Growing Broke: Why Fast-Growing Companies Keep Running Out of Cash

A growing number of companies are running out of cash even as revenue and profit climb — business author Verne Harnish calls this phenomenon "growing broke." The reason is simple: growth itself consumes cash, and a company that looks profitable on paper can still run dry and grind to a halt in practice.

The trend is intensifying under pressure from inflation, high interest rates, and tariffs. According to the U.S. Chamber of Commerce's Small Business Index for the second quarter of 2026, 57% of small business owners name inflation as their top concern, 26% point to falling revenue, and 20% cite employee health insurance costs.

Cash, Harnish says, is one of four decisions every company must get right, alongside People, Strategy, and Execution. Focusing on cash flow doesn't just make a company more resilient — it also raises its market valuation, which in turn makes it easier to attract top talent, secure cheaper bank credit, and grow through acquisitions.

A practical starting point is mapping the company's "Cash Conversion Cycle" — how long it takes a dollar spent to come back to your account. If customers pay late while suppliers demand payment upfront, the company is effectively acting as a free, interest-free "bank" for both sides. Renegotiating payment terms and tightening receivables management can shorten that cycle significantly.

Seven financial levers drive cash flow: price, sales volume, cost of goods sold, operating expenses, receivables, inventory, and payables. Harnish calls improving each one by just 1% — say, raising price 1% or cutting cost of goods by 1% — the "Power of One," because the combined effect of small changes can meaningfully move the needle on cash flow.

The takeaway is simple: paying daily attention to cash doesn't just prepare a company for growth — it also makes it a far more valuable, more attractive asset if a sale is ever on the table down the road.