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

Never sell your company - sell information. People will believe what you say and then check you out.

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