A Useful Decision Tool
Whether they are planning their new business or making decisions about offering new products or services, entrepreneurs need to know the point at which they will begin making money. Breakeven analysis is a handy tool for this purpose. Breakeven analysis can tell you how much (or how much more) you need to sell in order to pay for a fixed investment—in other words, at what point you will break even. With that information in hand, you can look at market demand and competitors’ market shares to determine whether it’s realistic to expect to sell that much. Breakeven analysis can also help you think through the impact of changing price and volume relationships.
More specifically, the breakeven calculation ...