Variable and Fixed Costs

There are certainty many costs in your business pertinent to stay focused on. Some of which include variable and fixed costs.

Variable costs are defined as all the costs that may change depending on sales. If you’re creating pro formas, this may include adding these costs as a percentage of revenue. Some costs in this category may include: materials (COGS), sales commissions to 1099 reps based on their production, legal fees from a random lawsuit, etc.

Fixed costs are all the costs associated with your business that stay the same. Think: rent, monthly bookkeeping, software as a service, etc. these are important, but won’t fluctuate like variable costs will.

Keep an eye on these costs and always think of substitutes, ways to improve efficiency, other vendors that are cheaper, etc.

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