Why You Need a Break-Even Analysis, Even If Your Business is Tiny and New
If it’s good enough for Walt Disney, it’s good enough for you (and me!)
By Shaunta Grimes
As the original ‘Mary Poppins’ budget of five million dollars continued to grow, I never saw a sad face around the entire Studio. And this made me nervous. I knew the picture would have to gross 10 million dollars for us to break even. But still there was no negative head-shaking. No prophets of doom. Even Roy was happy. He didn’t even ask me to show the unfinished picture to a banker. The horrible thought struck me — suppose the staff had finally conceded that I knew what I was doing.
— Walt Disney
I found the quote above when I set out to find a way to start this post. Because, really, how do you make something called a ‘break-even analysis’ exciting (or even interesting)?
Break-even analysis sounds boring. Like accounting and getting your teeth cleaned and watching paint dry, all rolled into one. Seriously. Here’s the definition, from Investopia.
Break-even analysis calculates a margin of safety where an asset price, or a firm’s revenues, can fall and still stay above the break-even point.
Woof. What does that even mean? And why do we even care? If we’re not the founder of a fancy start-up or owner of a major corporation, do we even need something like a break-even analysis on our radar?
That Walt Disney quote tickled me, because it perfectly illustrates why we need to even think about something like a break-even analysis, even if our business is creative and maybe even doesn’t quite feel like a business yet.
Mary Poppins was released in 1964. I don’t know about you, but the idea of anything I ever do needing to make $10 million to break even is har to even imagine. It’s even harder when you take a look at this calculator and realize the kind of money we’re really talking about.
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