Why?
Because growth consumes cash.
One of the most common questions I get — especially from students and early-stage founders — is:
“Doesn’t growth generate more cash?”
The answer? Nope.
Growth consumes cash—and the faster you grow, the more it consumes. But don’t panic. With the right capital strategy, you can manage growth effectively and avoid getting caught off guard.
📈 The S-Curve of Growth
Most companies grow in an S-curve:
- Early momentum
- A steep acceleration phase
- Then a plateau aligned with broader industry or market growth
At that plateau, you either maintain, optimize, or kick off a new growth cycle by launching a new product or entering a new market.
The real challenge lies in the middle of the S-curve, where growth starts outpacing your cash flow. You’re shipping more, ordering more, hiring more — but payments from customers lag behind.
That’s called the cash lag, and it’s one of the most vulnerable stages in a company’s journey.
(We covered this in more detail in Understanding Your Cash-to-Cash Cycle Gap.)
💡 A Simple Example
Let’s say you’re a $50M revenue business growing 25% year-over-year—about $1M in additional revenue per month.
With a 40% gross margin, your incremental cost of goods sold (COGS) is:
(1 – Gross Margin) × Incremental Revenue =
(1 – 0.4) × $1M = a minimum $600K/month in new spend —just to support inventory. And that doesn’t include additional operating costs like marketing, logistics, or sales.
Unless you have significant excess cash, this expense will widen your cash-to-cash cycle gap. Early on, you might stretch vendors or take discounts for early payments, but those levers have limits.
Eventually, companies can hit a tipping point where their capital structure can’t keep up. Not because the business isn’t working—but because growth has outpaced cash planning.
And depending on how steep your growth is, you may not see the wall until you hit it.
⚠️ The Risk of Not Being Ready
Without the right capital plan and structure, businesses can end up selling short Purchase Orders they receive straining, or impacting customer relationships or having to say no to growth opportunities simply because they can’t fund them.
Lost sales. Missed shelf space. Wasted promotional dollars. It all adds up.
🛠 How Capvia Helps
At Capvia, we don’t just solve short term problems but help companies build long-term capital strategies that scale with them.
We work side by side with management to:
- Understand your business deeply
- Plan ahead
- Revisit and adjust regularly
So when opportunity knocks, you’re ready.
🚀 Growing? Planning to? Let’s Talk.