Side hustle cash flow.

These are costs that remain the same no matter how many sales you make. Everyone’s fixed expenses are unique, but a few common ones include... 

• Rent, like rent for a workspace, storage space, or studio 

• Loan payments, like car and equipment loans 

• Some utilities and services, like your cell phone, internet, or software subscriptions 

These are costs that can vary from month to month. Variable expenses can also rise and fall with your total number of sales. A few common ones include... 

• Hourly labor

• Production costs, like raw materials

• Packaging and shipping costs

• Maintenance and equipment repairs

• Some utilities, like gas and electricity

Some variable expenses are unique to businesses with products, but that doesn’t mean services can’t have variable expenses. A tutoring business, for example, will need to pay more employees during the school year than in summer, when their services are less in demand.

When planning your budget, you’ll need to take both fixed and variable expenses into account. Fixed expenses are easy to budget for—they're the same every month. When it comes to variable expenses, however, you’ll need to know more about the cost and output of your business. The more information you have, the easier it can be.

Knowing your business’ variable cost per unit can help you identify areas for expansion and opportunity. An easy way to find this is by dividing your total variable expenses during a certain time period by the total number of units made.

There are a few simple ways your business can improve its net profit, or the amount of money left over after accounting for all fixed and variable expenses.

Reduce your fixed expenses.

Because these expenses are the same no matter how much a business sells, it’s important to keep them as low as possible. This might look like finding a cheaper space to rent or switching utility providers.

Reduce your variable expenses.

Because your variable expenses reflect cost per product, this can be an especially effective tactic if you have a high sales volume. This might look like reducing the cost of materials or finding more efficient ways to produce your product.

Sell more products.

Easy, right? Just make sure to keep an eye on your operating costs. If they don’t increase faster than revenue, you’re on the way to a higher profit margin. Don’t fret if this doesn’t happen right away either. You’ll get there as you find your groove.