Start-up losses

Financial statements are reports that record a business' financial activity, and are agnostic as to a business' life stage or relative success. There are no "yeah, but ..." entries on financial statements. If the numbers are negative, you get red numbers.

When your doors open for business the first month, it's a unique event financially because you have two kinds of expenses to account for: on-going expenses, like rent and utilities, and one-time start-up expenses, like signage and deposits. Unfortunately, start-ups typically have very little sales revenue to offset these extraordinarily high expenses.

This scenario is classic and one which all start-up entrepreneurs should consider very carefully as they are identifying how much start-up capital to begin their business' life with. The road to business failure is paved with the equity of those who didn't reckon with the reality of how much start-up capital is required to overcome the compound challenge of initial launch expenses and the incremental progress of sales growth.