05/08/2026
The first in our series of patterns we see from business owners who call us needing insolvency advice: growing businesses running out of cash. Even those with profit on their P&L. We hope this helps someone.
Many people think businesses fail because they stop making money. In our experience, it’s the opposite.
The business owners who end up booking a free consultation with us are usually growing. New customers. Bigger contracts. Hiring. Sometimes record revenue in the month they go under.
That’s not a paradox. It’s the problem.
Growth can eat cash. We call it “growing broke.” Every new customer is more stock, more wages, more receivables sitting at 60 days while you’ve already paid your suppliers at 20.
TIP: Have a process and follow it to get those average AR days down low.
Every new hire is three months of salary before they’re contributing.
TIP: Consider your cash conversion cycle, measure it and shorten it.
Every bigger contract is bigger working capital pressure; you fund the job, then wait to get paid.
If you’re profitable on paper but need cash to fund next month’s growth, many owners either keep selling or borrow, usually from fast business lenders or the lender of last resort: the IRD. By the time they call us, the balance sheet is a mess.
Here’s the pattern we see again and again:
Year one: small, scrappy, profitable. The owner runs it tight because they have to. Year two: big contract lands. Hires made to deliver it. Margins are still fine. Year three: more growth. Debtor days creep out. The owner stops watching weekly because monthly looks OK. Year four: a key customer pays late. Then another. PAYE arrears start. “We’ll catch up next quarter.” Year five: the call booked with us.
The cruel maths of growth is that it accelerates everything; including the things that were broken when you were small. A 10% margin with sloppy debtor management is annoying at $1M revenue. It’s terminal at $10M.
The growth didn’t break the business. It exposed what was already broken.
So what should you actually be watching? Not revenue. Not profit. Watch the gap between when you pay cash out and when cash comes back in. That gap is the working capital cycle, and it’s a critical number in a growing business. If that gap is widening, debtor days going up, supplier terms shortening, stock sitting longer; you are growing into a wall.
The businesses we never get a call from aren’t the most profitable ones.
They’re the ones who know, on any given Tuesday, exactly how much cash they have, exactly when the next chunk is coming in, and exactly what they owe in the next quarter. They have great cashflow management and forecasting.
That discipline is unglamorous. But it’s the difference between a growing business and a growing problem.
Next in the series: the single customer who becomes 30% of your revenue, and then leaves.
Norling Law is a specialist Litigation and Dispute Resolution Law firm with a core focus on Insolvency and Restructuring.
