What expense type does a property lease represent for a small business?

A property lease is classified as a fixed cost for a small business because it represents a recurring expense that does not change with the level of goods or services produced by the business. Fixed costs remain constant regardless of how much the business generates in revenue or how much it produces, making them easier to budget for over time. Rent or lease payments are typically agreed upon for a set period, and the amount due is predictable, which allows businesses to plan their finances accordingly.

In contrast, variable costs fluctuate with production volume; they increase or decrease depending on business activity. Operational costs generally encompass both fixed and variable expenses involved in running the day-to-day operations of a business. Growth expenses pertain to investments aimed specifically at expanding the business, which is not the primary purpose of a lease. Thus, the categorization of a property lease as a fixed cost accurately reflects its nature in a small business’s financial structure.