Fixed Costs
Expenses that remain constant regardless of production.
Fixed costs do not change with production volume or sales activity within a relevant range. Common fixed costs include rent, insurance premiums, salaried wages, loan payments, and software subscriptions. While fixed costs provide stability and predictability, they also create financial risk—you owe them even during slow months.
Example
A hair salon pays $3,000/month in rent, $500 in insurance, and $1,200 in software subscriptions regardless of whether it serves 100 or 300 clients that month.
Why It Matters for Your Business
Fixed costs determine the minimum revenue needed to keep the lights on, making them the foundation of break-even analysis and survival planning.
Related Terms
More Business Terms
Accounts Reconciliation
Ensuring account balances match between different records.
Break-Even Point
The sales volume at which revenue equals costs.
Budget
A financial plan estimating income and expenses.
Financial Forecast
A prediction of future financial performance.
Capital Expenditure
Funds used to acquire or upgrade physical assets.
Related Financial Guides & Resources
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