17 December, 2013

1-5-9 finance: Fixed and variable costs

Fixed costs

 The fixed amount of money your business need just by existing, no matter what you gain or lose from it
Think of it as the pills that will come no matter what you do

-          "Overhead" many other acronyms; "basic level of expenditure", "fixed costs", "burn rate" [it is called that when your money is a borrowed by any form. E.g. loan, venture capital …etc.]
Of course the lower the overhead, the better, the longer your business can survive without any revenue
Overhead is also a step in a very important operation; converting your financial resources into time calculations

-             Overhead comes first on your list of the things you have to pay for every month
-          To make your overhead calculations make a list of everything with a fixed price you have to pay o regular basis. For example: the Internet service, the house rent, the electricity, the domain rent, the employees' fixed salaries.
-          You may want to control some variable costs to be fixed costs. You will find that is more beneficial to you and less stressing



Variable costs 
The costs directly related to your business. Costs that you can adjust, cut down, increase and has an effect on your business
-          For example, resources costs, hourly paid employees' advertising costs,

This is the second item on your list to pay for, after the fixed costs