CHAPTER 1

Fixed versus Variable Costs

If you are already operating a company, you probably have monthly or quarterly P&L sheets from your accountant. You will need to take these P&Ls and analyze each cost and put a V if it is a variable cost or an F if it is a fixed cost next to each expense item.

The key to analyzing and making it simple to run your business profitably is to condense expenses, so that you can easily monitor them on a weekly basis. In our restaurant group, we would look at only about three or four fixed items. As the term indicates, fixed items don’t vary much and we can estimate what they will be each week or month. For our operational P&Ls that we used in the store with the general managers, we would condense all of the fixed ...

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