A variable expense is one that is related to the generation of income.
Think of this type of expense as one that only exists when the business generates income — unlike a fixed expense, which exists regardless of whether the business generates income.
If unclear about a variable expense, ask this question, “Does the cost of this expense relate to the company generating income?” If yes, the expense is likely variable (excluding paid media/ad expenses that can be increased or decreased within 24 hours, see below).
A few examples of typical variable expenses are:
Cost of Goods Sold (COGS)
Credit card processing fees
Shipping and fulfillment expenses (in-house or with a 3rd party fulfillment service (3PL))
Affiliate or referral fees
Website fees related to sales (i.e. Shopify)
Marketing agency fees
Sales commissions