Revenue and cost curves are important for knowing the break-even point (the point where the company has no profit and loss). At the start, all startups have some fixed costs and no variable cost or revenue. As startups start working they have to incur variable costs per transaction. Thus as startups expand they have a tendency to become loss-making.
The only way out to become profitable is to earn some revenue per transaction. The important thing to remember is that fixed costs will be recovered only when the startup achieves some scale. Till then the startup will remain loss making.
In the coming weeks I will be expanding this blog post to explain the revenue and cost curves in detail.
Author: Saurabh Jain (Follow him on Twitter : @skjsaurabh)
3 Steps To Startup Success
