Tip No. 7: Know your Breakeven Point

Every business has to spend money in order to make money. Those expenses that have to be paid whether the business opens it's doors or not are known as fixed costs, while those costs that increase and decrease with business sales activity are known as variable costs.

By dividing total sales by variable costs you can come up with the margin made per hour, per item or per service and when this is compared to the businesses fixed costs a measure can be made of how many units (hours, items or services) are necessary to cover these costs or to "break even".

Your industry should have certain expected break-even points or "bench marks" that you can measure your business against.

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