After figuring out how you'll make money, you need to know what it will cost you to deliver that value.

Smart entrepreneurs separate their costs into two essential buckets that affect every business decision.

Engagement Message

Give one reason why knowing your costs is crucial before opening your doors?

Fixed Costs are expenses you pay regardless of how much you sell. Whether you serve 10 customers or 100, these costs stay the same each month.

Think storefront rent, business insurance, local permits, or base salaries. You pay them even if you make zero sales.

Engagement Message

Name one fixed cost a neighborhood bakery would have to pay monthly.

Variable Costs change directly with your sales volume. The more you sell, the more these costs increase. The less you sell, the lower these costs become.

Think ingredients, travel costs to customers, commission payments, or packaging materials. These costs only happen when you make a sale.

Engagement Message

What's one variable cost for that same bakery?

Let's see both types with a neighborhood bakery. The flour, eggs, and packaging are variable costs - you only buy them when someone places an order.

But the storefront rent is a fixed cost - you pay it whether you sell 5 pastries or 500 pastries that month.

Engagement Message

Which type of cost gives you more control over your spending?

Here's why this matters: fixed costs create your "break-even point" - the minimum sales you need to cover your basic expenses every month.

Variable costs affect your profit per sale. Understanding both helps you price correctly and plan cash flow realistically.

Engagement Message

If your fixed costs are $1,000 monthly and you make $20 profit per sale, how many sales do you need to break even?