May 2020

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Using the Break-Even Formula to Determine Profit

For any business, knowing how much sales are needed in order to turn a profit is essential. Obviously, a company must generate a profit in order to be effective. By calculating the break-even point, you can determine if your company is profitable or not, and how much revenue or units sold you need in order to be so. 

The break-even point is referred to as the point at which your total revenue equals your total cost. Any revenue gained beyond that point is considered profit. This break-even analysis using revenue is called revenue break-even. Keep in mind, we can also do this calculation by swapping revenue for units, determining how many units we need to sell in order to be profitable. This analysis is called unit break-even.

Now let’s put the calculations into practice by using this simplistic example:

Let’s assume you own a burger joint and want to know how many hamburgers you need to sell in order to make a profit. You determine that each burger costs you $5, your selling price for each is $10, however, you also have monthly fixed costs of $5,000 for rent, the cook’s salary, and some advertising.

Let’s determine where your unit break-even point is:

Breakeven (units) = Fixed costs/ (Selling Price – Var. Cost)

Breakeven (units) = $5,000/($10-$5)

Breakeven (units) = 1,000 hamburgers 

Therefore, you would need to sell 1,000 burgers to break-even. Any burgers sold after that would be considered profit.

We can take this a step further and calculate our revenue break-even:

Breakeven (revenue) = breakeven units X price 

Breakeven (revenue) = 1,000 X $10

Breakeven (revenue) = $10,000

Therefore, you would need to sell $10,000 to break-even. Any dollars earned after that would be considered profit. 

Time to put it into practice yourself:

You now have the tools necessary to determine whether your business is profitable or not and how much revenue or units you need to sell in order to do so. It is true that this is a simple example of how to calculate break-even and more complex businesses will have more numbers to take into account. However, the calculations are the same. Hopefully, this lesson will have gained you the knowledge necessary in order to determine if your business needs some adjustments!

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How the Brand Resonance Model Can Lift Your Brand

Having a strong brand is essential to every business. Not only does a brand help a company have a unique identity that makes it stand apart from its competitors, but it can also create a distinct connection with its customers. We previously talked about the three steps to build a successful brand strategy, which is a must-read if you have not done so. This week, however, we will be looking at a more customer-focused approach to brand building. The Brand Resonance Model takes a much closer look at the connection between the brand and the customer, with each stage building upon the last, ultimately leading to brand resonance.

The Four Steps of Brand Building:

Building a brand that can create a powerful connection with the customer, leading to loyalty and continued purchases takes into account several steps. The reason why this model is so effective is that it emphasizes the importance of the previous steps in order to reach the last. As mentioned before, each step builds upon the previous, and cannot exist without it. This is why the Brand Resonance Model takes the shape of a pyramid.

By taking a closer look at each step we can begin to understand how the model works:

Brand Salience: This is the lowest section of the pyramid in which we establish a connection with the customer through the most simple way. The customer knows our brand exists and what needs of theirs it can satisfy.

Performance & Imagery: In this next step we begin to develop an identity through primary and secondary features regarding our product or service, its price, and its design. In this step we begin tailoring our brand towards a specific target audience as we move up the pyramid. 

Judgement & Feelings: This step closely related with what emotions and feelings our brand conveys. Not only are people judging our brand based on the quality of our products or our credibility as a company, but also there are certain feelings that are generated when they think of our brand. You can probably think of certain brands that convey a serious tone vs. a laid back one. 

Brand Resonance: This final step of the pyramid is the ultimate goal for the brand, where we have achieved customer loyalty and engagement with your company. Our customers know exactly what the brand stands for and what they can expect from it.

Conclusion: 

Now that you are more familiar with the Brand Resonance Model, you can begin to apply it yourself. You can use this template to analyze the connection between your customers and the company, taking a closer look at each step within the model, adjusting your strategies at a certain point if necessary. By taking a customer-focused approach, you are more likely to have a deeper understanding of your clients’ wants and needs, ultimately leading to a stronger brand and a more successful business!

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Free Census Data for Smart Business Strategies

Whether you are looking to start a new business, expand an existing one, or simply looking to make certain adjustments within your business strategies, the US Census Bureau offers countless amounts of data regarding your community that can help you out. More often than not, consumer data for businesses come at a charge supplied by corporations like Nielsen or IRI, however, the Census data is absolutely free! Demographic and economic data starting from the national level, all the way down to specific district information, is available for anyone to access at the click of a button. Let’s go over some of the basics so you can get started searching for information.

How to access data:

Let’s say you would like to access income levels within your county (Miami-dade).  

Go to data.census.gov in order to search the Census database.

  1. Use the search button to look up specific data, for example, income levels.
  1. The search will bring up different types of information regarding your search for income levels. For this example, we will click on the first result, explore data, in order to access median household income in the United States.
  1. The results are the median household income for the entire United States, however, we would like to condense our search to show only Miami-Dade county. In order to do so, we have to click the “customize table” button at the top right of the screen.
  1. By clicking on the geography button we can choose to filter the data by county and enter both the state (Florida) and the county we wish to look at (Miami-Dade).
  1. Once you hit the close button you will see displayed the household income data for Miami-Dade county.

Tip: You might want to dive deeper into the information regarding the county for example. By clicking the map button you can access additional information regarding the location chosen which includes things like population, ethnicities, employment, business counts, and several other data that might be useful. 

Now that you know the steps in order to access the Census data, you should take advantage of this opportunity. As mentioned previously, consumer data usually has to be purchased, and having this free source of information is incredibly useful. By having access to specific information regarding your community, whether it be demographic or economic data, you are one step closer to making smart business strategies!

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3 Steps for A Successful Brand Strategy

Nike, Apple, Gucci, Starbucks. What do all of these companies have in common? They all have outstanding brand equity! Brand loyalty is so elevated that their customers are willing to pay a premium only to be associated with the company, regardless of the product itself. The higher the brand equity a company has, the less likely their customers will turn to their competitors. Ever meet someone so obsessed with their Nike shoes that you never see them wearing any other brand? How many Apple fanatics you know of that have purchased all of their products regardless of their elevated prices? This is the power of having a strong brand! Regardless of your personal opinions on their products, one thing is for sure: the logo sells itself. However, these companies did not get to where they are by mere coincidence. Developing a brand takes time and thoughtful planning.

A successful brand strategy takes three steps:

  1. Segmentation: Being able to identify and separate the various types of customers is crucial. The only way of having a clear understanding of your audience is by segmenting them into groups determined by different factors. Keep in mind that there is no clear-cut way of separating customers into groups. An option is to segment based on where customers live for example, or what income level they are in. However, it ultimately depends on the product or service that is being provided and how that segmentation relates to it.
  2. Targeting: The next step is to evaluate the several groups and determine which is the most favorable to target based on a company’s SWOT analysis. It is important to note that although the group that the company should focus on depends on the SWOT, being able to fulfill this group’s needs is critical. Many times companies attempt to target customers who they are not able to attract due to the business’s characteristics. The customers must be attainable by the company!
  3. Positioning: After the target group has been chosen, the company can begin to position itself in a manner to attract this specific audience. The business must develop and implement marketing strategies that cater to the specific needs of this group. This is when Consumer-Based Brand Equity comes in. This tactic takes the perspective of the consumer in order to understand how they feel about the brand in order to implement strategies to strengthen that connection. Being able to understand the customer’s needs and feelings towards the company can lead to more successful marketing efforts. 

Hopefully, this has brought you closer to understanding what a successful brand strategy looks like. These three steps, if followed correctly, should lead to a stronger brand. However, keep in mind that the branding process takes time! The companies mentioned above took several years, some even decades, to get to where they are at. Although it might be farfetched to aspire to develop a brand of the sort, the point is that branding is not done overnight. However, with proper implementation, a well-developed branding campaign will surely reap rewards in the future!