Financial Analysis
Operating Leverage Explained: Why a 10% Sales Drop Can Wipe Out 40% of Profit in a Business With £300,000 of Fixed Costs
A modest 10% sales dip can slash profit by 40% in businesses with heavy fixed costs. This article unpacks operating leverage with a worked £300,000 fixed-cost example, showing why fixed costs amplify profit swings and how SME owners can stress-test their own exposure before committing to leases or headcount.