Funding Growth: How Much Cash Will Your Next 10% of Growth Require?

The question every CEO should ask before setting the next growth target.

How Much Cash Will Your Next 10% of Growth Require


The growth conversation needs another question

I spend a lot of time with leaders talking about growth.

It’s exciting. It’s energising. It’s what every business needs.

But there’s one question that often doesn’t get asked early enough:

Do we have enough cash to fund the growth we’re planning?

Because growth doesn’t just show up in your sales numbers.

It shows up in your receivables, your inventory, your people, your systems and your overhead.

And if you don’t see the cash requirement coming, it can put pressure on the very business you’re trying to build.

10% more revenue does not mean 10% more cash

Imagine a business generating $20 million in annual revenue and planning to grow by 10%. That means an additional $2 million of revenue.

It is easy to look at that $2 million and focus on the opportunity.

But that growth may require more cash before the business sees all of the benefit.

More sales can mean more receivables. More demand can require more inventory. More customers can require more people and capacity.

The faster you grow, the bigger that cash requirement can become.

Growth creates demand across the business

Growth rarely happens in one part of the business.

It can create demand for working capital, people, systems, equipment and space.

That means the growth target on the strategy plan needs another number beside it:

The cash required to fund it.

The bigger the gap between cash coming in and cash going out, the more pressure the business can feel.

Before you grow, understand the cash requirement

Before committing to the next 10% of growth, I’d want the leadership team to answer five questions:

1. How much additional revenue are we targeting?

2. What will happen to gross margin?

3. How much additional working capital will we need?

4. What additional people, inventory and capacity will growth require?

5. Where will the cash come from?

When you can answer these questions with clarity, you can grow with confidence.

Growth is only valuable if you can fund it

Revenue growth is the starting point.

Cash-funded growth is what makes it sustainable.

When you understand the cash requirement of growth, you can make better decisions, avoid surprises and build a business that is stronger for the long term.

That’s the real opportunity.

So, how much cash will your next 10% of growth require?

That’s the question I would put on the table before signing off the next growth target.

Not just: How much can we sell?

But: What will it take to fund it?

Because the best growth is not simply growth that makes the business bigger.

It is growth that makes the business stronger.

DISCOVER YOUR FINANCIAL OPPORTUNITY

If your business is growing and you want to understand what that growth is really doing to profit, cash and value, I’d welcome the opportunity to have a conversation.