This power tip helps you stay on top of your cashflow by understanding the fixed and variable costs in your business, and the difference between marginal revenue and marginal costs.
Understanding these cashflow concepts can help you to know whether to keep trading if your business is facing challenging times. It also provides an opportunity to maintain operating momentum whilst you build and innovate your business.
- Fixed Costs are costs that you’re going to incur no matter how many sales you make. For example, rent, insurance and loan repayments.
- Variable Costs are costs that are based on the number of sales you make, like the stock and materials you use to make your product or provide your service.
- Marginal Revenue is the additional revenue from the sale of one additional product or service.
- Marginal Cost is the variable cost of producing this additional product or service.
“The most important thing about Dylan is that he is just an email, text or phone call away. His turn around time is incredible. As an employer and a boss, you spend your life patting everyone else on the back. But the encouragement and the ongoing recognition from Dylan just gives me a real boost. Sometime when you fall down a bit and you’re loosing your pride they tell you that you are doing well and that you’re doing okay.” – Fiona, Art Mania Studio, Newcastle NSW
Don’t stop now! There is so much more to learn about how to start, stay and thrive in business and we have plenty of resources to help you get there. For a clearer understanding of what resources and topics we have available, take a look at our resources roadmap here and plan your learning journey now!
For existing clients, make sure you reach out to your business coach if you have any more questions about this topic. It is always a good idea to talk about what you just learnt. They might even have some more tips to share with you.
If you are new to Many Rivers, find out more about what we do by looking at some of our client stories. Each of our clients have a very different journey to share about their business and their experience working with Many Rivers. You can read about the different programs we have available here.
If you would like to read an article explaining revenue and cost, here’s the link:
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