Difference between revisions of "Introduction to entrepreneurship/IENT103/Valuing/Break-even"
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| − | [[File:Simple_balance_scales-02.jpg|320px|right]]Generally speaking, the value of a business is | + | [[File:Simple_balance_scales-02.jpg|320px|right]]Generally speaking, the value of a business is based on its future profit potential. |
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| + | The pre-seed funding stage commences with your idea for a new business, and with initial funding for the entrepreneur to progress a working prototype or [https://en.wikipedia.org/wiki/Minimum_viable_product minimum viable product]. The objective of this phase is to achieve the '''break-even point''', that is, the point where a business starts to make a profit. It is important, then, for you to | ||
| + | * know how to calculate the break-even point, and | ||
| + | * consider how long it might take to achieve this milestone for your planning.{{clear}} | ||
{{IDevice | {{IDevice | ||
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;Break-even point | ;Break-even point | ||
| − | :The break even point is the production or operational level | + | :The break-even point is the production or operational level at which total revenue is equal to total expenses. In other words, you do not make a profit or a loss, but you ''break even''. |
;Fixed Costs | ;Fixed Costs | ||
| − | : | + | :These are expenses that are not dependent on the amount of goods or services produced by the business. Examples include rent and insurance. |
;Variable Costs | ;Variable Costs | ||
| − | : | + | :These are costs that are volume-related (such as the cost of raw materials), and are paid per quantity or unit produced. |
}} | }} | ||
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|Title=Reading - Break-even point | |Title=Reading - Break-even point | ||
|body= | |body= | ||
| − | Read the following section of the Introduction to Business course published by Lumen Learning: | + | Read the following section of the ''Introduction to Business'' course published by Lumen Learning: |
* Lumen Learning. (n.d.). [https://courses.lumenlearning.com/wmopen-introductiontobusiness/chapter/introduction-to-the-break-even-point/ The Break-Even Point] | * Lumen Learning. (n.d.). [https://courses.lumenlearning.com/wmopen-introductiontobusiness/chapter/introduction-to-the-break-even-point/ The Break-Even Point] | ||
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'''Tasks'''<br> | '''Tasks'''<br> | ||
Using the outputs from the [[Introduction_to_entrepreneurship/IENT103/Statements/Start|financial statements learning challenge]]: | Using the outputs from the [[Introduction_to_entrepreneurship/IENT103/Statements/Start|financial statements learning challenge]]: | ||
| − | * Estimate the break-even point for your start-up business, i.e how many units or services | + | * Estimate the break-even point for your start-up business, i.e how many units or services you will need to sell to break even. |
| − | * Estimate how long it will take for your start-up to break-even. | + | * Estimate how long it will take for your start-up to break even. |
| + | }} | ||
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| + | {{IDevice | ||
| + | |theme=line | ||
| + | |type=Reflection | ||
| + | |title=Reflection | ||
| + | |body= | ||
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| + | In your '''learning journal blog''', write a short reflection (200-250 words) on what you have learned about the break-even point, and why it is important for entrepreneurs to consider. For example, what is the main purpose of conducting a break-even analysis? What would happen to your break-even point if your fixed costs were to increase? | ||
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| + | # {{:Introduction_to_entrepreneurship/Links/IENT103/Tag_blogpost}} | ||
}} | }} | ||
Latest revision as of 22:52, 18 February 2019
The pre-seed funding stage commences with your idea for a new business, and with initial funding for the entrepreneur to progress a working prototype or minimum viable product. The objective of this phase is to achieve the break-even point, that is, the point where a business starts to make a profit. It is important, then, for you to
- know how to calculate the break-even point, and
- consider how long it might take to achieve this milestone for your planning.
