Why Profitable Companies Still Run Out of Options
How ignoring cash dynamics turns growth into a trap.
We had our best year ever. Revenue was up. Margins were solid. The P&L looked fantastic. I was planning how to invest the profits into the next phase of growth.
Then my CFO showed me the cash forecast.
We had about ten weeks of runway. Maybe twelve if we got aggressive on collections. Despite being "profitable," we were running out of money.
It took me a while to understand how this was possible. We weren't losing money on paper. Customers were paying—eventually. But we'd hired aggressively to support the growth. We'd invested in inventory and infrastructure ahead of the revenue. We were billing on 45-day terms but paying our people every two weeks. The timing mismatch between cash going out and cash coming in had created a gap that profit couldn't fill fast enough.
We survived, but barely. We had to slow hiring at exactly the moment we needed to accelerate. We passed on opportunities because we couldn't fund them. We negotiated from weakness instead of strength. The "best year ever" almost killed us.
I call this the Runway Blindspot—the pattern where founders focus on revenue and profit while ignoring the cash dynamics that actually determine their options. It's one of the most dangerous traps I see when coaching founder-CEOs of $5M to $50M companies, because the warning signs are invisible if you're only looking at the P&L.
What the Runway Blindspot Looks Like
The pattern is deceptive because everything seems fine on the surface. Revenue is growing. Gross margins are healthy. The business is "profitable" by any standard accounting measure. The founder is confident because the numbers look good.
But underneath, cash is draining. Growth requires investment—hiring ahead of revenue, building inventory, extending credit to customers, investing in systems and infrastructure. Each of these consumes cash today in exchange for returns that come later. The faster you grow, the more cash you consume.
The founder doesn't track cash with the same rigor as revenue. They might glance at the bank balance occasionally, but they're not forecasting cash weekly or understanding the timing of inflows and outflows. They assume that profit equals cash, or close enough.
Then something happens. A big customer pays late. A key hire costs more than expected. A growth opportunity requires upfront investment. And suddenly the founder realizes they don't have the resources they thought they had. The "profitable" business is scrambling.
Why Founders Fall Into This Trap
Most founders came up through sales, product, or operations—not finance. They understand revenue intuitively. They understand profit conceptually. But cash flow dynamics are abstract until they become a crisis.
The confusion starts with a basic misunderstanding: revenue, profit, and cash are three different things, and they move on different timelines.
Revenue is what customers owe you. It shows up on your P&L when you invoice, regardless of when—or whether—you collect.
Profit is revenue minus expenses, but it's calculated on an accrual basis. You might show a profit in a month where you actually spent more cash than you brought in, because the accounting recognizes revenue and expenses based on when they're earned or incurred, not when money moves.
Cash is what's actually in your bank account. It's the only thing that pays salaries, buys inventory, and keeps the lights on. And it follows its own rhythm based on when customers pay and when your bills come due.
Founders often manage the business by revenue and profit because those are the numbers everyone talks about. Growth rate. Gross margin. Net income. These are the metrics investors ask about, the numbers that go in board decks. Cash feels like a detail that the finance team handles.
The other factor is that scaling inherently consumes cash. To grow, you typically have to spend before you earn. You hire the salesperson before they close deals. You build inventory before customers order it. You invest in systems before they generate efficiency. Every growth investment is a bet that future cash will exceed current cash—but the current cash has to exist first.
What This Pattern Costs Your Business
The most obvious cost is survival risk. Companies that run out of cash go out of business, regardless of how profitable they look on paper. This is how fundamentally sound businesses fail—not because the model was broken, but because they grew themselves broke.
But even short of catastrophe, thin cash reserves eliminate options. You can't make the opportunistic hire when a great candidate becomes available. You can't take on a big project that requires upfront investment. You can't weather a bad quarter without making painful cuts. You can't negotiate from strength with vendors, landlords, or potential acquirers.
Every decision gets filtered through "can we afford this right now" rather than "is this the right move for the business." Short-term cash pressure overrides long-term strategic thinking.
There's also the cost of desperation financing. Founders who don't manage cash proactively end up seeking money reactively—taking on debt at unfavorable terms, giving up equity when they have no leverage, or accepting deal structures they'd never agree to if they had options. The cost of capital goes up precisely when you can least afford it.
Finally, there's the psychological toll. Founders who are constantly worried about making payroll can't focus on growth. They're managing crisis instead of building value. The stress affects their decision-making, their relationships with their team, and their ability to lead effectively.
What a Real Cash Management System Looks Like
Strong companies treat cash as a strategic priority, not an accounting afterthought. They understand their capital requirements and plan accordingly.
Cash flow forecasting happens weekly, not monthly. The founder or CFO maintains a rolling forecast that shows expected cash inflows and outflows for the next 13 weeks minimum. This isn't a complex model—it's a clear view of when money comes in and when it goes out, so gaps are visible before they become crises.
The business tracks its cash conversion cycle. This is the time between when you spend money (on inventory, labor, etc.) and when you collect from customers. A longer cycle means more cash tied up in operations. Shortening this cycle—through faster collections, better payment terms with vendors, or more efficient inventory management—frees up cash for growth.
Capital requirements for growth are understood explicitly. Before committing to a growth plan, the leadership team calculates how much cash that growth will consume. How many people will we hire, and when? What inventory will we need? How long before new revenue starts flowing? This analysis prevents the surprise of discovering you've grown faster than your cash can support.
Cash reserves provide strategic cushion. Smart founders maintain enough cash to survive a bad quarter—or to pounce on an opportunity. The specific number varies by business, but the principle is constant: cash in the bank equals options.
Financing is arranged from strength, not desperation. The best time to secure a line of credit or raise capital is when you don't urgently need it. Companies with good cash management have financing relationships in place before they need them, giving them access to capital on favorable terms.
How to Know If You Have This Problem
There's a simple test. Without looking anything up, can you answer these questions:
How many weeks of cash do you have at your current burn rate? If you don't know this number within a rough range, you're flying blind.
What's your cash conversion cycle—the gap between when you pay for something and when you collect revenue from it? If you can't answer this, you don't understand the cash dynamics of your business.
If your biggest customer paid 60 days late, would you make payroll? If the answer is no, or "I'm not sure," your cash cushion is thinner than it should be.
Here's another diagnostic: look at your last three months. Compare your net income (profit) to your change in cash. If profit was positive but cash went down, you're experiencing the cash consumption that growth creates. That's not necessarily bad—but you need to understand it and plan for it.
Where to Start
You don't need sophisticated financial systems to manage cash better. Start with visibility.
Build a simple 13-week cash forecast. List your expected cash inflows by week—not revenue, but actual cash you expect to collect based on when invoices are due and how customers typically pay. Then list your expected cash outflows—payroll, rent, vendors, everything. The difference shows you where you're headed.
Update this forecast weekly. It doesn't take long once you have the template, and the discipline of reviewing it regularly will transform how you think about cash.
Calculate your cash conversion cycle. How long, on average, between when you incur costs and when you collect payment? Look for ways to shorten this—faster invoicing, tighter payment terms, deposits on large projects, better collections processes.
Set a minimum cash threshold. Decide how much cash you need to feel safe—enough to survive a bad quarter, cover a surprise expense, or fund an opportunity. Then manage toward keeping cash above that threshold.
Finally, separate your thinking about profit and cash. Both matter, but they're different games. A profitable quarter where cash declined isn't necessarily a win. An unprofitable quarter where cash increased isn't necessarily a loss. Understand both, and make decisions with both in mind.
Questions for You and Your Team
Before moving on, take a few minutes to reflect on these questions. The goal isn't to have perfect answers—it's to surface whether you're managing cash with the same rigor you apply to revenue and profit.
Without checking, how many weeks of runway do you have at your current burn rate? If you don't know this number, you're not managing cash—you're hoping.
What's the gap between your profit last quarter and your change in cash? Can you explain the difference? Understanding this gap is understanding how your business actually works.
If you wanted to make an unplanned $100K investment tomorrow—a great hire, an acquisition opportunity—could you do it without stress? Your answer reveals whether you have strategic optionality or are running on fumes.
What to Do Next
If this pattern sounds familiar, you're not alone. Most founders grew up managing revenue, not cash—and the difference becomes critical as companies scale.
If you want to see where your Cash systems stand relative to other growth companies, take the Growth Readiness Assessment. It's a free 15-minute diagnostic that scores your business across six dimensions, including Cash.
Take the Growth Readiness Assessment
If you'd like help understanding your capital requirements or building financial systems that support scaling, I offer a free 60-minute consultation.
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About the Author
Bruce Eckfeldt is a strategic business coach and exit planning advisor who helps founder-CEOs of growth-stage companies scale systematically and exit successfully. A former Inc. 500 CEO who built and sold his own company, he brings real-world operational experience to strategic planning and leadership development. He's a certified ScalingUp and 3HAG/Metronomics coach, Certified Exit Planning Advisor (CEPA), an Inc. Magazine contributor, and host of the "From Angel to Exit" podcast. Bruce works with growth companies in complex industries, guiding leadership teams through growth challenges and exit preparation. Reach him at bruce@eckfeldt.com with any questions or if you want more information or to book a call with him.
