What Calculations Have You Made?

What Calculations Have You Made?

The question that could have saved me and the one I now ask every business owner I meet.

Years ago I designed a minimalist self-inflating lifejacket. One you could Velcro onto a t-shirt or fix with straps, light enough to wear on the rocks, in a boat, anywhere water was a risk, without restricting your movement at all. I was 26 years old and I thought I had solved something real. I had.

I registered the provisional patent. Then two more after that.

What I had not calculated was the cost of converting a provisional patent into a full application. The companies I approached for development support knew that cost. They also knew I did not have it. So they waited, twelve months, which is exactly how long a provisional patent holds before it lapses. When it did, they moved.

No confrontation. No theft. Just patience on their side and arithmetic on mine, arithmetic I had never done.

Three patents. Nothing to show for it today except the one thing money cannot buy: knowing exactly what I should have calculated before I started.

I do not tell this story for sympathy. I tell it because in 47 years of business, across commodity trading, security operations, hospitality, and investment, I have watched the same thing happen in a thousand different forms. The product changes. The industry changes. The person changes. The outcome does not.

Enthusiasm, without calculation, is simply expensive hope.

The Mistake I See Most Often

In my experience as a business advisor, and I mean genuine experience, not theory, the single biggest mistake a new business owner makes is this:

The enthusiasm of a new business owner is a remarkable thing. It is also, without the right foundation, a dangerous one. It causes intelligent people to overlook the most basic of questions:

• Is this business actually viable, or does it only work on paper?
• What volume of sales or production do I need to simply keep the doors open?
• What are my real overheads, not my optimistic estimate, but the real number?
• At what point does this business stop costing me money and start making it?

That last question has a name. It is called the breakeven point. And in 47 years, it is the single number I have seen overlooked more than any other.

The Only Number That Matters at the Start

Your breakeven point is not a complicated concept. It is simply the answer to this question:

Not to make a profit. Not to pay yourself a salary. Not to impress your bank manager. Simply to keep the lights on and the doors open for one more day.

That number, calculated honestly, before you spend a cent, tells you everything you need to know about whether your business idea is worth pursuing. It tells you whether the market is large enough. Whether your pricing is realistic. Whether your cost structure is sustainable. Whether you are building a business or funding an expensive hobby.

Most new business owners never calculate it. They calculate their best-case revenue. They calculate what they hope to earn. They calculate how much the fit-out will cost and how beautiful the signage will look.

They do not calculate the one number that would tell them whether any of it makes sense.

I have watched profitable-looking businesses dissolve within eighteen months because the owner never asked: What do I actually need to sell every single month just to survive? When the answer to that question is higher than what the market will realistically support, no amount of enthusiasm, hard work, or beautiful signage changes the outcome.

Business Advisor: The Question I Ask First

When a business owner comes to me, whether they are just starting out or have been running for years, the first thing I ask is not about their product, their market, or their competition.

I ask: “What calculations have you made?”

Not because I want to discourage them. Quite the opposite. I ask because the answer to that question tells me everything I need to know about whether they are building on solid ground or on sand.

The ones who answer confidently, who can tell me their breakeven, their required sales volume, their real overhead structure, those are the ones I know will find a way. They may pivot, they may struggle, but they are operating in reality.

The ones who look at me blankly, or worse, the ones who pivot immediately to telling me about their product and their passion, those are the ones who need this conversation most urgently.

Passion is not a business plan. Enthusiasm is not a cash flow projection. And a great product in a market too small to support its cost structure is not a business, it is a very expensive lesson.

I know. I learned that lesson at 26, with three provisional patents and nothing to show for it today except the hard-won knowledge of what I should have calculated before I started.

Before You Spend Your First Rand

If you are starting a business, or if you are running one and have never done this honestly, sit down this week and calculate your breakeven point. Not the optimistic version. The real one.

Take your total monthly fixed costs, rent, salaries, utilities, loan repayments, insurance, everything that must be paid regardless of whether you sell anything. Add your variable costs per unit sold. Then calculate how many units you must sell, at your actual selling price, to cover all of that completely.

That number is your breakeven. It is the floor below which your business cannot survive.

Now ask yourself honestly: is that number achievable in this market, at this price, with the resources I actually have, not the resources I hope to have?

If the answer is yes, proceed with confidence and with your eyes open.

If the answer is no, or I am not sure, stop. Find out before you go any further. The calculation takes an afternoon. The alternative can take years and everything you have.

I have spent 47 years watching both outcomes. The only difference between them, more often than not, is whether someone asked the right question at the right time.

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