Cost Worked Example and Break-Even

Cost is easy to estimate once you write the numbers down.

The people, companies and numbers in this lesson are made up. Check any figure against your own situation before you rely on it.

The Setup

Maya runs the month-end summary for 12 clients. By hand it takes 30 minutes each. With the skill it takes 8 minutes of review and fixing per client. Her time is worth 40 an hour.

The Arithmetic

• Time saved per client: 30 - 8 = 22 minutes.
• Across 12 clients: 22 x 12 = 264 minutes, 4.4 hours.
• Value at 40 an hour: 4.4 x 40 = 176 a month.
• Assume model and tool cost of 20 a month, and 30 minutes of monthly upkeep (20 value).
• Net: 176 - 20 - 20 = 136 a month.

Break-Even

Setup took her 3 hours, worth 120. Break-even: 120 / 136 is a little under one month. If she only had 4 clients, the gain would be 22 x 4 = 88 minutes, 58.67 value, which leaves 18.67 after costs (cost unchanged). That is thin, and a reason to start with the bigger job.

Exercise

• Use your own numbers in the same five lines.
• Pass condition: you have a net monthly figure and a break-even in months.