Category Archives: Financial Analysis 101

Strategy – the journey for start-ups!

If strategy is achieving goals through efficient planning in order to gain competitive advantage, when our resources are limited, why do we see many start-ups that don’t have an efficient strategy? In many times, the uncertainty and unpredictable environment because their main concern of a new company because of 3 main reasons:
- limited understanding of the target market
- lack of market analysis in order to assess the environment, competitors, potential clients and possible opportunities or threats
- no or limited analysis on financials. If break-even is reached at 95% of potential clients, it is obvious that the rest of 5% (profit) could not reach the expected growth.

Start-ups often forget about the environment, the attractiveness of the sector in financial terms. Of course, in many high-tech new sectors this is also not possible because of lack of historical data. Some start-up owner could argue that there are many examples of companies that started with just an idea. This are exceptions, not the rule! Even if an idea is enough to start the business, basically it is impossible to develop it without a strategic plan, with target goals, assessment of the environment and capabilities in order to produce the most effective formula for action.

If the idea creates the launch of a start-up, the strategic plan prepares the JOURNEY OF A START-UP. 


This is a journey in which the company should focus on the resources (human resources, money, infrastructure, brand, IT), environment (competitors, clients, regulations), expectations (options to be taken into consideration to be applied), and acting upon the plan.

We are developing a free webinar that will be held on December 3, 2014 – Business strategy for startups- click here for details 

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Why getting to break-even is so crucial?

Here at we help organization improve their business by providing advice and tools for financial analysis.

A company can reach performance by reaching “break-even”. As the word tells us, at this point the company “breaks” it’s current results to “even”, where revenues are equal to costs.

So, why is is getting to break-even so crucial? We will point it out in the following examples.

Let’s presume that you are a start-up company that organizes events, let’s say conferences & seminars.

Your next conference will have fixed costs (e.g. renting the venue, speakers’ fee, hotel, plane tickets and more, team incentives, advertising) and variable unit costs (e.g. conference materials, meals, coffee breaks and so on). Your renting venue has around 150 seats, so you are interested in setting the price to see the number of tickets needed to be sold to reach break-even. This calculation will let us estimate if the number of tickets to reach break-even are realistic and if it’s too close to maximum capacity to be sold (reducing the potential profit).

break even calculation by @geekanalyst

We supposed that our variable cost are 210$, with fixed costs of 7,000$. The price was set at 410$/ticket (we can have multiple pricing, but in this example we consider an average one). By applying a simple formula that is

Break even point (no. of unit) = Fix expenses / (Unit price-Variable unit cost) 

the break-even point was calculated as 35. So, the number of tickets needed to be sold to reach break-even is 35 tickets. Based on this, we can adjust the  tickets price  based on our estimations. As, we considered that we can sell around 110 tickets, thus, there’s plenty of space for profit ($$$). Also, our venue has 150 seats, so we can reach break-even through 23.33% of the available seats.

This simple, but efficient calculation can trigger some actions like:

  • increase or reduce price
  • have cost-cuts on fixed expenses that we cannot afford
  • increase advertising cost in order to reach the break-even point

Of course, there could be others.

The break-even graph, based on our example is: BREAK-EVEN

In brief, here is our advice when it comes to break-even:

1. Don’t underestimate the fixed and variable costs .This frequent mistake can lead you to a lower value of sales at break-even.
2. Pay attention to production/sales capacity (or in our example the maximum number of seats). Based on the production capacity you can set a price that will lead to low values of sales needed for break-even to leave space for profit.
3. Adjust the pricing to meet the target sales. Adjusting the price on the market is the foundation, but adjusting based on break-even point is the actual construction.

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Also, register for our “Financial Analysis for startups” Webinar which will take place on October 17, 2013. Details and Registration here.

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