Appendix B

Breakeven Analysis

Whether they are planning their new business or deciding whether to offer 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. It can tell you how much (or how much more) you need to sell 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. ...

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