A packaging manufacturer in Vapi lands two large consumer-goods customers. Orders jump 60% in one season. The team celebrates. The owner hires, buys raw material in bulk and adds a night shift.
Four months later he is at the bank asking for more time on his loan.
The new customers are genuine. They pay reliably. They also pay on ninety days. Raw material suppliers want payment in thirty. Wages go out every month. For every rupee of new sales, the business first spends money it will only recover months later. The faster sales grow, the more cash disappears into that gap.
This is the part of growth that sales targets never mention. A profitable business can grow itself into a cash crisis. Not despite doing well. Because of it.
In a 2001 Harvard Business Review article, Neil Churchill and John Mullins asked a plain question: how fast can your company afford to grow? They proposed a measure called the self-financeable growth rate. It is the speed at which a business can expand using only the cash its own operations generate, without new loans or investors. Three things drive it: how long cash stays tied up in each sale, how much cash each rupee of sales needs and how much each sale brings back.
Grow slower than that rate and the business funds itself. Grow faster and someone else has to fund the difference. A bank. A partner. Too often, the owner’s family savings.
Every new order is paid for twice. Once by you now. Once by the customer later.
The answer is rarely to refuse growth. It is to shape it. Negotiate payment terms before you accept the big order. Ask for an advance against raw material. Ramp up in phases. Arrange working capital before the first invoice goes out rather than after the last rupee runs out.
Before your next big jump in sales, work out how much cash it will swallow before it returns any. If you cannot name that number, you are not ready to celebrate the order yet.
DeliberX Ref: B-057 · Self-financeable growth rate (Churchill & Mullins, HBR 2001) · Know how fast your cash lets you grow
Growth feels like success long before it feels like a cash problem.
How much growth your business can actually carry is a question the Decision Check helps you ask in time.
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