How to tell if your growth is killing you
Two very clear indications signal that growth is not happening in a sustainable manner.
First, if revenue growth accelerates and your margins start shrinking, then you’re probably under-pricing your services, which may be why you’re growing in the first place. Continued growth like this can can lead to future cash flow problems.
Reviewing your pricing and slightly increasing your prices tempers demand, allowing you to bring on extra manpower or invest in new infrastructure needed to maintain healthy margins as your company scales.
Second, listen to your customers. When they (or your prospects) tell you this is the second or third time they’ve called or emailed without hearing back, or complain about your customer service, then it’s likely your product/service demand is outpacing your team’s workload capabilities.
The fact is, profitability is not as important as cash flow — accounting wizardry can allow you to appear profitable if you’re cash poor. Being cash poor is expensive because you must take on higher-cost money (debt or equity investments) to continue funding operations.
Proper cash flow planning leads to long-term viability and enables you to grow over the long term in a sustainable manner. It also allows you to fund operations and investments internally, making your business less risky overall.