If You Can't Break Even
If your break-even point is higher than your expected revenues, you'll need to decide whether certain aspects of your plan can be changed to create an achievable break-even point. For instance, perhaps you can:
- find a less expensive source of supplies
- do without an employee
- save rent by working out of your home, or
- sell your product or service at a higher price.
If you tinker with the numbers and your break-even sales revenue still seems like an unattainable number, you may need to scrap your business idea. If that's the case, take heart in the fact that you found out before you invested your (or someone else's) money in the idea.
Further Financial Analysis
If your break-even forecast shows you'll make more revenue than you need to break even, you can consider yourself fortunate. But you still need to figure out how much profit your business will generate, and whether you'll have enough cash available to pay your bills when they are due. In short, a break-even forecast is a great screening tool, but you need a more complete analysis before you start investing real money in your venture.
The following are additional financial projections that should also be part of your business plan, to round out your business's financial picture.
- A profit-and-loss forecast. This is a month-by-month projection of your business's net profit from operations.
- A cash flow projection. This shows you how much actual cash you'll have, month by month, to meet your expenses.
- A start-up cost estimate. This is the total of all the expenses you'll incur before your business opens.
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