How To
Grow Your Small Or Home Based Business To The Break-Even Level
By Tom Egelhoff
 Why do small businesses fail?
One of the main reasons is that they never reach, or grow beyond,
the elusive break-even point. That time in business where revenues
finally equal expenses.
Up to this point the business must be subsidized by either
borrowed money or money that comes out of the owners pocket.
90% of all home-based businesses start this way.
When a business reaches the break-even point the business
is self-sustaining and appears on the verge of being a viable
business.
However, you the owner aren't making any money yet. Reaching
the break-even point is just the first step to business success.
Let's look at the steps necessary to grow a small business
to the break-even point.
What is the definition of the break-even point?
There are actually several break-even points I will deal with
in this article. The first one is the month-to-month break-even
point. To fully explain this first definition you must first
understand another term called profit.
You started your business to make a profit. The amount of
profit you receive is based on the success of the business. It
there is no profit, you don't get paid. Don't tell me that your
salary is part of the break-even expenses of the business because
that won't fly. You can only take profit out of a business for
your salary. You can include any employees you have as a salary
expense but you can't include yours.
Month-To-Month Break-Even
When I started this web site, I had zero book sales to offset
my expenses. At the beginning I had to assume all the expenses
in the operation of the site. As the site began to grow and books
begin to sell, the amount of my personal investment begin to
decline. Soon I reached the second break-even plateau which is
Cash In Equals Cash Out Break-Even
At this point you no longer have to subsidize the business.
You should also be able to take a livable wage out of the business.
You still aren't making a profit yet because all profit is going
toward your livable wage, but the business is on the threshold
of making a profit.
Most people who reach this point are good managers and won't
have their success denied. They have learned the expenses and
challenges of their businesses inside and out. This point must
be reached before the owners cash contributions run out.
Good News And Bad News
The good news is that once you've reached this point, the
business can exist indefinitely. The bad news is, you've bought
a job. The business is maintaining itself and you have a livable
wage but what about all the money you poured into the business
during start-up? Is it gone forever? What about retirement? Do
you really want a business that you must personally maintain
day in and day out for the next 40 years?
This brings us to the final break-even plateau and that is:
From day one to today
You want to move from buying a job, to owning a business.
You want to move past the livable wage to a respectable wage.
When the business reaches this point over a period of time the
business should produce enough profit to reimburse the owner
for all monies invested in the start-up of the business with
assets left over. These assets can be invested to produce additional
income for the business and/or the owner.
Here is where business ceases to be a task or job and becomes
fun and exciting.
Plan of Attack
How to break even? Here are some things to be aware of. Start
one piece at a time. (See: How
To Do A Break-Even Analysis) Calculate the break even
point on every product or service you offer. Eliminate any unprofitable
items. Don't give your business away. Don't devalue your services
or products just to get the business.
Look at every aspect of your business for ways to reduce expenses
without sacrificing quality or customer service. Look for ways
to increase profits. Take advantage of discounts whenever possible.
(See: How
To Control Expenses And Increase Profitability)
Look for ways to promote your business at little or no cost.
(See: How
To Get Publicity For Your Home Based Business) The most
powerful weapon against expenses is a satisfied customer who
buys over and over again. (See: Customer
Service: How to get first time customers to come back)
The break-even point in not beyond your control. You control
what happens in your business. The break-even point is a goal,
just like any other goal. Set specific objectives and strategies
to meet this goal and move on toward big profits.
(Return
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This article may be reproduced for your non-profit
group or organization provided it is not altered in any way and
the following is attached:
©1998 - 2004 Eagle Marketing PO Box 271 Bozeman, MT
59771-0271
http://www.smalltownmarketing.com - (406) 585-0219 - Toll FREE
(888) 550-6100
email: tommail@smalltownmarketing.com
Based in Bozeman, MT, Tom Egelhoff is the author of How To Market, Advertise & Promote Your
Business Or Service In A Small Town, and The
Small Town Advertising Handbook: How To Say More And Spend Less.
He is also a seminar and workshop presenter
and trainer. He may be reached at 888-550-6100 or PO Box
271 Bozeman, MT 59771-0271
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