Break-even Model

Overview

The break-even model that drives this workbook is shown below. Key elements of the model are explained further below:

Model Parameters

Top Line Numbers

This section of the sheet shows things like:

• Price per unit
• Any Discount applied
• Taxes at PoS
• Seller’s commission

Variable Costs

This section shows all variable costs per unit, such as:

• Storage
• Transport
• Handling
• Component
• Conversion
• Abnormal Waste
• Shipping
• Other Direct

This then leaves the Gross Profit / Unit

Semi-Variable Costs

This section shows all semi-variable costs (those that vary with time, but not with volume of units produced). E.g.:

• Marketing Services Expense
• Advertising Expense
• Software
• Salary

This then leaves the Net Income / Unit, after deducting for all Taxes

Fixed Costs

This section shows all non-recurring Capex costs, and include things such as:

• Infrastructure
• Machine Costs

Breakeven Figures

With both the contribution figures, and fixed costs, this section computes the Break Even amounts, in:

• Units, and
• Years

Sensitised Inputs

Note that the cells coloured in “peach” (see Excel sheet further above) are sensitised inputs, - i.e. those whose values are linked to other sheets in the workbook, so that if their values are changed elsewhere in the workbook, we can see directly how the payback period varies here.