The break-even point is the point at which the contribution margin of the project is reached. In other words, the sum of all revenues generated exceeds the resources expended on a project. If the break-even point is exceeded, profits are generated; if it is not reached, losses are incurred.
The break-even point in projects can be calculated if possible revenues can be offset against the costs incurred by a project.
From an economic mathematical point of view, the break-even point is a zero point of the profit function, just like the profit limit. At both points, revenues and costs are equal. As soon as the break-even point is reached, a profit is made, and as soon as the break-even point is reached, a loss is incurred.
As a rule, the break-even point is not reached until some time after completion of the project. For this reason, you should simulate the expected revenues in time to get the break-even point.
The best way to do this in smenso is to use a corresponding calculation in the list together with a dashboard widget. How this works is explained in this article:
Depending on the structure of the project, the project calculation or project planning looks different.
To illustrate the functionality in a simple example, let's take the acquisition, conversion and rental of 2 apartments.
In the concrete example we plan the costs for the acquisition of one apartment as planning costs within one task/subtask in smenso (one task = one apartment). In doing so, we create a more detailed cost planning in the subtasks and sum them up into the main task.
Of course, the costing does not have to be done over the subtasks, but is also possible over several main tasks. The important thing is to write the costs etc. in the correct field.
This is how it looks in smenso:
- Cost planning" folder
- Main task "Apartment 1" as collector
- Subtasks for different topics
- The start date and due date in which the costs take effect
Planned costs (the acquisition and the reconstruction costs are entered as planned costs and summed up in the main task (therefore gray in the main task because summed up over the subtasks).
This setting is created in the main task:
- The distribution of the costs over the months is defined by the respective start and end date. In the case of the acquisition, for example, the costs are incurred completely in January; in the case of the conversion costs, the 45,000€ are incurred over 3 months (i.e. 15 T€ per month).
- ACTUAL costs (the payments for the acquisition are entered as ACTUAL costs and also totaled in the main task. The distribution of the ACTUAL costs over the months is defined by the respective start and end date. In this case the payment is distributed over 2 months, i.e. the 120 T€ are credited with 60 T€ each in February and March.
To map the revenue side we create a new folder (is not a must, can also be done within the cost structure) for a better overview. There we create another main task as a collector for the now following tasks to map the revenues.
This looks then in smenso as follows:
- Revenue planning folder
- Main task "Apartment 1" as collector
- Subtasks for rental income per year
- The start and due dates in which the costs take effect (in this case, the year is used for each subtask).
- Revenues are entered in a separately created number flavor for each year
Ausaluation / break-even point
Now, to find out the break-even point from the planned, actual and revenue costs, we load this information into a cost widget with a monthly view.
To do this, we take the "Monthly Cost Distribution (Plan/IS)" widget, click on the 3-dots in the widget and click on "Configure Chart":
After configuring the chart according to our needs, we get the following representation:
Zoomt man nun in das Chart hinein, so erkennt man, dass die Gewinnschwelle im Januar 2036 erreicht wird.
If further costs are added to the cost planning, e.g. refurbishment costs for a specific year, this is also taken into account in the graphic and the break-even point is shifted further back.
Using this method, other scenarios can also be easily mapped using the smenso structure. The decisive factor is in which columns the planned, actual or revenue costs are entered and between which months (between start and end date) these are to be distributed.
We have provided the project from the article as an import template for download here.
How do I import projects into my workspace?
Please note the following when importing:
When importing the project, 01.01.2023 should be selected as the start date.
This ensures that the same numbers appear as in the article.