Breakeven Analysis » Accumulate Expense Info

The Purpose of Accumulating Expense Info

In order to successfully do the breakeven analysis, you need to gather and/or create the client’s financial information:

  • Current Monthly Fixed Expenses (Dollar Basis)
  • Current Monthly Variable Costs (as a Percentage of Revenue)
  • Any “What if” scenario changes that you would like to consider.
  • Depending on the robustness of the client’s financial system, they may or may not have some of the above inputs. As such, it may be necessary to first create them prior to working on the breakeven analysis.
  • Note: This is optional depending on whether or not you would like to conduct a sensitivity analysis.

Frequency of Accumulating Expense Info

A reasonable goal to set would be to finish the break even analysis within the first 30 days of the engagement. This target may change depending on how much other work and/or projects that you will need to be accomplished before then.

Once you have done the initial break even analysis, it will just be a question of maintaining it by inputting the most recent financial information. Do this maintenance on either a monthly or quarterly basis.

How To Do This

You can be easily obtain historical and YTD financial statements if you use an accounting system such as PeachTree, QuickBooks or Great Plains. However, depending on the client, you may need to work with the Owner(s)/Management to get a list of their expenses.

Once you get the expense info, separate the list to have a Fixed Expense portion and a Variable Expense portion.

Also, as part of your analysis, you may want to discuss any “What if” scenarios with the Owner(s)/Management. They will be able to provide any direction you need with regards to changes in expenses going forward.

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