What is the Break Even Point template and why is it so important in a business plan for Central Plumbing & Heating Inc.?

The Break Even Point is one of the most key pieces of financial analyis that a small business owner likeFelix Gonzalez can undertake when writing out the business plan for a small business like Central Plumbing & Heating Inc.. This analysis tells Felix Gonzalez just how many units of products or service have to sold in order to cover the fixed costs faced by the business. This analysis tells the business owner how much they need to sell in order to stay alive and stay in business.

The Break Even Point Template allows Felix Gonzalez the ability to analyse the costs and present a numerical and graphic analysis of just how much the business needs to sell to say alive. Also the template allows the businEss owner to conduct what if analysis by plugging in different unit sales prices amounts to arrive at the break even points for each.

How does the Break Even Point Analysis Template work? What goes into it?

The Break Even Point analysis template can be easily completed by following these steps:

1. Put in the name of the small business like Central Plumbing & Heating Inc..
2. Input the Sales Price for Unit of Product or Service. In the case of a realtor office you would enter a typical sales ticket, a dentist office would put in the sales of a typical patient visit on average.
3. Gross Margin - this is the inverse of the cost of goods sold. To arrive at this number you would subtract your cost of goods sold from the total projected sales number to get the gross profit. The Gross Margin is the gross profit as a percentage of the Sales. The Gross Profit per unit of sales will be automatically calculated by the template.
4. Next enter in the description of your operating expense one line at at time and enter in the dollar amount in the column to its rigth followed by that percentage of that particular operating expense you think is fixed. The template will calcualte the amount that is variable automatically.

That's it. As you finish up the operating expenses the template will automatically calculate the break even point and represent that on the graph and also update the chart that shows both your sales and fixed cost lines. The meeting point of these two lines if of course your break even point.

All you have to do is to click on the output tab from where you can copy and paste the updated Break Even Point analysis directly into your business plan word document.

Quick Links:

1. Go to the Corresponding Questionnaire section for this industry.
2. Go to the Corresponding Business Plan section for this industry.