corresponds to a net profit value of 0 (in our example, 20 rubles for a product quantity of 5 pieces) horizontally and the minimum required revenue value to cover total costs vertically.

You can also build a more detailed graph, which includes, in addition to the above indicators, fixed, variable costs and marginal income. To do this, the specified rows are sequentially added to the data range.

How to use a ready-made table in Excel

To calculate the break-even point, you just need to substitute your initial data, and also enter the production volume values ​​in the first column. If there are a lot of them, then to speed up the work you can write in cell A10, for example: =A9+1 and move this formula down. Thus, the interval between volume values ​​will be 1 piece. (you can enter any number).

• Download ready file excel to calculate break-even point

Example of calculating the break-even point

For example, let’s take an entrepreneur selling watermelons in summer stalls. He has one product, the price is the same in different parts of the city. Watermelons are purchased in bulk in the southern regions and delivered for sale to central Russia. The business is seasonal, but stable. The initial data is as follows:

It is necessary to determine the minimum acceptable volume of watermelon sales and the threshold value of revenue to cover all costs.

The procedure for calculating using the mathematical method

The price of 1 watermelon is taken as average, since they all have different weights. These fluctuations can be neglected. To calculate the break-even point in physical terms, we use the well-known formula:

To calculate the break-even point in monetary terms, you need to know the number of watermelons sold per month and the amount of variable costs for this volume:

• Q per month = 36000/250 = 144 watermelons,
• Zper. for monthly volume = 130*144 = 18,720 rub.

The first two values ​​give a break-even point with zero profit, but the volume of watermelons sold will be 91.67 pieces, which is not entirely correct. The third value is calculated based on the critical sales volume of 92 watermelons per month.

Current monthly revenue and sales volume are above the break-even point, therefore the entrepreneur is working with a profit.

Additionally, we determine the size of the safety edge:

A level above 30% is considered acceptable, which means the business is planned correctly.

Calculation procedure by graphical method

The break-even point can also be calculated graphically, without preliminary calculations. To do this, the volume of output in pieces is plotted along the horizontal abscissa axis, and the amount of revenue and total costs (sloping lines) and fixed costs (straight line) is plotted along the vertical ordinate axis. Next, they draw by hand or build a diagram on a computer based on the original data.

As a result of constructing the graph, the break-even point will be at the intersection of the revenue and total cost lines. This corresponds to a sales volume of 91.67 watermelons and revenue of 22,916.67 rubles. The shaded areas show profit and loss areas.

The given calculation model for one product is easy to analyze and calculate the break-even point. Well suited for companies with a stable sales market without sharp price fluctuations.

However, the above calculation has the following disadvantages:

• Seasonality and possible fluctuations in demand are not taken into account;
• The market may grow due to the emergence of progressive technologies, new marketing moves;
• Feedstock prices may change;
• For regular and “large” buyers, discounts are possible.

Thus, the data for calculating the break-even point are considered in conjunction with many factors and other economic indicators.

Break-even planning for the enterprise

Based on the obtained values ​​of the break-even point, an analysis of the current market conditions is carried out and the most significant factors influencing it are identified. Planning further work consists of forecasting production costs and competitive market prices. This data is used to calculate the production and break-even plan, which is part of the company's overall financial plan. For the successful operation of the enterprise, compliance with the approved goals is monitored.

Consecutive stages of break-even planning:

1. Analysis of the current state of affairs in the company and sales . Strong and weak sides and are determined taking into account internal and external factors. The work of supply and sales services, the level of management at the enterprise, and the rationality of the production process are assessed. Among external factors, the market share controlled by the company, the activities of competitors, changes in consumer demand, the political and economic situation in the country, etc. are taken into account;
2. Forecast of future prices for manufactured products, taking into account the assessment of all factors from paragraph 1 . An acceptable markup range is planned. Alternative options for selling to new markets or restructuring the enterprise to produce similar products are explored in the event of an unfavorable situation in the current market;
3. Fixed, variable costs and production costs are calculated . The volume of work in progress at all stages of production is planned. The need for fixed and working capital and the sources of their acquisition are formed. Additional possible expenses for loans and other obligations are also taken into account in production costs;
4. The break-even point is calculated . The required size of the safety edge is determined. The more unstable external factors are, the greater the margin of safety should be. Next, the volumes of production and sales of goods at the safety edge level are calculated;
5. Planning the company's pricing policy . Prices for products are determined that will allow achieving the required sales volume. The break-even point and safety margin are recalculated once again. If necessary, paragraphs 3 and 4 are repeated in order to find reserves for reducing costs in order to achieve the required safety margin values;
6. Adoption of the final break-even and sales plan divided by periods . The data is approved at the critical volume point.
7. Break-even control , divided into several components: control of all expense items, total cost, sales plan, receipt of payments from customers, etc. The enterprise should always have an understanding of how the current financial situation corresponds to the planned break-even level.

Calculation example for a store

Using the example of a store selling several types of goods, let’s consider a solution to a multi-product problem. These are musical instruments and related products: electric guitar (A), bass guitar (B), sound amplifier (C), acoustic guitar (D). The store has fixed costs, as well as individual variable costs for each type of product. They are purchased from different suppliers and bring in their own amount of revenue.

The initial data is as follows:

The store is quite large, but the structure of revenue by type of product does not change significantly. The range and prices for them are different, so it is more rational to calculate the profitability threshold in monetary terms. To solve this problem, we use formulas and methods from direct costing, which assume a range of break-even points for such a case:

Kz. lane – coefficient of the share of variable costs in revenue.

In the following table we calculate it for each type of product and the total for the entire store. We will also calculate marginal income (Revenue - individual variable costs) and its share in revenue:

After calculating Kz. lane For the entire store, the average break-even point will be:

Now let's calculate this indicator using the most optimistic forecast. It is called marginal descending ordering. The table shows that the most profitable products are A and B.

Initially, the store will sell them and the total marginal income (210+170=380 thousand rubles) will almost cover the fixed costs (400 thousand rubles). The remaining 20 thousand rubles. will be received from the sale of product B. The break-even point is equal to the sum of revenue from all listed sales:

The most pessimistic sales forecast is the marginal ordering in ascending order. Initially, goods D, C and B will be sold. The marginal income from them (125+30+170=325 thousand rubles) will not be able to cover the store’s fixed costs (400 thousand rubles). The remaining amount is 75 thousand rubles. will be received from sales of product A. The break-even point will be equal to:

Thus, all three formulas gave different results. Essentially, optimistic and pessimistic forecasts provide an interval of probable break-even points for the store.

Additionally, we calculate the safety margin in monetary terms and as a percentage based on the average break-even point:

Although the store is operating at a profit, the safety margin is below 30%. Ways to improve financial performance are to reduce variable costs and increase sales for goods D and C. It is also necessary to check fixed costs in more detail. Perhaps there will be reserves for reducing them.

Example of calculation for an enterprise

As an example, let’s take an enterprise producing household solvents with a volume of 1 liter. The company is small, prices rarely change, so it is more rational to calculate the profitability threshold in physical terms (number of bottles).

The initial data is as follows:

The calculation will be as follows:

The resulting value is very close to the actual volume (3000 pcs.).

Additionally, we calculate the safety edge in pieces (using a formula similar in monetary terms) and as a percentage:

Thus, the company operates on the verge of break-even. Urgent measures are needed to improve the financial situation: a review of the structure of fixed costs, perhaps the salaries of management personnel are too high. It is worth understanding in detail the costs that form variable costs. The primary direction to reduce them is to find new suppliers of raw materials.

Break even- a financial indicator, the value of which determines the required sales volume for the stable operation of the enterprise without making losses and profits.

The economic meaning of the break-even point

Essentially, the break-even point is the so-called critical production volume. When the break-even point is reached, profits and losses are equal to zero.
The break-even point is an important value in determining the financial position of a company. The excess of production and sales volumes above the break-even point determines the financial stability of the company.

Algorithm for calculating the break-even point

To calculate the break-even point, we will need to divide the costs by nature:

• Fixed costs are production costs that do not depend on production volumes (sales volumes).
• Variable costs are costs that increase with each additionally produced (additionally sold) unit of product.

Consider the following notation:

Vyr - revenue
Real - sales (volume, pcs.)
PostZ - fixed costs
PerZ - variable costs
Price - price
SPerZ - average variable costs
TB - break-even point
TBat - break-even point in physical terms (units of production, pcs.)

Formula for calculating the break-even point (in monetary terms):

TB = Vyr * PostZ / (Vyr - PerZ)

Formula for calculating the break-even point (in physical terms):

TBnat = PostZ / (Price - SPerZ)

Example of calculating the break-even point

Initial data:

Exp = 100,000
Real = 50
PostZ = 15,000
PerZ = 25,000

Calculated data:

Price = Vyr / Real = 100,000 / 50 = 2,000
SPerZ = PerZ / Real = 25000 / 50 = 500

TB= Vyr * PostZ / (Vyr - PerZ) = 100,000 * 15,000 / (100,000 - 25,000) = 20,000 rubles.
TBnat= PostZ / (Price - SPZ) = 15,000 / (2000-500) = 10 pieces.

The break-even point is shown on the chart at the intersection of the gross cost line with the revenue line. At this point, the company covers all costs and makes zero profit.

Lines of fixed and variable costs are shown on the graph for reference in order to see when and how one or another type of cost affects the volume of gross costs.

In a general sense, the graph reflects the change in all previously described indicators (revenue, fixed and variable, as well as gross costs) depending on production volumes (horizontal percentage scale).

Calculation of break-even point in Excel (with graph!)

Using MS Excel and our calculation table, you can quickly and clearly calculate the break-even point and build a graph of the break-even point. You will only need to enter 4 initial values, the table will calculate everything else!

The profitability threshold, or break-even point, is the volume of products/services sold, upon reaching which the company covers all its expenses, but does not yet have a profit. Using this indicator, you can calculate whether the chosen methods of production growth are suitable for the enterprise and how sustainable the course of development is.

The last parameter allows you to record the moment of financial stability, that is, when the sales volume exceeds the minimum profitability. Next, the term “break-even point” and methods for calculating it will be discussed in detail.

What is the break-even point

The break-even point is the volume of sold products/services at which the resulting profit (not to be confused with income) changes from a negative value to zero.

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Profit is calculated by deducting all expenses from the company's income. There are two types of break-even point:

• in kind;
• in monetary terms.

The break-even point is determined to establish the quantity of products/services with the sale of which income and expenses will become equal. Naturally, this applies to a situation where initially expenses were greater than income. As a result, after exceeding the break-even point, the business becomes profitable. In contrast to this state, the business operates in the negative until the equilibrium ratio has not yet been achieved in the company.

The break-even point shows how stable the company's financial position is. And if this value grows, then this is a sign that the company has difficulties in generating income.

At the same time, the break-even point is not fixed; its data changes in relation to the growth of the enterprise. And its value is influenced by many factors - growth in trade turnover, opening of new branches, changes in pricing, etc.

The break-even point, in turn, affects a number of positions in the company.

1. With the correct calculation of this indicator, it is clear whether it is reasonable to invest in the project at current state finance.
2. This parameter identifies problems in the company that affect changes in its value.
3. When establishing the break-even point and the volume of sales required by the company, it becomes clear how much it is necessary to increase or decrease the quantity of products sold, the scale of production, subject to a revision of their cost. In the opposite situation, it is possible, on the contrary, to identify the impact of changes in production volume on price formation.
4. The break-even point shows to what minimum limit the company's profit can be reduced, but at the same time still maintain positive work, without losses.

A graph that allows you to clearly see the appearance of the break-even point

Expert opinion

Correct 6 mistakes that prevent your company from increasing profits by the end of the year

Oleg Braginsky,

founder of the School of Trouble Shooters, director of the Braginsky Bureau

After half the year has passed, interim results are usually summed up and an analysis of the company’s work, its achievements and failures is carried out. We must remember that there are still six months for profits to grow and, at the end of the year, to be profitable. But there are some mistakes or incorrect actions that can prevent this from happening. The main ones can be seen in the checklist (see appendix), and the 6 main mistakes are as follows.

Mistake 1. Annoying monotonous actions.

A company can constantly do the same things - find customers only through the sales funnel, not listen to customers to create a more customer-friendly atmosphere, continue to interact with consumers through different channels instead of creating a unified one. At the same time, all departments are separated, each working on its own - advertising, service, and sales.

For example, in the middle of winter, a buyer came to one of the agricultural holdings on the b2b market to purchase fertilizer. The head of the enterprise, in the process of communicating with a client, who turned out to be the director of a state farm, learned that the latter got to the holding’s website thanks to the Internet. He made the purchase, and after that the marketing specialists of the agricultural holding began to attack him regularly, sending emails and communications over the network and offering tools, fertilizers, or seedlings. The client did not like this, it caused irritation, since unnecessary goods were offered, and fertilizers were offered at the wrong time. Marketers had to take into account the information received from customers, make advertising targeted and retain this customer.

Clients do not like it when the same identical actions are performed against them with enviable regularity. To prevent this from happening to you, over the next six months actively communicate with customers at all stages of cooperation. Otherwise, your customers will go to your competitors.

A good solution would be to use Client Journey Map (CJM). McKinsey claims that B2B firms using CJM experience a 10% increase in profits. CJM helps to look at the process through the eyes of the buyer, to outline and apply the customer experience. To do this, perform the following analysis:

• marketing channels that the client used when he first contacted your company;
• what exactly the person liked about the site;
• what the customer asked you before making a purchase;
• what products, services, what promotions are of interest to the client;
• what did not suit the customer during the purchase, what objections did you encounter.

Client Journey Map translated from English is called a client journey map and is a technology in the field of marketing that allows you to make working with consumers as simple as possible, increase their loyalty to the company, and help them interact with your company.

To obtain the data necessary to implement all of the above, your employees must constantly note all the moments and processes of a client’s contact with the company. To do this, you should install a CRM system, set up a website and all communication technologies:

• record all information about clients that is available;
• write down in the scripts the questions that the sales employee should ask first-time applicants;
• combine data about what steps a customer takes on your website with the actions of salespeople working with customers coming from the sales funnel.

This way, you can see the user's journey from their first visit to making a purchase. It is worth breaking down customers into sectors depending on how similar their behavior is. And for each group, draw up a map, best in the form of a diagram or graph, which will show all the moments of contact between customers and your company and their response actions. In the future, the information obtained can be used for clients with similar behavior.

This method will allow you to combine the efforts of different departments of your company, because with the joint activities of the marketing and sales departments and their use of complete information, the results of work will only improve.

Mistake 2. Insufficient detail in the buyer persona.

Customers in companies are usually divided into existing, former and new. But more detailed differentiation is not carried out, plus this principle will not apply to sellers, but in vain. Consumer behavior differs not only according to the specified criteria, but also depending on the region in which they live, on which manager they communicate with, and at what stage of the purchase they are at. And the same criteria apply to sellers. Taking these nuances into account will help maintain customer loyalty and improve service.

To solve this problem, it is worth starting from the scope of your company’s activities and its mission. When setting a goal to increase sales in certain territories, it is advisable to detail the list of clients according to the following parameters:

• their location;
• what kind of purchases they make in this area;
• Which sellers are they most willing to contact and make purchases with?

This will make it clear what the client looks like in a particular region. And based on this portrait, potential buyers can be offered exactly the products that are most likely to interest them. At the same time, it is worth assigning to the client exactly the manager whom he sympathizes with, because this will help increase sales. In this case, the client will see that you have high-quality service and that he is valued in your company.

If the company’s current goal is to improve the work of sales managers, then the following approach can be used. Specialists should be divided into groups. For example, some of them do a better job with male customers, while others do a better job with female customers. To organize work, incoming calls must be addressed to the administrator, who will distribute them to the most suitable sellers depending on the gender of consumers.

Taking into account exactly this information allows you to retain customers and increase sales. Therefore, it is necessary to analyze data on the behavior of buyers and sellers and choose the right managers to work with a particular customer.

Mistake 3. Not being interested in the opinions of customers.

When creating new types of products/services, a company usually focuses on its own views, and not on the wishes of customers or their needs.

That is, in most cases, no one asks clients for their opinions or listens to the feedback they voice. As a result, the company produces products that are not in demand and are inconvenient for customers. It is imperative to listen to the wishes of large clients. Let there be at least one full meeting with your most important customers.

A solution might be to invite your highest-earning clients to a meeting of sorts at least once a year. If this year you have not yet collected the opinions and feedback of your customers for analysis, then do it as quickly as possible. As an option, you should organize a business weekend at a hotel in the city or with a trip somewhere, have a buffet and discuss your products and services with guests, ask them to evaluate your company’s service, business development, find out their opinion about the products that you are planning release. At such a meeting you will be able to find out the following information:

• what improvements the company needs;
• what changes to make in goods being prepared for release;
• how necessary are the products already on the market, etc.

You can get this information during regular customer surveys, but the fact is that large customers like to feel appreciated and receive attention. Therefore, it is easier to achieve maximum loyalty from them by showing that their opinion as experts is important to you.

Mistake 4: Retaining customers who are no longer valuable.

Often in times of crisis, companies strive to retain any customers, despite the fact that they do not make a profit. Or, on the contrary, they are trying to attract new customers without trying to retain the old ones. However, the flow of customers requires constant attention on your part. It is worth starting to work according to the following scheme - keep profitable clients, and if they leave, then return them, and delete unnecessary ones. Before the end of the year, you need to edit your customer base according to this principle.

The solution is to retain those consumers who regularly buy your products, who have a loyal attitude towards your company and who advocate for your brand. The customer base should be divided into parts, highlighting the amount of the check, the frequency of purchases, the presence of debt or its absence to your company.

It is worth stopping to retain those customers whose check amount and, therefore, the margin are insignificant, even if they make purchases frequently, or those who contact you very rarely. To do this, you can change the sales conditions to be more profitable for the company. For example, increase the average purchase amount. Or change the minimum order conditions from one product to several. Loyal customers will accept these conditions, and the rest will drop out.

But if you see that customers are leaving in large numbers or that you have lost your best customers, then the situation needs to be analyzed. It’s worth calling buyers from the b2b sector to find out the reasons for their dissatisfaction. If it suddenly turns out that best clients are now collaborating with a competitor, ask why they left and what you are missing. This question can be asked directly to customers, or you can purchase a competitor’s product for comparison. The b2b sphere allows you to return lost customers using Internet tools - mailings e-mail, organizing surveys, notifications about discounts and promotions, etc. You just need to focus on attracting buyers who can bring profit and not be useless.

Mistake 5. Linking managers to clients.

Managers in the b2b sector usually work with their own client base. At the same time, customers do not like it when the seller changes. And managers act according to an already established scheme, often forgetting to offer new services or products. That is, you pay them for simply serving a regular customer.

To solve this problem, you can analyze the work of sellers over the past six months. And if it is clear that the client is buying the same thing and for the same amount as always, then assign another manager to him. Or you can motivate your employees by tying the receipt of a cash bonus to their performance results. In this case, understanding that his remuneration depends on the amount spent by the buyer and on the quantity of goods sold, the manager will make every effort.

Mistake 6: Content is unattractive to readers.

Today, many companies use social media - blogs, networks, and start their own channel on YouTube. But at the same time, the content posted by marketers is boring and uninteresting - ordinary reports, dry articles, speeches of directors, etc. That is social media are used formally, without the goal of attracting customers.

To solve this problem, you need to create interesting and non-standard content in order to get noticed. In this case, you must adhere to three rules.

• Management should not appear on social networks. Subscribers already subconsciously associate a speech or article from the director with boring content. And they need interesting and lively material to forward to their friends. Therefore, the best content would be to post photos, entertaining and educational information.
• Present your company's products or services in a unique way, from an interesting angle. You can show the production process or some unusual approach to using products. It is best to come up with at least ten such ways.
• Hire actors to produce interesting video content. Although it is more expensive, the result is worth it. Actors will be able to talk more convincingly about a company or product than ordinary employees; they will be able to convey to the audience the emotions of owning the products. Plus, such content will not only be educational, but also entertaining; it will be constantly “liked” and “shared,” especially by fans of the actors and their subscribers.

What is the break-even point - theoretical aspect + data needed to calculate it + 3 popular methods its calculation.

It is quite difficult to plan and carry out entrepreneurial activities without knowledge of the basics of economics.

Any businessman, no matter what it is or an LLC, will be faced with concepts such as income, expenses and profit.

And this is generally a hundredth part of what he must understand to successfully run his business.

For this reason, today we will talk about what is break-even point, and why is it needed?

What is the break-even point: a little theory

Break-even point (BPU)- this is one of the key concepts in microeconomics, which shows how much goods need to be sold (and not just produced) in order to equalize income with expenses, namely, not to make a profit and not to incur losses.

Thus, it is a critical indicator that forecasts sales volumes to cover gross production costs.

As soon as an enterprise crosses the profitability threshold (this is another name for the break-even point), it begins to make a profit, and, conversely, if it does not reach it, it becomes unprofitable.

The value of this indicator reacts to changes in the prices of raw materials (variable costs), the wage fund for administrative personnel (fixed costs) and many other circumstances, which we will examine throughout the article.

The importance of calculating the break-even point is due to the fact that it can be used to:

• determine the optimal cost of selling manufactured products;
• calculate the time frame for a new project to pay off (the moment when revenues exceed costs);
• monitor changes in the indicator in order to identify problem areas in the production and sales process;
• analyze the financial condition of the enterprise;
• find out how changes in prices or expenses will affect the resulting revenue.

Break-even point - practical aspect

The next step in analyzing the question of what the break-even point is is its calculation.

But before that, we suggest you familiarize yourself with when it would be advisable to do this:

• the amount of variable costs and value remain unchanged over a specific period of time;
• it is possible to accurately determine not only fixed costs, but also variable costs per unit of production;
• variable costs and volume of production have a linear relationship;
• the operating conditions of the enterprise are stable;
• there are practically no leftovers of finished products (i.e., what is produced is equal to what is sold).

Necessary data to calculate the break-even point

To calculate the break-even point you will need to know these indicators:

Let's take a closer look at these indicators:

Fixed expenses- these are those that do not depend on the volume of production, i.e. the enterprise bears them in any case.

These include:

• salaries (including contributions to social funds) of management personnel;
• rental of premises;
• depreciation of equipment.

1. Variable expenses- these are those that depend on the quantity of products produced.

   These include:

   • purchase of raw materials;
   • wages (plus contributions to social funds) of working personnel;
   • communal payments;
   • fuel and transportation costs.
2. Marginal income can be calculated as the difference between revenue (TR) and total variable costs (TVC) or between price (P) and unit variable costs (AVC).

Method 1. Using the formula.

Break even can be calculated in physical and monetary terms.

In the first case, we will find out how many units of goods need to be sold in order to break even, and in the second, how much revenue received will recoup the costs incurred.

Calculation of TBU in natural equivalent:

BEPnat = TFC / (P-AVC)

BEPden = BEP nat * P

For clarity, let's consider specific example:
Variable costs for the production of one product (AVC): 100 rubles;
Selling price (P): 180 rubles.
Substitute the original values ​​into the formula:
BEP nat = 40,000 / (180-100) = 500 pieces.
Having the obtained result, you can calculate at what gross income the enterprise will go to zero:
BEPden = 500 * 180 = 90,000 rubles.

Calculation of TBU in monetary terms:

BEPden = (TR* TFC) / (TR-TVC)

You can also calculate the break-even point through marginal income.

KMR for 1 unit = MR per 1 unit. /P

Based on the obtained values, we obtain:

BEPden = TFC / KMR

Again, to clarify the above formulas, consider them using an example:
We have the following data:
Fixed expenses of the enterprise (TFC): 40,000 rubles;
Variable costs (TVC): 72,000 rubles;
Revenue (TR): 120,000 rubles.
Substitute the values ​​into the formula:
BEPden = (120,000*40,000) / (120,000-72,000) = 100,000 rubles
MR = 120,000-72,000 = 48,000 rubles
KMR = 48,000 / 120,000 = 0.4
BEPden = 40,000 / 0.4 = 100,000 rubles

Thus, it can be seen that the BEP values ​​calculated using the two formulas are equal.
If an enterprise sells its goods for 100,000 rubles, then it will not suffer losses.
As for the marginal income coefficient, it shows that every ruble of revenue received from above will bring 40 kopecks of profit in this case.

As for calculating BEP for several products, the situation here is as follows:

1. First, the marginal revenue for each individual product is calculated.
2. Then the share of marginal income in revenue and its coefficient are determined.

3. BEPden = TFC / (1- K TVC) ,
   where K TVC is the coefficient of variable costs in revenue (TVC / TR).

To make it clearer what’s what, we suggest that you familiarize yourself with the table:

Method 2: Using Excel.

Do not use modern technologies in economic calculations - stupid. Large enterprises that work with large quantities of several goods cannot do without them.

So, to make calculations in a popular spreadsheet, you need to enter basic data:

Then a table is built, which will be gradually filled with the calculated data. And based on its results, it will be possible to see at what volume of goods sold the company will pass the loss line:

Using this principle, we fill out the table, based on the fact that the company produces and sells several units of goods:

So, in our case, it turns out that after selling 4 units of goods, the company receives zero profit. The proceeds will be 480 rubles.

And having already sold the fifth piece, a profit equal to 50 rubles is made.

As you can see, it is enough to build such a simple spreadsheet into which you need to enter the initial data, and the calculation of the break-even point will always be at hand.

Benefits of using Excel programs in calculating the break-even point:

• you can make any changes related to price or costs - the table will instantly recalculate the results;

When making a forecast, you can adjust the values ​​of the initial indicators to find the optimal sales volume.

For example, you want to achieve profit on the third unit of goods. To do this, you can immediately raise its price and see what changes.

Thus, having set the price at 150 rubles, the table was immediately recalculated and produced new data, which showed the current value of the break-even point.

Method 3. Drawing a graph.

To build a graph, we need all the indicators that we calculated in the table.

For the resulting linear diagram to be correct, it is necessary to highlight the following data:

• sales volume - X axis;
• gross (fixed, variable) costs, revenue, net profit - Y axis.

At the intersection of income and gross expenses (variables + constants) there will be a break-even point.

Moving the perpendicular down we will find its natural value, and to the left we will find the monetary equivalent.

Moreover, the chart clearly demonstrates the area of ​​losses and profits.

Let's return to our example.
Having a table, you can easily build a graph that will show the desired indicator. Again, when changes are made, the chart will react, showing new results.


The only drawback of this method is that the graph will not indicate the exact number of goods. Of course, you can increase the scale to understand what value the intersection point tends to, but still it is calculations that will give a specific indicator.

Calculating the break-even point is extremely important at the stage.

Once again about how to do this, but from first-hand experience:

Conclusions about the break-even point

Based on the information described above, we can say that the break-even point is:

• This great way find out how much you need to sell so as not to go into the red;
• it is quite simple (if you know the exact initial indicators);
• does not always correspond to the actual operating conditions of the enterprise, because its calculation assumes a “utopia” in running a business (one that is not affected by anything).

But still, despite the fact that this indicator works well under ideal conditions, every entrepreneur should be able to use it in analyzing the financial condition of their business.

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