What costs are fixed ?
When you are preparing your break-even analysis the main objective is 'when will I cover my fixed costs' - this is breakeven - ie: when you make no profit and no loss - you simply cover all of your costs.
Your next objective will be to see when you make your desired profits!.
But what of your costs are fixed.
Peter Hale had a recent conversation with one of our clients when he was preparing his P&L to discover those costs that are really fixed. Let's take that question in reverse :
Your variable costs are :
IF you made one more sale tomorrow what costs would change?
Everything else is fixed. Here are some examples :
- Rent
- Rates
- Salaries
- Accountancy costs
- Most marketing costs
These costs would not change whether you made 0, 1 or 10 sales today. Variable costs would be directly associated with that one sale :
- Raw materials
- Commissions
- Online bank charges (per sale)
- Delivery costs
Need more information? Try our Break-even analysis spreadsheet in business plan express.
MARKETING TIP - Leverage yourself
In all businesses small or large it is you and your people that really are the most important asset - whether you believe that or not !.
Small companies start with one person and develop from there - why ? Because it is that person who has the skills and knowledge to make it work.
So, for free marketing, sell yourself and your people - you and they are the experts in your company so why not be the industry experts ?
Here are some ways to market yourself :
- Speak at industry events - whoever is the expert association in your industry
- Write articles for newspapers, online or trade magazines
Not on the newsletter list yet? Sign up today
NB: We'll send you a 7 part course on "how to write a business plan" -- This is an opt in course and you need to provide a valid email address. We will never share your information with anyone else
