#5 exp. core

The 3 Types of Business Expenses That Matter

A guide to business owners on the 3 major types of business costs

By Namreet Bains on August 15, 2025

Running a business in Malaysia today means juggling rising costs, tighter margins, and tougher competition - but here’s what most SME owners don’t realise;

You can’t price smartly, grow confidently, or stay profitable if you don’t fully understand your costs.

Below are three core types of costs every business owner should know — and how knowing them can literally save your bottom line.

1. Fixed Costs (Doesn't Change Monthly)

2. Variable Costs (Costs That Change With Sales or Operational Activity)

3. Sunk Costs (Gone, Can’t Get It Back)

4. How to Make Better Business Decisions from your Business Costs

1. Fixed Costs (Doesn't Change Monthly)

These are the costs you pay regardless of whether you sell 10 units or 0.

Examples:

Rent
Staff salaries (fixed portion)
Accounting or software subscriptions (QuickBooks, Canva, etc.)
Insurance
Internet & other utilities (partial)

📌 Why It Matters

Fixed costs form your baseline breakeven. If you don’t account for them when pricing, you could sell like crazy and still lose money.

📌 Pro tip

Track your total fixed costs monthly and divide by average sales to know how much of each sale goes toward just keeping the doors open.

2. Variable Costs (Costs That Change With Sales or Operational Activity)

These rise and fall based on how much business you’re doing.

Examples:

Raw materials or stock
Packaging
Delivery fees (e.g. GrabExpress, Lalamove)
Commission payouts
E-wallet and payment gateway fees (ToyyibPay, Billplz, Shopee)

📌 Why It Matters

If your variable costs are too high, you’ll eat into profits every time you sell. That’s why margins are tighter than ever in food & e-commerce businesses.

📌 Quick Check
Your gross profit = sales – variable costs.
If gross profit is low, you’re not earning enough per sale — even if your sales volume is high.

3. Sunk Costs (Gone, Can’t Get It Back)

These are past expenses that should not affect current decision-making —but often do.

Examples:

Business logo you paid RM2,000 for last year
Equipment you bought that’s now obsolete
Failed ad campaign
Wasted training course or platform fee

📌 Why It Matters

Business owners often keep spending to “justify” past spending, instead of cutting losses. Sunk costs shouldn’t influence future strategy.

📌 Golden Rule
Just because you spent a lot on something doesn't mean you must keep using it if it no longer works.

4. How to Make Better Business Decisions from your Business Costs

To determine Pricings

To determine Hirings

To check if Promotions can be set

Scaling up the business

Stopping a product

➡️

The cost insight you need is Fixed costs + Variable costs per unit

Consider analysing your business fixed costs impact

Know how long your business can run before making a loss - identify monthly breakeven

Generate a projection on how Variables Costs will scale along the line (2 or more year projection)

Consider the expenses incurred as sunk cost and accept the loss/failure - before making more losses on it

Final Word

Knowing your costs isn’t “advanced accounting.” It’s survival.

Before you worry about tax savings or grant funding — make sure your sales are profitable. If you don’t know how to tell, that’s your sign to talk to a bookkeeper.

Want help identifying your real business costs?

💬 I offer a free 30-minute consultation for cost clarity session

References & Sources

1. LHDN Official Website: https://www.hasil.gov.my
(For the latest updates on Malaysian tax laws, allowable deductions & compliance guides.)

2. MyTax Portal (e-Filing): https://mytax.hasil.gov.my
(Access to taxpayer login, CP forms, PCB info, and more.)

3. Altomate – Allowable Business Expenses (Malaysia):
https://altomate.io/my/blog/allowable-and-disallowable-expenses-in-malaysia-a-guide-for-business-owners

4. Investopedia – Semi-Variable Cost Definition:
https://www.investopedia.com/terms/s/semivariablecost.asp

5. Investopedia – Fixed Costs vs Sunk Costs:
https://www.investopedia.com/ask/answers/042015/are-all-fixed-costs-sunk-costs.asp

6. Vaia – Fixed and Sunk Costs Explanation:
https://www.vaia.com/en-us/explanations/business-studies/managerial-economics/fixed-and-sunk-costs/

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