Before agreeing to growth, check cash, capacity and ownership

A new contract can look attractive in the sales meeting and much less comfortable when the first payroll falls due. The margin may be sound, but the business still has to finance delivery, absorb management time and keep existing customers well served.

Before approving the next stage of growth, I would test three things together: cash, capacity and ownership.

What must be funded before the customer pays?

A profitable contract may require stock, staff or subcontractors well before cash is collected. Put the actual payment terms into the forecast, including the effects of billing milestones, likely delays and relevant tax payments. Then consider what happens if the first receipt arrives later than planned.

Who will deliver the work?

Available capacity is not simply the number of people employed. It includes their skills, training needs, supervision and the work already promised. A new hire’s salary may be affordable while the time needed to make that person effective has been overlooked.

The board should understand which existing work will be protected and which commitments may need to be staged.

Who owns the decision after approval?

Name the person responsible for delivery and agree what they can decide, what they must escalate and which evidence will be reviewed. “The management team” is rarely a sufficiently clear answer when something starts slipping.

These tests do not mean every opportunity should be delayed until uncertainty disappears. They help directors decide whether to proceed, change the terms, phase the work or decline it.

Before signing the next commitment: ask for a short explanation of the cash requirement, capacity impact and accountable owner. A revenue target alone leaves too much of the decision unfinished.

Further reading: Connecting five-year ambition to a 90-day plan.