Break-even is the point at which revenue and total costs are the same, meaning the business is making neither a profit nor a loss. The break-even level of output informs a business of how many products it needs to sell to reach the break-even point (BEP).
Break-even is calculated as follows: Break-even = fixed costs ÷ (selling price − variable costs)
The result of this calculation is always how many products a business needs to sell in order to break even. The calculation in brackets must be completed first.
Example. - A business that sells books at £10 a copy wants to find out when it will Break Even. Or where its BEPoint is.
Assuming their fixed costs are £400
And the selling price (per unit) is £10.
And the variable costs (per unit) are £6.
Therefore: Break-even = £400 ÷ (£10 − £6)
= £400 ÷ £4
= 100 …. which means this business breaks even when it sells 100 Books.
Of course, this is a very easy example as we know it isn’t as straight forward as this especially when we’re talking about international trade.
In this article we’re going to look at the variables, and in some cases, the fixed costs that need to be taken into consideration when looking at the Break-Even Point for an international sale.
This list is not exhaustive as every sector or industry type has nuances that differentiate them, and this can only deal in generic terms.
The basic fixed costs stand for your exports as a proposition of the building, energy, staff and insurances will be applicable to your new market. However, there may be new costs that need to be allocated to this new market for example, your product may have needed to be registered or to have specific packaging designed that is compliant to the local or regional standards? What do you want to do with those costs? This list will run through many of the issues that you may face as a business and some that might not have occurred to you.
Fixed costs might include:
Variable costs might include anything that is specific to that one sale or consignment such as:
Check what you have agreed that the quotation covered these additional costs to ensure that any exporting you do is profitable and stress free. OpenBorders.Direct is here to help you to de-risk international trade leaving you to make a profit and grow your export markets.
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