Most CEOs don’t have a profit problem.
They have a cash illusion problem. On paper, the business looks healthy. Revenue is growing. Margins are “acceptable.” The P&L tells a reassuring story.
Yet…
- The overdraft is creeping up
- Supplier pressure is increasing
- Growth feels like it’s creating stress, not freedom
And the default response?
“We need better forecasting.”
“We need to manage cash more tightly.”
“We may need to extend the facility.”
That’s not strategy. That’s symptom management.
The Hard Truth: Cash Problems Are Operational Problems
The article you shared makes an important point: Most businesses treat cash as a finance issue, when in reality it’s an execution issue.
Cash doesn’t disappear randomly. It is consumed by decisions:
- Pricing decisions
- Cost discipline (or lack of it)
- Sales behaviour
- Contract terms
- Operational inefficiencies
If you don’t fix those… no forecast, no CFO, no banking facility will save you.
The 7 Drivers That Actually Control Your Cash
Inside every business—whether $20M or $100M—there are only seven levers that matter:
Profit Drivers (Percent-based)
- Price
- Volume
- Cost of Goods Sold
- Overheads
Cash Drivers (Time-based)
- Debtor Days
- Work-in-Progress / Inventory
- Creditor Days
Simple.
But here’s the problem: most leadership teams obsess over the weakest lever—volume.
The Biggest Blind Spot in Mid-Market Companies
Let’s put this into a real-world Australian context.
Example: $40M Business
- Gross Margin: 40%
- EBITDA: $4M (10%)
Now compare three scenarios:
Lever Change Profit Impact
Volume +1% ~$160K
Price +1% ~$400K+
COGS Reduction -1% ~$400K+
Same 1% effort. 2–3x different outcome.
Yet where does 80% of leadership time go?
- Chasing more sales.
Where This Goes Wrong (Every Time)
Here’s what I see repeatedly in mid-market businesses:
1. Discounting Without Discipline
Sales teams give away margin to “win deals”
→ No one calculates the real impact
→ Profit erodes
→ Cash disappears
A 1% price drop in a $40M business can easily wipe out $400K+ in profit and over $1M in enterprise value. And it happens quietly.
2. Growth That Consumes Cash
You grow revenue by 10%.
Everyone celebrates. But no one asks: “How much cash does that growth require?” Let’s say:
- For every $1 of growth, you need ~$0.20 in working capital
A $4M growth target = $800K cash requirement
That has to come from:
- The bank
- The owner
- Or somewhere inside the business
This is how companies grow broke.
3. Poor Working Capital Discipline
This is the silent killer.
- Debtors stretch from 45 → 60 days
- WIP blows out due to inefficiencies
- Suppliers get paid faster than customers
No one owns it. No one measures it daily. But it slowly drains hundreds of thousands in cash.
The Shift That Changes Everything
High-performing leadership teams stop asking:
- “Where did the cash go?”
And start asking:
- “What is driving our cash—and how do we improve it?
”That shift is not subtle. It changes behaviour across the business.
What This Looks Like in Practice
Let’s stay with the $40M example. A leadership team focuses on just three moves:
- +2% Price discipline
- -2% COGS improvement
- -5 days Debtors
Outcome:
- ~$1M+ increase in profit
- ~$1M+ improvement in cash
No new customers required. No major strategy shift. No additional overhead. Just better execution on the right levers.
The Real Issue: Leadership Attention
This is not a finance capability gap. It’s a leadership attention problem.
Most CEOs:
- Don’t see these drivers clearly
- Don’t connect operational decisions to cash
- Don’t hold teams accountable to the right metrics
So the business:
- Grows inconsistently
- Leaks cash
- Becomes dependent on external funding
What to Do Monday Morning
If you want to fix cash properly—not temporarily—start here:
1. Build Your “Power of One” Model
Understand the sensitivity of:
- 1% price change
- 1% cost movement
- 1-day shift in debtors/creditors
If you don’t have this… you’re flying blind.
2. Put Pricing Back Under Leadership Control
- No unmanaged discounting
- Clear pricing strategy
- Visibility of margin by deal
3. Treat Working Capital as a Daily Discipline
- Debtor days tracked weekly (minimum)
- Clear ownership of collections
- Contract terms reviewed before deals are signed
4. Align Sales With Cash, Not Just Revenue
Stop rewarding:
- Volume at any cost
Start rewarding:
- Profitable, cash-generating growth
5. Ask the Right Question Before Growth
Before approving growth targets:
- “Can we afford to grow at this rate?”
If you can’t answer that… you’re guessing.
Final Thought
Most businesses don’t run out of opportunities. They run out of cash discipline. And the companies that win? They don’t just grow faster. They grow smarter, cleaner, and self-funded.
Call to Action
If you’re a CEO of a $20M–$100M business and:
- Growth is creating pressure
- Cash feels unpredictable
- Or you suspect you’re “leaking profit”
Then it’s worth having a conversation. Because the solution is rarely more sales. It’s almost always better execution of the right financial drivers.
TED BONEL, SCALING UP PRACTITIONER – STRATEGY & EXECUTION BUSINESS ADVISORS
Are you looking to scale your business and execute strategy with clarity and impact? I help CEOs and founders turn big ideas into real-world results, guiding small to mid-market companies through tailored strategic insights that drive growth.
My expertise lies in simplifying complexity – bridging high-level strategic frameworks with the practical realities of running a business. Unlike many consultants who focus solely on theory or execution, I specialise in both—translating strategy into actionable, transformative steps that deliver lasting results.
Contact me at tedb@strategyandexecution.com.au to schedule a free 30-minute discovery meeting.
ABOUT STRATEGY & EXECUTION
For over 20 years, Strategy & Execution has supported leaders and organisations in developing and executing winning strategies. We provide expert facilitation, executive education, and hands-on consulting to help businesses refine their strategic direction and implement it effectively.
Using proven methodologies like Scaling Up, E-Myth Mastery, Outthinker, and more, we challenge conventional thinking and equip organisations with the tools to accelerate growth. Our approach is dynamic—combining deep business experience with practical execution. We don’t just advise; we roll up our sleeves and work alongside you to make strategy happen.
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