Cost structure describes how your total costs split between fixed and variable, and which categories they fall into. It shows where your money goes and how quickly your costs react when sales change. Two companies with the same revenue and the same profit can carry very different cost structures and very different risk.
An example with two agencies, both at €600,000 revenue and €60,000 profit. Agency A employs eight people: €480,000 in fixed salaries plus €60,000 in other fixed costs. Agency B works with freelancers: €120,000 fixed and €420,000 variable. Now revenue drops 30 percent to €420,000. Agency A carries the same €540,000 of costs, so it loses €120,000. Agency B's variable costs fall with the workload to about €294,000, so it stays close to break-even.
The mirror image applies when sales grow. If revenue rises 30 percent, Agency A keeps most of the extra money, while Agency B pays much of it out again. High fixed costs magnify both directions.
Present your cost structure as a table: each category, the monthly amount, the share of total costs, and a fixed or variable label. Investors read that table to judge how badly a slow quarter would hurt you.
Two mistakes are common. First, founders build a heavy fixed structure before demand is proven. Renting an office and hiring three people in month one turns a slow start into a shutdown. Start variable, then convert to fixed once volume is stable and the fixed option costs less per unit.
Second, they never update the table. Review it whenever a single category passes 10 percent of total costs.
