How to manage working capital during a period of rapid growth

Rapid growth — when your revenue is growing at 30–50%+ per year — actually creates working capital pressure, not relief. Your receivables, inventory, and operating costs grow before the cash from higher revenue arrives. Companies that don't anticipate this run out of cash at exactly the moment their business is succeeding.

Understand why growth consumes working capital. If your revenue doubles, your receivables (at the same DDO) double. Your inventory (to support higher production) increases. Your payroll and overhead increase. All of this happens before the cash from increased sales arrives. A business growing at 50% year-on-year may need to finance 3–6 months of incremental working capital before revenue growth translates to cash.

Model the working capital requirement of your growth plan. Don't just model revenue and profitability — model the cash. Build a monthly cash flow that includes the working capital impact of each new month's revenue growth. The model will show you exactly when and how much additional financing you need.

Communicate with your bank before the growth happens. Tell your banker: 'We're planning to grow revenue by X% over the next 12 months. Here's our model of what that does to our working capital requirement. I'd like to discuss increasing our facilities in advance of that need.' A banker who sees a well-modelled growth plan with a clear financing request is in a very different position from one receiving an emergency call at peak cash crunch.

Consider equity for growth working capital if debt doesn't fully cover it. For companies growing very rapidly, the working capital requirement may exceed what bank facilities can comfortably cover. This is a legitimate use case for growth equity — not for the business model, but for the working capital to execute the model at scale.

Pricing for growth: ensure that your pricing delivers adequate margins as volume grows. It's common for fast-growing companies to win volume at prices that are sustainable at current scale but inadequate at larger scale, when fixed costs per unit decline but variable costs and quality costs increase.

TBC works with rapidly growing companies on financial planning and working capital management. If your growth plan doesn't include a working capital model, it's incomplete.