Vinu: Manu, my sales have grown from ₹25 lakh to ₹40 lakh this year. That means my business is doing well, right?

Manu: Not necessarily, Vinu. Sales growth is good—but it doesn’t guarantee profitability or survival.

Vinu: How is that possible?

Manu: Because growth can come with lower margins, higher costs, and cash pressure.

Manu: Sure.

Last year: Sales ₹25 lakh, profit ₹5 lakh.

This year: Sales ₹40 lakh, profit ₹3 lakh.

Sales increased, but profit actually dropped.

Manu: Exactly. If you’re giving heavy discounts or costs are rising, growth can destroy profitability.

Vinu: What about cash flow?

Manu: Growth often increases debtors and inventory.

If receivables rise from ₹8 lakh to ₹20 lakh, your cash is stuck—even if sales are high.

Vinu: That explains my cash shortage despite higher sales.

Manu: Also check your expenses.

To support growth, you may hire more staff or take bigger premises—fixed costs increase.

Vinu: And loans?

Manu: Yes, expansion often comes with higher EMIs.

If your monthly EMI rises to ₹3 lakh but your cash surplus is only ₹3.20 lakh, risk is very high.

Manu: Three things:

Profit margins, cash flow, and working capital levels.

Manu: Sales growth without profit and cash control can push a business faster towards failure than success.

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