Fundamentals of Prospecting at Breakeven, Part 1 of 2

If you have the business rule to mail down to where you’re breaking even on prospecting, you’ll maximize the acquisition of new buyers without losing profitability. And new catalog buyers are the lifeblood of your business!

Calculating Breakeven
Your breakeven calculation can be simple. Most catalogers calculate breakeven using this formula: sales per catalog needed to cover the actual cost of mailing your catalog divided by your merchandise margin. For example, if your catalog costs 60 cents per catalog to mail and your merchandise margin is 50 percent, then you break even when the catalog sells an average of $1.20 per catalog mailed. If you mail 10,000 catalogs at $1.20 per catalog, your sales are $12,000. Sales multiplied by your merchandise margin of 50 percent leaves $6,000 to pay for 10,000 catalogs at 60 cents apiece.