We all know that sales are the backbone of a business, but do you know how much income you need to keep the business going?
When you start out in business the key is to focus on sales, sales and more sales whilst at the same time there are bills, bills and more bills to pay usually requiring you to use some of your savings to pay the bills.
Over time as your business grows, there will come a time when the income is sufficient to pay the bills. Happy days. The next step at this point is to start to pay yourself a salary (or start drawing from the business if you’re a sole trader) and then as the business grows more, you’ll employ staff to support you.
At each phase of your business, it’s important to know what your minimum income is. This is what accountants call break even as it is when your income equals your expenses. However, there is a trap for young players in this definition as it doesn’t take into account...