A good deal can make money every month and still leave you short on cash for months.
I watched the leadership team at a manufacturing business I help run learn this the useful way this fall. A large new customer opportunity was on the table. On paper it was easy: every unit made a healthy gross profit, and the deal was profitable from the first month.
Then they walked through a working capital forecast for it. The deal made money. It just didn't return cash for months, because the business would pay for materials and labor long before the customer's payments caught up.
One leader in the room put it plainly. In his head, if each unit makes money, the cash shows up a couple of months later. Seeing the forecast changed the question from "is this deal profitable?" to "what has to be true for us to fund it?"
Profit is a P&L idea. Cash is a balance sheet idea.
Most owners I talk with watch the P&L closely. It tells you whether the work is priced right and whether the business makes money.
It doesn't tell you when the money arrives.
Cash lives in the gap between what you pay out and what you collect. Inventory you've built but haven't sold. Invoices you've sent but haven't been paid on. Bills you have to pay on your supplier's schedule, not your customer's. A business can be profitable and growing and still feel tighter every month, because growth widens that gap.
This team didn't build the forecast because they wanted to. A lender asked for it. But once it existed, it became the lens for every new opportunity, not just the one in front of them.
Growth you can't fund chooses for you
Here's why this matters for your options as an owner.
When cash is always tight, decisions get made by the bank balance instead of by you. You take the deal you can afford instead of the one you want. You borrow to cover the gap and hope the next quarter is better. You stay in the middle of every decision because there's no room for anyone else to be wrong.
That's not a position of choice. Whether you want to keep the business, step back from it, or someday sell it, you want to make that call from a business that funds itself, not one that needs you to keep finding cash.
The way out for this team isn't to stop growing. It's to speed up how fast the business turns materials into finished work and finished work into cash, so less money sits on the shelf. Their phrase for the season ahead was simple: keep it small, keep it all, and fund growth on their own time.
Try this
Before you say yes to your next big deal or customer:
- Ask when the first dollar of cash comes back, not just when the deal turns a profit.
- Map the gap: how much you'll pay out for materials, labor, and inventory before the customer pays you.
- Decide how you'll fund that gap before you sign, and what you'll do if payments run late.
- Look at your inventory and open invoices. Which one is holding the most cash you've already earned?
- Ask whether the deal widens your options or narrows them.
A profitable deal you can't fund isn't growth yet. It's a cash problem you haven't met.
Build the business. Keep your life.
If you want the longer version of how owners get stuck in the middle of every decision and how to build a business that needs you less, get the free book, One Reasonable Yes at a Time.
