Fixed Costs

Get to know your cost structures

Get to know your cost structures

When we start working with a business, one of the first things we do is review their historical Profit and Loss to get an understanding of sales growth and channels, margins, and cost structures. Whilst all really important, we often find business owners have a great handle on what drives their sales but not so much their costs.

The distinction between variable and fixed costs is an important one and the best businesses recognise this. To remain agile and be in a position to quickly react to changing market conditions requires intimate understanding of what cost are locked in versus those that are flexible, those that are business critical versus those that are nice to have and those that are lead or sales generators versus those that won’t bring an extra dollar through the door.