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Anonymous A
on Jun 15, 2021
Global
I want to receive updates regarding this question via email.

Upfront/investment costs and fixed costs

What are some examples of upfront cost, how are they different from fixed costs? Don't you have to buy equipment, factory to rent etc anyway if you have a new business..so would this be upfront/investment costs or fixed costs? 

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Top answer
Ian
Coach
on Jun 15, 2021
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi there,

Fixed costs occur every year (i.e. equipment maintenace/repair, equipment depreciation, factory maintenace/repair, rent, etc.). Upfront investment costs occur in the first year and are what it costs to setup things (i.e. factory construction, bonds, legal fees, etc.)

If you're thinking about an investment decision/ROI, here's how the logic goes:

Your recuring annual revenues need to be greater than your recurring annual costs...and the difference between these two needs to aggregate to be larger than your upfront investment cost (to a high enough ROI). Finally, your recurring annual costs are broken down into fixed costs AND variable costs.

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