Since starting a business, I understand that managing costs is not a game. Especially when it comes to distinguishing which costs are fixed and which are variable because it affects every decision in the business, from setting prices, planning production, to evaluating whether we can make a profit.

Talking about fixed costs, what are they? I find that this issue is often overlooked by many entrepreneurs. But in reality, it is a very important foundation. Fixed costs are expenses that the business must pay regardless of how much it produces or sells. Whether it’s a good month or a loss-making month.

A clear example is office or factory rent. Every month, I have to pay the same rent whether production is high or low. The same goes for employee salaries. If we have permanent staff, we need to pay them every month, even if that month we don’t have many projects.

Additionally, what else are fixed costs? For example, business insurance, depreciation of machinery and equipment, interest on loans obtained from banks. All of these are costs we are always responsible for.

What I’ve learned is that knowing what fixed costs are helps me plan finances better. I know that even if sales decrease in a month, I still need money to pay rent, salaries, and other expenses, so I must have a reserve fund.

On the other hand, variable costs are different. They change according to the volume of production or sales. The more I produce, the higher the variable costs. For example, raw materials, direct labor, packaging, transportation—all of these increase as production or sales increase.

What I find interesting is the difference between the two types. Fixed costs are stable, making it easier for me to forecast, but variable costs offer more flexibility. I can control them by adjusting the production volume.

Analyzing both types of costs together is very important because it helps me understand the cost structure of the business comprehensively. I can set appropriate prices to cover all costs and still make a profit.

In fact, knowing what fixed costs are and managing variable costs well are the keys to successful entrepreneurship. Whether the business is small or large, this understanding helps us make correct decisions and lead the business toward long-term growth.