How to Figure Out Break Evens in Your Business

How to Figure Out Break Evens in Your Business

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Imma keep talking about money stuff this month until we’re all comfortable and willing to be honest with ourselves about finances. And this week, I want to talk about pricing our products.
 
I too have been guilty of just winging it when it comes to pricing out a product for sale. Looking at my competitors and trying to price on what I believed the market would bear. Do you know what that got me? Stuck.
 
By not pricing out my products based on my own costs (because I was afraid to fess up to it!) I was stuck in a rut, unable to build my business faster and experiment with new product lines, or hiring staff, or not being beholden to terrible wholesale deals because I needed the cash flow. My business was stagnant and taking on debt because I was intimidated by the math behind a business.
 
Like I said last week, I am no accountant (shout out to my accountants for being amazing and human enough to tell me when the government is “full of shit”), but I’ve run enough businesses to know that there are basic steps that anyone can do to set themselves up for success.

How to Figure Out Break Evens in Your Business

I won’t go into the big picture, that’s what things like PRICR is for. But instead, I want to tackle one of the mysteries that a lot of new entrepreneurs get confused with: Break Evens
 
It sounds simple enough:

A break-even is when you…well…break even. Like in poker: you didn’t lose, but you didn’t gain anything extra.
 
Figuring out your break-even is Step 1 towards developing a profitable business. Because it tells you the absolute bare minimum you need to sell before you take a loss. Break-evens should never be used as a final price, or anywhere near a final price. But instead will give you an understanding of what your costs are and can also help you figure out if you’re spending too much to create a product of your own.
 

Break-Evens should account for:

  • Overhead (more on that next week)
  • Materials
  • Your Time
  • Advertising
  • Shipping* (if you have free shipping, but if you don’t, you should pad this a little to account for overages)
  • Retail Packaging
  • Shipping Packaging

And so on
 
There are more costs that go into this. But most of them can be smushed into the “Overhead” category, which I’ll talk about more in my next post. But for this week, take some time to think about your products: did you spend time actually figuring out your costs to produce it? If not, why? Bite the bullet and take a long, hard look at your costs and finances so that you can drive growth in your business and stop half-assing it (like I did).

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