Question 2 of 4
How does a bio-business reach break-even?
The short answer
A bio-business reaches break-even when it knows its real unit cost, with losses and freight included, and sells above it. It also has to survive the harvest cash cycle, which usually pays producers months before the customer pays.
The full answer
Step by step
The real unit cost compared with the cost that appears in the spreadsheet.
Losses and freight in the field, which change with the season.
The harvest cash cycle and the working capital that covers it.
Working capital finances the cycle between buying from producers and getting paid by the customer. It is repaid by the same sale.
See the capital ladderCapacity and supply before sales growth.
What an industrial plant teaches about costing several fractions from the same process.
In the omega-3 unit I balanced the line and designed a strategic costing system for the full line of omega-3 concentrates, a process that yields several fractions.
See the operate stage
Frequently asked questions
People also ask
When does it make sense to finance working capital?
When the harvest cash cycle pays producers months before the customer pays. Working capital finances that cycle and is repaid by the same sale. To receive it, the company shows purchase orders or contracts, a known cash cycle and a repayment track record, even a small one.
Public sources
Sources
Questions
The other questions
- 01How do you prepare a bio-business for investment?Investment readiness, the Investment Passport and what an investment committee asks.
- 03Which financial instruments work for a bio-business?The capital ladder and the order of capital in blended finance.
- 04How do you scale a bio-business?Operations, market and capital, with field logistics and supply.