Business Performance
Revenue is up, but the business feels harder to run
“Revenue is up, but running the business feels harder than ever.”What owners tell us
The situation
Signs you are facing this
- Sales grow but profit stays flat
- More staff, more hours, same result
- Cash gets tighter as the business gets bigger
- Problems surface as surprises
The situation
Revenue is up, but the business feels harder to run
Driver 1
Low-margin growth
New sales come from discounts or costly customers.
Driver 2
Costs rise in steps
Staff, space and systems added faster than revenue.
Driver 3
No performance rhythm
Results reviewed yearly, not monthly.
- 1
Diagnose
Review performance
Margins, cost base, cash and operating KPIs.
- 2
Design
Find the leaks
Where growth costs more than it earns.
- 3
Embed
Set a monthly rhythm
Targets, reporting and review meetings that stick.
- Growth economics analysis: margin, cash and capacity
- Working capital and cost-to-serve review
- Pricing and customer mix recommendations
- Cash-flow forecast under growth
Try it on your numbers
See how growth absorbs your profit.
Fixed here: NPR 10 crore sales, 22% gross margin, 6% net margin. Change every input in the full calculator.
From profit to cash
This year, NPR
- Net profit for the year+NPR 60.0 lakh
- Less: more owed by customers−NPR 56.9 lakh
- Less: more stock on hand−NPR 59.2 lakh
- Add: more credit from suppliers+NPR 14.8 lakh
- Cash from operations−NPR 41.3 lakh
- Cash conversion cycle
- 180 days
- Cash tied up in working capital
- 4.39 crore
- Growth profit can fund
- 16% a year
The business makes NPR 60.0 lakh of profit, but growth absorbs NPR 1.01 crore into customer balances and stock. Cash from operations is −NPR 41.3 lakh: the profit is real, the cash is not there.
At these settings, profit alone can fund about 16% growth a year. Faster than that, the difference has to be borrowed or invested.
Illustrative. Assumes balances move in line with sales and that profit is kept in the business. Leaves out tax timing, depreciation, capital spending and loan repayments, which a real cash forecast includes.
Common questions
Why is my profit not growing with sales?
Typical reasons are falling gross margin, overheads growing faster than sales, and working capital absorbing cash. A performance review shows which applies.
What is a business performance review?
A structured look at margins, costs, cash, and operating measures, ending in a short list of priority actions.
Related situations
- “We do not know which products or customers make money.”Not sure which products or customers make money
- “We price imports off the invoice, and margins keep surprising us.”Import costs and margins you cannot see
- “We are about to scale, and I am not sure the model holds.”About to scale, unsure the business model holds