Fixed Cost

What is a fixed cost?

Fixed costs are expenses that don't change based on your business activity. Your rent is the same whether you complete ten jobs this month or zero. Your insurance premium doesn't go up when you take on more clients. These costs are "fixed" because they stay constant regardless of revenue.

Understanding fixed costs helps you know the minimum amount you need to earn just to keep your business doors open.

Common fixed costs for small businesses

Typical fixed costs include:

• Rent or lease payments — Office, shop, or storage space
• Insurance premiums — Liability, vehicle, workers' comp
• Loan payments — Equipment financing, business loans
• Subscriptions — Software, professional memberships
• Salaries — Fixed wages for permanent staff (not hourly workers)
• Vehicle payments — Truck or van financing

Fixed costs vs. variable costs

Fixed costs stay the same regardless of activity. Variable costs change with each job—materials, hourly labor, fuel. Knowing the difference helps you price jobs correctly and understand your break-even point.