What is Fixed Costs vs Variable Costs?
Fixed costs (rent, salaries, licence fees) stay roughly the same whether you sell one item or a thousand. Variable costs (stock, packaging, transaction fees) rise and fall directly with sales volume.
A real Kenyan example
A shop pays KES 40,000 rent whether it sells anything or not (fixed). It pays KES 70 per unit sold for stock (variable).
Why it matters
Separating the two is the basis of your break-even point and your true margin per sale. Businesses with high fixed costs need more consistent volume; businesses with mostly variable costs are more resilient to a slow month.
How Veira helps
Veira categorises expenses so you can see your fixed cost base and your per-sale variable cost separately, not lumped into one expense total.
FAQs
Is rent a fixed or variable cost?
Fixed. It is due whether you sell a lot or nothing at all in a given month.
Are wages fixed or variable?
Usually fixed for salaried staff, but a commission-based wage is variable since it moves with sales.
Why does the split matter for pricing?
Your price must cover the variable cost of each item plus a contribution toward fixed costs; understanding the split stops you pricing below what actually sustains the business.
Can a cost be part fixed and part variable?
Yes, a phone or electricity bill often has a fixed base charge plus a variable usage component.
How does this relate to break-even?
Break-even sales = fixed costs divided by the contribution margin left after variable costs, so you need both figures to calculate it.