A variable expense can change each period, depending on key metrics. In most cases, for example with subscriptions and SaaS products, the key metric will be number of users or amount of usage.
Variable expenses can also provide some comfort because they are usually tied to success in business. For example, if you have to let go of staff because of tough times, you also lower any variable expenses related to them being at work such as health insurance or email addresses.
On the flip side, a variable expense also increases when you become more successful. It’s not a problem, per se, just something to keep in mind – that extra dollar of profit might actually cost you more than a dollar in variable expenses. With good unit economics planning, you can ensure that your variable expenses are always increasing at a rate less than your revenues.
The good thing about variable expenses increasing alongside success is that it opens up room for price negotiation at scale. You may not have been able to negotiate a bulk discount when you were paying for 10 staff subscriptions for a SaaS product, but you likely will be able to get lower per-person rates for 25, 50, or 100 subscriptions.