What do you want to change?

The answer might be ownership. It might also be the hours, the responsibility, the constant interruptions, or the feeling that nothing happens unless you personally make it happen.

Those answers lead to different decisions.

An owner who wants to retire needs an exit plan. An owner who wants fewer operational responsibilities may need a management plan. An owner whose business cannot support either option needs to understand its economics before assuming a sale will solve the problem.

Selling can be the right decision. But it helps to know which problem you are trying to solve.

Separate Ownership From the Job

Owning a business and running it every day are different roles, even when one person performs both.

The ownership role involves capital, risk, returns, and major strategic decisions.

The operating role involves customers, employees, schedules, purchasing, collections, and the problems that arrive before you finish your coffee.

An owner can enjoy building and owning a company while becoming tired of the operating job they have created.

Before putting the business on the market, I would ask:

If the company could operate reliably without your daily involvement, would you still want to sell?

If the answer is yes, that helps clarify the direction.

If the answer is no—or “I’m not sure”—then the decision deserves more work.

Can the Business Afford to Replace You?

Hiring a manager sounds straightforward until you examine what the owner actually does.

Suppose the owner handles sales, approves purchases, supervises employees, resolves customer complaints, and manages cash.

That may involve several responsibilities that require different skills.

The business needs to account for the cost of performing those functions after the owner steps back. Documented procedures, clear authority, and reliable financial reporting matter too. A new manager cannot succeed if every decision still requires the owner’s permission.

The financial question is equally important:

After paying for the necessary management, would the business still produce an acceptable return for its owner?

If not, the proposed transition may require better pricing, different customers, lower overhead, or a change in the business model.

Replacing the owner’s labor can reveal whether the company generates an ownership return or mainly provides the owner with a demanding job.

Selling May Still Leave You With Responsibilities

A sale does not automatically mean a check arrives and all responsibility ends.

Depending on the agreement, a seller may provide transition assistance, finance part of the purchase price, or receive payments tied to future performance.

Those arrangements can make a transaction possible. They also create obligations and risks that owners must understand.

An owner seeking immediate freedom should evaluate the payment structure and post-sale commitments alongside the headline price.

A higher offer with uncertain payments and years of required involvement may fit the owner’s goals less well than another offer with different terms.

Avoid an Open-Ended Improvement Project

Sometimes it makes sense to prepare the business before a sale.

But “let’s improve it first” needs a defined objective.

Which improvements would make the company easier to operate or transfer? What would they cost? How long would they take? Can the business fund them? Does the owner have the capacity to carry them out?

Set a decision date and measurable targets.

Otherwise, an owner who already wants to leave can spend another year pursuing an improvement plan that never reaches a finish line.

Consider Three Paths

I would compare three practical alternatives:

Sell the business. Appropriate when the owner wants to exit, and the available transaction terms support that goal.

Reduce daily involvement. Appropriate when management can take over, the company can afford it, and the owner still wants the ownership risk and return.

Prepare for a later sale. Appropriate when specific, achievable improvements justify the additional time and investment.

None is automatically superior.

The right choice depends on the business, the owner’s finances, the available people, and the life the owner wants afterward.

The question is whether you want to stop owning the business—or whether you want the business to stop depending on you every day.

Answer that before choosing the solution.

Working Through an Ownership Decision

I work with owners to assess operating responsibilities, business economics, and transition options before committing to a sale or restructuring.

Learn more about my advisory work at RobertRitch.com.

Sources

• U.S. Small Business Administration — Close or sell your business: background on sale preparation and ownership-transfer options.

The decision framework and judgments in this article are Robert Ritch’s advisory perspective.

In this article I wrote for US City Pulse, I examine the business lesson from Silicon Valley Bank’s failure: a cash balance tells you how much money you have, but it doesn’t tell you whether you can access it when you need it.

Owners should know where their cash is held, how concentrated their banking relationships are, and how they would fund essential payments during a disruption.

Read my article on US City Pulse →

Before making those commitments, I would ask whether the company’s own customers are showing demand that can support them.

The Bureau of Economic Analysis’s August report raises that question. Consumer spending increased 0.9%, while disposable personal income increased 0.3%. After inflation, spending rose 0.6%, but disposable income was unchanged. The personal saving rate was 4.1%.

Spending growth therefore outpaced higher prices. Consumers purchased more in inflation-adjusted terms, even though their aggregate after-tax purchasing power did not increase that month.

That is encouraging for businesses selling to consumers. It also deserves a closer look before an owner assumes the pace will continue.

Start with your customers

National spending figures describe a broad economy. Your business serves a particular group of customers, in a particular market, buying particular products or services.

I would look at what those customers are doing.

Are more people buying, or are existing customers spending more? Are purchases becoming more frequent? Are customers choosing less expensive options, waiting for promotions, or postponing larger purchases?

Those patterns can lead to different decisions.

A retailer gaining repeat customers may have a stronger reason to increase inventory than one whose sales improved during a heavily discounted promotion. A service business filling its schedule with returning customers may have different staffing needs from one experiencing a brief seasonal surge.

The national report provides context. The company’s records should support the commitment.

Separate a good month from dependable demand

One month of stronger spending does not establish a lasting trend. It also does not tell you whether your customers can comfortably sustain their purchases.

I would compare recent sales with the same period last year and examine several months of activity. Then I would identify what produced the improvement.

Was it a promotion? A new customer? A competitor closing? A change in pricing? A temporary event?

Each explanation matters because it tells the owner something about repeatability.

If a large customer or successful promotion drove the increase, the next question is how much of that business is likely to return. That estimate should be grounded in evidence rather than carried forward automatically.

Match the commitment to the evidence

Businesses often have to commit money before demand is certain. Inventory takes time to arrive. Employees need training. Additional space may require a long lease.

The practical issue is how much uncertainty the company can afford.

Before increasing inventory, I would examine which products are selling consistently, how quickly they turn into cash, and what happens to unsold stock.

Before adding staff, I would determine whether the workload is sustained and whether scheduling or a change in responsibilities could cover it.

Before expanding space, I would want to know how much additional profitable business is needed to support the lease and related expenses.

The stronger the commitment—and the harder it is to reverse—the stronger the evidence should be.

Test a slower sales scenario

A forecast should show what happens if the expected demand fails to arrive.

For example, suppose an owner is planning around 10% sales growth. I would also examine flat sales and a modest decline. Could the business still meet payroll, supplier payments, rent, and any new financing obligations?

That exercise helps establish how much room the owner has to act.

A company with sufficient cash and flexible purchasing may be able to pursue growth in stages. A company with little financial room may need customer commitments or a smaller initial investment before proceeding.

The purpose is to make the expansion decision with a clear understanding of what the business can carry.

Watch for changes early

Once the company commits, management needs signals that show whether the plan is working.

Useful measures might include repeat purchases, cancellations, quote acceptance, bookings, discounting, inventory age, or collection delays. The right measures depend on the business.

I would choose a few that connect directly to the decision and establish when a change would trigger action. If demand weakens, the owner should know while purchasing, staffing, and spending can still be adjusted.

Strong spending is welcome news. Before building more fixed costs around it, I would want to understand the demand behind the company’s sales and how much room it has if that demand slows.

If you are weighing additional inventory, hiring, or expansion, I work with business owners to review the assumptions, cash requirements, and alternatives before they commit. Request a conversation.

Source: Bureau of Economic Analysis — Personal Income and Outlays, August 2026, released September 30.

Our September 15 article explained the scheduled transition from additional tariffs to import prohibitions for specified products. New guidance from U.S. Customs and Border Protection now provides practical details businesses need to review.

Confirm the product before committing to delivery

The September 8 presidential proclamations established September 29 as the effective date for excluding specified Canadian products identified in their annexes. Their titles refer to alcoholic beverages, dairy, and motor vehicles, but the actual coverage depends on the listed tariff classifications and product descriptions. Businesses should avoid treating those broad categories as a complete description of what is prohibited.

That makes product verification the first business decision.

Before accepting another order or promising a delivery date, confirm with your customs broker the specific merchandise, its classification, and the applicable restriction. A supplier’s assurance that it has shipped similar products before does not answer whether the next shipment is eligible.

CBP has clarified how the restrictions operate

In its September 28 bulletin, CBP says the exclusion applies to covered products imported beginning at 12:01 a.m. Eastern on September 29, 2026. It also prevents admission into a foreign-trade zone or bonded warehouse, in-bond transportation, and entry for consumption.

Timing matters for earlier shipments. CBP says covered products imported before the cutoff remain eligible for entry for consumption. Qualifying goods already in a bonded warehouse or foreign-trade zone before the restriction may be withdrawn for consumption subject to the applicable 50% additional duty.

Alcohol requires particular attention. Where an annex specifies “Packaged,” CBP identifies bottles, cans, boxes, kegs, and similar containers intended for direct consumption. Products outside an applicable scope limitation are not subject to that exclusion, but remain subject to the applicable additional duty.

An order date alone therefore provides little reassurance. Businesses need to establish the shipment’s actual import status and how the particular goods are treated.

Review the customer commitments behind the shipment

The customs question is only the beginning of the operating review.

A distributor may have promised delivery to several customers. A retailer may have planned a promotion around incoming stock. A manufacturer may be relying on a supplier without knowing whether an affected product is involved.

The useful questions are specific:

• Which open orders depend on merchandise whose eligibility remains uncertain?

• How much available inventory can support existing commitments?

• What replacement suppliers can deliver, and on what terms?

• Which customers need revised delivery dates or product alternatives?

• What happens to margin and cash requirements if replacement goods cost more?

These are potential business consequences, not a prediction that every company purchasing from Canada will experience a shortage.

Price the alternative before making the switch

Finding another supplier may solve an availability problem while creating a financial one.

Compare the full replacement cost: purchase price, freight, deposits, lead time, minimum order quantity, and any changes needed to use or sell the product. Then check whether existing customer pricing can support it.

I would also separate confirmed supply from expected supply in the cash forecast. Money committed to a replacement order may leave the business well before the original customer payment arrives.

That is where a trade restriction becomes a management decision. The owner needs to know which commitments can be fulfilled profitably, which require renegotiation, and which should wait for clearer information.

What to do now

Start with product-level confirmation from your customs broker. Then connect that answer to inventory, open orders, customer promises, and cash.

For affected goods, continuing to use the old delivery and cost assumptions can leave the business making commitments it cannot support.

If a supplier disruption is forcing decisions about pricing, working capital, or customer commitments, I work with owners to assess the business consequences and determine the next step. Request a conversation.

Primary source: CBP Cargo Systems Messaging Service bulletin #70050970, September 28, 2026, including links to the proclamations and product annexes.

Sometimes that is exactly what it needs. But before recommending debt, I want to know why the cash is short and what will repay the loan.

Those sound like simple questions. They can lead to very different answers.

Is this a timing problem?

A business may have profitable work and reliable customers but pay suppliers and employees well before it collects from those customers. If that pattern is predictable, financing might bridge the gap.

I would start by tracing when cash leaves and when it returns. Which invoices are outstanding? When are they actually likely to be paid? What inventory or work in progress is consuming cash? Are customers paying more slowly than before?

I would then build a short-term cash forecast using expected receipts and required payments, week by week. A loan may make sense if it covers a defined gap and the business can repay it as the related work turns into cash.

But I would also test the forecast against a late payment or a delayed job. If the plan works only when everything happens on time, the owner needs to see that before signing.

Or is the business losing money?

Debt cannot repair the economics of a product or service.

If each additional sale produces too little gross profit to cover the company’s operating costs, more borrowing may keep the doors open temporarily while the underlying problem grows. The same is true when recurring expenses exceed what the business can support, and management has no credible plan to change them.

That is why I look at margins by product, service, job, or customer—not just total revenue. I also look at expenses that have become routine without anyone asking whether they still earn their place.

The objective is to find out whether cash is temporarily trapped in an otherwise sound business, or whether the business needs operating changes before it can support more debt.

What is the loan paying for?

The intended use should be specific.

Financing equipment with a clear production benefit is a different decision from borrowing to cover payroll after several unprofitable months. Funding a seasonal inventory build is different from repeatedly using a credit line to pay old bills.

I would ask the owner to identify what the money buys, when the benefit should appear, and how the company will measure it. Then I would put the proposed payments into the cash forecast alongside existing obligations.

The business must be able to carry those payments even if the improvement takes longer than expected. A lender’s willingness to provide money does not, by itself, establish that the business should take it.

What changes without the loan?

This is often the most useful question.

Could faster invoicing or collections reduce the gap? Are deposits or payment milestones possible? Is too much cash sitting in inventory? Could pricing, purchasing, scheduling, or the mix of work improve the position? Would an owner be borrowing less if those changes were made first?

None of those questions means debt is the wrong choice. They help determine how much is actually needed and whether borrowing addresses the cause of the shortage.

When an owner tells me, “We need capital,” I do not start with a lender introduction. I start with the cash forecast, the economics of the work, the intended use of funds, and a realistic repayment path.

If those pieces hold together, financing may help a good business move forward. If they do not, finding the money is only the first problem. Understanding what needs to change is the more valuable work.

That is meaningful news about public offerings. It tells an owner very little about whether investors will fund their company.

I see businesses approach capital raising as though the main task is finding the right investors. Access matters, but an introduction will not fix questions the company cannot answer. Before I would spend time on outreach, I would look closely at what an investor is likely to find during diligence.

Can the company explain its numbers?

Investors need more than a pitch deck and an attractive revenue forecast. They need to understand how the business has performed and how management knows.

I would want financial statements that can be reconciled to the underlying records. I would look at revenue by customer, product, or service; gross margins; cash flow; debt; and the assumptions behind the forecast. If the company says sales are growing, I would ask whether gross profit and cash generation are improving too.

The numbers do not have to describe a perfect business. They do have to describe the same business management is pitching.

When an owner cannot readily explain a material difference between the presentation, the books, and the bank activity, I would resolve that before inviting investors to examine it.

What will the money accomplish?

“We need capital to grow” is a starting point, not a use of proceeds.

How much is needed, when will it be spent, and what measurable milestone should that spending achieve? What happens if the company raises less than planned? How long will the money last if sales arrive later than forecast?

I also want to know whether the proposed capital funds an opportunity or repeatedly covers an operating shortfall. A business with weak unit economics may need changes to pricing, delivery, expenses, or management before more money improves its position.

Sometimes the right answer is to raise capital. Sometimes it is to fix the business first. Those decisions require different plans.

Can the business survive a hard look?

Diligence rarely follows the order of a pitch deck. An interested investor may ask about customer concentration, contracts, intellectual property, pending disputes, taxes, ownership, prior financing, or obligations that are not obvious in the financial summary.

Those questions are easier to answer before an investor is waiting. I would organize the key records, identify gaps, and decide which issues need to be resolved or explained. If management already knows a material weakness exists, hoping nobody asks is a poor strategy.

Preparation does not mean pretending risks have disappeared. It means describing them accurately and showing what the company is doing about them.

Is this the right capital for this company?

The IPO figures describe companies accessing public markets. A smaller private business may be considering equity, debt, a strategic partner, or another source of funding. Each has different costs, obligations, and consequences for the owner.

The question is not whether capital is available somewhere in the market. It is whether the company has a sound reason to raise it, can support the proposed terms, and is prepared for the scrutiny that comes with it.

A strong market may make a headline. Readiness is company-specific.

Before I help an owner think about investor introductions, I want to understand the business, the numbers, the proposed use of funds, and what diligence is likely to uncover. That assessment can reveal whether it is time to raise—or what needs attention before the company tries.

Coming back to investors for another round creates a different set of challenges.

The second time around, investors have something they didn’t have the first time:

Your track record.

You already told them what you planned to do.

You already established milestones.

You already explained how the capital would help the company grow.

Now they can compare what you said with what actually happened.

That’s why I think one of the first questions a company should be prepared to answer before starting another capital raise is very simple:

What happened to the last money?

Repeat Raises Are More Common Than You Might Think

Recent research from KingsCrowd looked at Regulation Crowdfunding issuers that returned to raise capital more than once.

In its September 18 dataset, 865 of 5,824 issuers had multiple qualifying Reg CF campaigns.

That’s only about 15% of the issuers.

But those companies accounted for approximately $1.41 billion, or 52.6%, of the $2.7 billion-plus in recorded Reg CF campaign amounts included in the analysis.

The numbers are interesting.

But I think the more important lesson is what happens when a company comes back.

The first raise is largely about what management believes it can accomplish.

The next raise includes evidence of what management actually accomplished.

That changes the conversation.

Start With the Previous Pitch

If I’m looking at a company returning for additional capital, I’d want to pull out the previous offering materials.

What did management tell investors?

Maybe the company said it would:

Launch a product.

Open three locations.

Reach $5 million in revenue.

Hire a sales team.

Complete regulatory approval.

Build a manufacturing facility.

Enter two new markets.

Reach profitability.

Whatever the milestones were, put them on the table.

Then compare them with reality.

What happened?

Missing a Milestone Isn’t Automatically a Problem

Businesses don’t run on pitch decks.

Markets change.

Products take longer than expected.

Customers behave differently than anticipated.

Regulatory approvals get delayed.

Suppliers fail.

A strategy that looked sensible 18 months ago may no longer make sense.

So if management didn’t accomplish everything it predicted, that doesn’t automatically make the company a bad investment.

What concerns me more is when management doesn’t clearly explain the difference.

Suppose the company raised $2 million to build manufacturing capacity but ultimately outsourced manufacturing instead.

That could actually have been a very good decision.

Maybe outsourcing required less capital, accelerated production, and reduced risk.

Explain it.

Investors don’t necessarily need management to have predicted the future perfectly.

But they should expect management to understand what happened.

Show Investors What Their Money Accomplished

Founders naturally want to talk about what the next $2 million will accomplish.

Before doing that, I’d show what the previous $2 million produced.

Maybe revenue increased from $1 million to $4 million.

Maybe gross margin improved.

Maybe the company went from prototype to commercial product.

Maybe customer count tripled.

Maybe a regulatory milestone was achieved.

Maybe the company acquired intellectual property.

Maybe manufacturing capacity increased.

Maybe recurring revenue grew.

Those are tangible results.

The important thing is connecting capital to progress.

An investor should be able to understand:

We raised X.

We said we would accomplish Y.

Here’s what actually happened.

Here’s what we learned.

And here’s why the next dollar gets us to Z.

That’s a much stronger financing story than simply presenting another optimistic forecast.

What If the Money Didn’t Produce Enough Progress?

That’s the harder conversation.

Maybe the company raised $3 million and revenue barely changed.

Maybe the product still isn’t finished.

Maybe customer acquisition costs are considerably higher than management expected.

Maybe the company burned through the capital faster than planned.

Maybe management hired too quickly.

Maybe the market didn’t develop.

Don’t hide from it.

Explain it.

What went wrong?

What has changed?

What did management stop doing?

What expenses were eliminated?

What assumptions are different now?

Why should the next round produce a different result?

If the answer is essentially:

“We just need more money to keep doing the same thing,”

I’d expect investors to be skeptical.

Capital should solve something.

If repeated infusions of capital don’t materially improve the underlying business, eventually investors are financing survival rather than growth.

Those are very different propositions.

Your Existing Investors Matter

There’s another reason to think about this before your next raise.

Your current investors may be some of your best prospects for the next one.

KingsCrowd highlighted Pirouette Pharma as an example. In a March 2026 investor update cited in the research, the company reported that more than 70% of the investors participating in its second community round at that point were returning investors.

That’s important.

The relationship with investors shouldn’t disappear when the wire arrives.

Keep them informed.

Tell them what’s working.

Tell them what’s taking longer.

Explain significant changes.

Share meaningful milestones.

And when something doesn’t go according to plan, tell them that too.

If investors only hear from management when the company wants another check, the company has missed an opportunity to build trust.

Don’t Wait Until the Next Raise to Reconstruct the Story

Companies should start doing this immediately after a financing closes.

Document the promises.

Track the milestones.

Track how capital is actually deployed.

Maintain financial reporting.

Communicate with investors.

Record why management materially changes strategy.

Then when it’s time to raise again, you don’t have to reconstruct two years of history.

You already have it.

More importantly, management itself can see whether the capital is producing the results it expected.

That’s useful even if the company never raises another dollar.

The Valuation Has to Make Sense Too

Progress alone doesn’t automatically make the next investment attractive.

Suppose a company genuinely performs well.

Revenue triples.

The product launches.

Customers are happy.

Management executes.

That’s excellent.

But if the valuation increased tenfold, investors still have to evaluate whether the new price makes sense.

The company can be better while the investment becomes less attractive.

Likewise, the security may have changed.

Earlier investors may have been diluted.

Debt may have been added.

Terms may be different.

Investors aren’t simply deciding whether they still like the company.

They’re deciding whether they like this investment at this price on these terms.

That’s an important distinction.

Every Capital Raise Creates a Record

I think founders sometimes treat fundraising rounds as separate events.

I don’t.

Every financing becomes part of the company’s history.

The promises you make today can become questions you have to answer two years from now.

That’s not a bad thing.

Accountability can actually strengthen the next raise when management has executed well.

Instead of asking investors to believe another forecast, you can show them:

Here’s what we said.

Here’s what we did.

Here’s what changed.

Here’s what we learned.

And here’s exactly what the next round is designed to accomplish.

That’s a much more credible conversation.

So before building the new pitch deck, updating the valuation, and explaining what you’re going to do with the next round of capital, pull out the old deck.

Because investors may do exactly the same thing.

Preparing for the Next Capital Raise

If you’re preparing to raise additional capital, the financing story should connect the company’s past execution with what the next round is intended to accomplish—not simply start over with a new set of projections.

I work with business owners and entrepreneurs on capital strategy, investor readiness, and the business issues surrounding a financing so the raise reflects what the company has actually accomplished and what it realistically needs to do next.

Learn more about how I work with business owners at RobertRitch.com →

Sources

KingsCrowd — Repeat Issuers Account for More Than Half of Reg CF Capital Raised — September 21, 2026
https://kingscrowd.com/repeat-issuers-account-for-more-than-half-of-reg-cf-capital-raised/

But an order is a promise of future revenue. It doesn't tell you when cash will arrive, what it will cost to fulfill the work, or whether you will make enough to justify expanding.

The Census Bureau’s latest durable-goods report is a useful reminder to look beneath the headline. New orders for manufactured durable goods were virtually unchanged in August at $338.6 billion. Excluding transportation, they rose 0.3%. Those national figures describe demand across industries. They cannot tell an individual manufacturer whether its next order will strengthen the business.

That takes a closer look at the work itself.

Start with the cost of fulfilling the order

When I look at a manufacturer considering expansion, I want to know what happens between receiving an order and collecting payment.

Does the company have to buy materials up front? How much labor will the job require? Is the price fixed while material costs can change? Do installation, freight, warranty, or rework costs tend to appear after the initial estimate?

A job can add revenue and still produce less profit than expected. If several jobs have the same problem, adding capacity may allow the company to lose money faster.

I would review recently completed jobs against their original estimates before using the current backlog to justify a major commitment. Where did actual costs differ? Were those differences unusual, or have they become part of the way the business operates?

Then map the cash gap

Profit and cash arrive on different schedules.

A manufacturer may pay for materials and payroll weeks or months before it can invoice. Even after delivery, a customer may have payment terms or hold back a portion until the work is accepted. Meanwhile, the company still has to meet its own obligations.

The question is not simply, “How much work have we sold?” It is, “How much cash must we put into that work before it pays us back?”

I would map the expected cash outflow and collection date for the largest jobs in the backlog. Then I would test what happens if a supplier requires an earlier payment, production takes longer, or a customer pays late. If a modest delay creates a serious cash shortage, the business needs a plan before it increases volume.

Expand for a constraint you can identify

New equipment or additional staff may be the right answer. First, I would want evidence of the constraint they will solve.

Are orders being turned away because the existing equipment cannot produce enough? Is one stage of production holding up everything else? Would scheduling, pricing, or a change in the product mix improve results without a large new commitment?

Expansion has costs beyond the purchase price. It can bring training time, maintenance, added management work, and debt service. The expected return should still make sense if orders arrive more slowly than forecast.

A growing backlog is encouraging. Before treating it as permission to expand, I would ask three questions:

1. Which orders generate worthwhile profit after all fulfillment costs?

2. How much cash is tied up before customers pay?

3. What specific constraint will the expansion remove?

If the answers are clear, the company can make a more confident decision about capacity and financing. If they are unclear, that is where I would start.

I work with business owners facing decisions like these: whether to expand, seek capital, change pricing, or fix an operating problem first. Reviewing job economics and cash timing can often make the next decision much clearer.

A new customer.

A new market.

A partnership.

Another product.

An acquisition.

A new location.

A side business that could become something bigger.

I understand the attraction. I’ve spent much of my career looking at businesses, investments, partnerships, and deals. I still like looking at opportunities.

But I’ve also learned something:

Finding opportunities usually isn’t the hard part. Deciding which ones not to pursue is.

A business can have too few opportunities.

It can also have far too many.

And at some point, opportunity becomes distraction.

A Good Opportunity Can Still Be the Wrong Decision

This is where I think owners sometimes make a mistake.

They evaluate an opportunity by asking:

“Could this work?”

That’s a useful question.

But it’s not enough.

Something can be a perfectly viable business opportunity and still be the wrong thing for your company to pursue.

Maybe there’s a market.

Maybe the margins look attractive.

Maybe you already have an interested customer.

Maybe someone has offered you a partnership.

None of those things answer the question I care about:

What happens to the rest of the business if we do this?

Every new initiative consumes something.

Cash.

People.

Management attention.

Technology resources.

Sales capacity.

Relationships.

Time.

Usually several of them.

Those resources aren’t unlimited.

Management Attention Is Capital

Most owners understand that money is limited.

They’re often less disciplined about another scarce resource:

management attention.

Suppose a $10 million company has a capable owner and three senior managers.

The company decides to launch a new division.

On paper, the investment might be only $100,000.

But the real investment may be considerably larger.

Someone has to develop the offering.

Someone has to price it.

Someone has to hire or assign people.

Someone has to build the sales process.

Someone has to solve the problems that inevitably appear.

Someone has to monitor whether it’s working.

And when something goes wrong, it usually ends up with senior management.

That means those same people aren’t spending that time somewhere else.

The $100,000 check may be the smallest part of the investment.

Opportunity Has an Opportunity Cost

This is one reason I don’t like looking at new initiatives in isolation.

Suppose an owner tells me:

“I think this new division could generate $1 million in revenue.”

Great.

Now I want to know:

What could the existing business produce if we put the same resources there?

Could improving the sales process add $1.5 million?

Could fixing customer retention create more profit?

Could expanding the highest-margin existing product produce a better return?

Could acquiring a competitor be more valuable?

Could paying down debt materially improve cash flow?

Or could management simply execute the current plan better?

The choice isn’t always:

Do this or do nothing.

It’s often:

Do this instead of something else.

That’s a much higher standard.

Complexity Has a Cost

Every new product, division, location, and partnership also creates complexity.

More accounting.

More reporting.

More vendors.

More contracts.

More employees.

More systems.

More decisions.

More things management has to understand.

Sometimes the revenue grows faster than the complexity.

That’s good growth.

Sometimes complexity grows faster than the revenue.

That’s when businesses start feeling bigger without necessarily becoming better.

I’ve seen companies with plenty of activity but very little focus.

Everyone is busy.

There are meetings everywhere.

Management has a long list of initiatives.

Yet very few things are being executed exceptionally well.

That isn’t always a lack of effort.

Sometimes it’s a lack of subtraction.

Put an Owner on Every Opportunity

One of the questions I would ask before approving a significant new initiative is:

Who owns it?

Not who suggested it.

Not who likes it.

Who wakes up responsible for making it work?

If the answer is:

“We’ll all work on it.”

I’m already concerned.

Someone needs responsibility, authority, measurable objectives, and accountability.

And if you can’t identify someone capable of owning the initiative without abandoning something more important, that tells you something.

You may have found a good opportunity that the organization isn’t ready to pursue.

That’s okay.

You don’t have to do everything now.

Decide What You Are Willing to Risk

I’d also establish the limits before starting.

How much money are we willing to invest?

How much management time?

How long are we willing to test it?

What would tell us the idea is working?

What would tell us it isn’t?

At what point do we stop?

Those decisions are much easier to make before you’ve invested six months and $300,000.

Once people become emotionally attached to an initiative, the conversation changes.

Nobody wants to admit the idea isn’t working.

The company keeps investing because it has already invested.

Another quarter.

Another employee.

Another marketing campaign.

Another $50,000.

That’s how a small experiment becomes an expensive distraction.

Some Opportunities Should Be Tested

Saying no doesn’t always mean permanently rejecting an opportunity.

Sometimes the right answer is:

Not yet.

Or:

Let’s test it.

Maybe instead of launching an entire new division, you sell the service to five existing customers.

Instead of opening another location, test market demand first.

Instead of building the technology, see whether customers will actually pay for the outcome.

Instead of hiring a team, start with an outside partner.

Create the smallest reasonable experiment that answers the biggest unanswered question.

If the evidence gets stronger, commit more resources.

If it doesn’t, stop.

That’s considerably cheaper than falling in love with the opportunity first.

Ask What This Does to the Core Business

There is one question I think gets overlooked:

Does this opportunity strengthen the core business?

Some opportunities create leverage.

A new service increases revenue from existing customers.

An acquisition adds capabilities the company already needs.

A partnership opens distribution without adding significant overhead.

Technology improves the economics of the existing operation.

Those opportunities can make the entire company better.

Others create an entirely new set of problems for management to solve.

That doesn’t automatically make them bad.

But the hurdle should be higher.

Saying No Is Part of Strategy

Business owners are usually rewarded for seeing possibilities.

That’s one reason they became entrepreneurs.

But as a company grows, the owner’s job changes.

The challenge becomes less about finding something that could work and more about deciding where the organization’s limited resources will produce the greatest return.

That means rejecting some genuinely good opportunities.

I’ve had to remind myself of this too.

There will always be another idea.

Another deal.

Another company.

Another partnership.

Another interesting person with something worth exploring.

The question isn’t whether I can see the opportunity.

It’s whether pursuing it moves the business I’m responsible for in the direction I actually want it to go.

Sometimes the most valuable strategic decision you can make is not adding something new.

It’s deciding what you’re going to ignore.

Too Many Good Options Can Still Create a Bad Strategy

If your business has several attractive opportunities competing for capital and management attention, choosing among them can be harder than finding them in the first place.

I work with business owners and executives on strategic decisions like these—evaluating the opportunity, the resources it will consume, what it competes with, and whether it actually advances the business.

Learn more about how I work with business owners at RobertRitch.com →

Related Reading

Robert Ritch — Contemplating New Business Ideas: How to Ensure They’re Worth Pursuing
https://robertritch.substack.com/p/contemplating-new-business-ideas

Robert Ritch — Ensure a New Business Idea Is Worth Pursuing
https://robertritch.substack.com/p/ensure-a-new-business-idea-is-worth

The phone starts ringing.

A supplier wants its money.

The landlord wants the rent.

The credit card company wants a payment.

A lender wants to know why something is late.

Another vendor threatens to put the account on hold.

Management starts reacting to whoever is making the most noise.

That’s understandable.

It’s also potentially a very expensive way to manage a cash crisis.

When there isn’t enough money to pay everyone, I don’t think the first question should be:

Who is demanding payment?

I want to know:

What happens to the business if we don’t pay them?

Those are very different questions.

Not Every Creditor Has the Same Importance

Imagine a business has $150,000 in the bank and needs $250,000 over the next few weeks to satisfy everything that’s due.

Among its obligations are:

• A critical supplier owed $75,000

• The landlord owed $30,000

• A credit card balance of $40,000

• An equipment lender expecting a payment

• Several smaller vendors

• Payroll and payroll taxes

There isn’t enough cash.

Someone isn’t getting paid on time.

The easiest response is to pay whoever is threatening the most immediate consequence.

But before moving money, I want to understand the entire situation.

What happens if the critical supplier stops shipping?

Can another supplier replace them?

How quickly?

Does the company need the location to operate?

Is the equipment essential?

Which obligations have legal or tax consequences?

Which creditor has collateral?

Who might negotiate?

Which relationship would be difficult to rebuild?

And most importantly:

Which payment keeps the business able to generate tomorrow’s cash?

That last question matters.

Protect the Company’s Ability to Operate

In a stressed business, cash is oxygen.

But preserving cash isn’t enough.

The company still has to operate.

Suppose a manufacturer owes $75,000 to the supplier providing a component it cannot easily obtain anywhere else.

That supplier says:

No payment, no more shipments.

Without the component, production stops.

If production stops, customers don’t get their orders.

If customers don’t get their orders, the company doesn’t invoice.

If it doesn’t invoice, the next cash shortage gets worse.

That $75,000 payment isn’t simply paying an old bill.

It may be protecting future revenue.

Now compare that with another creditor that is unhappy but unlikely to materially affect operations tomorrow.

Both obligations matter.

But their consequences may differ greatly.

That’s why I don’t think you should manage accounts payable simply by looking at which invoice is oldest.

Don’t Confuse Pressure With Leverage

Creditors apply pressure because pressure works.

Collection calls become more frequent.

Emails become more aggressive.

Someone threatens to send the account to collections.

Another creditor says the matter is going to legal.

Management naturally wants the problem to go away.

But the loudest creditor isn’t necessarily the creditor with the greatest leverage.

You have to understand what each party can actually do.

Can they stop something the company needs?

Do they have collateral?

Can they terminate an essential service?

Can they accelerate an obligation?

Are there personal guarantees?

Are there tax consequences?

Can they easily replace you as a customer?

Would a partial payment change their position?

Are they likely to negotiate?

I’m not suggesting ignoring contractual or legal obligations. When those issues are involved, management needs appropriate legal and financial advice.

I’m saying that cash allocation during distress needs to be deliberate.

Writing checks based on anxiety isn’t a strategy.

Relationships Have Value

Another factor doesn’t appear neatly on the balance sheet.

Relationships.

A supplier that has supported your company for ten years may be extremely valuable when things get difficult.

Maybe they can extend terms from 30 days to 60.

Maybe they’ll continue shipping against a partial payment.

Maybe they’ll help reduce inventory requirements.

Maybe they’ll work through a temporary problem because you’ve built trust over time.

Burning that relationship to preserve a small amount of cash can be shortsighted.

The opposite is also true.

If you know you’ll be late, disappearing is usually one of the worst things you can do.

Call them.

Explain what is happening.

Tell them what you can realistically do.

Then do what you said you would do.

I’ve found that many difficult situations become more manageable when people aren’t surprised.

Don’t Make Promises You Can’t Keep

One of the worst things a cash-strapped business can do is promise everyone payment next Friday.

Especially when management already knows the money won’t be there.

That buys a few quiet days.

Then Friday arrives.

The payment doesn’t.

Now you have the original financial problem plus a credibility problem.

I’d rather tell a creditor:

“I can’t pay the entire $50,000 this week. I can send $15,000 Friday and another $10,000 in two weeks. Let’s talk about the remaining balance.”

That’s not always a deal they’ll accept.

But it’s a conversation based on reality.

Once management starts making commitments it knows it can’t honor, negotiating becomes much harder.

Build a Cash-Priority Map

When cash becomes constrained, I like to get the obligations out of management’s head and onto paper.

For each significant obligation, I want to know:

Amount owed

How much is due and when?

Operational importance

What happens to the business if this party stops performing?

Legal and contractual exposure

What rights does the creditor have?

Collateral or guarantees

What assets or guarantees are involved?

Replacement options

If the relationship ends, can the company replace the supplier, lender, service provider, or location?

Negotiability

Is there an opportunity to extend terms, make partial payments or restructure the obligation?

Relationship value

Will the company need this person after the crisis is over?

Then management can start making informed decisions instead of reacting invoice by invoice.

Cash Problems Are Usually Negotiating Problems Too

When a company has plenty of money, paying bills isn’t particularly complicated.

When it doesn’t, cash management becomes a negotiation exercise, partly.

Can the landlord temporarily modify the payment schedule?

Can a supplier extend terms?

Can an equipment lender restructure payments?

Can a vendor accept a partial payment?

Can an annual expense become monthly?

Can a deposit requirement be reduced?

Can inventory purchases be changed?

Can the company collect receivables faster?

The objective isn’t simply to delay everything.

It’s to create enough room for the business to stabilize without destroying the relationships and operating capabilities it needs to recover.

The Business Still Has to Exist on the Other Side

This is the part I think owners sometimes miss when they’re under pressure.

The goal isn’t merely to survive this Friday.

It’s to have a viable business next month.

That means some painful expenses may still need to be paid.

Some creditors may need protection.

Some relationships may be more valuable than the cash temporarily saved by damaging them.

And some creditors applying enormous pressure may need to wait while management protects something more critical.

These aren’t easy decisions.

Legal, tax, fiduciary, and contractual issues may also require professional advice, particularly when a company is insolvent or approaching insolvency.

But from an operating standpoint, the principle is straightforward:

When there isn’t enough cash to pay everyone, don’t let the loudest voice decide where the money goes.

Understand the consequences.

Protect the company’s ability to operate.

Negotiate where you can.

Keep commitments realistic.

Allocate scarce cash to give the business the best chance of producing more cash tomorrow.

Because in a distressed business, deciding who gets paid can be just as important as deciding how much gets paid.

When Cash Forces Difficult Decisions

When a business doesn’t have enough cash to satisfy every obligation, the solution usually requires more than cutting expenses or delaying checks. Management needs to understand which payments protect operations, where there's room to negotiate, and how today’s decisions affect the company’s ability to recover.

I work with business owners facing cash-flow pressure, operational problems, and other special situations to understand the choices available and develop a practical path forward.

Learn more about how I work with business owners at RobertRitch.com →

Related Reading

Robert Ritch — What I Look at First When a Business Is Struggling

Robert Ritch — How to Turn Around a Struggling Business: A Practical Roadmap

For business owners, the obvious question is:

What will this do to my borrowing costs?

That’s worth asking.

But there’s another financing question I think is just as important:

Are you using the right kind of money for what you’re buying?

I’ve seen businesses create unnecessary cash problems not because the investment itself was bad, but because they financed it the wrong way.

A company buys equipment with its line of credit.

It uses working capital to fund a major expansion.

It finances something expected to produce value for seven years with money the business may need back in six months.

Everything looks fine—until the business needs that liquidity for something else.

The Fed Changed the Environment Again

On September 16, the Federal Reserve raised its target federal funds rate by a quarter percentage point to 3.75%–4.00%.

The Fed’s September projections also show a median federal funds rate projection of 4.1% at the end of 2026.

Nobody knows exactly where rates will go from here.

And I wouldn’t build a business plan around predicting them.

I’d rather ask a different question:

Does this financing structure still make sense if money stays expensive longer than we expect?

That’s a question management can act on.

Your Line of Credit Has a Job

Consider a business with a $1 million revolving line of credit.

The company has $800,000 available and needs a new piece of equipment costing $400,000.

The owner thinks:

We already have the line. Why go through another loan process?

So the company writes the check.

The equipment may be a perfectly good investment.

But the business has now consumed half of its available borrowing capacity.

Six months later, sales increase.

That’s good news.

Except accounts receivable also increases by $300,000.

Inventory has to increase another $150,000 to support the new orders.

Suddenly, the company needs $450,000 of additional working capital.

The business had the borrowing capacity.

It spent it on the machine.

That’s the problem.

The company didn’t necessarily make a bad investment.

It used the wrong money to make it.

Match the Money to the Asset

One basic principle I look at in financing is whether the duration of the financing reasonably matches what the money is being used for.

If you’re buying equipment that should produce revenue for seven years, financing it over an appropriate multiyear period often makes more sense than permanently consuming your revolving working-capital facility.

If you’re acquiring a business, the financing structure should reflect that business's expected cash generation.

If you’re purchasing real estate, that’s a long-lived asset and generally calls for long-term capital.

If you’re financing seasonal inventory that will turn into receivables and then cash within a few months, a revolving facility may make perfect sense.

Different capital has different jobs.

Problems start when we ask one type of capital to do another type’s job.

Working Capital Isn’t Extra Money

This matters especially with lines of credit.

An unused line can feel like money sitting around doing nothing.

It isn’t.

It’s liquidity.

And liquidity has value.

A business may need that borrowing capacity because:

A large customer suddenly takes 60 days instead of 30 to pay.

Inventory has to be purchased ahead of a seasonal rush.

A supplier offers favorable pricing for a large purchase.

A major piece of equipment unexpectedly fails.

Sales grow faster than collections.

A customer fails to pay.

The company experiences a temporary downturn.

Or an opportunity appears that requires immediate capital.

If you’ve already used the company’s working-capital facility to finance long-term assets, you have fewer options when one of those things happens.

Growth Can Actually Increase the Problem

This is one of the counterintuitive things about business.

Growth can consume cash.

Suppose a company sells $1 million a month and customers pay in approximately 45 days.

If sales increase substantially, the company may need to finance a larger receivables balance before it collects the cash.

If it’s an inventory business, it may also have to buy more product before making those additional sales.

Payroll may increase before customer payments arrive.

The business is growing.

The income statement may look better.

And the company’s cash requirements can increase at exactly the same time.

That’s why I don’t like unnecessarily consuming working-capital capacity.

You may need it precisely when things are going well.

The Cheapest Money Isn’t Always the Best Money

Owners understandably focus on interest rates.

If Loan A costs 6% and Loan B costs 8%, the 6% money looks better.

But you don’t make financing decisions based on interest rates alone.

I also want to know:

How long is the money available?

What is the amortization schedule?

Is the rate fixed or variable?

What collateral is required?

Are there financial covenants?

Can the lender reduce or terminate the facility?

Are there prepayment penalties?

What happens if the business has a bad quarter?

How much liquidity remains after the transaction?

The lowest interest rate can become very expensive if the financing structure puts the business in a cash crunch.

Stress-Test the Financing Before You Sign

Before making a significant capital commitment, I like to make the assumptions worse.

What happens if revenue is 10% below plan?

What happens if customers take 15 days longer to pay?

What happens if the project takes six months longer to produce the expected return?

What happens if interest rates don’t decline?

What happens if inventory requirements are higher than expected?

What happens if another major capital need appears six months from now?

If the financing only works when everything goes according to plan, I don’t think you have a financing plan.

You have a best-case scenario.

Businesses need room for things to go wrong.

Because eventually something will.

Preserve Your Options

I’m not arguing that businesses should avoid debt.

Used properly, debt can be an excellent tool.

It can finance equipment, acquisitions, real estate, inventory, and growth without requiring owners to give up equity.

But the structure matters.

When I’m looking at financing, I’m not simply asking:

What’s the interest rate?

I’m asking:

What are we financing, how long will that asset produce value, how will the debt get repaid, and what financial flexibility will the company have left afterward?

A seven-year asset doesn’t necessarily need exactly seven-year financing.

But it probably shouldn’t be financed with money the company might desperately need next month.

That’s how a good investment can become a cash-flow problem.

Before You Commit the Capital

If you’re considering equipment, an acquisition, expansion, or another significant investment, the question isn’t simply whether you can obtain the financing. The structure needs to work with the company’s cash flow, working-capital needs, and downside scenarios.

I work with business owners to evaluate financing and capital decisions in the context of the entire business—not simply the quoted interest rate.

Learn more about how I work with business owners at RobertRitch.com →

Sources

Federal Reserve — FOMC Statement, September 16, 2026
https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm

Federal Reserve — Summary of Economic Projections, September 16, 2026
https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20260916.htm

I’ve heard some version of that from business owners many times.

Sometimes they’re right.

But hiring another employee shouldn’t be the first response to a capacity problem.

It should come after you understand why the capacity problem exists.

The distinction matters because adding people to a broken process doesn’t necessarily fix the process.

Sometimes it just makes the broken process more expensive.

Productivity Matters More Than Headcount

Recent Bureau of Labor Statistics data provides an interesting backdrop.

Nonfarm business productivity increased at a 1.4% annual rate during the second quarter. Output increased 1.7% while hours worked increased only 0.3%.

Manufacturing productivity increased 2.4%, with output rising 5.4%.

The broader lesson for an individual business isn’t to match those national numbers.

It’s that output and labor don’t have to increase at the same rate.

Businesses can produce more without adding employees proportionally.

That sounds obvious.

In practice, many companies don’t operate that way.

When orders increase and employees start complaining about workload, management’s immediate conclusion is often:

We need another person.

My response would be:

Show me why.

Find the Constraint First

Imagine a company with three stages in its operation:

Assembly can produce 100 units a day.

Packaging can process 60.

Shipping can handle 100.

The company ships about 60 units per day and falls behind.

Where should you add people?

If you hire another person in assembly and increase its capacity to 120 units, you’ve accomplished almost nothing.

Packaging still handles 60.

You’ve increased payroll while potentially creating even more work-in-process inventory sitting around waiting.

The problem wasn’t staffing throughout the company.

It was a specific bottleneck.

Real businesses are obviously more complicated, but the principle is the same.

Before hiring, find where the work actually stops.

What Are Your Employees Waiting For?

One of the simplest things management can do is observe the operation.

Not from a spreadsheet.

Actually watch the work.

What are employees waiting for?

Approval?

Materials?

Information?

Another department?

A machine?

A manager?

The owner?

I’ve seen businesses where employees look overwhelmed, yet spend significant portions of the day waiting for something required to keep working.

Hiring another employee doesn’t solve that.

It creates another person who waits.

How Much Work Are You Doing Twice?

Rework is another hidden capacity killer.

A company may believe it needs additional production employees when the real problem is that existing employees spend too much time fixing mistakes.

That can come from poor instructions, bad handoffs, incomplete information, quality problems, sales promising things operations can’t easily deliver, inadequate training or poor project management.

If 10% of your organization’s labor is spent correcting work that should have been done correctly the first time, that’s effectively capacity you’re already paying for but not receiving.

Before adding payroll, I’d want to know how much of that capacity you can recover.

Technology Doesn’t Have to Mean AI

Technology and automation should be part of the discussion, too.

And I don’t mean putting “AI” into everything.

Sometimes the improvement is remarkably basic.

A form that eliminates duplicate data entry.

Better scheduling software.

Automated customer notifications.

Inventory systems that prevent employees from searching for parts.

Templates.

Integrated systems.

A piece of equipment.

Even a better checklist.

The question isn’t:

“Where can we use AI?”

The better question is:

“What are people doing repeatedly that doesn’t require their judgment?”

Automate or simplify that first.

Let employees spend more time doing work that actually requires employees.

Management Can Be the Bottleneck

This one is uncomfortable.

Sometimes the owner is the capacity constraint.

Every quote requires approval.

Every purchase requires approval.

Employees won’t make decisions without asking the owner.

Customer problems get escalated.

Managers have titles but no authority.

As the business grows, everything eventually arrives at one desk.

Then the owner says:

“We’re overwhelmed. We need more people.”

Maybe.

Or perhaps the organization needs decisions to be made somewhere other than the owner’s desk.

You cannot indefinitely scale a company where one person must touch every meaningful decision.

At some point, management structure has to grow too.

Hiring Is Still Sometimes the Right Answer

None of this means businesses shouldn’t hire.

Sometimes the analysis produces a very simple conclusion:

We don’t have enough people.

Great.

Now hire.

But you’re hiring because you’ve identified a genuine labor constraint—not because the organization feels busy.

That’s an important difference.

An employee isn’t just a salary.

There’s payroll tax, benefits, insurance, equipment, software, recruiting, training, management time and overhead.

And once someone becomes part of the organization, reducing headcount later is considerably harder than approving the hire in the first place.

That’s why I prefer to diagnose operations first.

Five Questions Before Adding Payroll

Before approving another position, I would ask:

1. Where exactly is work backing up?

Identify the constraint rather than relying on general complaints about workload.

2. What are existing employees waiting for?

Waiting time often exposes process and management problems.

3. How much work is being done twice?

Measure errors, rework and unnecessary handoffs.

4. What work could be eliminated, simplified or automated?

Don’t automate a bad process before asking whether the process should exist.

5. Is management causing the bottleneck?

Look at approvals, decision-making and the owner’s involvement.

If you work through those questions and still need another employee, the answer becomes much easier.

Hire them.

But don’t confuse being busy with being understaffed.

They’re not the same thing.

Before Adding Payroll, Diagnose the Operation

If your company is busy, falling behind or struggling to handle growth, the answer may be additional employees—but it may also be workflow, management, technology, rework or a bottleneck somewhere else in the operation.

I work with business owners to identify what’s actually constraining the business before committing more money and people to a solution.

Learn more about how I work with businesses at RobertRitch.com.

Sources

U.S. Bureau of Labor Statistics — Productivity and Costs, Second Quarter 2026 (Revised)
https://www.bls.gov/news.release/prod2.htm

robertritch.com

If a business went from $5 million in annual sales to $5.5 million, most owners would tell you they had a pretty good year.

Maybe they did.

But I wouldn’t know that from the revenue number.

One mistake I see business owners make is assuming a growing company automatically becomes a better company. It isn’t.

Sometimes growth actually hides a deteriorating business.

The Number Behind the Revenue Number

The latest Producer Price Index provides a good reason to revisit this.

According to the Bureau of Labor Statistics, producer prices for final demand increased 5.4% during the 12 months ending in August. Prices for final-demand goods were up 7.7%.

Those are national statistics. They don’t tell me what’s happening inside your company.

That’s the important distinction.

The inflation number I care about most isn’t the government’s.

It’s yours.

What happened to the cost of the materials you buy?

What happened to labor?

Freight?

Insurance?

Utilities?

Outside services?

And most importantly, what happened to your gross margin?

Consider a simple example.

A company generates $5 million in revenue at a 35% gross margin.

That produces:

$1.75 million in gross profit.

The following year, sales increase 10% to $5.5 million.

Sounds great.

But rising costs, discounting and an unfavorable product mix push gross margin down to 30%.

Now the company produces:

$1.65 million in gross profit.

The company grew revenue by $500,000.

But it produced $100,000 less gross profit.

That’s not the kind of growth I want.

Growth Can Cover Up Problems

Revenue is an easy number to celebrate.

Margins require more attention.

That’s particularly dangerous during periods of rising costs because businesses don’t always feel the deterioration immediately.

Sales are coming in.

Employees are busy.

The company may even be hiring.

Management feels like the business is growing.

Meanwhile, the economics of each sale may be getting worse.

The problem eventually appears somewhere else.

Cash gets tighter.

The line of credit gets larger.

Accounts payable stretch.

Owners wonder why there’s never as much money in the bank as they expect.

They may conclude they need even more sales.

Sometimes that’s exactly the wrong answer.

If the underlying economics are deteriorating, adding more low-margin revenue can make the cash problem worse.

Don’t Treat Every Dollar of Revenue Equally

Another mistake is looking only at the company’s overall gross margin.

I want to know where the margin comes from.

Look at it by:

• Product

• Service

• Customer

• Location

• Sales channel

• Project type

You may discover that one product category produces excellent margins while another barely contributes anything.

Or your largest customer may generate impressive revenue but demand discounts, special handling, longer payment terms, and excessive management attention.

The customer everyone celebrates might not be nearly as valuable as everyone thinks.

That is why revenue alone doesn’t tell you much about a business's quality.

Pricing Is Only One Lever

When costs increase, the obvious answer is:

Raise prices.

Sometimes that’s the right answer.

But it shouldn’t be the only answer.

If margins are declining, I would want management to look at several things.

Pricing: Are prices keeping pace with the company’s actual cost structure?

Purchasing: Have suppliers been rebid or renegotiated?

Product mix: Are salespeople pushing revenue or profitable revenue?

Labor: Has the amount of labor required to produce a unit of output increased?

Waste and rework: How much gross profit is disappearing because work has to be done twice?

Customer profitability: Are certain customers expensive to serve?

Discounting: Are salespeople giving away margin to close deals?

Freight and delivery: Are costs being absorbed that should be passed through?

Often there isn’t one big problem.

Six small problems quietly take two or three points each out of the business.

Put the Percentage Into Dollars

Owners sometimes hear that gross margin declined from 35% to 32% and don’t react strongly.

Three percentage points doesn’t sound dramatic.

Convert it into dollars.

On $10 million of revenue, three percentage points of gross margin represents:

$300,000.

Now the conversation changes.

If you’re trying to recover $300,000 through additional sales instead, the amount of new revenue required can be substantial.

At a 30% gross margin, generating another $300,000 of gross profit requires $1 million in additional revenue.

That’s why protecting margin can sometimes be more valuable than chasing growth.

Bigger Isn’t Automatically Better

I like growth.

But I like profitable growth much more.

There is an important difference between building a larger company and building a more valuable company.

A business that grows from $5 million to $7 million while margins, cash flow and operating discipline deteriorate may not have created much value at all.

It may simply have created a bigger organization with bigger problems.

That’s why when someone tells me:

“We’re up 20% this year.”

My next question isn’t automatically congratulations.

It’s:

“What happened to the margin?”

Because until I know that, I don’t really know whether the business got better.

When Growth and Profitability Stop Moving Together

If your revenue is growing but your margins, cash flow or profitability aren’t following, simply pushing for more sales may not solve the problem.

I work with business owners to look beneath the headline numbers—pricing, margins, customer profitability, operating costs, and cash flow—to determine where the business economics are changing and what management can do about it.

Learn more about how I work with businesses at RobertRitch.com.

Sources

U.S. Bureau of Labor Statistics — Producer Price Index, August 2026
https://www.bls.gov/news.release/archives/ppi_09102026.htm

robertritch.com

What does this mean for grocery prices? Gas? Housing? Interest rates?

Business owners should be asking a different question:

What is happening to my margins?

The latest Producer Price Index gives you a good reason to ask.

The Bureau of Labor Statistics reported that producer prices increased 0.4% in August and were 5.4% higher than a year earlier. Prices for final-demand goods increased 1.1% during the month.

I’m less interested in debating what one month’s inflation report means for the overall economy than in what business owners should do when their costs start moving.

The first thing I would do is pull the income statement.

Revenue Can Hide a Problem

One mistake I see businesses make is focusing too heavily on revenue.

Revenue can increase while the underlying business becomes less profitable.

Imagine a company increases sales from $5 million to $5.5 million. On the surface, that’s 10% growth.

But suppose its gross margin falls from 35% to 30%.

At $5 million and a 35% margin, the company generates $1.75 million in gross profit.

At $5.5 million and a 30% margin, it generates $1.65 million.

The business grew revenue by $500,000 and actually produced $100,000 less gross profit.

That’s why I would rather understand the quality of the revenue than simply celebrate growth.

Inflation can accelerate that problem.

Don’t Wait Until the Cash Is Gone

Businesses often respond to financial problems too late.

Cash gets tight, and then management starts looking for financing.

But financing doesn’t solve an unprofitable business model. In some cases, it simply gives the company more time to continue losing money.

If costs are rising, management should examine the problem while options remain.

Start with gross margin.

Compare it month to month and against the same period last year.

Then determine what changed.

Was it materials?

Labor?

Freight?

Supplier pricing?

Discounting?

Product mix?

Overtime?

Waste?

You can’t fix “inflation.” You can address individual expenses and decisions.

Pricing Should Be Deliberate

The obvious response to rising costs is to raise prices.

Sometimes that’s exactly what should happen.

But simply adding 5% to every price isn’t a strategy.

I’d want to know which products and services generate the strongest margins, which customers are most price-sensitive, and where the business actually has pricing power.

Some companies discover they are underpricing their most valuable offering while carrying products or customers that barely contribute to profitability.

Inflation can expose problems that were already there.

Look at Purchasing and Inventory Too

Pricing isn’t the only lever.

If you’re buying significant amounts of inventory or materials, supplier relationships deserve another look.

Can volume be consolidated?

Can terms be renegotiated?

Are you carrying unnecessary inventory?

Are employees ordering reactively rather than strategically?

Are multiple departments buying similar products from different suppliers?

None of those changes will make headlines, but together they can meaningfully affect cash flow.

Revisit Your Assumptions

If you created a 2026 budget assuming certain material, labor, or financing costs, those assumptions may no longer be valid.

That’s okay.

A budget isn’t supposed to predict the future perfectly. It’s supposed to provide a benchmark against which reality can be measured.

The mistake is continuing to operate from assumptions that you already know are wrong.

Update the forecast.

Run several scenarios.

What happens if costs increase another 3%?

What if revenue remains flat?

What if customers resist another price increase?

What if borrowing costs don’t decline as quickly as expected?

Those aren’t pessimistic questions. They’re management questions.

The Number I’d Watch

If I owned an operating business today, I wouldn’t spend much time predicting the next inflation report.

I’d watch my gross margin.

National statistics can tell you what’s happening to the economy.

Your margins tell you what’s happening to your company.

And ultimately, that’s the number you have to manage.

Source: U.S. Bureau of Labor Statistics, Producer Price Index, August 2026.

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That surprises some owners. The natural reaction to a struggling business is usually, “We need more revenue.”

Sometimes they do.

But I’ve seen businesses where increasing sales would actually make the problem worse.

Over the years, I’ve worked with businesses as an owner, investor, advisor, and sometimes as the person brought in when things were already going sideways. While every situation is different, I tend to start with the same areas.

1. Where Is the Cash Actually Going?

The income statement may tell me whether a company is profitable. The bank account tells me whether it can survive.

I want to understand how cash moves through the business.

How much comes in each month? How much has to go out? When does it go out? What debt is being serviced? Are customers paying on time? Are owners pulling money out of the company? Are there expenses that made sense two years ago but no longer make sense today?

I’m especially interested in expenses that have become invisible to management.

A $200 monthly subscription doesn’t seem significant. Neither does a $500 service contract. But businesses accumulate expenses. Twenty seemingly insignificant expenses can add up quickly.

Before talking about growth, I want to know the company’s true operating cost.

2. Is the Business Actually Making Money on What It Sells?

Revenue can hide a lot of problems.

A company doing $3 million a year isn’t necessarily healthier than one doing $1 million.

I want to know what happens to every additional dollar of revenue.

What does it cost to deliver the product or service? What is the gross margin? Which customers are profitable? Which products are profitable? Are certain customers consuming substantially more resources than they’re paying for?

I’ve seen businesses chase revenue from customers they'd be financially better off without.

That’s why “we need more sales” isn’t a strategy until we know what kind of sales the company needs.

3. What Does the Owner Really Do?

This is one of the most revealing questions I ask.

If the owner disappeared for 30 days, what would stop?

In many owner-operated businesses, the answer is: almost everything.

The owner sells. The owner approves purchases. The owner handles important customers. The owner resolves employee problems. The owner makes pricing decisions. The owner knows where everything is.

That isn’t necessarily a bad business.

But it is a business with a serious constraint.

You can’t meaningfully scale a company when every important decision has to pass through one person.

I start by looking for things you can document, delegate, automate, or eliminate.

The objective isn’t to remove the owner from the company. It is to make sure the company doesn’t depend on the owner for every function.

4. Is There Really a Sales Problem?

If revenue is declining, I want to know why.

There is a major difference between not having enough leads and not converting the leads you already have.

So I work backward.

How many prospects enter the pipeline? Where do they come from? How many receive a proposal? How many buy? How long does that process take? Why do prospects say no? What happens to prospects who aren’t ready today?

Sometimes the company needs marketing.

Sometimes it needs better salespeople.

Sometimes it needs better follow-up.

And sometimes the problem is the offer itself.

Spending more money on advertising before answering those questions can simply bring in more people who don’t buy.

5. Who Is Accountable for What?

As companies grow, job descriptions often become blurry.

Everyone is busy, but nobody is clearly responsible for the outcome.

I want to know who owns sales, marketing, operations, finance, customer service, and other critical business functions.

Then I want to know how performance is measured.

“We’re working on it” isn’t a measurable result.

Businesses need a small number of numbers that tell management whether things are getting better or worse.

You don’t need 50 KPIs.

You need the right ones.

6. What Can We Fix in the Next 30 Days?

I don’t start with a five-year strategic plan when a company is struggling to make payroll.

There may be a long-term strategy eventually, but first we need stability.

I look for changes that can produce measurable results quickly.

That could mean cutting unnecessary expenses, renegotiating obligations, changing pricing, collecting overdue receivables, improving sales follow-up, concentrating marketing on the best-performing channel, eliminating an unprofitable service, or restructuring someone’s responsibilities.

A few relatively small changes can sometimes dramatically change a business's trajectory.

7. Only Then Do I Look at Capital

This matters because I spend a lot of time around investors and companies seeking capital.

Money does not fix a broken business model.

It can hide one.

If a company is losing $50,000 every month because its economics don’t work, raising $500,000 may simply give it another ten months to lose money.

Before I recommend debt or equity, I want to understand exactly what the money will accomplish.

There is a big difference between capital that funds growth and capital that funds losses.

Sometimes a company genuinely needs capital.

Sometimes it needs restructuring.

And sometimes it needs both.

Knowing the difference matters.

The Question I’m Really Trying to Answer

When I look at a struggling business, I’m ultimately trying to answer one question:

Is there a good business trapped inside a bad operating structure?

Quite often, there is.

The company may have good customers, a good reputation, capable employees, and a product people actually want. The problem may be pricing, overhead, cash management, sales processes, accountability, or simply that the business grew without the infrastructure needed to support that growth.

Those problems can often be fixed.

But the order matters.

Before adding more marketing, more employees, more debt, or more investor capital, I want to understand what is actually happening inside the business.

Because growth doesn’t automatically solve problems.

Sometimes it just makes them bigger.

What happens after the money goes into the company is where I believe investors can make a real difference.

Over the years, I’ve developed a simple phrase for my approach to investing:

I babysit the money.

That doesn’t mean micromanaging founders or trying to run their companies. I invest in people because I believe they are capable of building the business. But I also don’t believe in wiring money, wishing everyone good luck, and waiting for the next investor update to find out what happened.

My philosophy is that capital should come with access to resources that can help the company succeed.

A Check Isn’t Always Enough

Many groups do more than simply provide capital. They monitor their investments, make introductions, provide advice, participate on boards, and help portfolio companies overcome problems.

I agree with that philosophy, but I’ve tried to take it further by building an ecosystem of services and relationships companies can draw on when they need them.

Early-stage and growing businesses rarely fail because they lack ideas. More often, they encounter a series of practical problems.

They need customers.

They need publicity.

They need better financial controls.

They need to attract and retain employees.

They encounter regulatory or governmental issues.

They need insurance, benefits, or warranty programs.

They need introductions to additional capital.

Sometimes they simply need someone who has encountered a similar problem before.

Building all of those capabilities internally can be expensive, particularly for a young company. My approach is to give companies access to an existing network rather than expecting them to build everything from scratch.

Building an Ecosystem Around the Investment

Over the years, I’ve developed businesses, partnerships, and professional relationships covering areas including:

Public Relations — Helping companies develop their story, gain visibility, communicate with stakeholders and respond when something goes wrong.

Marketing — Helping companies reach customers, investors and other important audiences through data, digital marketing and direct outreach.

Finance and Capital — Assisting with financial strategy, capital planning, investor relationships and introductions to potential funding sources.

Employee Benefits — Connecting companies with programs that can help them compete for and retain employees.

Warranty Programs — Helping appropriate businesses use warranty and protection programs to improve their customer offering and potentially create additional revenue opportunities.

Governmental Affairs — Helping management understand government, regulation, and public policy when those issues affect the business.

Other resources are available depending on what a particular company needs.

The important distinction is that I’m not trying to sell every portfolio company every service.

The ecosystem exists to solve problems.

If a company doesn’t need something, there is no reason to introduce it. When a need arises, however, I would rather be able to make a phone call and put the right resource in front of management than watch a preventable problem grow.

Protecting the Investment Without Running the Company

An important line exists between being an engaged investor and becoming an interfering investor.

Founders need room to operate.

An investor sitting on the sidelines contributes very little beyond capital. An investor constantly telling management what to do can become an obstacle.

I try to operate between those extremes.

I want to understand how the company is performing, where the problems are developing, and what management believes it needs. Then I can determine whether someone in my network can help.

Sometimes that means making an introduction.

Sometimes it means asking a difficult question.

Sometimes it means helping management evaluate several options.

And sometimes the right answer is to stay out of the way.

That’s what I mean when I say I babysit the money.

Capital Plus Resources

I don’t believe investors can eliminate the risk of early-stage investing. Even good companies with talented founders and adequate capital can fail.

But investors can improve the environment surrounding an investment.

If I’ve invested my own money—or brought an opportunity to people who trust my judgment—I have an interest in doing more than watching the company’s bank balance decline.

I want management to have access to the relationships, experience, and infrastructure we’ve accumulated over the years.

The goal isn’t to guarantee success. Nobody can do that.

The goal is to give a good company more tools with which to succeed.

That’s why, after the check clears, I don’t consider my job finished.

That’s when babysitting the money begins.

Private equity investment activity in July 2026 reflected continued appetite for businesses with durable demand and opportunities for operational growth. According to information compiled by PrivateEquityInfo.com, the month’s leading platform investment sectors were Software & SaaS, Industrial Manufacturing & Equipment, and Infrastructure & Field Services.

Transactions in these categories point to several recurring investment themes: digitizing essential business processes, modernizing domestic industrial capacity, and rising demand for specialized services supporting utilities and infrastructure.

Software & SaaS Remains a Private Equity Priority

Software continued to attract private equity capital because of its recurring revenue models, scalability, and ability to improve complex business processes.

Shore Capital Partners invested in ThrivePass, a Denver-based cloud platform for administering employee benefits. ThrivePass supports lifestyle spending accounts, pre-tax benefits, COBRA administration, and tuition reimbursement. The investment illustrates growing interest in technology that helps employers consolidate fragmented benefits programs and improve the employee experience.

Apax Partners invested in Minneapolis-based Inspectorio, an AI-powered SaaS platform serving retailers, brands, suppliers and manufacturers. Inspectorio digitizes quality and compliance programs, helping customers identify and manage risk throughout their supply chains. Its combination of artificial intelligence, compliance management and supply-chain visibility places the company at the intersection of several important enterprise technology trends.

Volaris Group invested in IVèS, a Montréal-based provider of software solutions focused on accessibility and inclusion. The transaction highlights the growing importance of technology that helps organizations make digital services more accessible while meeting evolving customer expectations and compliance requirements.

Together, these investments demonstrate the breadth of private equity interest in software. Rather than concentrating on a single vertical, investors are backing specialized platforms that address essential administrative, operational, and social needs.

Industrial Investments Target Specialized Capabilities

Industrial Manufacturing & Equipment was another leading sector in July, with investors targeting businesses offering technical expertise, specialized production capabilities and exposure to resilient end markets.

Pelican Energy Partners invested in Riggins Company of Hampton, Virginia. Riggins provides custom industrial metal fabrication, specialty welding, integrated engineering and project management services. Its customers operate in demanding sectors such as defense, aerospace, shipbuilding, energy and petrochemicals. These end markets require technical precision and dependable execution, creating meaningful barriers to entry.

Platinum Equity invested in Tangent Technologies, an Aurora, Illinois-based manufacturer of synthetic and recycled high-density polyethylene products. Tangent serves outdoor living, commercial, marine, infrastructure, and industrial applications. The company’s use of recycled materials adds a sustainability dimension to an investment supported by diverse end-market exposure.

Canerector invested in RITZ Machine Works of Dauphin, Manitoba. The company manufactures precision-formed tubular and fabricated metal components. Its capabilities reflect the type of specialized manufacturing expertise that can benefit from additional capital, operational resources, and access to a broader network of industrial businesses.

These transactions suggest that private equity firms continue to see opportunity in technically differentiated North American manufacturers. Businesses with advanced fabrication capabilities, demanding customer requirements and exposure to multiple end markets may be particularly attractive in an environment that increasingly values supply-chain resilience.

Infrastructure Spending Drives Demand for Field Services

Infrastructure & Field Services also ranked among July’s most active platform investment sectors. The category benefits from long-term demand for utility modernization, energy reliability, transportation improvements, and specialized technical services.

New Mountain Capital invested in SAM, an Austin-based national provider of geospatial solutions. SAM serves customers across the utility, transportation, and broader infrastructure industries. Geospatial data and related technical services are increasingly important for planning, constructing, managing and maintaining complex infrastructure assets.

Greenbelt Capital Partners invested in Bowe & Gant of Sewell, New Jersey. The company provides electrical and energy infrastructure services, including construction, power distribution, testing, commissioning, and maintenance. Its service offering spans several stages of the infrastructure lifecycle, positioning it to participate in both new development and the continuing upkeep of existing systems.

Gemspring Capital invested in Key Line Construction, a Roseburg, Oregon-based powerline contractor. Key Line provides transmission, distribution, substation, civil construction, and utility infrastructure maintenance services. The investment reflects the need for skilled contractors that can support grid reliability, capacity expansion, and ongoing utility upgrades.

The appeal of infrastructure field services rests partly in their essential nature. Utilities, transportation networks and energy systems require continual investment, inspection and maintenance. Companies with trained workforces, established customer relationships and strong safety records can therefore occupy strategically valuable positions within their markets.

What July’s Activity Signals

Although the three leading sectors serve different markets, the July 2026 investments share a common foundation. Each supports an important organizational or physical system.

Software platforms help employers, manufacturers, and other organizations manage benefits, compliance, and accessibility. Industrial companies provide components and fabrication capabilities for demanding applications. Infrastructure service providers supply the specialized expertise required to build, monitor and maintain essential assets.

The transactions also show private equity firms balancing growth potential with resilience. SaaS businesses offer scalability and recurring revenue, specialized manufacturers benefit from technical barriers to entry, and infrastructure service providers operate in markets supported by long-term capital needs.

Based on the July activity reported by PrivateEquityInfo.com, investors appear to be prioritizing companies that combine specialized capabilities with enduring customer demand. Software, advanced manufacturing, and infrastructure services may look different on the surface, but all three can offer the same underlying investment qualities: mission-critical products or services, defensible market positions, and multiple avenues for expansion

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Monday, July 20, 2026 is a milestone day for one of my early investments. Boxabl Inc. begins trading on the Nasdaq Stock Market under the ticker BXBL, following the completion of its business combination with FG Merger II Corp. at a $3.5 billion valuation — 350 million shares issued to Boxabl stockholders at a deemed value of $10 per share.

I invested in Boxabl early on, when the pitch still sounded audacious to most people: build homes the way the world builds cars — on an assembly line — and unfold them on-site in under an hour.

Why I Made the Bet

The housing affordability crisis isn’t a demand problem. It’s a production problem.

Boxabl was one of the few companies attacking construction cost at the root — the manufacturing process itself. That’s the kind of structural thesis I look for after 30+ years of building and investing in businesses: not a better mousetrap, but a fundamentally different factory.

Their flagship product, the 361-square-foot Casita, is a fully equipped studio unit with a complete kitchen, bathroom, and utilities. They’ve since added the smaller Baby Box and are developing stackable, connectable models for larger residential structures.

I invested early because I saw Boxabl’s potential to address affordable housing. The public listing is a milestone, not the finish line — the addressable problem, attainable housing at scale, is still almost entirely unsolved.

What This Teaches About Early-Stage Investing

Early-stage investing is about seeing the business the founder is building five years before the market prices it.

Most investors want proof. The returns go to the people who can underwrite the thesis before the proof exists — and who have the discipline to hold through the messy middle.

That’s the same lens I bring to every engagement at Ritch Ventures: distressed acquisitions, turnarounds, and capital strategy for early-stage companies. Find the inflection point. Underwrite the thesis. Structure the capital. Stay disciplined.

Congratulations to the entire Boxabl team on reaching the public markets.

If you’re a founder building toward an inflection point — or an investor who wants to see deals before the market prices them — learn more at ritchventures.com.

This article is for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell any security.

I had the privilege of participating in the scholarship review process for the State College of Florida Foundation, helping evaluate scholarship applications from hardworking students pursuing their educational goals.

Reading through the applications was both inspiring and humbling. So many students are overcoming challenges, working hard, and striving to create better futures for themselves and their families.

Education creates opportunity, and scholarships can truly change lives. I’m grateful for the chance to contribute my time and experience to help support students in our community.

A big thank you to the Foundation and everyone involved in making these opportunities possible. Investing in students today helps build stronger communities tomorrow.