Welcome to the newest post in our blog series, Darren’s Great Ideas! for Independent Operators.
How to Calculate the Breakeven Point on a Truckstop Promotion
Please note: The prices and margins used in the examples that follow are purely hypothetical and are not meant to state or suggest the prices you should charge or the margins you should realize for any item of merchandise in your store.
|Gross Margin Percent||49.75%||=(Retail - Cost)/Retail|
|Single Unit Margin Dollar Production||$0.99||=Retail - Cost|
|Average/Normal Unit Sales*||100|
|Typical Margin Dollars||$99.00||=Single Unit Margin Dollar Production times by Average/Normal Unit Sales)|
|Gross Margin Percent||40.00%||=(Retail - Cost)/Retail|
|Per Single Unit Margin Dollar Production||$0.60||=Retail - Cost|
|Total Average/Normal Profit Dollars||$99.00|
|Proposed Per Unit Margin Dollars||$0.60|
|Breakeven Units||165||= Total Typical Margin Dollars divided by Proposed Per Unit Margin Dollars|
So, for this example, you need to sell at least 165 units of bottled water at the lower retail price to break even. If you thought you could sell 200 units at the reduced price, it would be a success. More units, more sales and more profits. But remember, every promotion is different and a more sales is not always the measure of success. Sometimes the desired outcome is to bring more customers in the door to generate sales in other categories.
/// Read more Darren's Great Ideas for Independent Operators posts here.
Join the conversation! Do you calculate the breakeven point when you offer promotions? What advice would you give other operators facing this quandary?
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