Fixed Costs Aren’t Fixed

| By Mike Michalowicz (Google+)

They say fixed costs are things that can’t go away. Buildings, machinery, alimony (that last one is a joke, people). They lie.

Fixed costs don’t really exist. For example, if you ran out of all your money, you would get rid of that building (or it may be taken from you). When you can’t pay, or are unwilling to, the costs goes away. Of course, the benefit goes away too.

Just because something is categorized as a fixed cost does not mean it is permanent and can’t be cut or reduced. Fixed costs are usually the less liquid costs. Maybe they are more arduous to cut. But they can be cut. All costs can be cut.

Fixed Costs Aren't Fixed

Posted in Cash Flow, Money Strategies,

4 Responses to “Fixed Costs Aren’t Fixed”

  1. Donnie Law says:

    I think fixed costs are the costs necessary to run your business, right?

    • That is how is defined…. the variable is “necessary”. Is it REALLY necessary.

    • SandraLarkin says:

      The things that you absolutely cannot do without to run your business are “fixed necessities.” What you pay for them is flexible. Maybe you have to have an office–but it doesn’t have to be in a high-rise downtown. It could be a shared space, or a spare bedroom. Finding creative ways to keep costs down helps you speed up on the road to profitability.

      • I like that. Maybe fixed costs, should be renamed “opportunities for creative solutions”. I think changing the name will get people thinking differently about how they approach it. Fixed feels unchangeable… when it in fact can be changed.

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