Mar
its costs us £1250 to open each week eg rent rates wages lighting ect… and we have a nett profit of around 80% mark up so whats the easyist way to work out what we need to do to break even ??
i recon it`s arround the £3000 mark ? thanks
Answer:
Say you take £1,800 in a week. With your 80% mark-up, you must have spent £1,000 to buy in that stock. Thus you made £800, but your costs were £1,250, so that only covered about two thirds of your costs.
You actually need to turnover £2,812.50, so your £3,000 was a good guess.
You need some margin for anything that you can't sell at the full 80% mark-up, and any other unplanned costs, so maybe the £3,000 is a good starting point.
Answer:
Multiply 1250 X 1.80= 2250.
That is the gross you have to take per day to brake even.
That ,though, is before paying taxes.
Good luck. But it looks so you will need an accountant.
Answer:
I think that you have left out important information. You have told us what your weekly expenses are, but you haven't told us what the cost of your furniture is. I assume you buy it in, and don't manufacture it.
What I need to know is, what is the average gross profit mark up on the furniture you sell? In order to answer your question, lets make an assumption, that is, for every £100 of furniture cost, you sell it for £200 pounds. So, for every £200 of sales you make a gross profit of £100.
Now, to cover your fixed costs, total sales would need to be as follows - divide £1250 by £100 and multiply by two hundred, which gives sales required of £2500.
Don't base your calculation on net profit, but on gross profit. Strictly speaking, some of your cost isn't fixed cost, ie. it is only incurred when you sell and deliver furniture. The way to deal with this cost is to add it to the cost of furniture when calculating gross profit, and not include it with general overheads. I am thinking here of those costs such as vehicle running costs, particularly petrol, but excluding those costs that you have to incur anyway when the vehicle is not used, licence, depreciation etc.
The reason that break even calculations are based on gross profit, is that the gross profit can be easily calculated and is a constant, so that it is easy to work out a selling price. If you base it on net profit and your sales keep increasing, your mark up figure will appear to increase, whereas in fact, all you are doing is selling more. Another danger is that you will have difficulty in knowing what selling price to arrive at, and may even be tempted to reduce them.
I can assure you that a qualified accountant will tell you exactly the same thing, but he would have more time to explain it to you.
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