There are millions of startups launched every day. Not all of them achieve the success they deserve, but some are successful because of the many factors working behind. However, one of the primary factors working for the success of any startups is the profits they earn. In order to cover their basic expenses and also save on for future updates, startups wish to earn higher profits that can lead them to upgrade their business with newer trends and maintain their pace with the continuous changes.
Money: The Hero of Your Entire Business
Money doesn't grow on trees. In order to earn money, you will have to work hard and achieve success in your business. It is the driving force of your startup that also decides whether your startup fails or achieves success. Therefore, earning more profits is necessary as it helps cover your basic expenses and also defines your business success. But where does break-even point fit into the picture?
Break-Even Point: First milestone to Success
Break-even point is the point where your business is earning profits enough to cover your basic expenses and is dedicatedly serving all your needs. Not a penny less, not a penny more.
Hence, this is the point where your business starts seeing the peak of success and starts marching towards it. Therefore, when starting off your business, you must first set your goal to reach the break-even point as soon as possible as it helps you plan out your future clearly by relieving you from all the financial worries and defines your startup to be self-sufficient and leads your way further.
Here are the stages that help you define and understand your startup's break-even point and also depicts the importance it holds for startups like yours and what all can be done to achieve it as soon as possible.
Helps You Importance Break-Even Point Holds for Startups: Know How to Make Profits Raise Funds
For startups, there are two primary sources of money: customers and investors. Customers will buy your products or avail your services and pay the charges accordingly. While investors are required to be convinced to put their money in your business and help you make your business operations efficient.
Therefore, when it comes to convincing the investors, the businesses that cover their basic expenses and which are able to pay their bills are chosen over the businesses that can not even cover their expenses.
Therefore, reaching your business's break-even point is important to raise more funds from investors as it takes you one step closer to success with helping you cover all your expenses and declaring you as a reliable startup where investors can invest their money safely.
Supports Business Decisions
As you have reached the break-even point, you are covering all your business bills successfully. Hence, it is now time for you to consider implementing new and better concepts in your business that can lead you to success with helping you decide and invest in your future goals.
Helps In Increasing Sales
Since you have reached your break-even point, now you know what prices and the quantity your product is required to be sold for and after concluding the analysis for break-even point, businesses generally reach the conclusion where they can decide to decrease or increase the prices of their products accordingly which can later help in increasing sales.
By deciding to lower the prices of the most popular products you craft, you can increase the sales of these products and earn profits per widget that are small but all together- results in increased profits. Therefore, conducting the analysis for break-even point helps you understand and set your prices according to market demands and in turn increases the sales of products and ultimately, increases the profits.
Supports and Encourages Discounts
As the analysis done for break-even point provides you insights into the fixed market prices you have set and the profits you make from them, it helps you determine whether you should consider discounting the prices or not. During the season of sale and discounts, you can take advantage of the analysis done and decide on the lowest prices that results in some amount of profit for you and later helps you in increasing your profits by having sold maximum item quantities.
Therefore, discounting the prices according to customer requirements and market conditions is made easy for businesses knowing and understanding their break-even point to confidently increase the discounts on total amounts and target larger user base from the market.
As break-even point defines the ultimate value to which your profits must reach, it also guides you to put control on expenses by knowing just where to stop to avoid debts. As the earned profits must be saved for future use and also to cover expenses of your business, expense control is all about saving more while completing all your set targets and paying your bills.
Providing more than just business control, break-even point defines your business limits and helps you grow more with supporting in building an excellent strategy that can help you answer all your financial demands by completing the user queries and completing their requirements. Break-even point analysis is all about finding out your fixed and variable costs' ratio with the money you earn and it helps you derive the best business strategy to follow to ensure the success of your startup.