What is my break-even point?
What is my break-even point?
Knowing what you need to earn to breakeven is something that every business owner needs to know. It helps you plan your work and helps you actually make a profit.
Do you know what profit you are making?
One of the major problems that we see with creative agencies is that they simply don’t know how much money they are making each month. They know that they are busy and that their team are busy working on projects but they don’t actually know what that means for them each month in their bank account.
They have money in the bank, but what is owed in taxes and vat and what they need to save for a lot of them is a mystery. They don’t have any clarity on what they need to save and what they can spend.
The problem is that agency owners don’t know what their breakeven point is each month. That is the amount of money that they need to earn to keep everything running. What should be included in this? Should the owner’s wages and dividends be included in this or should it be on top? There is a lack of clarity even on how this should be calculated let alone what it is.
I don’t know what we need to earn each month?
Not having a clear understanding of that you need to earn each month to pay the bills will impact the profitability of your business. When you get clear on what you need to earn each month you can plan your team’s work each month. You can plan what they need to do and what work will need to be completed.
You have a focus in the work that you need to compete to earn this money and then a plan on what you need to do to earn above the break-even point. The point where it gets really interesting and that you can start to see the extra profits and growth that you are making.
When you focus on numbers and targets generally they improve. Focus on your money that you earn each month and try to beat it month on month and it will slowly creep upwards.
Ignore this number and things get sloppy. You miss deadlines for work, your staff have no focus and you don’t have a way to plan your team’s work for the next month.
The planning and improvement always start with the numbers and finances first.
I’m not sure what money I can take out of my business?
All these problems generally lead to one thing, as a business owner you are not taking the money out of your business that you are entitled to. Your responsibility as the owner of the business is to make sure that the bills are paid and that the staff are paid their wages and taxes are paid.
It’s likely that in all of this you are putting yourself last. That you pay everyone else and that you take what is left. If you are doing this, why are you in business in the first place? Do you want to run a business to provide employment for your staff? Or do you want to run your business to provide your staff with a great place to work and where you take the money that you are entitled to and you have a great life.
These should be looking towards the latter. But to do that you need to get clear on what you need to earn each month so you can pay your staff well, you can give them a great place to work and that you are adequately rewarded for taking all this on.
How does this impact my business and my life?
When you don’t take out the money from your business that you are entitled to, you don’t have the house that you want. You don’t have the holidays that you need to take from the business that you need to. You don’t have the freedom to live your life that you want.
You won’t treat yourself fairly and more than likely this starts with taking the money out that you are entitled. But this will also mean that you are not taking the holidays that you need. That you are again working long hours for little pay.
This all leads to a downward spiral that you become less motivated with your business and less interested in it. Like your employees you need to be financially rewarded to see that all the work that you are putting in is actually worthwhile.
You stop doing that and the motivation to continue will slowly ebb away. Why do all this when you can get a job yourself and not have the stress of running a business.
I need help to see what I can pay myself and what I can spend!
To get that excitement back in to running your business you need to be able to take the money out that you deserve and also take the holidays that you want. There has to be an end goal to all of this. However you say to yourself I’ll take the money when the business can support it, that time really has to be now.
You are going to need help to do all of this. The support of a virtual finance team who can help you work out what you break even point is and how that might change if you take on more work or take on more staff. You need help to work out what you can actually take out of your business and to more importantly to make sure you take it each month.
Just as your staff will get de-motivated when they are not getting paid, you will too. You need to see that reward so that you have that excitement to work on your business again and that you can start to see that all the work is worthwhile.
You need to see what the break-even point is, you need to work to wards your goals of work to be completed and money earned and then take the money that you deserve each month.