Using Break-even to set Targets.

Targets! Why? Well, if you don't tell your people what you expect them to do, don't be surprised if they don't do it. So set targets.

In the last post we showed how you calculate break even for a month. The same calculation can be used to set targets. Let us use the same figures as before, $10,000 a month fixed cost, and GM% of 25%. But let us now add the fact you want to make $2,500 profit. Profit is also a fixed cost. So we now divide $12,500 fixed cost by our GM% of 25%, to get $50,000.

So the sales target becomes $50,000 per month at GM% 0f 25%. If we achieve that target, we automatically achieve our profit goal.

Say it again Sam, "If you don't tell your people what you expect them to do, don't be surprised if they don't do it."