How to determine the minimum sales necessary for a profitable business?

All bussiness, have to have sales to make a profit. That is the volume of sales is important depending on the cost structure of a business. That is if the sales volume is less than a particualar volume the business will not make a profit. This is called break-even point. All business particualrly new business msut evaluate whether they can get that volume of sales in the first few years of operation. if depending on the market and competition if they have sufficient evidence they cannot get the sales volume in the first few years then the business will not ba a viable venture if they cannot bosst sales by whatever means. That is sles management for a new business is vital and marketing is very important in these years. One also must control fixed costs and varibakle cost so that it can have a profit margin comparable to the sector or more than the sector of industry it is operating. That is it must be cost and quality competitive.

Any business cost can be divided in to fixed and variable cost. Fixed cost are costs which are constant irrespective of the volume of activity. However ever some costs are variable and it depends on the level of activity. The break-even point is derived by dividing the fixed cost by selling price - variable cost per unit is dollar terms. For example if a business has 5000 as fixed cost and selling price 5 and variable cost 3, then the break even point is 5000/2 = 2500 in dollar value. Put it simply, the break even point reduces if fixed costs are low and contribution margin is higher. That is by proper cost control and improve efficency of production consistently a business can become profitable even with a low level of sales and there fore becomes viable even in low demand conditions. That is, it can mange risks effectively and become viable in any market conditions. The business msut diversify where it can minimize fixed cost and improve contribution margin. This break even analysis give insifhts and practical suggestion what a business msut do to be competitive. if any business do not add value and manage risk they become vulnerable to market conditions and will not survive in dynamic and uncertain compettive market enviornment. I hope this helps many small business operators as for then cashflow is the crucial one for them to survive and they msut  be able to promote and expand in fields where there is potential to sales growth at a considerable profit margin and consider cost control and financial mnagement at the centre of their business success strategy.