The cost structure in a business model refers to the various types of expenses a company incurs as it operates and delivers its products or services. It encompasses both [[fixed costs]], which remain constant regardless of the level of production or sales (such as rent, salaries, and insurance), and [[variable costs]], which fluctuate with the level of business activity (such as raw materials, direct labor, and utilities). Understanding the cost structure is crucial for a business as it impacts pricing strategies, profitability, and overall financial health. Companies often analyze their cost structure to identify areas for cost reduction or efficiency improvements and to ensure alignment with their value proposition and revenue streams. In the [[Business Model Canvas (BMC)|Business Model Canvas]], the cost structure is one of its nine main building blocks. This section focuses on identifying and analyzing the primary costs related to operating a business and delivering its [[value proposition]]. By defining the cost structure, organizations can align their financial planning with their overall business model.