The break-even analysis is a very important tool to allow us to analyze all the factors that affect the flow of money through the company. In the analysis below, various assumptions are set for the Stages 2 through 4, and all calculations for variable expenses are based on those assumptions. Each of these assumptions is explained in detail below.
However, while the break-even analysis is typically a determining factor as to whether a business is viable, in this case that isn’t really the case, because the volume required to reach the financial break-even point is far lower than the volume required to achieve a customer satisfaction ‘break-even point’. As the chart below shows, the financial breakeven point for this business is somewhere in the range of 320 Members. But as discussed on Operations » Volume, at this level there would not be enough flights to satisfy customers need for frequent enough flights to and from the places they want to go.
The company will need to scale up to much larger volumes in order to meet the customer satisfaction levels. The following chart shows how break-even analysis is calculated at the various Stages. By Stage 4, we are well beyond financial break-even, but are just approaching customer satisfaction levels.
