Capital expenditure (capex)

What is capital expenditure (capex)?

Capital expenditure is spending on long-lived assets such as equipment, vehicles, buildings or software, recorded as an asset and expensed over time through depreciation or amortization. Operating expenses hit the P&L in full when incurred; capex is spread over the asset's useful life. In services companies it often means service vans, lifts, testing equipment and field software.

Why it matters to a revenue leader

Capex matters to a revenue leader in two ways. Inside the company, growth that needs new trucks or equipment uses capex and reduces free cash flow, so sponsors weigh it before they back a growth plan. On the customer side, buyers often fund large repairs and replacements from capital budgets set a year ahead, while routine service comes from operating budgets. Knowing which budget a deal draws from tells your sellers when it can close and who approves it.

A building owner's facility team has $400,000 of approved capex for next year, already assigned to specific projects. A mechanical contractor's seller proposes a $350,000 rooftop unit replacement in June, after the capital plan is set. The project waits for the next budget cycle, while a $40,000 repair funded from the operating budget closes the same month.