Break-Even Percentage

[rob1]

Does anyone have any ideas for lowering break-even percentage? I am running almost understaffed and my expenses are fairly low but my break-even percentage is at about 32%.

[cwalden]

THIN OUT YOUR INVENTORY

[cwalden]

THIN OUT YOUR INVENTORY ie GET RID OF OLD STUFF

[LSN]

Break Even is the relationship between cost of goods sold (department cost of sales) and the cost of doing business (department expenses). To calculate break even, divide YTD Cost of Sales BY YTD Department Expenses. The lower the break even the better. To reduce a high break even, you must increase cost of goods sold by selling more inventory (not paying more for the parts)while maintaining and/or reducing your department expenses. It's a doable but masterful challenge! Best of luck.

[callbob]

All this time I have had it wrong. I thought Breakeven was the relationship of GROSS PROFIT (Sales less Cost of Goods Sold) to Expenses. The idea is correct, to lower break even you must:
Sell more while maintaining gross
or
Sell the same at higher gross
or
Reduce expenses
or
Cook the books (it worked for WorldCom and others for a while)
or
A combination of the first three.

Just takes smart selling and hard work. No secret formula required.

[GLB]

"Break Even" is another one of those "games" like liars poker. Very few Parts Managers have complete control
over the expenses that are charged to their departments. This means that the "break even" percentage is bogus.
I have heard Dealers say your break even point is 30% and your wholesale profit is only 22% so your losing 8%
on every wholesale sale! Duh! What do we get paid in? Dollars or percentage points? The only good thing I have
ever found for using break even numbers for is to show the dealer principal that he is charging to much to the parts
department.

[Rotnjonny]

Sales to break even is calculated by taking your total expenses for a given period of time (year) and dividing by your gross profit retention percentage (after adjustments) There are only two ways of changing your sales to break even:

1. Increase your gross profit retention (as a percentage)

2. Decreasing your expenses structure.

If you have an erradict work mix, it wll have significant ramifications to your gross profit percentage, which will impact the sales to breakeven.

If you have erradict expenses, the same will occur.

I agree that we all bank dollars and cents. However, if you want to calculate what the sales requirements is to actually have dollars and cents left to take to the bank, you need to know your sales requirement.

Note: This formula is valid for any known expense. Example: How much will my sales need to increase to pay for the new parts driver that I just hired? This calculation will work to determine that!