The breakeven point is one of the most important figures for any business. It is the number, which indicates whether you will be successful. If you are not reaching this point, you should look at few things.
Staff – It is time to consider reducing the size of your work force. You may have to think about letting someone go. Alternatively, you could think about asking your employees to take a cut in pay. In these economically trying times, many individuals would rather take a cut than lose their job. You might also have to think about reducing staff hours. Part time employees may be a viable option until your company increases its revenue.
Think about other ways to get the work done, which will be less expansive. Consider hiring a contractor, who will only work when you need them. Try outsourcing certain jobs i.e. you might find that it is less expensive to get an accountant, which will free up your time to concentrate on revenue generating projects.
Location – If you are renting space, consider the idea of relocating to a place that charges less rent. Alternatively, you might want to think about working out of your home. Can you still operate if the business is in the garage or in a spare room?
Shop Around – Look at all of your expenses and see if you can find less costly alternatives. This includes everything from getting cheaper phones to changing manufacturers.
Product – How are you packing your product? Can you present it in a cheaper way?
Price – Can you increase the profit margin on your product? Will you still make as many sales if you increase the price? Many companies try to increase sales by reducing the price of each item. They believe that more sales will increase revenue. However, to make this work, you might be looking at an unrealistic amount. A better option might be to raise the price.
Advertizing – Look at your present campaign. Are you reaching your target market? Some companies realize that what they are currently doing is not having the desired results. Can you use a different form of advertizing media? For instance, can you stop buying radio spots and get some promotional products instead? Are you doing enough advertizing? Some companies simply do not spend enough money to let the public know about their service and/or product.
Competition – Learn from your competition. If there is a comparable company that you can study, take the time to examine their business in detail. Determine what they are doing to make their company successful and try to emulate their formula. This does not mean that you want to be a copy of them; you are merely trying to follow their successful path.
When you started your company, you should have created a break-even analysis document. This report is meant to be a flexible guideline. It has to be one which will allow for changes.