Fixed Cost

A fixed cost is an expense that stays the same regardless of how much the business produces or sells. Rent is the classic example: it is due in full whether the month was record-breaking or dead quiet.

• Rent and property costs: lease payments, property insurance, business rates
• Salaried payroll: staff paid the same regardless of output
• Software and subscriptions: accounting tools, CRM seats, hosting plans
• Insurance and licenses: premiums and fees set annually

The opposite is a variable cost, which rises and falls with volume, like raw materials or card processing fees. Some costs are mixed: a utility bill with a standing charge plus usage is part fixed, part variable.

This business must generate $36,000 of gross profit every month before it makes a single dollar. If each unit sells for $50 with $30 of variable cost, each sale contributes $20, so break-even is $36,000 ÷ $20 = 1,800 units a month.

High fixed costs raise risk and reward together. Below break-even they burn cash fast, because they keep arriving whether sales do or not. Above break-even, each extra sale carries most of its contribution straight to profit, since the fixed base is already covered. That is why a slow month hurts a high-rent business far more than a lean one.

Fixed costs leave your account on schedule whether sales come in or not. They set the cash floor you clear every month before anything else. Cash Flow Frog carries those scheduled outflows into every future month automatically from your accounting data, so the forecast always shows whether projected receipts clear the floor, and by how much, up to three years out.