Break-Even Analysis Part 2 and Small Business Tax Credits

Break-even:  As one can see from my previous B/E analysis posting the additional sales needed to "breakeven" on a new hire decision can be challenging.  With new revenue hard to come by, why would a company add staff if sales have to be increased so much to make a profit on the decision?

  At some point companies take a calculated risk and B/E analysis provides the sales goal needed to accomplish their business plan.  Alternatively companies adjust their budgets in other expense areas so there's not so much pressure to increase sales to cover the hiring decision.  Lastly I want to include the break-even formula to plan profits from a hiring  decision.  After all a company is in business to make a profit not just to break-even.   Using the example from my previous post, the sales target to net for example a $5,000 profit is calculated as follows:   $30,000 (New hire expense) + $5,000 (Planned profit)/Gross profit percentage 50% = $70,000 (Increase in Sales required to cover hiring decision and planned profit).

Small Business Tax Credits:  There has been a lot of legislation passed recently targeted towards small businesses.  Much of the focus has been on subsidizing employment cost through the use of tax incentives.   By reducing your employment cost through tax incentives you reduce the amount the business needs to grow to support the cost of your workforce.  The following is a brief summary of some of the key provisions:

Health Care Tax Credit for Small Employers -  The maximum credit is 35 % percent of health insurance premiums paid by eligible small business employers.  It is specifically targeted to help small employers that primarily employ low to moderate income workers.  The credit can be significant so it is worth checking into to see if you qualify.

Tax Benefits for Hiring and Retaining Unemployed - A combination of reduced payroll tax expense incentive and a new hire retention credit of up to $1,000 per hire of unemployed workers.   Qualifying new hires must be hired by 12/31/10.  You don't have to be a small business to qualify for these tax benefits.

Work Opportunity Tax Credits -  Offers tax savings to businesses that hire employees belonging to various targeted groups.  The targeted groups include, recipients of various types of public assistance, certain veterans, ex-felons and certain youth workers.

The above is a brief summary of these key tax provisions, other eligibility rules may apply.  Please contact me at for additional information.  Additional information on the above can also be obtained from

Stay tuned.  In my next blog I will cover LLCs.  What's the difference between an LLC that's a sole proprietor, partnership or corporation?   What are the cost/tax advantages of each?