Your revenue is growing, you are making a profit and there is no shortage of work. Yet your business may gradually be losing financial headroom. Cash remains tied up for longer, margins shrink or an investment performs less well than expected. As an owner, you often sense that something is not right without seeing exactly where it goes wrong.
Good results are something to be proud of. You have built a customer base, hired people and seized opportunities. But higher revenue does not automatically make the business financially stronger.
Perhaps every new assignment requires more pre-financing. Or a new location grows in revenue but not yet in profit. The benefits of an acquisition may also take longer to materialise.
That is why I look beyond revenue and historical profit. What does growth genuinely deliver? How much cash does it require? And how much room does the owner retain afterwards?
Four examples make that difference visible.
A larger customer requires €186,000 in additional capital
A wholesaler with €3 million in revenue has the opportunity to supply more to an important customer. Revenue from that customer grows to €900,000 a year. There is one condition: the customer wants to pay after 90 days instead of 45.
That longer payment term ties up approximately €111,000 extra in receivables. To meet demand, the business must also hold an additional €75,000 in stock. The expansion therefore requires roughly €186,000 in extra capital.
At a financing rate of 6%, that costs more than €11,000 a year. The business also becomes more dependent on one customer.
This does not mean the owner should reject the opportunity. It does mean the decision is about more than additional revenue. Margin, payment terms, inventory, financing costs and customer concentration all belong in the same assessment.
My article on working capital during growth explains why growth often requires cash before it produces cash.
Twelve per cent more revenue, but €110,000 less EBITDA
A professional-services firm with €7 million in revenue opens a second location. The owner has confidence in the region and sees ample commercial opportunity. One year later, revenue has risen to €7.84 million.
That sounds like a positive step. Yet EBITDA falls from €1.05 million to €940,000. The margin drops from 15% to approximately 12%.
The reason is understandable. From the day it opens, the new location incurs rent, staffing and other fixed costs. Occupancy simply grows more slowly than expected.
The immediate question is not whether the location should close. The real question is how much time the owner is prepared to allow and what result must be achieved during that period.
I would want to see how occupancy develops month by month. I would also want to know which services and customers contribute to margin. Only then can you determine whether this is a normal ramp-up period or whether the plan needs adjusting.
€250,000 of the expected synergy fails to materialise
A manufacturing business with €10 million in revenue acquires a smaller competitor. The business case assumes €400,000 in annual savings, mainly from joint purchasing and more efficient production.
After the acquisition, reality proves more difficult. Supplier contracts cannot be changed immediately. Systems do not integrate as well as expected, and the integration demands more management time.
Only €150,000 of the expected savings is achieved in the first year. €250,000 is missing.
If that gap becomes permanent, at an illustrative valuation of six times EBITDA it could represent €1.5 million in enterprise value.
By then, the acquisition has long been completed. The real work is only beginning. Someone must continue to track which benefits have been achieved, where delays arise and who takes the next step. Without that follow-up, a substantial part of the expected value remains merely in the acquisition plan.
One project delivers €120,000 less
An installation company has a full order book and accepts a €3 million project. The estimate assumes €2.55 million in costs. Expected project profit is €450,000, a margin of 15%.
During delivery, the schedule slips. Subcontractors become more expensive and the team performs additional work before the client has approved it. At completion, costs have risen to €2.76 million. Only €90,000 of the requested additional work is reimbursed.
The project ultimately delivers €330,000. That remains a positive result, but it is €120,000 less than expected.
This is precisely where things often go wrong. Everyone has worked hard, the client is satisfied and the project is complete. The result therefore does not immediately feel like a problem. But if the same deviations occur across three projects, €360,000 disappears from expected annual profit.
In this practical article about project profit, I show how hours, purchasing, additional work and invoicing together determine what a project genuinely earns.
Where is the financial progress?
These examples differ in size and sector, but their core is the same. Results look good from the outside while financial headroom is being lost behind the figures.
At €10 million in revenue, one additional percentage point of operating margin already adds €100,000 to annual profit. A shorter payment term can release substantial cash. And a deviation identified early can often still be corrected.
That is why I discuss more than last month's profit with business owners. We also look at customers, projects, investments and expectations for the coming months. Where is cash tied up? Which growth genuinely contributes? And who must act when performance deviates?
That sounds logical. In daily operations it does not happen automatically. Customers, employees and ongoing projects demand attention. The figures are produced, but they do not always lead to a decision.
With Growth Partner, we establish a fixed rhythm. We connect cash flow, profit, forecasts and KPIs to concrete decisions and follow-up. This suits owners who need more than a retrospective view from their bookkeeper but do not yet want to hire a full-time CFO.
Would you first like to see where your business may be losing financial headroom or value? Take the free business scan. In about five minutes, you receive an initial view of cash flow, profitability, manageability and value creation.
Do you already have a specific question about growth, margins or cash flow? You can also book a no-obligation introduction directly.
Mylène helps SME owners who need more than a bookkeeper, but for whom a CFO is still a step too far. Drawing on experience in finance, private equity and M&A, she turns financial figures into clear decisions about cash flow, profit, growth and business value. Together with entrepreneurs, she builds financially stronger, better organised and transferable businesses.
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