Understand what actually drives your costs, so you know where the money goes and what moves the margin.
Sort your costs into fixed versus variable and find the biggest drivers. Fixed costs stay roughly the same whatever your volume; variable costs move with how much you sell. For each cost, note which it is, its share of total cost, and whether it is a big driver.
| Cost | Fixed or variable | % of total cost | A big driver? |
|---|---|---|---|
Below break-even you lose money; above it you make it. Knowing this number tells you how much cushion you have.
Owners are routinely surprised by where the money actually goes; the biggest line items are rarely the ones you worry about. Fixed costs set your break-even and your risk, variable costs move with volume. Knowing the split is what makes both pricing and cost decisions rational rather than guessed.
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