Are there downsides to growth? Yes.
For one thing, rapid growth can create a perilous cash flow situation. A common pattern is that a company shells out cash to purchase materials and labor in anticipation of rapid sales increases. It then turns those materials into products and sales but, as you know, cash doesnât come in until months after the initial purchases. If the company doesnât hit its forecasts, cash is tied up in inventory. Cash is like blood or oxygen; without it, you die. And growth eats cash. This is why roughly half of all bankruptcies occur after a year of record sales.