In the times of economic uncertainty all businesses need to have flexibility to respond to changing market conditions. One of the ways you can do this is by converting as much of your fixed costs to variable as possible.
The reason for converting fixed cost to variable is simple Ė fixed costs donít change with sales or production; while you can control variable costs in response to change in sales. Monthly rent you pay for the building is an example of fixed cost; whereas the amount you pay to buy raw material to make final product (commonly known as Cost of Goods Sold) is an example of a variable cost.
High fixed cost can hurt you in difficult economic times, such as now, and can even drive you out of business. This is what happened to many of the businesses that simply could not cover fixed cost with the sales plummeting. There are several ways in which you can convert fixed costs to variable.
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