Follow the cash behind the growth

Three questions to ask when expansion looks better on paper than it does in the bank.

Revenue growth tells us that a business is selling more. It does not tell us when the money arrives, or how much cash the business needs to keep growing. Our fictional Northline Retail case is a simple way to explore that distinction.

First, look at whether collections are keeping pace with sales. Next, consider how much inventory and other working capital each new store needs. Finally, separate spending that maintains the business from spending intended to expand it.

In this illustration, expansion absorbs cash faster than the existing stores produce it. The useful next checkpoint is store productivity and working capital, rather than another headline growth number. The demo call records that checkpoint so the next review has something specific to test.