What’s your daily nut to crack?
That’s a question I often ask business owners.
What I’m searching for is, “How much do you need to sell today to break-even?” Fixed costs are the shell. Inside the shell are tasty profits.
Break-even is sales revenue number your business must surpass to make a profit.
Most business owners don’t know the answer to my question off the top of their head. But I help them identify the number using their business’ Profit & Loss report. After we identify the nut, business owners rarely forget it.
It may sound complicated, but it’s not. Break-even analysis lets you know how many hamburgers, stampings, books, or hours of consulting you must sell each day in order to cover your costs.
The formula for Break-even = Fixed Cost/Gross Profit.
For example, if the daily fixed cost to operate a business is $500 and the average Gross Profit percent is 25%, the daily nut to break-even is $500/.25 = $2,000 . You’ve got to sell $2,000 every day to cover fixed costs before you make a profit.
Why do I ask, “What’s your daily nut?”
Knowing your daily nut is practical wisdom. The wisdom to answer “What’s your daily nut?” with a sales number and to act rightly is distinctly practical.
If you have questions on how to define your daily nut, email TomPryor@icms.net .