A lot of times, when you first start a business, you begin to explode in size after a fairly short time. Your first few orders come in, and you can actually turn a profit. Then a hundred more orders come rushing in the door… and you find that you no longer have the capacity to fulfill the orders that are coming in, with the current size of your operation. This is one of the best problems that you can ever have, but it is still a problem. And it is still going to need to be addressed, if you are going to progress as a business and avoid having it simply die off. Businesses are the closest thing that humanity has ever created to being life forms in and of themselves, after all. They have got to grow, at least to a point, or they will no longer be able to function.
But you must expand cautiously. For example, no matter where you are, it is always a good idea to maintain a cash hoard which can keep your anticipated expenses paid for at least three months at the current size of your operation. And while this can be very difficult to calculate when you are building new facilities and hiring on new employees left and right, putting half of your business’s free cash flow into savings is often a responsible way to ensure that you do not find yourself lacking the cash to pay who needs to be paid.
It is very important to never surrender to the notion that your business is invincible, and should be allowed to grow at an unbridled pace. After all, this is the kind of foolhardy thinking that has resulted in many businesses crashing and burning over time. If the pace of your business’s growth is not supported with cash flow from its operations, you need to consider how you are financing your growth. Keep your pace reasonable.