Why Growing Businesses Run Out of Cash even When They’re Profitable

Send us Fan MailA growing business can be profitable and still run out of cash.Growth requires money before it produces money.New employees need recruiting, onboarding and paying before they become fully productive. Stock and raw materials must be purchased before customers pay. Offices, machinery and technology can consume enormous amounts of cash upfront.In this episode, Peter Boolkah explains why business owners must understand the difference between reinvesting profits and spending the company’s cash reserves.You’ll discover:Why profit and available cash are not the same thingHow rapid growth creates pressure on working capitalWhy paying cash for every major asset can restrict future growthWhen financing equipment may be more sensible than buying it outrightWhy banks are often more willing to lend when you do not desperately need the moneyHow cash reserves create flexibility and negotiating powerThe hidden cash cost of recruiting and onboarding employeesWhy profitable companies can become unable to fund stock, materials or peopleHow inappropriate capital spending traps businesses in a cash-flow cycleWhy financial resilience is essential when scalingPeter also explains why owners should maintain an appropriate liquidity reserve rather than treating every pound in the bank as spare money.The correct reserve depends on the company’s industry, margins, working-capital cycle, debt commitments and risk exposure. Peter’s 10% of turnover figure is presented as his coaching benchmark, not a universal financial rule.This conversation was recorded in 2018. Comments about interest rates and the cost of borrowing reflect the economic conditions at that time. Any financing decision should be based on current terms and appropriate professional advice.Learn more about Peter Boolkah and The Hamster Wheel Trap® at https://www.boolkah.comCONNECT WITH PETER BOOLKAHWebsite: https://www.boolkah.comLinkedIn: https://www.linkedin.com/in/boolkahInstagram: https://www.instagram.com/pboolkah/Facebook: https://www.facebook.com/BoolkahX: https://twitter.com/boolkahABOUT PETER BOOLKAHPeter Boolkah is a business coach, author and speaker who has spent more than 20 years helping business owners build stronger, more valuable businesses that do not depend on them for everything.He is the creator of The Hamster Wheel Trap® and author of Your Business Sucks: Build a Business That Works Without Destroying Your Life.Peter works with founders and leadership teams on the issues that ultimately determine whether a business creates freedom or becomes another job: leadership, founder dependency, people, profit, execution, scaling, exit readiness and enterprise value.His approach is direct, practical and built around one simple question:Do you own the business, or does the business own you?Learn more at https://www.boolkah.com