Case study answer!

Question:To what extent does the experience of Nick Hess and Foodeaze show that break-even analysis is of little value to an entrepreneur starting a new business??

Answer:
Break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain.With Break Even analyses,the entrepreneur can meet and may exceed the guarantee of not making a loss.It may manage and set up a plan and aim to sell that amount of a product to make sure and check that selling that product is not making a loss.Also,by break even analyses,it may control and check is the business going well and does it meet the aims of selling the amount of products that have been set up.According to the case study,the financial planning for Foodeaze was thorough and at first all went well.Within 5 weeks of opening the business was close to it's break even level of sales.So that it means the entrepreneur knows how his business is going,and also helps to make later decisions.

But the break even analyses is not included all factors that might affect on the sales of the business.It just calculates and includes simply as price and volume to sell.It can't always go straight way like that and there are more factors to care about.About the volume,the business can't guarantee that it can always sell all of that volume.And the price in break even analyses is always the same,but in a business of course you have to have pricing strategies to be relevant to business.It doesn;t consider also about other factors like competitors,economy situation so that it might be wrong or too simple.In the case study,the new store nearby sells similar products led to sales falling and break-even becoming a distant possibility.So this is the experience of Foodeaze not always accord to Break even analyses because it doesn't include competitors research.

In conclusion the break even is useful for starting up businesses but we can't always relate to that to make choices because it might be wrong.BE analys is just the first steps of planning to make profit.