Back to the basics
The Fixed Cost Mountain
- Every month, your business must cover its fixed costs before profit can exist
- Fixed costs stay the same whether you sell 1 job or 1000
- You climb this mountain one job at a time
Contribution = fuel for profit
- Contribution = sales minus variable job costs (materials, sales commission, outsource, shipping)
- What is left over is contribution dollars that go towards covering fixed costs
Breakeven → Profit Land
- When total contribution dollars equals fixed costs, you've reached breakeven
- Every contribution dollar after that is sweet and juicy profit
Ladies and gentlemen, welcome to Profit Land.
