How to calculate the break-even point: formula and examples. How to calculate the payback of a business: simple and discounted method What data is needed to calculate the break-even point

Hello! Today we’ll talk about the break-even point and how to calculate it.

Any person who decides first of all thinks about making a profit. When running a business, there are production costs - these are all the costs of manufacturing and marketing products. They are subtracted from the total sales revenue in monetary terms, obtaining a positive (profit) or negative (loss) result. For the successful functioning of an enterprise, it is necessary to know the boundary of the transition of revenue into profit. This is the break-even point.

What is the break-even point

The volume of production at which all income received can only cover total costs - this is the break-even point(from English break-even point - point of critical volume).

That is, this is the minimum amount of revenue in monetary terms or the produced and sold volume of products in quantitative terms, which only compensates for all production costs.

Reaching this point means that the company is not operating at a loss, but is not yet making a profit. The result of the activity is zero. With each subsequent unit of goods sold, the company makes a profit. Other names for this term: profitability threshold, critical production volume.

Why do you need to know the break-even point?

The value of this indicator is important for assessing the current financial condition of the enterprise, as well as for economic planning for the future. The break-even point allows you to:

• Determine the feasibility of expanding production, dealer network, mastering new technologies and types of products;
• Assess solvency and financial stability, which is important for company owners, investors and creditors;
• Monitor changes in indicators over time and identify bottlenecks in the production process;
• Calculate and plan a sales plan;
• Determine the acceptable amount of revenue reduction or the number of units sold so as not to go to a loss;
• Calculate the impact of changes in price, production costs and sales volume on the financial result.

What data is needed to calculate the break-even point

To correctly calculate the indicator, you need to understand the difference between fixed and variable costs.

And also know the following information:

1. Price of 1 unit of products or services (P);
2. The volume of products produced and sold (in the classical calculation model) in physical terms (Q);
3. Revenue from products sold (B). To calculate the threshold in physical terms, this indicator is not necessary;
4. Fixed costs (Fc.) are production costs that do not depend on the volume of production. They do not change for a long time.

These include:

• Salaries and insurance premiums of engineering and technical workers and management personnel;
• Rent for buildings, structures;
• Tax deductions;
• Depreciation deductions;
• Payments on loans, leases and other obligations.

5. Variable costs(Zper) are production costs that increase or decrease depending on the increase or decrease in the production of goods or the volume of services provided. The value of the indicator can vary widely, instantly reacting to any changes in the company’s activities.

These costs include:

• Cost of raw materials, components, spare parts, semi-finished products;
• Salaries and insurance contributions of key production workers and personnel working on piecework;
• Electricity, fuels and lubricants (fuels and lubricants), fuel;
• Fare.

The division of all costs into fixed and variable is conditional and is used in the classical model for calculating the break-even point. The specifics of a number of economic entities imply a more precise allocation of costs into separate types according to economic meaning.

In particular, production costs may additionally be:

1. Conditionally permanent. For example, warehouse rent is a fixed component, while the costs of storing and moving inventory are a variable component;
2. Conditional variables. For example, the payment for depreciation (wear and tear) of capital equipment is a constant value, and the cost of planned and routine repairs is a variable value.

Cost accounting systems at different enterprises differ (for example, standard costing, direct costing, variable costing, etc.). There is a division of variable costs into individual ones for each product, a division of fixed costs into fixed and individual ones for each product, etc.

This article will examine in detail the classic model for calculating the break-even point for one product, and also provide an example of calculation with several types of goods.

Formula for calculating the indicator

Using the mathematical method, the break-even point (abbr. BEP) is calculated both in monetary and in kind terms. It all depends on the characteristics of a particular enterprise. When calculating according to the classical model involving one product (or several - then average data are taken), assumptions are taken into account for a number of factors:

1. Fixed costs within a given production volume remain unchanged (this level is called relevant). This also applies to variable costs and prices;
2. Product output and the cost of finished products increase or decrease linearly (directly proportional);
3. Production capacity is constant over a given calculation interval;
4. The product range does not change;
5. The effect of inventory size is insignificant. That is, the amount of work in progress has minor fluctuations and all produced products are released to the buyer.

This economic indicator should not be confused with the payback period of the project. It shows the time (months, years) after which the company will begin to receive profit from its investments.

Break-even point in monetary terms

The calculation formula will show the minimum amount of revenue that will cover all costs. The profit will be zero.

Calculated as follows:

In the denominator, the difference between revenue and variable costs is the contribution margin (MR). It can also be calculated for 1 unit of production, knowing that revenue is equal to the product of price and volume:

B = P*Q,

MD for 1 unit. = P — Zper. for 1 unit

To determine the break-even point using another formula, find the marginal income coefficient (Kmd):

The final value in both formulas will be the same.

Break-even point in physical terms

The calculation formula will show the minimum sales volume to cover all production costs with zero profit. Calculated as follows:

Each subsequent unit of goods sold above this critical volume will bring profit to the enterprise.

With a known value of VERNAT. VERDEN can be calculated:

VERDEN. = VERNAT. *P

How to calculate break-even point in Excel

It is very convenient to calculate the break-even point in Microsoft Office Excel. It is easy to set the required formulas between all the data and build a table.

Table compilation procedure

First, you need to create cost and price indicators. Let's assume that fixed costs are 180 rubles, variable costs are 60 rubles, and the price for 1 unit of goods is 100 rubles.

The value in the columns will be as follows:

• We fill out the production volume ourselves, in our case we will take the interval from 0 to 20 pieces;
• Fixed costs =$D$3;
• Variable costs =A9*$D$4;
• Gross (total) costs = B9 + C9;
• Revenue (income) =A9*$D$5;
• Marginal income = E9-C9;
• Net profit (loss) = E9-C9-B9.

These formulas in cells must be carried out throughout the entire column. After filling in the values ​​for production volume, the table will take the following form:

Starting from the 5th unit of production, net profit became positive. Prior to this, revenue did not cover the total (total) production costs. The profit in this case is equal to 20 rubles, that is, formally this is not quite the correct break-even point. The exact value of volume at zero profit can be calculated:

That is, the break-even point is mathematically calculated at a production volume of 4.5 units. However, the economist takes into account 5 pieces. and the revenue value is 480 rubles. is considered the break-even point, since it produces and sells 4.5 pcs. product is not possible.

Let's add 2 more columns to the table with the calculation of the safety margin (margin of safety, margin of safety) in monetary terms and in percentages (KB den. and KB%). This indicator indicates the possible amount of reduction in revenue or production volume to the break-even point. That is, how far the enterprise is from the critical volume.

Calculated using the formulas:

• Vactual (plan) – actual or planned revenue;
• VTB – revenue at the break-even point.

In this example, the actual revenue value is taken. When planning sales volume and profit, they use the value of planned revenue to calculate the required safety margin. In the table, these columns will be calculated as follows:

• Safety edge in rub. = E9-$E$14;
• Safety edge in % = H10/E10*100 (calculation is carried out starting from a production volume of 1 piece, since division by zero is prohibited).

A safety margin value above 30% is considered a safe limit. In our example, production and sale of 8 pcs. goods and more means a stable financial position of the company.

The final table will look like:

Algorithm for constructing a graph

For clarity, let's build a graph. Select Insert/Scatter Plot. The data range includes gross (total) costs, revenue, and net profit. On the horizontal axis there will be production volume in pcs. (it is selected from the values ​​of the first column), and along the vertical – the sum of costs and revenue. The result will be three slanted lines.

The intersection of revenue and gross costs is the break-even point. It corresponds to a net profit value of 0 (in our example, 20 rubles for a product quantity of 5 pieces) horizontally and the minimum required revenue value to cover total costs vertically.

You can also build a more detailed graph, which includes, in addition to the above indicators, fixed, variable costs and marginal income. To do this, the specified rows are sequentially added to the data range.

How to use a ready-made table in Excel

To calculate the break-even point, you just need to substitute your initial data, and also enter the production volume values ​​in the first column. If there are a lot of them, then to speed up the work you can write in cell A10, for example: =A9+1 and move this formula down. Thus, the interval between volume values ​​will be 1 piece. (you can enter any number).

• Download a ready-made excel file to calculate the break-even point

Example of calculating the break-even point

For example, let’s take an entrepreneur selling watermelons in summer stalls. He has one product, the price is the same in different parts of the city. Watermelons are purchased in bulk in the southern regions and delivered for sale to central Russia. The business is seasonal, but stable. The initial data is as follows:

It is necessary to determine the minimum acceptable volume of watermelon sales and the threshold revenue value to cover all costs.

The procedure for calculating using the mathematical method

The price of 1 watermelon is taken as average, since they all have different weights. These fluctuations can be neglected. To calculate the break-even point in physical terms, we use the well-known formula:

To calculate the break-even point in monetary terms, you need to know the number of watermelons sold per month and the amount of variable costs for this volume:

• Q per month = 36000/250 = 144 watermelons,
• Zper. for monthly volume = 130*144 = 18,720 rub.

The first two values ​​give a break-even point with zero profit, but the volume of watermelons sold will be 91.67 pieces, which is not entirely correct. The third value is calculated based on the critical sales volume of 92 watermelons per month.

Current monthly revenue and sales volume are above the break-even point, therefore the entrepreneur is working with a profit.

Additionally, we determine the size of the safety edge:

A level above 30% is considered acceptable, which means the business is planned correctly.

Calculation procedure by graphical method

The break-even point can also be calculated graphically, without preliminary calculations. To do this, the volume of output in pieces is plotted along the horizontal abscissa axis, and the amount of revenue and total costs (sloping lines) and fixed costs (straight line) is plotted along the vertical ordinate axis. Next, they draw by hand or build a diagram on a computer based on the original data.

As a result of constructing the graph, the break-even point will be at the intersection of the revenue and total cost lines. This corresponds to a sales volume of 91.67 watermelons and revenue of 22,916.67 rubles. The shaded areas show profit and loss areas.

The given calculation model for one product is easy to analyze and calculate the break-even point. Well suited for companies with a stable sales market without sharp price fluctuations.

However, the above calculation has the following disadvantages:

• Seasonality and possible fluctuations in demand are not taken into account;
• The market may grow due to the emergence of progressive technologies, new marketing moves;
• Feedstock prices may change;
• For regular and “large” buyers, discounts are possible.

Thus, the data for calculating the break-even point are considered in conjunction with many factors and other economic indicators.

Break-even planning for the enterprise

Based on the obtained values ​​of the break-even point, an analysis of the current market conditions is carried out and the most significant factors influencing it are identified. Planning further work involves forecasting production costs and competitive market prices. This data is used to calculate the production and break-even plan, which is part of the company's overall financial plan. For the successful operation of the enterprise, compliance with the approved goals is monitored.

Consecutive stages of break-even planning:

1. Analysis of the current state of affairs in the company and sales . Strengths and weaknesses are identified and determined taking into account internal and external factors. The work of supply and sales services, the level of management at the enterprise, and the rationality of the production process are assessed. Among external factors, the market share controlled by the company, the activities of competitors, changes in consumer demand, the political and economic situation in the country, etc. are taken into account;
2. Forecast of future prices for manufactured products, taking into account the assessment of all factors from paragraph 1 . An acceptable markup range is planned. Alternative options for sales to new markets or restructuring the enterprise to produce similar products are explored in the event of an unfavorable situation in the current market;
3. Fixed, variable costs and production costs are calculated . The volume of work in progress at all stages of production is planned. The need for fixed and working capital and the sources of their acquisition are formed. Additional possible expenses for loans and other obligations are also taken into account in production costs;
4. The break-even point is calculated . The required size of the safety edge is determined. The more unstable external factors are, the greater the margin of safety should be. Next, the volumes of production and sales of goods at the safety edge level are calculated;
5. Planning the company's pricing policy . Prices for products are determined that will allow achieving the required sales volume. The break-even point and safety margin are recalculated once again. If necessary, paragraphs 3 and 4 are repeated in order to find reserves for reducing costs in order to achieve the required safety margin values;
6. Adoption of the final break-even and sales plan divided by periods . The data is approved at the critical volume point.
7. Break-even control , divided into several components: control of all expense items, total cost, sales plan, receipt of payments from customers, etc. The enterprise should always have an understanding of how the current financial situation corresponds to the planned break-even level.

Calculation example for a store

Using the example of a store selling several types of goods, let’s consider a solution to a multi-product problem. These are musical instruments and related products: electric guitar (A), bass guitar (B), sound amplifier (C), acoustic guitar (D). The store has fixed costs, as well as individual variable costs for each type of product. They are purchased from different suppliers and bring in their own amount of revenue.

The initial data is as follows:

The store is quite large, but the structure of revenue by type of product does not change significantly. The range and prices for them are different, so it is more rational to calculate the profitability threshold in monetary terms. To solve this problem, we use formulas and methods from direct costing, which assume a range of break-even points for such a case:

Kz. lane – coefficient of the share of variable costs in revenue.

In the following table we calculate it for each type of product and the total for the entire store. We will also calculate marginal income (Revenue - individual variable costs) and its share in revenue:

After calculating Kz. lane For the entire store, the average break-even point will be:

Now let's calculate this indicator using the most optimistic forecast. It is called marginal descending ordering. The table shows that the most profitable products are A and B.

Initially, the store will sell them and the total marginal income (210+170=380 thousand rubles) will almost cover the fixed costs (400 thousand rubles). The remaining 20 thousand rubles. will be received from the sale of product B. The break-even point is equal to the sum of revenue from all listed sales:

The most pessimistic sales forecast is the marginal ordering in ascending order. Initially, goods D, C and B will be sold. The marginal income from them (125+30+170=325 thousand rubles) will not be able to cover the store’s fixed costs (400 thousand rubles). The remaining amount is 75 thousand rubles. will be received from sales of product A. The break-even point will be equal to:

Thus, all three formulas gave different results. Essentially, optimistic and pessimistic forecasts provide an interval of probable break-even points for the store.

Additionally, we calculate the safety margin in monetary terms and as a percentage based on the average break-even point:

Although the store is operating at a profit, the safety margin is below 30%. Ways to improve financial performance are to reduce variable costs and increase sales for goods D and C. It is also necessary to check fixed costs in more detail. Perhaps there will be reserves for reducing them.

Example of calculation for an enterprise

As an example, let’s take an enterprise producing household solvents with a volume of 1 liter. The company is small, prices rarely change, so it is more rational to calculate the profitability threshold in physical terms (number of bottles).

The initial data is as follows:

The calculation will be as follows:

The resulting value is very close to the actual volume (3000 pcs.).

Additionally, we calculate the safety edge in pieces (using a formula similar in monetary terms) and as a percentage:

Thus, the company operates on the verge of break-even. Urgent measures are needed to improve the financial situation: a review of the structure of fixed costs, perhaps the salaries of management personnel are too high. It is worth understanding in detail the costs that form variable costs. The primary direction to reduce them is to find new suppliers of raw materials.

Writing a business plan is impossible without calculating the break-even point using a formula. After all, the resulting number is the milestone after which the company’s profit begins. In the article we will show how this point is calculated in different situations and give examples.

What you will learn about:

What is the break-even point and how to calculate it

Are you ready to name the company’s fixed and variable costs (i.e. expenses) for the product or for its implementation? Well, at least their approximate value?

If so, then you are able to calculate a point for the company at which there is still no profit, but no longer a loss. The so-called break-even point of the company (English break-even point or BEP). By overcoming this milestone, the organization begins to earn profit.

Store managers can use the break-even point formula to determine how many units they need to sell at a given price to achieve a minimum profit.

The calculation is used for planning, determining the correctness for the strategy for the future, and even for calculating the material motivation of employees!

Read more about developing a staff motivation system

To determine BEP you need to know:

• the number of fixed costs - an amount that does not change with sales volume (for example, rent of a store’s retail space or the salary of management personnel);
• the size of variable costs - increases or decreases and depends on the volume of sales (for example, the cost of production (purchase) of goods);
• the price at which a product (service) is sold.

You can receive reports on expenses and income in the commodity accounting program Business.Ru. With detailed cash flow reports, you'll be able to make the necessary calculations to determine your business's performance.

How to calculate the break-even point: formulas

There are several basic formulas for calculating the break-even point of a business. One is based on the number of units sold, and the other is based on the cost of sales.

Break-even point in physical terms: formula

The calculation looks like this:

BEP = Fixed costs ÷ (Price - Variable costs)

Important! When calculating in pieces, fixed costs are indicated as the sum of all expenses for the company. In this case, price and variable costs are calculated per unit of product.

Let's look at the components of the formula:

1. Fixed costs. As noted above, fixed costs do not depend on the number of goods sold, such as rent for retail or manufacturing space, computers and software. Fixed costs also include advertising fees and fixed labor costs.
2. The denominator of the equation, price minus variable costs, is called contribution margin in economics.

Margin contribution is the difference between the selling price and variable costs. Thus, if you sell a product for 100 rubles, and the cost of materials and labor is 40 rubles, then the margin contribution is 60 rubles. These 60 rubles are then used to cover fixed expenses. If there is any money left after this, it is your net profit.

So, if your sales equal your fixed and variable costs, you have reached the break-even point. We are talking about net profit or loss in the amount of 0 rubles. Any sales beyond this point contribute to your bottom line.

Monitor your sales and manage inventory using the Business.Ru inventory program. With it, you can control sales volumes, check sellers, calculate the profitability of products and organize sales.

Example of calculating the break-even point

Entrepreneur Ivan has fixed costs consisting of rent, depreciation of assets, wages and property taxes. These fixed costs amount to up to 60,000 rubles . He is engaged in sewing sports suits. Variable costs are calculated as 800 rubles per unit. He plans to sell the suits for 2,000 rubles each.

60 000 / (2000 - 800) = 50 units

Therefore, Ivan needs to produce and sell 50 tracksuits per month to cover his total fixed and variable costs.

Therefore, the 51st tracksuit sold makes a profit; before that, 50 pieces are simply break-even.

Formula for calculating the break-even point in monetary terms

The break-even indicator in monetary terms is calculated when the product is in different price categories, and it makes no sense to calculate in units.

For example, if a cosmetics store sells nail polishes for 100 rubles and perfumes for 15,000 rubles.

The calculation looks more complicated, since you need to find the marginal income, then its coefficient (index).

You can calculate the index based on price and revenue.

If we take price as a basis, then marginal income is determined by the formula:

where MR is marginal income;

P – price;

AVC – variable costs per unit. goods.

For entrepreneur Ivan from the example above, the marginal income is equal to 2000 - 800 = 1200 rubles.

For Ivan KMR= 800 / 1200 = 0.67

Another way to calculate the index is based on revenue. Let's calculate the marginal income using the formula:

In this case:

TR – company revenue;

VC – total variable costs.

According to the formula KMR=MR/TR the marginal income index is calculated.

For example, Ivan’s revenue is 100,000 rubles, while variable costs are 40,000 rubles.

MR = 100,000 - 40,000 = 60,000.

KMR = 60,000 / 100,000 = 0.6

Knowing this index (coefficient), we substitute it into the following formula for calculating the break-even point:

where BER is the break-even point,

FC – fixed costs;

KMR – marginal revenue index.

For entrepreneur Ivan BEP = 60,000 / 0.6 = 100,000 rubles.

Sometimes calculations with a graph or using Excel are used to determine a point.

Calculation with plotting

For clarity, the break-even point is calculated using a graph.

You need to draw axes and designate monetary units vertically, and pieces horizontally.

The cost lines will intersect the gross revenue graph (also a sloping line).

At a certain point, gross revenue will cross the variable cost line. This is where the break-even point is.

On the graph you can also see the threshold revenue and the threshold sales volume (that is, the volumes that must be reached in order to receive at least zero profit).

Figure - Determining the break-even point on the chart

Break-even point: formula in Excel

The break-even point is calculated in Excel by filling out a table. We will present ready-made formulas and an algorithm so that you can make the calculation in five minutes.

1. We indicate the quantity: you need to indicate variable and fixed costs, as well as prices, as is done in the table below. In this case, variable costs should be noted per unit of production:

2. Below we draw up a table in which gross costs, revenue, marginal income and profit will be calculated.

If you draw similar tables in the same cells, use ready-made formulas:

• Fixed costs $D$3;
• Variable costs A9*$D$4;
• Gross costs B9+C9;
• Revenue (income) А9*$D$5;
• Marginal income E9-C9;
• Net profit E9-C9-B9.

How to Use Break-Even Analysis: 5 Areas of Operation

Determining the break-even point is not the end of all calculations. When you crunch the numbers, you may find that you need to sell more products than you expected to achieve even zero revenue.

If you have calculated the break-even point using a formula when drawing up a business plan, you need to choose what needs to be done:

• rise prices;
• cut costs;
• do both.

Important! If you have come up with the idea of ​​selling unique products online, you need to understand whether these products will be successful in the market. Break-even analysis determines the number of products that need to be sold, but there is no guarantee that they will be sold in principle.

Existing businesses conduct this analysis before launching a new product or service to determine whether the potential profits are worth the launch costs.

This analysis is not just useful for launch planning. Here are some ways companies can use the break-even point formula in their daily operations and planning.

Should we raise prices?

If the analysis shows that you need to sell a large number of goods over the desired period of time, then you can check the cost of this product on the market. It may turn out that your price is below the market.

Set the average price, you can always lower it to have a sale.

You can calculate the profitability of products, analyze the cost and markup in the commodity accounting program Business.Ru. With it, you can easily forecast sales, make purchases based on profit analysis, conduct sales, and set automatic discounts.

Whether to use cheaper materials or reduce labor costs

If you want to reach the break-even point faster, you can pay attention to materials and labor costs. Find out how you can maintain the quality of products and service you desire while reducing costs.

The simplest thing is to reduce your own salary in order to quickly reach the break-even point.

For example, if Ivan from our example, who needs to sell 50 suits to reach the break-even point, reduces his salary by 7 thousand rubles, then this will reduce expenses to 53 thousand rubles per month.

Let's substitute the values ​​into the same formula:

53,000 / (2000-800) = 44,166 units. Therefore, if the manager's salary decreases, then it is possible to break even with a lower figure.

The same will happen if Ivan uses cheaper knitwear for sewing clothes, receiving the cost of one item at 600 rubles:

60,000 / (2000-600) = 42,857 units.

This way, you can reach your goal faster without increasing the price.

Calculation for new products

If you are about to launch a new product, calculating the break-even point is necessary. Pay attention to new variable and fixed costs, such as design and promotion fees.

Learn more about how to promote a new product to the market.

Using the Zero Profit Point to Plan for the Future

If you understand how much money you need to make to break even, it's easier to set long-term goals. For example, if you want to expand your business and move to a location with higher rents and more traffic, you can determine how much more you need to sell to cover all your fixed costs.

To calculate material motivation

By understanding how much product you need to sell and how much money you need to make to break even, you can plan motivational tools. That is, establish sales standards, above which sellers receive additional bonuses.

A transparent employee motivation system can be installed in the Business.Ru program. This way your subordinates will understand how much they earned and for what. Set plans for them, distribute tasks according to importance, track the percentage of completion.

Examples of calculating the break-even point using the formula

An example of calculating the break-even point for a store

Let's determine the break-even point for a hardware store, which has a wide product range, so there is no point in calculating the number of sales. It is necessary to calculate the break-even point using the formula in monetary terms.

Fixed store expenses:

• rent including utilities;
• salaries of staff and managers;
• insurance premiums;
• advertising.

Variable store expenses:

• purchase of goods.

Let's put them in two tables.

The product is sold at a premium, and the revenue will be 1,250,000 rubles.

Marginal income amount: 1,250,000 – 500,000 = 750,000

Contribution margin ratio: 750,000 / 1,250,000 = 0.6

The break-even point is calculated: 270,000 / 0.6 = 450,000 rubles.

What should a store do if the break-even point is higher than sales volume?

The owner of a small store can try to cut his expenses, but such savings can become a critical business mistake. There is a chance of falling into a “downward spiral.”

The essence of the downward spiral is that cutting costs can affect:

• on the quality of service (for example, when the position of a sales consultant is reduced);
• on the quality of the product itself that is being sold (you will choose cheaper brands and sell at a larger markup).

If quality deteriorates, you will realize that some customers have gone to a competitor, so profits have decreased again. If the store owner cuts costs again, there will be no return to positive revenue: there will be even fewer customers, and in the end the businessman will lose all the money invested.

There is a version that the concept of “Black Friday” arose in the retail trade to mark the break-even point. The fact is that most retailers receive their main income in the last five weeks of the year (preparation for Catholic Christmas and New Year). Before that, it’s just working to break even. Profit allows you to make reserves for a rainy day.

Is it necessary to take into account the owner’s wages when calculating the break-even point?

This question is asked by many business owners. The salary of the company owner must be taken into account in fixed costs when calculating the break-even point, so the salary will be fixed. How much is up to you to determine, but it should be higher than the regular staff.

Many store owners end up failing because:

• do not plan their own salary in the first year;
• They set their own minimum salary, less than a cashier or cleaner.

You can not pay a salary only if you are not a manager or a manager, but are retiring by hiring an outside manager. However, this happens extremely rarely if we are talking about small businesses.

An example of calculating the break-even point for an enterprise

Let's calculate the break-even point for a small enterprise producing liquid for washing car windows.

Let's take the following indicators:

• fixed expenses of a small enterprise - 50,000 rubles;
• variable costs for the production of 1 container of liquid (raw materials) - 50 rubles;
• wholesale price – 80 rubles.

We find the break-even point: 50,000 / (80 - 50) = 1666.6.

Thus, the company needs to sell 1,667 units of windshield washer to turn a profit.

Calculation example for a catering enterprise

The break-even point for a restaurant or cafe helps determine the required average bill and the number of guests to be served per day. We advise you to determine this indicator before opening a restaurant, when planning and determining the prospects of the catering market.

Read more about trends and prospects of the catering market

It is necessary to determine variable and fixed costs, which include food purchases, rent, salaries of cooks, waiters and other workers, and marketing costs.

For example, the fixed costs of a restaurant are 150,000 rubles, while preparing one dish (on average) requires 130 rubles worth of food. The dish is sold at a premium for 280 rubles.

Let's calculate how many dishes need to be sold to reach zero profit.

150,000 / (280 - 130) = 1000 pieces per month. Therefore, you need to serve 34 guests a day, who will eat one dish each.

If you need to calculate not the number of dishes sold, but the average check per day, then first we will determine the margin coefficient.

The amount of marginal income from one dish: 280 - 130 = 150 rubles.

Contribution margin ratio: 150 / 280 = 0.53.

The break-even point is calculated as 150,000 / 0.53 = 283,018.9 rubles.

Thus, the restaurant should sell 283,019 rubles per month or 9,434 rubles per day.

Thus, if you raise the average bill from 280 rubles to 350 per day (for example, by persistently offering a drink), then the restaurant will need only 27 customers to reach the break-even point.

Calculation example for service company services

Let's calculate the break-even point for a service company whose main indicators are as follows:

• the average cost of one service is 3,000 rubles;
• total fixed costs (rent, personnel, office expenses, advertising) – 250,000 rubles;
• There are no variable costs.

In physical terms, the break-even point is calculated as follows:

BEP = Fixed costs / Cost per service = 250,000 / (3000 - 0) = 83.3. Thus, the service company needs to sell at least 84 units. services per month (that is, serve 84 clients) to break even.

In value terms, the break-even point coincides with the totality of fixed costs, since the company has no variable costs.

For ease of calculation, entrepreneurs are advised to use Excel tables, where they enter data on variable and fixed costs, as well as prices per unit of goods.

To calculate, you need to use the formulas:

By changing the numbers in the table in the “Production volume” column, we determine how many units the company will reach the break-even point when producing (selling) how many units.

Thus, with the release (sale) of 12 products, the company “broke to zero.” The 13th unit is already making a profit.

Conclusion. The break-even point can be calculated in various ways, in physical terms or in monetary units. When planning, the indicator helps determine whether it is worth doing business at all at such costs. Also, the zero profit point helps plan motivational programs for store sales assistants and determine how much the average check for a restaurant needs to be increased so as not to close due to losses.

Break even - the minimum volume of production and sales of products at which costs will be offset by income, and with the production and sale of each subsequent unit of product the enterprise begins to make a profit. Break-even point can be determined in units of production, in monetary terms, or taking into account the expected profit margin.

Break-even point formula:

Tb = (V x PZ) / (V - PR)

B – revenue

FZ – fixed costs

PR - variable costs

The payback period is defined as the expected number of years required to fully recover investment costs. The payback period is calculated as follows:
T(ok)= number of years preceding the payback year + Unrecovered cost at the beginning of the payback year / Cash inflow during the payback year

Let's consider the methodology for calculating the indicator using a conditional example. The investment project “Uranium” requires an investment of 1000, the projected income flow will be: 1 year -200; 2nd year - 500, 3rd year - 600, 4th year - 800. 5th year - 900. Discount rate - 15%.

A simple (static) method suggests that the project will pay off in 2.5 years. However, this period does not take into account the required rate of return on investments in a particular area. More objective results are obtained by a technique based on a temporary assessment of cash flow.

Scheme for calculating the payback period.
1. Calculate the discounted cash flow of income for the project based on the discount rate and the period of income.

3. The accumulated discounted cash flow is calculated until the first positive value is obtained.

4. Determine the payback period using the formula.

Topic 6 Test questions

1.What is meant by network project planning?

Network planning is a management method that is based on the use of the mathematical apparatus of graph theory and a systems approach to display and algorithmize complexes, interrelated works, actions or activities to achieve a clearly defined goal.

2.What problems does network planning solve?

Network planning allows you to determine, firstly, which of the many works or operations that make up the project are “critical” in their impact on the overall calendar duration of the project and, secondly, how to build the best plan for carrying out all work on this project with in order to meet specified deadlines at minimal cost.

The main goal of network planning is to reduce project duration to a minimum.

The task of network planning is to graphically, visually and systematically display and optimize the sequence and interdependence of works, actions or activities that ensure the timely and systematic achievement of final goals. To display and algorithmize certain actions or situations, economic and mathematical models are used, which are usually called network models, the simplest of which are network graphs. With the help of a network model, the manager of a work or operation has the opportunity to systematically and on a large scale represent the entire progress of work or operational activities, manage the process of their implementation, and also maneuver resources.

Payback period- the minimum time interval (from the start of the project), beyond which the integral effect becomes and subsequently remains non-negative. This is the period from which the initial investments and other costs associated with the project are covered by the total results of its implementation. Payback period T OK is a solution to the equation:

Determining the break-even point of the project

The break-even point characterizes the volume of production (sales) of products at which income D will be equal to current expenses R: ( D= R)

Income from the project: D=QC

Q- quantity of products produced or sold;

C- price per unit of production.

Current expenses:

Where WITH- semi-fixed expenses;

V– conditionally variable costs per unit of production.

Then:

The volume of production corresponding to reaching the break-even point.

The volume of production (sales) of products adopted in the project must exceed its value for the break-even point.

Key Success Factors

Key success factors (KSF)- factors common to all enterprises in the industry, the implementation of which provides opportunities to increase the competitiveness of products. The challenge is to identify these factors. Some firms define a so-called “success formula” that includes CFU.

An example of a “formula for success”:

Thus, KFU based on scientific and technological superiority include:

Experience in organizing scientific research (important in high-tech industries); - ability to quickly implement technological and organizational innovations; - experience working with advanced technologies; - professional excellence; - possession of “know-how”.

General provisions and concepts in project management.

Project(Latin projectus - thrown forward) can mean:

1) a set of documents (calculations, drawings, etc.) for the creation of any structure or product;

2) preliminary text of any report;

3) idea, plan.

Project- a certain task with certain initial data and required results (goals), which determine the method of its solution (“Code of Knowledge on Project Management”, Project Management Institute, USA).

1. “Project management- the art of managing and coordinating human and material resources throughout the life cycle of a project by applying a system of modern management methods and techniques to achieve the results defined in the project in terms of the composition and scope of work, cost, time, quality and satisfaction of project participants.”

Mono-projects- projects that have clearly defined resource, time and other frameworks and represent separate investment, innovation and other projects.

Multiprojects- these are complex programs or projects related to the definition of concepts and directions for the strategic development of enterprises and organizations.

Megaprojects- these are targeted and comprehensive programs containing many interrelated projects, united by a common goal, allocated resources and time allotted for their implementation.

Investment project- this is a set of measures for making capital investments with the aim of obtaining profit in the future. Priority is given to ensuring profitability, therefore capital investments are made only if the planned profitability and profitability from them exceeds a certain level.

Innovative scientific and technical project - this is scientific research or development aimed at solving a specific scientific and technical problem, as a result of which high-tech products are created, sold as goods on the domestic and foreign markets.

The structure of the project cycle, characteristic of modern conditions in Russia:

I. Pre-investment period. Phases:

----------------pre-investment research;

​Development of design and estimate documentation and preparation for investment activities.

II. Investment period. Phases:

・carrying out tenders and concluding contracts;

。organization of purchases and supplies;

---------------- construction and installation works;

​Completion of the project.

For the mathematical relationship between profit and production volume in microeconomic theory, the English abbreviation CVP (cost-volume-profit, which means “price-volume-profit”) is used. And the study and calculation of the interdependence of these parameters for a given project before its start of production is called CVP analysis or profitability analysis.

A popular aspect of this analysis is to find the minimum volume of product sales at which capital investments in the project plus operating costs for the production of the first editions of the product are offset by income from the sale of the same first editions.

In other words, we are talking about the number of units of products (or the amount of income from their sales) at which the project paid off and after which, with the sale of each subsequent unit of production, the enterprise begins to make a profit.

What is break-even point and payback point

The time distance until such a number is reached is called payback point project. And this number itself - more precisely, two variants of the number: in units of production or in income from their sales - is called break-even point or profitability threshold(in English break-even point or BEP, in French seuil de rentabilité).

To calculate the break-even point (in formulas it is usually abbreviated BEP), you need to enter three more parameters:

• Fixed or fixed costs (costs) that do not change depending on the quantity of products sold - for projects this is usually only capital investments - they are defined by the English abbreviation TFC (total fixed cost);
• Variable costs (costs) are current production operating expenses. Their value for the entire enterprise is called TVC (total variable cost) in formulas, and the average cost per unit of production is simply VC (variable cost).
• Retail cost per unit of production - let's call it P (price).

So, for a production line of homogeneous products, if:

V) accept the retail prices of products in the near future are always the same (or take the average price, the price in hard currency);

then the formula for calculating the break-even point in units of production will be:

BEPunits = TFC / (P-VC)

And the payback point is calculated by dividing BEPunits by the average number of units of production per working day (at the same time, with a five-day working day and the absence of long-term production stops, it is considered that there are, on average, 20 working days in a month).

For example, 50 thousand dollars were spent on the start of a project (TFC), a unit of production costs the enterprise, on average, including taxes, 100 dollars (VC), and the product is sold for 200 dollars (P). Then BEPunits = 50000 / (200-100) = 500 units.

If, say, two units of product are produced per working day, the payback point for the project will be 250 working days from the start of the project (just over a year).

Break-even points in monetary terms are calculated by multiplying BEPunits by the retail cost of products (P). In our example, BEPincome = 500*200 = 100 thousand dollars. Receiving exactly this kind of income will be the threshold of profitability for this project.

Break-even point and margin of financial strength for current activities

In addition to calculations before starting a project, studying break-even points can be an effective analysis of risks and business planning of current activities. In this case, all numbers are usually taken for a certain period - month, quarter, year.

TFC is then understood not as capital investment, but as overhead costs, independent of production volumes - rental, credit, insurance, leasing payments, energy payments, regular repairs, and so on.

Typically, such calculations are made for each type of product of a given enterprise at the same time - in order to see which of the production lines brings more profit, and which, sometimes, operates at a loss, which is invariably covered by the more profitable line. At the same time, the fixed costs of the entire enterprise are divided in proportion to the sales volumes of each production line - and the break-even points are calculated from these shares.

For example, there are three conveyors (A, B, C) producing 150, 100 and 50 units of product per month, sold for 10, 9 and 12 dollars, respectively. Variables (raw materials, wages, incidentals) and tax costs are $5, $5, and $9, respectively. Fixed expenses are $800 per month. Let's say right away that together the conveyors are profitable - the total net profit, as is easy to calculate, is $500 per month. The calculations will be like this:

Margin of safety

In addition, for current activities, along with the break-even point, such a parameter as margin of safety. It is equal to the percentage of the margin between revenue and the break-even point (in monetary terms of the latter, BEPincome) to the same revenue.

So, in the example given for conveyors A and B, the break-even point in monetary terms is equal to 80*10 = $800 and 60*8 = $480, respectively. The safety factor will be correspondingly equal for the first conveyor (1500-800)/1500*100% = 46.7%. For the second conveyor - (900-480)/900*100% = also 46.7%.

This means that a decrease in production or sales volumes of less than 46.7% will not lead to unprofitability of each of these two pipelines.

However, if we take into account that the conditional unprofitability of the third conveyor “hangs” on these two profitable conveyors, the total safety margin of the enterprise will be less than the number indicated for the first two conveyors.

Production leverage

Also, at the same time, such a parameter as production lever or production leverage(operating leverage) - a number showing by what percentage profit will increase if production and sales increase by 1%.

Production leverage is equal to the margin between revenue and variable costs, divided by the same number, reduced by the amount of fixed costs (a complete analogue of the physical concept of “acceleration” - in this case, it is the acceleration of profit growth).

In the example given, the variable costs for the first conveyor are equal (we count everything for one month) 5*150 = $750, and for the second conveyor 5*100 = $500. As a result, the production leverage of the first conveyor is (1500-750)/(1500-750-400) = 2.14. The production leverage of the second conveyor will be (900-500)/(900-500-240) = 2.5.

This means that with an increase in production and sales of both conveyors by 10% and the same distribution of fixed costs, the profit of the first conveyor will increase by 21.4%, and the second by 25%.

In fact: let's take the second conveyor - it brought, minus variable and fixed expenses, 900-500-240 = $160 per month. Let's increase the volume of production by 10% - and it will bring us 990-550-240 = 200 dollars per month, that is, 25% more.

However, on the scale of the entire enterprise, in our example, we recall that the specified planned “acceleration” will be reduced by a serious entropy factor - the conditional unprofitability of the third conveyor.

Finally, let us mention the formula for approximate calculation of the “monetary” break-even point of a store containing a huge range of products:

BEPincome = TFC*(100/i),

where TFC is gross fixed costs, and i is the average retail margin for the store.

Basic chart: plotting the break-even point graphically

Charts with graphs are used to visualize break-even calculations. Monetary amounts are usually plotted on their vertical axis (for revenue and cost volumes). Units of production are most often plotted on the horizontal axis of break-even calculation charts. However, you can build graphs by dates and even by the percentage of costs covered by income (the latter is sometimes used for investment projects and calculations of payback periods).

It is obvious to the reader familiar with the mathematics of charts that fixed costs will produce a graph in the form of a straight horizontal line. And the graphs of variable expenses and income will rush in a straight line from the zero point at different angles to the right and upward. Of course, for a profitable enterprise, the income schedule will be higher than the variable expenses schedule, otherwise one would have to admit that income does not even cover variable expenses, not to mention fixed ones.

Finally, to determine the break-even point, a fourth line is always introduced on the chart - a graph of total expenses. Naturally, it starts from where the fixed cost line on the left begins (that is, total costs start at the level of fixed costs with zero variable costs).

So, for the first conveyor in the given example, using Excel, it is not difficult to compile the following table for one month (the “total costs” column in each line automatically sums up the readings of the two previous columns, the third and fifth columns are formulaically multiplied by the number of units of production, respectively, the value of variable costs per unit products and the total accumulated amount of income from sales):

And from this table, the Excel Chart Wizard quickly builds the following chart:

The point of intersection of the total expenses graph (light green line) and the income graph (turquoise line) is the BEPunits break-even point. The vertical gray bar indicates that the value of this point is 80 units of production. We got exactly the same amount in the table in the previous section of the article.

Finally, it remains to be mentioned that such calculations and graphs are quite approximate - in reality, for example, the sales speed noticeably lags behind the production speed.