Capital expenditure, or CAPEX, is money you spend on assets you will use for more than one year: machines, vehicles, buildings or larger software systems. CAPEX does not appear as a cost in your profit statement in the year you pay. Instead it is written off through depreciation over several years.
CAPEX and OPEX are two ways of spending money with very different effects on your numbers. A 24,000 euro machine is CAPEX. Your bank account drops by 24,000 euros now, but with a useful life of six years, only 4,000 euros of depreciation appears in this year's profit statement. Renting the same machine for 500 euros a month is OPEX: 6,000 euros hits this year's profit statement and the cash leaves gradually.
That difference matters for two reasons. First, CAPEX makes your first year look more profitable than your bank balance suggests. Second, CAPEX is usually the reason a young company needs financing at all. Banks lend against assets more readily than against salaries.
Worked example for a bakery. Oven 45,000 euros, refrigeration 12,000 euros, shop fitting 28,000 euros, delivery van 20,000 euros. Total CAPEX is 105,000 euros before the first loaf is sold. At an average useful life of ten years, annual depreciation is 10,500 euros, or 875 euros per month. The profit statement carries 875 euros a month, while the financing plan has to carry 105,000 euros on day one.
Two mistakes are common. Founders list the full purchase as a cost in the profit statement and then also depreciate it, which counts the same money twice. Or they plan CAPEX only for year one and forget replacements. Laptops with a three-year life inside a five-year plan mean a second purchase in year four.
Foundor's financial plan separates investments from running costs, so both effects stay visible.
