Situation 03 / Finance & Turnaround
Growing fast. Running out of cash.
Written by Tristan Roberts, Co-Managing Partner
Revenue is climbing, retailers are ordering and everybody thinks things are going well. The bank balance says otherwise.
The situation
This is one of the strangest situations in consumer products.
Sales are growing.
And the company is running out of money.
A large retailer places an order. Manufacturing has to happen months before payment arrives. Inventory increases. Freight gets paid. Marketing investment rises. More people are hired.
Revenue looks fantastic.
Cash disappears.
Growth consumes working capital, and eventually someone discovers that the business needs significantly more funding just to deliver the growth it has already won.
What matters now
Do not start with another fundraising deck.
Start with the numbers.
We want to understand:
- SKU profitability
- customer profitability
- gross margin
- landed margin
- inventory cover
- inventory ageing
- promotional spend
- debtor days
- creditor terms
- purchasing commitments
- freight
- fulfilment costs
- marketing efficiency
- headcount
- cash conversion cycle
Then build a genuine 13-week cash forecast.
Not an optimistic annual budget.
Cash. By week.
What we would do
Separate what is urgent from what is merely uncomfortable.
Protect cash.
Reduce unnecessary inventory.
Renegotiate terms.
Challenge purchase orders.
Review promotions.
Identify low-margin customers and SKUs.
Prioritise the channels generating contribution rather than vanity revenue.
Then determine how much capital the business genuinely needs and what that capital will achieve.
Because raising another $2 million without fixing the underlying economics simply delays the same conversation.
The bigger lesson
Revenue doesn't pay bills.
Cash does.
And growth without working-capital discipline can destroy an otherwise perfectly good business surprisingly quickly.
Relevant capabilities
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