Business planning tools

Learning Aim B1:

Understand the planning tools businesses
use to predict when they will start making a
profit
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¨  Businesses incur costs
¨  They generate revenue

¨  They make a profit or a loss

Profit = revenue - expenditure

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When businesses start up they often make a
loss for a period of time.

They need to plan when they will start

making a profit.

The point need to have an idea when they

will breakeven.
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Breakeven: the point at which revenue
(from sales) is the same as costs.

At the breakeven point there is no profit and

no loss. The revenue covers the costs.

Revenue = costs.
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Q. Define the term “breakeven point”

“When a business has made enough money through

product sales to cover the cost of making the product (no
profit and no loss)”

Q. What does a business need to know to

start to find out if it is breaking even?
Business planning tools
To plan effectively businesses can use a
Breakeven Chart.

Q. Why would a business want to use a

breakeven analysis?
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