As I’m an accountant/business consultant, I thought I’d add a “bean-counter’s” perspective to supplement your valid comments.

Break-even Analysis helps establish what a business person has to sell, weekly, monthly or annually, to cover the costs of them doing business.

If they are able to predict their costs and sales accurately, conducting breakeven analysis should be a “fairly” straightforward calculation. A company “breaks-even” when its total revenue (sales) equals its total overheads (expenses). At this breakeven point, the business has achieved neither a profit or loss. This often ignored calculation is critical for business owners because the breakeven point is the minimum level needed when establishing sales and profit margins.

The break-even analysis depends on several assumptions being made for revenue, per-unit cost, and fixed costs. Like most forecasting, these are seldom exact figures.

It’s important to note that breakeven analysis isn’t a predictor of demand. If a business person enters a market with either a poor product with no demaqnd or with the wrong price, they may find it extremely difficult to achieve a breakeven point.

Great comments! “…will those first wave of customers accept a price rise from you later?”

Usually not. We set patterns and attract people that want the same pattern repeated. And they all have friends who want that price, too.

I’m convinced that wherever we set ourselves up in the economy, we will find customers at that price. And they have friends who will buy at that price, too. If we go after the “cheap” crowd it’s tough to move up. If we go after those who want performance over price, we’re likely to have a much better business long term.

It doesn’t matter if you are making a loss on every sale as long as there are customers coming in through the door.

That’s their mind set.

But will those first wave of customers accept a price rise from you later? Perhaps not. But perhaps that first wave has served their purpose – they ironed out the bugs in your products/service/proceedures, and now it’s time to let them go. Or, as you suggest Charles, perhaps you should price high right from the start. You might be sitting there twiddling your thumbs for the first few months but at least you’ll have excess time to dazzle the customers that you do serve with excellent service.

Thanks Charles