Use the Goal Seek command if you are aware of the output of a formula but are unsure of which input value is required to produce that output. If you are looking for some special tricks to know how to do break even analysis with Goal Seek tool in Excel, you’ve come to the right place. There is one way to do the analysis in Excel. This article will discuss every step of this method to do this analysis in Excel. Let’s follow the complete guide to learn all of this.
What Is Goal Seek in Excel?
The What-If Analysis command in Excel has a feature called Goal Seek. This feature helps to find a specific input value for the desired output from a formula. Using this feature, you can resolve a lot of problems in everyday life. The input value is back-calculated using the trial-and-error technique by this feature.
Parameters of Excel Goal Seek Tool
The Goal Seek dialog box has three parameters that must be entered in order to produce the desired outcome. They are:
- Set cell: You must choose the cell containing the formula in the Set cell parameter. The targeted value should be located in this cell.
- To value: You must enter the value you want the formula to return in this parameter.
- By changing cell: In this parameter, you will have to select the cell where you want to change or find the input value.
How to Perform Break-Even Analysis in Excel
The steps to perform a break-even analysis in Excel are as follows:
- Determine Cost: You must be aware of both your fixed and variable costs in order to determine your break-even point.
- Establish the sale price: Calculating your break-even point requires first setting a price point for your goods. If you explore multiple pricing options and perform break-even analyses on each, you can determine the optimal price for your inventory. Choosing an appropriate starting price for your products and services requires market research. If prices are raised, sales may fall, and if prices are lowered, sales may rise.
- Equation to solve: Prior to making any calculations, it is advisable to evaluate your conclusions based on fixed and variable expenses, as well as the selling price. Profitability can be calculated using the following formula:
Break-Even point = Fixed costs / (Selling price per unit – variable costs)
How to Do Break-Even Analysis with Goal Seek in Excel: Step-by-Step Procedure
In the following section, we will use one effective and tricky method to do goal seek break-even analysis in Excel. To do a break-even analysis, first, we have to insert particulars for break-even analysis in Excel, and then we will evaluate profit, and finally calculate the break-even point. This section provides extensive details on this method. You should learn and apply these to improve your thinking capability and Excel knowledge. We use the Microsoft Office 365 version here, but you can utilize any other version according to your preference.
Step 1: Input Basic Particular
In this article, we’ll go over how to use Goal Seek in Excel to determine the breakeven point. Imagine you are in charge of a conference at your university. Your Fixed Cost is $15,000. You must pay the college union $300 per conference for food and lodging expenses, and you must pay the ten speakers $700 each. Each non-speaker at the conference will be charged $900, which covers the conference fee as well as travel and lodging expenses. How many paid attendees are necessary for you to break even?
Step 2: Calculate Profit
For the purpose of conducting a break-even analysis, we will compute the total profit in this step. Your profit needs to be zero to break even. Gross income minus total costs equal profit. Consequently, we can write a formula like this:
Let’s look at how to use the Goal Seek feature to obtain the non-speaker numbers. We’ll start by adding the Profit formula to the worksheet.
- First, select the cell where you want to calculate the Profit.
- Then, write the following formula in the selected cell.
In this case, we multiply cell C9’s value with cell C10’s value. Then, subtract the value in cells C5 and C6 from the final calculation. The Profit is then returned by multiplying the value in cell C7 by the value in cell C8, subtracting it from the earlier result.
- Next, press ENTER to get the Profit.
Since you haven’t yet entered the number of non-speakers, the profit, in this case, is -$22,300. This is because you don’t yet have any gross income.
Step 3: Determine the Break-Even Point Using Goal Seek
In this step, we are going to determine the break-even point using the goal-seek tool. Here are the steps to complete the task.
- First, go to the Data tab.
- Next, select What-If Analysis.
- Therefore, a drop-down menu will appear.
- Then, select Goal Seek from the drop-down menu.
- Consequently, the Goal Seek dialog box will appear.
- Firstly, select the Set cell. Here, select cell C12 because this cell contains the formula for the Profit.
- After that, enter To value. Here, we wrote 0 because the Profit is 0 at the breakeven point.
- Next, select By changing cell. Here, we selected cell C10 because this cell contains the Number of non-speakers.
- Finally, click on OK.
- Afterward, another dialog box named Goal Seek Status will appear. This dialog box displays the Target value and the Current value.
- Next, click on OK.
- At last, we got the Number of non-speakers needed for us to reach the breakeven point by using Goal Seek and, it is 25.
- It should be noted that the cell you are selecting By changing cell parameter must contain a value. If the cell contains a formula then you will get an error.
💬 Things to Remember
✎ The goal seek data table and the input variables for the break-even analysis must be in the same worksheet. If not, the calculation made by this tool will result in inaccurate data.
✎ If you want to get more precise results by using the Goal Seek feature (for example, calculating data in percentage), go to the File tab, select Options, then go to the Formulas tab and decrease the value for Maximum Change to get a more precise result. Finally, select OK.
Download Practice Workbook
Download this practice workbook to exercise while you are reading this article. It contains all the datasets in different spreadsheets for a clear understanding. Try it yourself while you go through the step-by-step process.
That’s the end of today’s session. I strongly believe that from now you may be able to do break-even analysis using the goal seek tool in Excel. If you have any queries or recommendations, please share them in the comments section below. Don’t forget to check our website Exceldemy.com for various Excel-related problems and solutions. Keep learning new methods and keep growing!
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