Activity

USS Biz Trek Activity # 27: Entering the Profit Zone

Reaching the break-even point is exciting — the very next sale you make puts you in the profit zone! How much profit do you want to make? And, more importantly, how many sales will it take to reach that level of profit?

Study the example of the necktie business again. Pay close attention to the steps for calculating exactly how many ties need to be sold to reach the desired income level.

Step 1: Figure out how many sales it takes to reach the break-even point. (In the previous activity, we found out you have to sell 10 neckties to break even.)

Step 2: Set a goal for the amount of monthly profit you want to make. This goal is entirely up to you. Depending on how hard you want to work, you may set a goal of making $100 a month, $200 a month, or even $500 a month. (For this example, let’s use $200 a month.)

Step 3: Divide the amount of profit you want to make by the gross profit per sale. (Gross profit per sale was $5. $200 divided by $5 = 40 units to sell.)

Step 4: Add the number of units you need to sell to break even (10) to the number you need to sell to make your desired profit zone (40). You need to sell 50 neckties a month to meet all of your expenses and make a $200 profit.

Step 5: Divide the total number of units you have set as a sales goal (50) by 4 (weeks in one month). You must sell 12 or 13 ties a week, or about 2 ties a day, to reach your goal.

Step 6: Evaluate your sales goals. Can you sell two ties a day? Adjust your sales goals up and down to reach the level of business activity you feel is right for you. Where do you want to be in the profit zone? It’s your decision.

Loggin’ On

Grab your USS Biz Trek log and start a new page titled "Profit Zone." Use the example above to figure out your profit goals in one month, three months, and six months. Set sales goals for each of these time periods. Then celebrate your accomplishments — you’re almost ready to blast off on the entrepreneurial adventure of a lifetime!

Finished?

Rocket back to Lesson 8

Rocket forward to Activity 28