Sneha runs a cloud kitchen in Pune. She sells paneer thalis on delivery apps at ₹250 each.
Every thali brings its own costs: paneer, dal, rotis, a box, the app’s commission. Together, about ₹150.
Then there’s ₹45,000 in rent, ₹50,000 for two cooks and ₹10,000 for gas and power. Those arrive on the first of every month.
Now a rival opens two streets away and her orders halve. Her paneer bill halves. The rent doesn’t move.
Some costs follow your sales. Others don’t care.
Two kinds of cost
Variable costs rise and fall with every unit you sell: ingredients, packaging, commissions. Sell nothing, and they’re nothing.
Fixed costs arrive whether you sell one thali or a thousand: rent, salaries, EMIs, software. Fixed means they don’t move with sales, not that they never change.
The mix decides how a business suffers in a bad month. Mostly variable costs, and it shrinks quietly when sales drop. Mostly fixed, and it keeps paying in full while its income disappears.
Planes on the ground
In 2020, the lockdown grounded India’s domestic flights for two months. IndiGo, the country’s largest airline, saw revenue for April to June fall 92%, from ₹9,420 crore a year earlier to ₹767 crore.
Grounded planes burn no fuel. But it still had 274 aircraft to pay for, and thousands of staff on the payroll, even after pay cuts. The quarter ended with a loss of ₹2,844 crore.
The planes stopped flying. The bills didn’t.
Think of a gym
A gym membership is a fixed cost: ₹2,000 a month whether you go thirty times or never. A ₹200 pass per visit is variable: skip a day, pay nothing.
Go often, and the membership wins. Miss a month, and it’s money gone. Fixed costs reward busy months and punish quiet ones.
Where you’ll spot it
- Hotels in the monsoon. Staff and buildings cost the same all year, so Goa’s hotels cut monsoon prices to fill rooms.
- Freelancer vs agency. A freelancer with a laptop survives a dry month. An agency with ten salaries can’t wait long.
- One kitchen, many brands. Rebel Foods runs Faasos, Behrouz Biryani and Oven Story from shared kitchens, spreading one rent over more orders.
How to use it
Sort every cost into two lists:
- What comes with each sale. Ingredients, packaging, commissions.
- What comes every month anyway. Rent, salaries, EMIs.
Ask of each item on the second list: does this need to be fixed? A shared kitchen, a freelancer instead of a hire, software paid per use. Each swap makes a bad month smaller. It makes a great month smaller too, but that’s another story.
Finally, total the second list. What’s left from each sale must cover it before you keep a rupee.
Variable costs move with your sales. Fixed costs move with the calendar.
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