break even costs

[vodkacat]

hi, and thank u in advance for the use of your forum, have only just registered and not looked round the forums yet so i deeply apologise if this is not the right place.
having a dumb blank day and trying to work out some figures and need help just bouncing it off someone make sure i am along the right lines. ( too many candle burning days i think!!)

am looking into costs and viability of keeping a retail outlet open ( currently making losses) or to close the shop reduce some of the costs but i still have a two year lease so need to pay rent and rates, have wrote to landlord and he willing to do nothing and there is no way we can get out of the lease!

so am i doing this right? if we work on a 48% gp margin and the costs needed to pay per month inc wages rent rates etc were £2200 then i would need a turnover of £ 4550 to break even per month?
so in a four month period would need £18,200 to break even, if takings were £14,500 roughly, at 48%gp i would have made a gp profit of £7000. losses would be costs = 2200*4 months =£ 8800 so losses of £1,800. have i done that right?

if took away some overheads but kept rates and rent and standing charges total costs per month would be approx £1250. so times 4months = loss of £ 5000. at that i am £3200 better off ,even though making a loss if open, so had best keep open to help pay towards the bills. sorry to bother you with this but having one of those days where i have looked at so many figures wondering if am losing something somewhere, :) thank you so much x

[Robert Pearce]

If your turnover is £14,500 for a four month period, the gross profit will be £6,960 (based on a 48% gross profit margin). If your costs are £1,250/month (or £5,000 for the period), then you'll make a profit of £1,960. I assume that this is a 'cash' profit and that non-cash items such as depreciation of fixed assets hasn't been included in your workings.

You'll have to consider whether reducing your costs from £2,200 to £1,250/month is realistic and sustainable, particularly if this means that you're not taking anything from the business to live on.

The timing of payments also needs to be considered. For example, do you pay the rent monthly or is it payable quarterly in advance, which puts an additional strain on your cash flow?

Do you run the shop as a sole trader or through a limited company? If the latter, did you have to give a personal guarantee to the landlord when the lease was taken out?

[vodkacat]

hi robert, thanks for your reply, the turnover and gp i understand and agree,
The costs of 5k to make profit of £1960, sorry think i confused you there, the costs are £2200 per month with shop open and inc wages for the employee and phone etc, , the £1250 per month are ( 5000 for period) are with the shop closed, so there would be no profit as no turnover.

you are right havent included depreciation in that.

have other premises so taking earnings from them

rent should be 1/4ly but paying monthly now to help cashflow

we are ltd and yes we had to sign a personal guarantee, thats what the letter said from them that we are personally responsible.

just trying to work out if to keep open and make losses at the moment or to just close and loose overheads, but it appears from my workings today we better of keeping open for now. Am considering probably closing an extra day to reduce some wages costs but hopefully still get same turnover. we have thought of putting sign in to offer lease as we can assign it, but have to be careful for customers not to know.
thanks again for your input, i just needed to know that the way i had done things were right before we make a decision.