A high break-even point can hold your business back in many ways.
It not only delays the point at which you can re-invest in your business, but some analysts believe it can lead to blander business products.
The rationale? High break-even points can mean companies need high volumes and, therefore, a broad market appeal.
And trying to appeal to a broad market often results in “safe” products, unlikely to inspire all-important brand loyalty.
The major ways to reduce your break-even are:
Reduce your fixed costs
Can you negotiate a lower rent, or sub-let some space? Can some tasks be outsourced at an hourly/volume rate to reduce costs? Is there a better deal on insurance or loan repayments?
Reduce your variable costs and expenses
Look for better deals on things such as parts, shipping and utilities; streamline office procedures and cut waste, but be aware you don’t want to stagnate by cutting too hard.
Increase prices
This assumes you can maintain sales volumes, but you may have more room to manoeuvre than you think
Boost your sales mix
Sit down with your accountant to work out which activities generate the best margins and focus on increasing volumes in those valuable areas.
