When you run a business, the amount of money you have to spend is largely determined by the size and success of your business. If you’re a small company that does minimal sales, you don’t need to spend a ton of money on product development and marketing. However, the larger your company gets, the more products it sells, the more money you’ll have to spend on these costs.
These changing costs are known as variable costs, and they’re an important part of running a business. Understanding how to use the variable cost formula can help you estimate production and marketing costs, that way the growth of your business isn’t a hindrance to its success. In fact, you can design your business, your products, and your marketing in a way that everything grows together to minimize costs.
Every good business plan should include a plan for growth in the future, whether that means taking on more clients, selling more of a product, or developing a specialty product or service that offers greater profitability. No matter what you plan to do, you should have a plan in place to increase sales and grow your business with time.