when do you break even

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celtic

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Just wondering when do you know when you break even and how do you work it out. ie. does it include wages for the rest of the year. I am self employed and started business in January this year. ( service industry)
average takings were 4500 per month and fixed expenses are 1100 per month. I still owe about 1000 euro for supplies for office which are one off expenses and wont need reordering. When would I break even. Does break mean start up costs are all paid or does it mean wages for the year are made. Still havent had time to do a business course and accountant does all accounts for me. Just wondering how I stand.
Thanks
 
broadly speaking you break even when your monthly income is equal to your monthly outgoings. However there are some outgoings which are classed as capital expenditure and these can be written off over a period of time ,depends on the nature of the item purchased and its expected lifespan.There is also the vat issue to be considered ie are you in a reclaim situation or do you owe vat. Its not so simple to work out but your accountant should be able to tell you
Based on the raw figures above if they are complete it looks like you are making a profit however do fixed expenses include everything wages/rent/rates/bank chgs/phone /printing/motor/travel etc etc
 
Thanks for reply dinjoecurry.
Fixed expenses are following: rent , advertising, esb of office, computer hp and office phone and insurance. it doesnt include mobile phone bill which would be about 200 pm and diesel about 60 per week. I have no staff to pay. My wage has being what is left over each month. I cant afford staff yet. So would that mean I have broke even. I am starting a business account course in september so I should be a bit cleverer then. I am not registered for vat yet on advice of accountant.
 
Well you sound like you are making 3,400 euro profit per month, which equates to a gross salary of just over 40k per annum, so yes, you can definitely say you've 'broken even' although in the service business, the big cost is your time, so breaking even is simply a matter of what you value yourself at. If you could get a 40k+ salary by working for someone, then perhaps you havent broken even yet.
 
It looks like you are making about 3K per month It's not bad for start up Have you a bank account/overdraft if so that will be another expense.Be sure you include every expense eg printing/stamps/accountancy costs when estimating your outgoings.If the company has any potential to grow it looks on the face of it to be a good way for you to go Can't beat working for yourself
 
celtic said:
Just wondering when do you know when you break even and how do you work it out. ie. does it include wages for the rest of the year. I am self employed and started business in January this year. ( service industry)
average takings were 4500 per month and fixed expenses are 1100 per month. I still owe about 1000 euro for supplies for office which are one off expenses and wont need reordering. When would I break even. Does break mean start up costs are all paid or does it mean wages for the year are made. Still havent had time to do a business course and accountant does all accounts for me. Just wondering how I stand.
Thanks
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Break even is when you earn equal to or more than you spend each month.
So add up all the money that goes out each month.
Then calculate all the money that comes in each month.

If you are not taking a regular salary, then your break even point will be artifical as it is not sustainable, as eventually you will need to starting taking a regular income each month.

Some companies raise money to fund their operations. That take on staff and other expenses (rent,energy,marketing) to grow sales, it can take them years to get to a break even point. But for a sole trader, you would want to break even within a few months or its not viable.
 
dinjoecurry said:
Can't beat working for yourself
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Try telling that to the fellow whose business has failed or is sick and cannot get any social welfare. Try telling that to the businessman that is completely wound up in red tape with increasing overheads, fuel costs, minimum wage. Try telling that to the business man that is at work hours before his staff and still sees them driving out the gate before him in the evening.
Self employment is not everything it's cracked up to be.
 
Self employment is not everything it's cracked up to be.
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Indeed, well said.
In addition, there's an also a constant underlying threat of employee litigation.
A very aggressive Revenue that would rather put you out of business than take the more positive action of other countries and help you with payment schedules etc.
To top if off, 'S' class directors also lose their PAYE tax credit.

It's a complete disincentive for anyone to try starting their own business.
 
Have worked for myself for past 25years you can't beat it.If something goes wrong its my fault so its up to me to make sure it does not Sure the staff may leave first but thats their job If the company does very well I pay myself very well if not I don't --so what, its in my hands As for the PAYE tax credit its a loss but the way pensions can work for self employed far out- weigh that.To be selfemployed entails risks and rewards and remember if it does'nt work out go get a job
 
As for the PAYE tax credit its a loss but the way pensions can work for self employed far out- weigh that
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Well not being able to afford a pension, I'd much prefer my tax credits back.
 
Talk to your accountant, be sure you're not overlooking some costs ( VAT payments, PRSI contributions etc)...better safe than sorry!
 
Self employment works if you plan it right and know what you are getting into.

Breakeven is a term mostly used when forecasting. you identify your fixed overheads like rent, rates, utilities, staff wages etc.

Add to this your product costs and calculate how much sales you need to breakeven.

All sales above this point will be profit, anything less will be a loss.
 
Well said Joe. Been there, done that, got Epilepsy . I'm on my own.

Make sure you factor in some sort of illness cover or you are on your own.
 
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