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Many new venture starters are least concerned with the concept of break even because they erroneously believe that they will be profitable from day one. Sadly, the vast majority of these ventures don’t survive because as any seasoned entrepreneur or new venture financier will tell you … it can take between 18 months to 2 years to get most new ventures to the point at which they produce a profit. These ventures die because they don’t have the working capital needed to support their losses until it reaches this point.
(Fixed costs per month)/(Selling price – Variable costs) with fixed costs being those costs that don’t change in proportion to a change in sales volume (i.e. Rent) and variable costs being those costs that do (i.e. purchase costs of goods sold).