You need to know your break-even point to get on the road to profitability. The information needed to produce your break-even are your fixed costs and your variable costs and the selling price of your product.
- Fixed Costs are rent, salaries, utilities or any expense that you pay even if you have no sales.
- Variable Costs are those cost directly related to each sales like commissions, materials, labor to create your product or service.
The break-even point of any business is the point where all income covers both the variable and fixed costs. From that point forward, a portion of each sale is profit.
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