Question

how is that small firms survive long enough to become more worried about their variable costs and less so about fixed costs? explain using examples

Answer 1

Small firms have lower fixed costs like office space, electricity, administration, rent, utilities, etc which is fixed irrespective of scalability of size of team provided the firm opens another office at another location.

However what bothers is variables cost of production and service when firms scale higher and reach new clients which incurs additional costs like advertising, marketing, hiring, training, management and development, legal, etc. Which is cumbersome. If firms continue to manage seeking higher revenue growth by lowering these variable cost and optimisation of resources then firms become sustainable and survuve easily despite growing competitive markets.

Hence, firms tend to worry more about variable costs which grow enormously and needs substantial cost mitigation practices.