What are variable costs?
Variable costs are business expenses that fluctuate in direct proportion to the volume of goods or services produced or sold — raw materials, transaction fees, commissions, hourly labour, fulfilment, hosting based on usage and shipping. Variable costs are central to gross-margin and unit-economics analysis.
Variable-cost discipline is critical in marketplaces and e-commerce, where small per-unit savings compound across high volume. SaaS startups typically have low variable costs (per-customer hosting, support) but high fixed costs (engineering, sales).