Break-even point and deadlock

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We sure have already heard breakeven point and deadlock of companies or businesses Pero, ¿qué es el punto de equilibrio o el punto muerto? ¿En qué se basa? ¿Es verdaderamente importante para una compañía? ¿Cómo se puede calcular? ¿Para qué sirve? ¿En que momento debo hacerlo? A lo largo de este post explicaremos punto a punto la relevance de este cálculo, lo fácil que es y los beneficios que aporta a las compañías o comercios.

Todo de una manera comprensible y sin tanto enredo para que be sencillo de comprender y realizar, sobre todo para persons que recién están iniciando o con la intención de poner en marcha una compañía o negocio.

So without further ado let's get started understand this widely used term and calculation and beneficial for companies.

In most companies, regardless of whether they are small or medium, a price is determined that is through the calculation of products in stock and to market, with this, the expenses that were made are paid, in other words, what was invested previously, this is what is called neutral or balance point; In other words, it is the amount of sales that were made and that in this way there was no loss or profit, in other words, basically what was already invested was recovered.

The neutral or balance point So it is the sum of what you entered or the percentage of sales that is equal to the amount of fixed value; Above that amount, these incoming income will cover the fixed value and the rest will provide benefits that in the same way if they are below will result in losses of the invested.

WHAT DOES THE PROFITABILITY THRESHOLD OR DEAD POINT MEAN?

This term so widely used in economics the break-even point, neutral point or breakeven point It is derived from its acronym in English BEP (Break Even Point) and is in simple words it is the minimum amount of units sold in our company to conclude in the profit of zero. In other words, it is when the total amount spent is similar to the total income of what is sold.

With this minimum income of sales and minimum production it will become a profitable product for the business, as long as everything that is produced is sold; since if there is production but no sale, obviously there will be no income for the business or company; In other words, there will only be one storage cost.

Para categorizar una compañía rentable o no rentable, se debe analizar la cantidad de productos que vende y si todos ayudan a otorgar un bien a través de la diversidad del briefcase de productos producido. Por otra parte, si el caso de la compañía es la elaboración de un solo post o producto, se concluye que se ha alcanzado the point of equilibrium or the neutral point.

In other words, to better understand; the profitability threshold or dead end is the quantity of products or services that we must commercialize to be able to pay all our fixed or variable expenses that we invest for the realization of this product to be commercialized. Explained in another way, it is that limit in which we begin to recover the invested in the business and we begin to generate money with our products.

WHAT ARE YOUR ADVANTAGES OR BENEFITS?

One of the The advantages of the balance point or deadlock is to report to the company or business about the dangers or risks. that is had in the variation of the quantity of production; At the same time, it helps to give a broader and clearer picture of the effects of increasing the fixed value; At the same time, it helps us to choose the changes that will be made to achieve greater benefits, such as an increase in price or cost in the products manufactured.

LIMITS OF THE PROFITABILITY THRESHOLD OR DEAD POINT:

• Making sales does not go hand in hand, so when you suffer, it will affect the level of what already exists.
• The number of posts sold will always depend on the sale price.
• The value of the variable may go up or down, so they must be categorized according to the planned time.
• If the quantity of production is greater, the costs will not remain constant and will increase.

HOW DO I CALCULATE THE PROFITABILITY THRESHOLD OR THE DEAD POINT?

To calculate the deadlock or profitability threshold, only 3 points are needed about our company:

1. The total value of our company or business.
2. The prices of the posts for sale.
3. The variable value of each unit already sold.

The total value of our company or business.

The The fixed price or value is that of everything that will be invested or paid. So it is necessary for the preparation of the products that will be sold, such as the rental of the property, the payments to the workers, the electricity, the telephone, the insurance companies, the transport, gasoline for the transport, etc. It is important to pay attention to each and every one of them in order to properly estimate the fixed value.

The prices of the posts for sale.

Another variable value or price is the sale price than if you only sell a single product it is easy because you only have to determine one. But in general, different prices are handled per post or product, which is called the average sale price; but on the other hand, if your company is already large and consolidated and has enough products and presentations of these, then we are talking about a break even or deadlock and the calculation must be made for each of these lines of business.

The variable value of each unit already sold.

The last point we need is the variable value of each unit or average variable cost here enter everything that is spent in the business, raw material to make the product or products that are manufactured and depending on the quantity that is manufactured of these, it is This is classified as variable cost since it will depend on the quantity to be manufactured, in other words, if we manufacture a lot the quantity will be greater, but if we manufacture little the quantity will be less, whether it is lowered or increased; the result of all this calculation will be the third point three. It is essential to remember that this calculation will be done excluding electricity, salaries, insurance, parking space and everything already indicated in the first point that we classify as fixed expenses.
Contribution margin

To get the contribution margin we must do the following calculation:

Subtract the price of the post for sale, less the variable value of each unit.

Calculation of the profitability threshold or dead center.

To calculate the profitability threshold or neutral point, we have to divide the total value between the unit contribution margin that was previously explained; namely:

Dividing the total value by the unit contribution margin will result in the breakeven point.

This will be the point from which you will start to make a profit.

This result will be the profitability threshold or deadlock that we must do each month, year or day, (as is more comfortable or appropriate for the company) to be able to start with the profits or benefits because we will know with certainty the total value as well as the variable value of each unit sold, which will give us more control and organization to have greater Benefits.

This calculation is one of the most important to perform; Therefore, if you have in mind to determine a business or company it will be very important that you do it, from this dynamic you will be able to configure points of sale to be able to achieve this profitability threshold as soon as possible and it will be one of the most important for you settle in viability plan that you must present in a bank.

The formula with which the previously explained is carried out is the following:

Qc = CF / (PVu - Cvu)

SYMBOLIGY

Qc = breakeven or dead center, which is the number of units manufactured and sold to achieve zero profit.
CF = fixed cost or total value.
PVu = Unit sale price.
CVT = Total variable costs.
CVu = Unit variable costs.
B ° = Benefits.
I = Income.
C = Total costs.

In a simple way and in clear language we have explained what is the Balance point and deadlock for companies or businesses and their benefits. Therefore, it is only a matter of organizing, planning and forecasting all the expenses that are made in the company or business, and keeping a record of them to be able to calculate it daily, weekly, monthly or annually according to needs (even when it is recommended to do so monthly).
We hope this post has been to your liking and helps you.