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How much money do you need for your business? To get it started and running, to pay salaries to your employees, to keep it operational, to break-even, to earn a profit! How much do you think you need?
Our years of experience of working with several startup entrepreneurs have made us appreciate the dilemma of raising funds for a business. With this business calculator, we hope to assist and encourage more entrepreneurs to achieve his/her dream.
Vakilsearch’s business setup calculator can also help forecast annual expenditure and savings. It involves including fixed and variable elements and evaluating pricing strategy to enable the business to break even or make a profit.
It’s simple and easy to use the calculator, estimate cost and calculate profit, and set you on the path to starting your dream business.
Vakilsearch’s Business Calculator is in many ways is a company valuation calculator. It considers the cost of setting up a company including capital and operational expenditure, and revenue estimation. To use the company valuation calculator or the business calculator there are a total of six steps involved;
The first step involves providing details related to personal information such as name, contact details, the primary language of communication, and the name of the startup.
The second step involves providing business-related information. The business industry you are part of, the primary and secondary activity of the business. This information will help to provide the details on the licenses required (the cost) and the registration process.
The third step involves one-time capital expenditure details, security deposit, infrastructure costs, compliance, and incorporation.
The fourth step involves operational expenditure, such as monthly recurring costs. These include rent, payroll, insurance, utilities, GST filings, etc
The fifth step is the revenue estimation. It involves taking into account the average sales per unit, average sales per month, average individual sales of every month, etc. This will help identify how long until the business earns revenue
Finally, the sixth cost is will provide you with the setup cost, and first-month cost, and the months required for reaching the breakeven.
The break-even point formula helps identify the break-even sales formula for the company or the business. In other words, the break-even point formula refers to the safest revenue margin for the business. At this point, the business can meet all its expenses and run its operations, but at zero profit. The break-even sales formula points to the total number of units sold at a particular unit price, to meet the costs (fixed and variable) involved in producing and selling those products. This because the break-even sales formula is to be considered as a business tool. In other words, using this break-even formula one can calculate when a business can be successful or arrive at a profit. The break-even formula achieves this by matching total revenues against total expenditure.
Break-even point (Units to be sold) = Total Fixed costs / Unit sales price - variable cost per unit
For the purpose of understanding the concept of break-even point formula, we are going to illustrate a break-even point example using unit sales price and total cost of a business.
Fixed Cost = Rs.100000
Variable Cost/unit = Rs.400
Unit sales price = Rs.500
Break even point = Rs.100000 / (Rs.500 - Rs.400)
Break-even point or units to be sold to break even = 1000
The break-even analysis formula is used to determine the units required to produce a profit. The Break-even analysis formula uses the break-even formula to calculate the units to be sold to break even. However, we also multiply the unit sales price with the respective units to be sold and arrive at the break-even point in Rupees.
With reference to the above example, the break-even point is 1000. Unit sales price Rs.500. So as per break-even analysis formula, 1000 X Rs.500 = Rs.500,000 is the break-even point in Rupees.
Now, using the break-even formula analysis we can calculate the units to be produced to generate a profit!
The break-even calculator employs the formulas used above and allows us to target the number of units that need to be produced to generate profit. In principle, the break-even calculator functions the same way as a gross salary calculator. The gross salary calculator takes into account a person’s fixed components of a salary and the variable components. The gross salary calculator then calculates the number of days to pay out the gross salary. Now, in the case of break-even point calculator, you need to take into account the profit you want, to calculate the units you need to produce.
Break-even point (Units to be sold for desire profit) = (Profit needed in Rupees / Unit sales price - variable cost per unit) + Break-even point (Units to be sold)
Taking into account the above Break-even point example;
Rs.10000/(Rs.500-Rs.400) + 1000 = 1100 units
The break-even calculator, with the break-even point formula, establishes the relationship between pricing and costs incurred in sales and production. As a business owner, this is useful information, as it helps in running a cost-volume-profit analysis, break-even analysis, and sales-profit analysis. This helps the business owner to not just establish the costs involved in setting up a business, but also plan on producing and selling the required number of units to break-even, and make a profit.
Vakilsearch’s business setup calculator is a fantastic tool to figure out the funds required to set up your business. You can use the business calculator to not just figure how to break even, but also how to target the profit you desire. It can be an essential tool when it comes to fundraising and one that can be relied upon for new or seasoned entrepreneurs.
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