What is Fixed Costs?

Fixed costs are business expenses that remain constant regardless of the level of goods or services produced. These costs are incurred even if there is no production or sales activity. Examples include rent, salaries of administrative staff, insurance, and software subscriptions.

For Startups: Startups often try to keep their fixed costs as low as possible to reduce their burn rate and extend their runway. A high fixed cost base increases the breakeven point, meaning the company needs to generate more revenue to become profitable.

For SaaS: SaaS companies often have significant fixed costs related to R&D and employee salaries. However, their low variable costs mean that once they cover their fixed costs, they can achieve high-profit margins as they scale.

Example: A startup's monthly office rent of ₹1 Lakh is a fixed cost, as it must be paid every month regardless of how much revenue the company generates.