The full title of this book by Vincent Turner is
“The Secret to Increasing Your Profits – An Introduction to Breakeven Analysis“.
In my review at Amazon.co.uk, I rated the book at the Four Stars level. This means I consider it to be good or very good.
Here is my review.
Short and simple explanation of break even analysis
Business owners need to have financial acumen and the two fundamentals I want them to understand are
1 Break even analysis or as it is sometimes called cost volume profit analysis.
2 The cash flow cycle in a business as a business buys stock, pays for it, makes a sale and collects the cash.
This book looks at the first issue.
It explains the difference between fixed and variable costs with a simple example. It then goes on to explain how profit arises through sales.
It then explains the four ways to increase profit – more sales volumes, higher sales prices per unit, lower variable costs per unit and lower fixed costs.
In the real world, decisions have to be made when you have to do a “bad” thing like increase one sort of costs to get more of a good thing, higher sales volumes. Or perhaps the decision under consideration means cutting prices in the hope of increasing sales volumes, or vice versa. The book shows how this can be done and it’s very empowering to feel you’re managing profit.
There is a significant amount that could have been included in the book that is missing.
First break even analysis can be presented on a chart and it’s an approach I’ve always found helpful to think about the direction of changes.
Second I’d like to see more discussion about the distinction between variable costs and fixed costs. Is weekly paid labour variable or fixed? What about costs like electricity which have a fixed element and a variable element. Fixed costs are only fixed across a fairly small volume range but step up or down based on management decisions.
I thought the discussion about extra products wasn’t well handled and mix is a complicating issue which needs more explanation.
If I was allowed half ratings, I’d put this at 3.5 stars. I’ve rounded up because I want business owners and managers to understand break even analysis.
Paul Simister is a business coach who helps business owners who are stuck, get unstuck. If your business is based in the UK, you can have a free Business SOS consultation with me.