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  • Writer's pictureJordan Silverman

Cost Understanding 101: Breaking Down Costs for Small Businesses

As the CEO of Starfish, my mission is to help small businesses better understand their costs, benchmark these costs, and ultimately, lower them. A strong grasp of costs is crucial to run a profitable business. So, let's delve into 'Cost Understanding 101.'


Why does understanding costs matter?

  1. Boosts Profitability: Cost reduction directly impacts your bottom line. Save $1 on costs, and you've added $1 to your profits

  2. Supports Pricing Decisions: Accurate cost insights enable you to price your products/services competitively while maintaining profitability

  3. Identifies Efficiency Opportunities: A thorough breakdown of costs can uncover areas for improved efficiency and cost-saving

Key Elements of Business Costs

Understanding costs means understanding where your money goes. There are several types of costs involved in running a business:

  1. Fixed Costs: These are your consistent, predictable expenses. Examples include rent, salaries, and insurance.

  2. Variable Costs: These costs fluctuate based on your business activity. They can include raw materials, direct labor, and commission-based pay.

  3. Operating Costs: This is the money required to keep your business running day-to-day. It includes both fixed and variable costs.

Cost Control Strategy

Knowing your costs is just the first step. Actively managing and controlling these costs is the key to increasing profitability. Here are some simple steps to get you started:

  1. Track Every Dollar: Use tools and software to monitor your business expenses. Starfish can help streamline this process.

  2. Analyze Regularly: Regular reviews allow you to spot trends and identify areas where costs can be controlled.

  3. Benchmark: Compare your costs to industry standards. This gives you an idea of where you stand and where improvements can be made.

Remember, every business is unique. What works for one might not work for another. That's why understanding your individual costs is so critical.

Starfish is committed to helping businesses navigate their cost landscape. We aim to empower you to make informed decisions to increase profitability. As always, we're here to support you every step of the way.

Take control of your costs today. Reach out to us via the 'Get a Demo' button on our website, and let's start increasing your profits together.

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