Break-even: As one can see from my previous B/E analysis posting the additional sales needed to "breakeven" on a new hire decision can be challenging. With new revenue hard to come by, why would a company add staff if sales have to be increased so much to make a profit on the decision?
At some point companies take a calculated risk and B/E analysis provides the sales goal needed to accomplish their business plan. Alternatively companies adjust their budgets in other expense areas so there's not so much pressure to increase sales to cover the hiring decision. Lastly I want to include the break-even formula to plan profits from a hiring decision. After all a company is in business to make a profit not just to break-even. Using the example from my previous post, the sales target to net for example a $5,000 profit is calculated as follows: $30,000 (New hire expense) + $5,000 (Planned profit)/Gross profit percentage 50% = $70,000 (Increase in Sales required to cover hiring decision and planned profit).
Andrew Jordan, CPA, MSF, CGMA
ajordancpa@comcast.net
About Me
- andrewjordancpa.com
- Andrew J. Jordan, CPA, MSF is a licensed Certified Public Accountant. He achieved a successful career as a CPA, Financial Manager and Consultant for a variety of large and small businesses. Andrew is experienced in creating value for companies in industries ranging from staffing and professional services, retail automotive dealerships, manufacturing and real estate. He also has over 25 years experience assisting individuals and businesses with income tax planning and compliance. Andrew holds a Bachelor of Science degree in Business Administration from Wayne State University in Detroit, MI and a Master of Science in Finance from Walsh College in Troy, MI. His graduate education included significant elective study in Taxation. His services include: Accounting, Tax and Advisory Services. Visit andrewjordancpa.com for more information.
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