Forbes.com:
How can you tell if your business idea will be profitable? The honest answer is, you can’t. But this uncertainty shouldn’t keep you from researching the financial soundness of your idea. Preparing what’s known as a ‘break-even analysis,’ or ‘break-even forecast,’ as well as several other financial projections, can help you determine whether or not your business will succeed.
What a Break-Even Analysis Tells You
A break-even analysis shows you the amount of revenue you’ll need to bring in to cover your expenses, before you make even a dime of profit. If you can attain and surpass your break-even point–that is, if you can easily bring in more than the amount of sales revenue you’ll need to meet your expenses - then your business stands a good chance of making money.
Many experienced entrepreneurs use a break-even analysis as a primary screening tool for new business ventures. They won’t write a complete business plan unless their break-even forecast shows that their projected sales revenue far exceeds their costs of doing business. The good news is that a break-even analysis is part of every business plan, so if you start by doing a break-even analysis now, you’ll have already started work on your business plan. Read full article.
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