Improve the profits of your trade by analyzing the profitabi
Mar 7, 2024 6:09:52 GMT 1
Post by account_disabled on Mar 7, 2024 6:09:52 GMT 1
A business will be viable as long as it obtains positive returns, that is, as long as it makes profits by carrying out its activity. And to know the level of income from which your business is profitable, you need to calculate what is known as “Profitability threshold”, “Dead point”, “Equilibrium point” or “Break even point” BEP. The breakeven point in your retail business tells you when sales are equal to expenses, that is, there are no profits yet but no losses either. The theory is that if you can break even, then you can make your business viable. The profitability threshold is given by the minimum level of sales necessary to obtain a profit equal to zero, that is, when total costs are equal to total income. From that break-even point, the business begins to make profits and below that amount, the business is not viable because it would be in losses. This level of profitability is affected by all those variables that have to do with the sales figure , the margin with which the business works and the costs necessary to carry out the activity.
During the recent crisis, many retailers were forced to close their business, the culprit in many cases was a high fixed cost in relation to total costs. When consumer spending suddenly declined, businesses were unable to respond Paraguay Mobile Number List in time. These retailers fell below their profitability threshold and entered into losses. However, many businesses survived the recession and remain profitable because they have a higher proportion of variable costs, so they are less risky from sudden changes in sales volume. Before studying the breakeven formula there are some definitions that you should know, such as the difference between fixed and variable costs. ^ Fixed Costs are those expenses that remain the same no matter how much you sell. ^ Variable Costs are expenses that fluctuate up and down depending on sales. Variable costs increase and decrease based on sales and result in a lower break-even point, which is an advantage over the competition.
But, to have this information, you need to know the figure from which the business becomes viable, that is, the amount that you must be able to sell and, therefore, buy to make those sales effective, depending on the margin with which you estimate to work. From the moment you start thinking about starting a new business, you should keep this figure in mind so as not to take unnecessary risks. Furthermore, in each campaign, it is important to perform this calculation again before facing the purchase of merchandise, since purchasing below the figure resulting from this calculation means assuming that the project is not viable and overdoing it can make a project unviable. project that had the capacity to be profitable. This article will teach you how to calculate the profitability threshold of your business, in addition to showing you examples, exercises and ideas with which many retailers are reducing their break-even point.
During the recent crisis, many retailers were forced to close their business, the culprit in many cases was a high fixed cost in relation to total costs. When consumer spending suddenly declined, businesses were unable to respond Paraguay Mobile Number List in time. These retailers fell below their profitability threshold and entered into losses. However, many businesses survived the recession and remain profitable because they have a higher proportion of variable costs, so they are less risky from sudden changes in sales volume. Before studying the breakeven formula there are some definitions that you should know, such as the difference between fixed and variable costs. ^ Fixed Costs are those expenses that remain the same no matter how much you sell. ^ Variable Costs are expenses that fluctuate up and down depending on sales. Variable costs increase and decrease based on sales and result in a lower break-even point, which is an advantage over the competition.
But, to have this information, you need to know the figure from which the business becomes viable, that is, the amount that you must be able to sell and, therefore, buy to make those sales effective, depending on the margin with which you estimate to work. From the moment you start thinking about starting a new business, you should keep this figure in mind so as not to take unnecessary risks. Furthermore, in each campaign, it is important to perform this calculation again before facing the purchase of merchandise, since purchasing below the figure resulting from this calculation means assuming that the project is not viable and overdoing it can make a project unviable. project that had the capacity to be profitable. This article will teach you how to calculate the profitability threshold of your business, in addition to showing you examples, exercises and ideas with which many retailers are reducing their break-even point.