So, you want to make a breakeven analysis.

Pro-tip for those wanting to do something really badly that they’re also really afraid of: Post about it all over social media, write a bunch of blog posts about it, link those blog posts to more social media, start another instagram account and ask people to follow it even though there’s nothing to post about. It’s called shame based accountability and so far it’s working super well.

Last week, I was told by my very smart friend that I needed to do a Cash Flow Breakeven Analysis first. And if that didn’t work work out in the black, nothing else mattered. My idea was trash. I appreciate the directness of my very smart friend. Quick googling led me to a super helpful article that explained what exactly that was:

Breakeven Point = Fixed Costs/(Unit Selling Price – Variable Costs)

I read the words. The words made little sense. I checked instagram instead.

Today, I am coming back to that article and putting on my brave hat. Because, yes, doing very simple math and deciphering articles with words that are unfamiliar to me requires some type of bravery. Let’s not pretend it’s not there. It totally is.

(Btw, this is the moment in so many of my ideas before where I close the computer, I temporarily shelf the idea, I never actually come back to it and I stay stagnate. But I’ve already told all of you people that I’m doing this. The accountability is real and therefore, the idea is still alive. Not letting myself off that easy this time.)

Back to the breakeven analysis. Must take two steps back  — no — must take five steps back to take one step forward.

Real first steps:

  1. I must Google half of the words in the article. Learning something new isn’t scary, actually. It’s fascinating. And you know what I like to tell myself? That babies weren’t born knowing all of the words. They had to learn them at some point. And I’m basically a baby business lady, so learning these terms isn’t something I should already know. It’s something I’m learning in the natural development of my lil baby brain.
  2. I need more data. In order to plug those numbers into that badass formula, more research needs to be done.

So, let’s take a few more steps back. (This is like packing a backpack before a hike. No, this is like going to the store to get the snacks to put in the backpack.)

Numbers needed:

  • Fixed costs
    • Rent
    • Utilities
    • Insurance
    • Computers
    • Payroll
    • Equipment
  • Variable costs
    • Labor costs
    • Shipping charges
    • Delivery charges
  • Price per unit – This is a little tricky due to the fact that the “unit” in my case is not a fixed cost. Also,  the different “branches” of the business will require/produce different types of revenue. My liberal use of quotes here is my safety net proving that I “don’t” feel “comfortable” and “confident” in “what I’m sayingggg.” We move forward anyway.
    • Class price (will vary)
    • Retail prices (will vary)
    • Temporary rented space price
    • Permanent rented space price
    • Membership pricing?
  • This will all lead me to my breakeven point! (Are you picturing the breakeven point like the last square on Candy Land? Because I definitely am.)

Must further investigate: 

  • Is retail markup something that is a variable cost?
  • Depreciation on equipment
  • Psychology of pricing

This week’s vocab list: 

  • Variable costs
  • Fixed costs
  • Direct costs
  • Indirect costs
  • Cost-based pricing
  • Price-based pricing

Actions:

  • Must get the numbers
    • Retailers
    • Real Estate
    • Way more people… but let’s start there.
  • Must buy flashcards for vocab words
  • Must take 30 seconds to go in the room, close the door, jump on the bed and celebrate the learning and progress made today

PS – these are the articles I used today. Super helpful, in case you’re wanting to learn too!

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