TRC 043: How you can be profitable but still go out of business

Read time: 5 mins

There is a ton of stuff that I got wrong in my first business.

Hiring processes, marketing… it would be a very long list.

But there is one mistake that very nearly cost us the company.

Not having a close enough eye on the finances (despite the alarm bells our financial controller was ringing).

And it’s a story I have seen repeating with first time founders again and again over the years.

They aren’t comfortable with understanding the financial levers of the business and trust that it will just somehow ‘work out’

People underestimate just how crucial it is to keep a close eye on the finances

The consequences can be dire.

Here’s why getting a handle on your company’s cashflow, costs, and forecasting is essential for survival and growth and the 101 of what you should do.

1. Cashflow: The lifeblood of your business

A company can be profitable and still go out of business if it runs out of cash.

This may sound counterintuitive, but profitability doesn’t mean liquidity.

Simply put, your startup may be making money on paper, but if your invoices aren’t getting paid on time (or you are having to pay your expenses a long time before you receive the revenue) and your cash is tied up, you might not have enough cash to cover payroll or other expenses.

You need to watch your cashflow like a hawk — ideally, on a weekly (and occasionally daily) basis.

Regular monitoring lets you spot potential shortfalls before they become a crisis.

Understanding when your cash is coming in and going out will help you manage expenses and keep the lights on.

2. Forecasting: Map the future whilst being mindful of the present

It’s tempting to assume that if you’re doing well now, you’ll continue to do so.

But business doesn’t work that way.

Market conditions change, customers delay payments, and expenses can creep up faster than expected.

Building and regularly updating a cashflow forecast is essential. It helps you:

• Predict and manage periods of cash shortfall (e.g., covering payroll gaps).
• Understand when to raise funds or secure debt finance.
• Identify trends in your expenses so you can control costs before they spiral.

By looking ahead, you can avoid nasty surprises and steer your company with greater confidence.

3. Cost Control: It’s in the details

When you’re just getting started, it’s easy to overlook small costs or make decisions without considering their full financial impact.

Unfortunately, small leaks sink great ships.

Unchecked expenses can quickly balloon and eat away at your runway.

For instance, SaaS tools, contractor costs, travel, and marketing spend can grow faster than you anticipate.

Regularly audit your expenses—at least once a month—to see where you can cut costs without sacrificing efficiency.

Ask yourself: Is this expense absolutely essential right now?

Eyeballing every invoice helps you build a strong mental picture of the costs you have and whether they are necessary.

I did this up to £10m of revenue in my first business.

4. Systems & Processes: Just enough structure

You may feel like you’re drowning in responsibilities, so implementing complicated financial systems feels like overkill.

The good news is you don’t need extensive bureaucracy — just enough structure to keep everything from falling apart.

Just enough red tape to bind it all together.

Here’s what you can start with:

• Set up a basic accounting system. Tools like QuickBooks or Xero can automate invoicing, expenses, and payroll while giving you a high-level view of your finances.
• Weekly cashflow reviews. Pick a day (e.g., Fridays) to review incoming cash, outgoing payments, and any potential shortfalls.
• Monthly financial reporting. Whether through a bookkeeper or DIY, generate profit and loss (P&L) statements, balance sheets, and cashflow reports to see the health of your business.

Your Top 3 Financial Priorities:

If you’re just getting started, here’s what you need to focus on first:

1. Cashflow Monitoring – Start tracking your cashflow weekly. You don’t need fancy software—just a simple spreadsheet will do. Note when cash comes in and when it goes out.
2. Forecasting – Build a 6-12 month cashflow forecast. This will help you spot gaps and plan when you may need external funding or to tighten spending.
3. Expense Management – Keep a close eye on costs, and question all expenditures. Is it necessary? Is there a cheaper or more efficient way to get the same result?

Final Thoughts

Financial management doesn’t have to be daunting.

By putting just enough structure in place and being disciplined about cashflow, forecasting, and costs, you’ll have a much stronger foundation for sustainable growth.

Remember, profitability doesn’t guarantee survival—cashflow does.

Stay on top of it, and you’ll be miles ahead of many founders who learn this lesson the hard way (including me).

Whenever you're ready...

There are three ways we can help you:

1. Join the Founder Coaching Club. 

1:1 coaching and an exclusive community for early stage founders.

Limited to 20 founders. 

Sign up here.

What other founders say about their sessions:

'Marcus’s expertise is unparalleled'
'Marcus has been an absolute game-changer for my start-up.'
'So many people offer up such sessions, but few can pull it off like this.'

2. Understand your level of investment readiness with our comprehensive pitch deck review.

3. Get free actionable advice in your inbox every fortnight.