What Are Fixed Costs, and How Do I Calculate Them for My Business?

By Bill Stilwell · Last reviewed October 16, 2026

The short answer

Fixed costs are the bills you pay whether you do one job or a hundred, like rent, insurance, software, phone, and salaries. List every one, turn yearly and quarterly bills into a monthly amount, and add them up. That monthly total is what your sales have to cover before you make any profit.

What this means

The outline asks you to calculate rent, insurance, software, communications, utilities, payroll, and other recurring overhead.

The U.S. Small Business Administration (SBA) describes fixed costs as costs that stay the same no matter how much you produce or sell. Variable costs change with each job. Some costs are both, like a phone plan with a base fee plus overage, and the SBA suggests splitting those into fixed and variable parts where you can.

Common fixed costs for a small local business:

Rent or a share of home costs if you work from home
Insurance (general liability, auto, and others)
Software subscriptions: scheduling, bookkeeping, email, customer records
Phone and internet
Website hosting, domain, and email accounts
Vehicle payments and loan payments
Salaries for office staff, and your own planned pay
Licenses and permits that renew yearly
Bookkeeping and accounting fees
Utilities for a shop or office

Example: a landscaping business lists its fixed costs. Truck and trailer payments, insurance, a yard lease, scheduling software, phones, website hosting, and a part-time office helper. The insurance is billed once a year, so the owner divides it by 12. The total comes to a set amount each month, which becomes the starting point for the break-even math (see 7.8.11 Break-Even Point).

Why it matters

It’s the floor you have to clear. Until sales cover fixed costs, you’re losing money every month.
Yearly bills surprise people. A big insurance or license renewal can drain the account if you didn’t plan for it.
Fixed costs are hard to undo. Leases and contracts lock you in. Adding them slowly protects you.
Your tools depend on it. A missed hosting or domain payment can take your website offline.

Who this applies to

Every business. Even a one-person service business working from home has fixed costs for phone, software, insurance, and the website.

How to do it

Go through your bank and card statements from the last 3 months, if you’ve started, or list every tool and service you plan to use.
Write each cost, how often it’s billed, and the amount.
Turn each into a monthly amount. Divide yearly bills by 12 and quarterly bills by 3.
Split mixed costs into a fixed part and a variable part. Put the variable part in your cost per job (see 7.1.8 Direct Delivery Cost).
Add a line for your own pay. A business that only works if you’re paid nothing isn’t working yet.
Add a small cushion for costs you forgot. The SBA suggests adding about 10 percent to cover unexpected expenses.
Total the monthly fixed costs.
Put the renewal dates for yearly bills on a calendar so they don’t catch you off guard.
Review the list every quarter and cancel anything you don’t use.

What proof to keep

Your fixed cost list with amounts, billing frequency, and monthly totals
Contracts and leases with end dates
A renewal calendar for yearly bills

Keep these with your bookkeeping records. A bookkeeper will use the same categories (see 10.5.1 Chart of Accounts).

Common mistakes

Leaving out your own pay. If you don’t count it, the business looks more profitable than it is.
Forgetting yearly bills. Insurance, licenses, and domain renewals are easy to miss.
Signing long contracts early. A 3-year lease or software contract before you have customers adds risk.
Counting job costs as fixed. Materials and job labor belong in your cost per job, not here.
Too many small subscriptions. A dozen small tools can add up fast. Review them often.

When to get help from a pro

A bookkeeper or a certified public accountant (CPA) can help you sort fixed and variable costs and set up categories. Ask:

Did I put each cost in the right group?
How should I count my own pay in my plan, given my business structure?

Bill’s note

[Bill: add a short story or opinion here. For example, the fixed costs that surprised you when you started SiteSmarty, or a client whose website went down after a missed hosting payment.]

If you’d rather have this done for you, SiteSmarty handles website hosting and Google Business Profile management for a set monthly fee.

How I did this for SiteSmarty

[Date I did this:]
[What I actually did, step by step: the costs I listed and how I turned them into monthly numbers]
[What it cost and how long it took:]
[What surprised me or what I’d do differently:]
[Screenshot or photo to add, with private info blurred: my fixed cost list]
[Result so far:]

Questions people ask

What’s the difference between fixed and variable costs? Fixed costs stay the same each month no matter how much you sell. Variable costs go up and down with each job or sale.

What counts as overhead? The costs of running the business that aren’t tied to one job: rent, insurance, software, phones, office staff, and similar bills.

How do I handle bills that come once a year? Divide them by 12 and count that amount each month. Set aside that money monthly so it’s there when the bill comes.

Should I count my own pay as a fixed cost? For planning, yes. Include the amount you need to live on so your break-even point is honest.

Audit check

Question: Does the owner have a complete monthly fixed cost total, including yearly bills and their own pay?
Pass looks like: A dated list with every fixed cost, billing frequency, a monthly amount, a line for owner pay, a cushion, and a renewal calendar.
Fail looks like: No list. Yearly bills left out. No owner pay. Job costs mixed in.
Evidence to collect: The fixed cost list, contracts, and the renewal calendar.

Where this fits

Do this first: 7.8.7 Warranty, Refund, and Bad Debt Costs

Do this next: 7.8.11 Break-Even Point

Sources

U.S. Small Business Administration, "Calculate your startup costs" (checked October 16, 2026)
U.S. Small Business Administration, "Break-even point" (checked October 16, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.