I have worked with hundreds of passionate business owners with a fire in their belly who are ready to take the world by storm. It’s inspiring! But sometimes, that excitement can lead to decisions that aren’t the best for the long-term health of the business.  Maybe you rent a swanky office that’s bigger than you really need or buy up massive inventory because of a bulk discount that’s too good to miss. Too many of these kinds of choices can lead to a financial squeeze, making it difficult to reach profitability.

That’s where understanding your financial breakeven can help.

Breakeven is that magic number where your expenses (what’s going out) equal your revenue (what’s coming in). It’s a key factor for any growing business. 

Planning for the minimum amount you must sell to cover your spending can be the saving grace that keeps your company afloat during unstable economic times.

A sense of financial stability can be even more important for entrepreneurs of color.  Historically, we get hit harder in economic downturns.  To give your company the best chance at long-term success, black and brown business owners must employ a sound financial strategy. And breakeven is just the hack you need to get there.

Here are a few ways breakeven can help you build a profitable and sustainable business:

• GOAL SETTING — With a clear breakeven target, you can set realistic and achievable goals for sales and growth. No more flying blind; You’ll know exactly how much revenue you need to generate each month or quarter to stay on track.
• BUDGETING — Knowing your breakeven also helps you prioritize spending. If you aren’t monitoring your breakeven, you may not realize your costs are rising, making it harder to reach profitability.
• PROFITABILITY — You can make confident choices and avoid costly mistakes. Without understanding breakeven point, you might set your prices that are too low to cover your costs. So you might have lots of sales but still be losing money on each transaction.

Reaching breakeven isn’t just about a number; it’s a stepping stone to financial freedom. It will help you to build a thriving business, on your own terms.

Stay tuned . . . In this blog series, we’re walking you through an easy process for using breakeven targets to crush your profit goals.  Don’t miss the next article, where I’ll share a quick and dirty method for understanding how your business operates.