Fixed costs are no fun. These are the bills and other expenses that have to be paid regardless of how much revenue is coming in. Effective cost management starts with understanding your fixed costs because this is the amount of money you’ve already spent every month before you do any business.
Think of it as the cost of keeping the lights on (electricity is the perfect example of a fixed cost). The costs themselves may vary but they are “fixed” in relation to your revenue. Your electric bill won’t be the same every month, but it will be the same whether you run one tour or 500 tours.
What are some examples of fixed costs?
While every business is going to have different fixed costs, here are the main categories fixed costs tend to fall into.
Payroll for full-time employees is the big one for operators, representing 60-70% of your total fixed costs.
This includes fixed overheads such as rent or mortgage for your premises and utilities – from electricity to internet.
Insurance provides a necessary safety net for your operations. Whether it’s property, liability, or workers’ compensation insurance, these expenses protect you from unexpected events that could disrupt your business.
The cost of insurance could vary dramatically depending on local and national laws and the nature of your business. A walking tour is going to have very different insurance needs than a whitewater rafting tour.
Debt and financial commitments
Debts, loans, permits, and other financial obligations are important fixed costs with legal strings attached. These costs are often contractual and expected to be paid regularly, making them a consistent part of your budget.
Action for operators
Take a close look at your operations and create a detailed list of your fixed costs.
This exercise will not only give you a clearer picture of your operational expenses, but it will also set the stage for the next part of our series – navigating variable costs.
Stay tuned as we continue to demystify the world of cost management in our next blog post. Your journey towards a more financially robust operation is just getting started!
Contact firstname.lastname@example.org to chat to a member of our sales team
Interested in our products?
Ventrata is a comprehensive booking solution for tour and attraction businesses that are looking to win back control of their sales channels and maximise profits. With Ventrata as your booking and ticketing partner, you not only get industry-leading software you also get 24/7 support from our global team!