Lifestyle
Publishing's
Home Business Course
Lesson 5
Welcome to part 5 of our home business mini-course. Today, we are going to discuss the “Break-Even Analysis”.
Break-Even Analysis is the process of determining how much income your business needs to recover your initial start-up costs. If you were going to investors to get money to start a new company … a restaurant for example … the first thing they want to know is how much revenue (i.e., income) you need to cover the expenses and how soon will you earn that revenue. In other words, how long will it take to get their money back?
You perform your break-even analysis by first adding up all your start-up costs. For example, purchase of the franchise name, security deposits, first and last months lease payments, capital equipment, supplies, legal fees, etc. Next, you project your future expenses such as rent, advertising, utilities, shipping, production costs, etc.
The next step is to project your revenues based on whatever market information you have, planned advertising, and so forth. This step is perhaps the hardest.
Once you have these three figures, the break-even point is that point in time that your revenues earned equals your expenses paid to date. So, if you spent $10,000 to start, project $1,000 in monthly expenses, and expect to sell 200 products per month on average with a $10 profit per product. You will have a net profit per month of $2,000 revenue - $1,000 expenses = $1,000 net profit. At this rate, you will recover the remainder of your investment (i.e., $10,000) in 10 months.
This is where the beauty of a home business comes in. Typically, you have a very small start-up investment … say, a couple of hundred dollars if you already have a computer, printer, fax, or whatever you equipment you need. A typical network marketing company, for example, will cost you $140 to $750 start-up costs, and your primary recurring monthly cost is the business volume you must cover each month. Of course, if you sell products and meet your monthly minimum requirement, then the profits each month divided into the start-up cost will yield your break-even point. If you are already buying $100 worth of vitamin products from a place like GNC, and you sign up for a network marketing company that requires you to purchase or sell $100 worth of vitamins per month, you have zero net monthly costs that you were not already paying. Plus, since it’s now a business requirement, it’s tax deductible. Hence, you save money.
The consumer direct marketing company we mentioned in yesterday’s lesson only costs $29 to start and you can easily meet the very small monthly requirement simply by buying some or all of the products you currently buy from yourself instead of the local store. Add up the fact you get these products for 30-40% less than store prices, the business requirement makes them tax-deductible, and the start-up cash is so low, you can break-even in the very first month PLUS save even more money every month!
The primary business available at http://www.LifestylePublishing.com/MSPWP.htm
will actually save you more in the first month than it costs you for the entire program. Throw in the special report with three ways to make you money back within 30 to 45 days, all the other bonuses, and the fact that there are no monthly expenses, and your break-even point should be one or two weeks if you follow the guidelines. You can even get a 90-minute audiotape that will save you several times the cost of the program BEFORE you invest in the program if you wish. Just go to this website:
http://www.LifestylePublishing.com/MSPWP_ad2.htm.
Conclusion:
========
So, for planning purposes, break-even analysis is very important. It gives you an idea how long your investment is “at risk” until you at least get back what you put in. The type of business and your monthly expenses delay the break-even point further into the future and hence raise your risk.
FREE BONUS:
===========
What condition are your finances? Do you want to make your money work harder? Do you want to discover how to save money? Get it all for free with Lifestyle Publishing’s 20-Lesson Wealth Builder course. Simply click this link to sign up:
http://www.LifestylePublishing.com/default.htm
Dr. R. Bryan Stoker
President, Lifestyle Publishing