Cash runs out before break-even: the founder's surprise
Cash often runs out before a new business reaches break-even. A one-table forecast shows the lowest cash point, and how much extra funding slow-paying customers add.
A new business rarely fails on the day it stops being profitable on paper. It fails on the day the bank balance reaches zero, and that day usually comes before the break-even month.
1. The problem: spending leads, receipts lag
Costs start on day one: equipment, rent, wages, software. Revenue starts later, and cash from that revenue starts later still, because customers pay after 30, 60 or 90 days. The profit and loss account can turn positive while the bank balance is still falling.
The question a founder needs answered is therefore not "when do we break even?" but "how much cash do we need to reach the lowest point?" Most first forecasts do not show that number.
2. Why it matters
The Office for National Statistics counted 317,000 business births and 280,000 deaths in the UK in 2024 (provisional for deaths), according to its Business Demography bulletin, released 20 November 2025. Of businesses born in 2019, 38.4% were still active five years later. That figure covers every cause of closure, so it is not a measure of cash shortages alone. It does show how thin the margin for a slow start can be.
Funding is part of the picture. GOV.UK describes Start Up Loans of £500 to £25,000 at a fixed 7.5% a year, repaid over 1 to 5 years. A fixed repayment begins whatever the sales line does. If the loan is sized to the plan rather than to the lowest cash point, the gap appears after the money is spent.
3. The solution: one table, one lowest point
Build a monthly table with five columns: revenue billed, cash received, costs paid, closing cash, and the month of the lowest balance. The figures below are illustrative, not from any real business.
Opening cash is £3,000 (£15,000 raised, £12,000 spent on setup). Monthly costs are £9,000. Billing grows from £4,000 in month 1 to £16,000 by month 7.
| Month | Billed | Paid in (30 days) | Costs | Closing cash |
|---|---|---|---|---|
| 1 | £4,000 | £0 | £9,000 | -£6,000 |
| 2 | £6,000 | £4,000 | £9,000 | -£11,000 |
| 3 | £8,000 | £6,000 | £9,000 | -£14,000 |
| 4 | £10,000 | £8,000 | £9,000 | -£15,000 |
| 5 | £12,000 | £10,000 | £9,000 | -£14,000 |
Billing passes costs in month 4, but cash is lowest in the same month: -£15,000 after the £3,000 opening cash is already counted, so £15,000 of extra funding is needed, plus a cushion. Now let customers pay after 90 days instead of 30. The lowest point drops to -£33,000 in month 6, and cash is still negative in month 8. The same sales plan needs £18,000 more funding, purely because of timing. Direction, not measurement: the table is only as good as its three weakest assumptions.
4. Why the principle holds
A lender's first request is a plan, and the plan has to show when money goes out and when it comes back. The Start Up Loans scheme reflects this: GOV.UK lists support with drafting the business plan and up to 12 months of mentoring for successful applicants. The lowest-point table is the same idea reduced to one hour: it turns a plan into a funding figure you can check against the amount you intend to borrow.
Tips and tricks for this week
- Write down the three assumptions that move your break-even month: price, first-sale date, customer payment time.
- Calculate the lowest cumulative balance, not just the closing one.
- Add a scenario where customers pay three months late. Note the change in the lowest point.
- Ask one question before borrowing: how much cash do we need to reach the lowest point?
- Put the month of the lowest point in your diary and review the forecast against actuals that day.
The average hides the story. If you want a second view of where your own cash and margin go, the Business Health Check looks at the same question for your own numbers. One change, one date.