Growing Your Business Could Be Making You Poorer
I sat down with an owner whose bank account was fat. Not comfortable, fat. Six figures sitting there, growing month after month. The leadership team had started making decisions off that number. They hired ahead of need. They handed out raises. They built an overhead structure that matched how the business felt, not what it had actually earned. They were running full speed on the muscle that gets money, and nobody in the room was exercising the muscle that keeps it.
The cash was real. What it represented wasn’t. Most of it was deposits, money customers had paid in advance for work that hadn’t happened yet. It looked like profit sitting in the bank. It was actually a stack of promises the business hadn’t delivered on, and hadn’t spent a dollar of cost against yet.
Then a downturn hit. Nothing catastrophic, just a normal slowdown. New deposits stopped refilling the account as fast as old obligations drained it, and the mirage evaporated in nine months. They burned through $500,000 and had to make the calls nobody wants to make, salary cuts, layoffs of people they’d hired because they liked them and trusted them, the whole gutting exercise. The owners told me later they weren’t sleeping.
Here’s the part that stayed with me. When we went back through it together, they didn’t have a revenue problem. Revenue had been fine the whole time. What they had was a visibility problem, and a growth problem sitting right on top of it. Nobody had ever calculated true operational breakeven, the number that strips deposits back out and shows what the business actually earns versus what it’s obligated to deliver. If they’d stayed flat, that blind spot would have revealed itself much quicker. It was the hiring and the raises stacked on top of it that turned a bookkeeping gap into a $500,000 wound. They’d built a beautiful skyscraper on a foundation nobody had checked.
Two different skills, and most owners only build one
The ability to make money and the ability to keep money are almost entirely different skill sets. Growing revenue, landing clients, expanding into new work, that’s the visible half, the half that gets talked about at the holiday party. Keeping what you make, knowing what your cash actually represents, building reserves before you need them, that half is quiet and unglamorous, and most owners never deliberately build it. They assume it’ll show up on its own once things settle down.
That owner had the get it muscle in great shape. It’s what got the bank account to six figures in the first place. What was missing was the keep it muscle, and growth without it doesn’t create wealth. It just means the mistake compounds faster.
Big is not the same as rich
That’s the trap in one sentence. Revenue growth feels like progress. It’s visible, it’s exciting, it’s the number everyone asks about. But growth without structure underneath it doesn’t create wealth. It creates a faster version of whatever chaos was already there, just with more zeros and less time to catch it before it breaks something.
If your business takes any money in before you’ve delivered the work, deposits, retainers, progress payments, advance bookings, this isn’t a niche problem. It’s the single most common way “the bank account looks healthy” and “the business is healthy” quietly become two different facts.
This is a pre-mortem, borrowed loosely from investor Howard Marks: a house that can withstand a hurricane looks identical to one that can’t, until the hurricane actually hits. Most owners are excellent at picturing the upside of a decision and terrible at picturing the downside. Before you commit to the next hire, the next location, or the next big spend, spend ten minutes imagining it went badly and working backward to why.
Where Profit First fits in
This is the entire logic behind paying yourself profit first instead of last. It forces you to build the keep it muscle at the same time as the get it muscle, instead of hoping you’ll remember to build reserves once things settle down. Things rarely settle down on their own, and a fat bank balance built on unearned deposits settles down the fastest, and the worst way. The structure has to come first, or the growth just amplifies whatever was already fragile underneath it.
This is what he help out clients figure out.