THA 061: Know Your Daily Sales Break Even Number

• Knowing your break-even point — the point at which total cost and total revenue are equal is important to running a business. It is not just good enough to reach your daily break even, you must exceed it if you are to stay in business.
• Knowing the break-even point is helpful in deciding gross margin on parts, labor rates, setting sales budgets and preparing a business plan. If you do not reach your daily break-even then there is a great chance that you had a loss of profit for the day.
• Find the worksheet calculator for break-even, a promised in the episode, at the end of the talking points.
• Critical to know you’re breakeven so you know if you’re digging a hole.
• Include monthly loan payments in expenses to have the cash flow to pay them.
• Calculate your break even at least every six months, quarterly preferred.
• Watch for expense creep. You must pay attention to your expenses closely.
  1. Health insurance.
  2. Fuel costs.
  3. Energy costs.
  4. Waste/Recycling costs.
  5. Subscriptions and fees.
  6. Shop supplies, gloves, eye protection.
  7. Phone and internet invoices.
  8. To name a few.
• Gross Margin Creep and accuracy.
  1. Costs of oil and staples. Review supplier invoices and be sure that you are making the right margin.
  2. Inventory on the shelf, is your computer cost reflected properly?
  3. Credits for cores, alleged defective, new returns.
• Know your break-even number but don’t focus on it. Don’t focus on surviving, focus on thriving. Calculate a growth number and focus on that.
• We are activity driven and feel that fixing more cars per day will raise your sales and margin.
• John Cooper valued his business coach, John Francis in showing him the light for break even and to create a sales goal that included a strong profit.
• Components of a Break-Even Calculator
  1. YTD Gross Profit Percentage
  2. Average Monthly Expenses
  3. Monthly Depreciation
  4. Monthly Principle Payment (loans)
  5. Days Open Per Month
• Power of gross profit in break-even number. Run the calculator and see the impact margin makes to your break-even. The higher your Gross Margin the lower your Break Even will be.
• Gross Margin management is important. Be sure your costs are correct in your SMS and your margin on labor has been reviewed quarterly or at least twice a year.
• You must normalize your expenses and be sure there are only expenses directly for the business in your P & L.
• Expense creep. You must watch your expenses if not they will grow. Carefully review all expense invoices before they are paid.
• Be careful if you are installing an engine that will carry lower margins. You will make your sales nut but may not hit your gross margin goal. Those anomalies happen. Be aware. This demonstrates that break-even is not an exact science.
• Billed hours per day is a strong indicator.
  1. What are your potential billed hours per tech?
  2. Your labor inventory.
• Goal setting must include stretching your number. Incredible growth happens when you intelligently stretch beyond the norm. You may have to include more people to accomplish this and keep watch on when that new hire many need to happen.
  1. You need to have the people to reach your stretch goal.
  2. A good idea to plan out three years ahead.
• Michelangelo said: “The danger in setting goals is not setting them to high and missing them; it is setting them too low and hitting them. “
  1. It must be your goal, not your coaches, and it must be a stretch.
• John Francis: If you are hitting your goals 60% of the time you are doing good in having set stretch goals.

Download The Break Even Calculator Spread Sheet offered by John Francis Here.