The major objective in this interval, after the survival period, is to establish and lower the “cash flow” break-even point for your business. If you have never determined your business’s breakeven operating level this exercise should yield some new insights. This new information can help drive necessary reductions of costs through operating modifications.

A review of the template provided here, with model figures, should help you understand the operation of the analysis. The first step is to determine the breakeven point for your business without any changes. To do this analysis, study your different operating expenses to see what portion is “fixed.” Separate those expenses from the variable expenses in each category, as shown in the template provided.

Be sure to recognize that depreciation is a “non-cash” expense and conversely that capital investments (CAP-X) are cash uses not shown on the income statement. Work up the “pre-tax” cash required to make your debt principal payments and compute the total “fixed payments” exhibited in your business. (Your accounting staff or another outside professional can help you do this analysis to keep all the moving parts in proper order. They also can do this work in a relatively short time if asked.)