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Purpose
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The purpose of this break-even tool is to input all of the fixed and variale costs to determine when and how many units is the break-even point allowing you to decide if a project makes sense to move forward. If you find the break-even is too long, this provides insight into where negotiations or cost reductions could be needed to shorten the break-even point.
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Instructions
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Start with inputs to get all of your costs totaled.
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Delete or hide the rows you don't need. You can right click to do either. Hiding is useful if you think you could need them down the road.
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The input rows are set up to be equal for each month, however, sometimes that is not the case. If you have a developer working on a project, you may allocate 50% of their time for 12 months and then reduce it to zero or increase it to 100% so be sure to take that into account.
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If you need to add rows for salaries or any other, it's easiest to right click in the middle of the rows and insert, and you won't need to update formulas or formatting.
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Enter the start date in cell B1 and the dates going to the right will update by month. Like adding rows, you can insert columns and drag formulas right if there aren't enough by right clicking and inserting. The sheet is set up for 60 months or 5 years.
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On the break even tab, there are growth factors based on column B. If you want to manually enter values, you may, and type over the cells, leaving the growth factors 0%. The idea is to assume growth will happen and avoid manual entry of each value.
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Variable costs are per unit costs. There are fields going across by month so that adjustments can be made as time goes on. You may expect increases or decreases. The total variable costs are calculated on the break even model tab
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Note that the break even point is checking based on cumulative values. If you want to see if each period reaches break even you will need to adjust that to the cell above.
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If you see a bunch of ##### after entering values, your columns aren't wide enough. You can select all, Ctrl + A and then double click a column between the letters and it will auto fit.
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You will see both gross margin and contribution margin on the break even model. They are treated the same in this simpler version. If you want to distinguish between the two you may adjust formulas or right click to hide contribution margin.
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You need to type in zero in column B on inputs tab where values are zero instead of leaving blank. If you run into formulas not working, this is likely why so that you address every area and not see inflated profit due to a section looking like it has no costs.
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MetricRowWhat it shows
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Break-even revenue10Revenue at the first month break-even is reached
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Break-even units9Units sold at the first month break-even is reached
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Break-even months7Count of months before break-even occurs
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Break-even status23“yes” or “no” for each month (indicates whether cumulative revenue covers costs)
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Note that XecuteTheVision is not responsible for outcomes in this file. It is up to you to validate numbers and make decisions for your business. If you have questions regarding a project or investment risk or benefits, consult with your advisors. This tool is meant to get an idea of what outcomes could be and is not meant to guarantee success of a project.
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