What are fixed costs?
Fixed costs are business expenses that do not vary with the volume of goods or services produced or sold — rent, base salaries, insurance, software subscriptions, depreciation and most administrative overhead. Fixed costs remain stable in the short term regardless of revenue fluctuations.
High fixed-cost businesses (SaaS, software platforms) benefit from operating leverage: incremental revenue largely flows to gross margin once fixed costs are covered. Low fixed-cost businesses (services, marketplaces) scale more linearly with revenue.