Question # 24: Fixed or variable expenses - which is better?
What happens to your income when revenues go down?
Does your income go down? Substantially?
So you’re humming along doing $100,000 per month in revenues. You’re meeting payroll for your team, paying your marketing-related expenses, and covering your miscellaneous costs like rent, IT, equipment, and other expenses. Thankfully, you’re taking home a good income from the business.
Suddenly, things change. Maybe the economy goes south (again), maybe you do something with your marketing that doesn’t quite work, or maybe you hit a season that is generally slow for your business type.
Let’s say revenues go from $100,000 to $75,000 per month for two months in a row. That’s not an extraordinary change.
Do you continue to draw your income? Or do you go on a cash diet and start living off savings? Or do you patch it together with a credit line or retained earnings?
Wouldn’t it be nice if you didn’t have to worry about these fluctuations in revenue?
Wouldn’t it be nice if you had some flexibility in your expenses?
I specialize in creating a model for businesses so that their expenses move in sync with revenues.
Book a session and find out how.