When Major Business Blunders Happen: Learning My Break-Even Point

This was originally published at Outlaw Soaps—Pyragraph’s favorite place to get handmade soap—and is reposted here with kind permission.

In the past two weeks, I learned that I had made what I consider to be a pretty serious business forecasting error based on a simple lack of knowledge when I started the business.

I had my costs covered and got my pricing right, but I didn’t know something really fundamentally important: my break-even point.

That’s the number of units we need to sell in order to cover our expenses.

On any given day, I am forgetting something critically important.

And you might think, “OMG! How could they have just been skating along not knowing that?!?” But you gotta remember, I had savings to go through in the first year and some bridge loans to get through the second year, and this year, we had the Kiva loan … and not only that, we have been so close to the break-even point that we only really needed to cover a few hundred extra dollars in the lean months.

But this is a big deal. I wish I had known about it before.

Because I’m taking a hard look at finances before we enter the busy Christmas season, I endeavored to learn everything I possibly could about finances and business planning—not just in a superficial, gotta-get-by kind of way, but in a professionally investigative way as the CEO of our growing business.

So I downloaded the audiobook Accounting for the Numberphobic (which I definitely am) and have been listening with rapt terror as things like balance sheets are explained in painstaking detail. I hired a bookkeeper to reconcile all our books for the past three years, since my accounting has been consistent, but not the most tidy.

I decided I needed to actually step up and become the CEO, and that means looking at cash flow statements, balance sheets, and P&L statements.

And because of this, I’m going back through my business plan to re-evaluate everything.

Gonads.

This is the tip of the iceberg, my friends. I can assure you, this wasn’t the first such revelation and it won’t be the last.

The reality is this: On any given day, I am forgetting something critically important. Over time, those critically important things add up.

But what am I gonna do? Know everything? Spend all my time reading Entrepreneur magazine so I never wade into scalding hot water?

Or am I gonna freak out for a little while, go take a bath, and then regroup?

Today, I am gonna freak out for a little while. Then I’m going to take a bath. And then I’m going to rework our business plan. Again.