What Is Fixed Cost?
Fixed cost is an expense you have to pay regularly—whether your restaurant is packed or completely quiet. These costs are usually paid monthly and stay the same regardless of how much you sell.
Example:
Let’s say you’ve just opened a small coffee shop by the roadside. You pay Rp8 million per month for rent and have two full-time baristas, each earning Rp3 million per month.
That means your total fixed cost is already Rp14 million per month, not counting electricity and your POS subscription.
In your first month, business is booming and you bring in Rp40 million. But the next month, things slow down and you only make Rp18 million.
But here’s the thing: you still have to pay your full fixed costs, no matter how much you sell.
The Struggle Many Business Owners Face
“I feel like I’ve sold quite a lot, so why am I still losing money?”
One reason could be that you don’t actually know your total fixed costs, so you have no idea how much you need to sell just to break even. Your fixed cost is the baseline number you need to hit to avoid losing money every month.
How to Deal with It
- List all your fixed costs in detail: Include rent, full-time salaries, software subscriptions, and anything else you pay regularly.
- Calculate your break-even point: This will help you figure out how many portions of food or drinks you need to sell to cover your fixed costs.
- Think about efficiency: For example, do you really need two full-time staff, or can you manage with one full-time and one part-timer?
Here’s the Insight:
Fixed costs are like your business’s “living expenses.” You need to know how much they are if you want to survive—and grow.