Financial Resilience: The Missing Ingredient for Sustainable Business Growth

Financial Resilience: The Missing Ingredient for Sustainable Business Growth

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Are you stressed out your business is not truly prepared for unexpected events?

From what I have seen, many small business owners think they are… until a single setback reveals their lack of financial resilience.

It reminds me of a quote from Warren Buffet.

“Only when the tide goes out do you discover who’s been swimming naked”.

It only takes one or two bad financial decisions or cash flow mistakes to your business down to the knees.

It happened to Philippa who owns an ecommerce store selling sustainable dresses and swimwear for women mainly based in the UK and USA.

Her business model is simple. She buys sustainable clothes from China and sells to UK and US market both B2B and B2C environment.

In her case, it was a double whammy.

First it was the Covid-19 lockdown and then China shut down for longer than most countries. As a consequence she didn’t have product to sell.

Furthermore, she had already taken advance payments from some big brands to fund the stock purchases, she didn’t have enough money to return it to them.

To further add to the problem, one of her major supplier went bust in China and her business lost £90k worth of goods value at costs price with RRP of £285k.

Her biggest mistake supplier value chain was over relying on a particular supplier.

Eventually, she managed to fix the issues by having an alternative supplier chain in Turkey.

It shows how vulnerable a single setback can question the viability of the existence of the business.

During the transitioning phase from China to Turkey and she had to work 12 hours a day with 3 kids, and had to deal with delayed orders, customer complains and damage to brand reputation.

The Profitability Trap

From my experience of working with clients over the last two decades as a cash flow advisor and accountant, cash flow issues are very common.

Even the most profitable and cash rich business at some point in their business journey goes through the cash flow rollercaster.

The biggest mistake I come across from what I have seen working with small business owners, they believe good and growing revenue automatically means they are doing well.

Here’s my view…

“It’s not a question of whether you will come across cash flow issues in your business journey, it’s only matter of when. When it does is your business cash flow financially resilient?”

From what I have seen over the years working closely with my clients, throughout the business journey financial stability is tested time to time.

Those who can withstand the demands of cash flow pressure to run business operations smoothly even though income is down at certain periods, excel in business further.

Sustainable Growth vs. Fragile Growth

There is a difference between going fast and going further in business.

Remember the story of rabbit and hare.

Moral of the story is slow and steady wins the race.

Here’s the breakdown:

  • Sustainable growth: You can handle the fluctuations in sales revenue, customer buying patterns, seasonality, massive tax bill, adverse economic conditions and macro factors such as inflation rate, Bank Of England base rate increase.
  • Fragile growth: One bad quarter dropping revenue by 35%, one unexpected massive expense or tax bill…and suddenly you don’t enough cash to run your daily business operations, meet other financial obligations such as capital repayments or even your living expenses as an owner managed business.


It reminds me of one of the ecommerce businesses I know from a personal connection. They buy outdoor tents from China and sell to the UK market. They overestimated sales volume and bought lot of stocks which remained unsold. Not only this, they hired more staff.

When sales revenue started to plummet so did the cash balance, eventually bringing the business to a grounding halt.

Key Takeaways

  • Key Takeaway: Financial Resilience is keeps the business going when competitors are coming to a standing half.

How to Conduct a Cash Flow Resilience Reality Check

One of the first I do, when I take on a new client is to go through my financial resilience check up checklist. You can grab one here and it only takes less than five minutes to answer the questions.

Here are a few crucial questions for you to answer . Be honest to yourself.

  • Question 1: If your biggest client stops making the payment to you for whatever reason, do you have emergency funds to pay your staff salaries, rent and other fixed expenses such as monthly debt repayments for at least the next twelve weeks ?
  • Question 2: If there is an increase in costs of sales by 15-20% and or salary rise as we are seeing UK government has increased hourly rate, can your business cash flow sustain the extra cash burden?
  • Question 3 If a competitor launches a new superior product that is better, faster , simpler than you offer could you adapt your offerings quickly, or would you be left behind?
  • Question 4:If you receive a shocking massive VAT to pay or corporation tax to pay, will you able to cover it without affecting to pay for daily operations?
  • Question 5: If your personal financial circumstances change such as you need to take money out of business to cover additional mortgage repayments as a result of interest rate rise, then will you able to support both both and personal finances?


It’s okay, if these questions make you feel awkward.

My view is to get a crystal cash flow clarity on on your cash flow situation.

I cover three areas.

Cash Flow Position- Taking into account all assets and liabilities what is your cash position not what the current bank balance says.

Cash Flow Momentum- Your Ability to build cash cushion for strategic re-investment in buisness growth as well as setting aside for rainy days

Cash Flow Estimation- You are clear on cash flow needs to invest BIG.

Let me ask you a question.

Out of five questions, which question made you feel uncomfortable and why?

What are the hidden Threats That Derail Growth ?

Most small business owners pay attention to obvious causes like seasonal sales dip, equipment replacement, website rebuild etc.

Here’s the thing.

They miss out on other factors:

Sudden Regulatory Shift

A New law or tax changes in your sector catches your off guard. It reminds of economic crime levy introduced by the UK government in 2023 in art market sector.

As one of my clients was doing more than £36m sales revenue, he had to pay £36,000 . This is quite a significant amount of money to pay.

The Tech Disruptor You DIDN’T See Coming

With AI and LLM models we are prone to most disruptions in all the sectors. Take example in my accounting and finance niche, we don’t need to keep the hard copy papers anymore, everything is online. HMRC is okay keeping records online. Which means, we don’t even need a physical office.

This could be happening in your industry.

I remember speaking to one of my marketing agency client, he said charging more for social media management fee retainer is very hard to justify to his clients as most of the heavy workload is done by ai and software.

Supply Chain Bottleneck: Remember Philippa from earlier in this article? How her business as hugely affected due to supply chain issues.

Here’s what I want you to know This list isn’t to scare you. But to highlight the situations you could fall into without you knowing about it.

Here’s what I believe.

When you know the potential threats , you have solved half of the problem. Because you know what actions you need to take, to cover it.

Building Resilience IS Growing Your Business

Here’s what I believe.

Business is a marathon not a sprint.

What do I mean by that?

When you build a business, it takes longer and more cash than anticipated to launch new product or services.

Just like in a marathon, you need a stamina to complete the marathon, you need cash to keep on reinvesting to keep your business going.

Sometimes, the ads doesn’t work, sometimes, website doesn’t convert, sometimes, there is no traffic.

The point is , when you are fixing these points, it is costing you money, not to forget your time which is an opportunity costs.

When you have tried and tested few times you will come up with a winning formula, a model for your business. Then you can accelerate your business growth. In the meantime, while you reach that stage, your business will consume lots of cash and therefore needs to be financially resilient.

Key Takeaways

  • Without financial literacy, you cannot gain financial knowledge.
  • Without financial knowledge, you cannot gather financial insights.
  • Without financial insights you cannot do financial risk management.
Your Resilience Action Plan

If you are looking to build resilience, I am going to share with you an overview action plan.

Don’t worry, it’s not something that happens overnight. It’s a process to making consistent positive cash flow impact, so that when you are presented with an opportunity to invest big taking calculated risk, you can do so.

Here are the steps I follow with my clients, when we do this exercise.

Step 1: Scrutunize Expenses

A small amount of saving per month adds up to a significant sum for meaningful investment in a long term.

Cash you need to collect each month to cover fixed expenses and indirect costs and taxes.

Set up a cash flow dashboard to track key cash flow metrics and define your own Kpis to find out how likely are you able to meet your metrics.

This might include your minimum closing cash balance, cash margin, customer retention rate, etc.

Create three scenarios – most likely, best case and worst case.

Be financially disciplined to meet your month end cash balance target. Stay away from emotional buying habit.


Need to invest in growth? With a clear cash flow picture, Lisa secured the funding she needed to expand her team, leading to a 40% sales increase.”


Remember, just like London marathon isn’t won until the runner completes 26.2 miles , he who can go longer in the business wins the race of more clients, more market share if the business is financially resilient

Ready for More Advanced Strategies?

Check out how to build cash flow surplus by clicking here, it covers three areas

1. Cash flow clarity

2. Cash flow control

3. Cash flow creation

I will leave you with a quote for you to think about.

“The name of the game is to stay in the game, until you win the game”

Improve your financial literacy to improve your financial knowledge so that you can do proper financial planning to stay in the game of business, by being financially resilient.

Your next step

Do you need my help implementing the five steps I have laid out?

Click here to book the call to check out my availability

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Shishir Khadka, qualified as a chartered certified accountant in 2009. He is the creator of cashflow hub– the world’s most comprehensive cash flow resource online and is one of the UK’s leading cash flow specialist who helps busy business owners and entrepreneurs generate more profit and create consistent positive cash flow without over relying on getting new sales.

He has delivered a masterclass to a global software Zoho’s audience to create consistent cash flow. He has written articles for floatapp– one of the leading cash flow software and has also been featured in the major publications such as Independent. He has been sharing his learning and insights on his youtube channel.

He wrote about his learnings from helping an e-commerce client scaled the business cash flow positive from £500k to £1.6m in four years in “The Three Key Obstacles to Faster Growth: How You Can Overcome Them Using Cloud Accounting.

In his career spanning 18 years as the cash flow specialist, he has helped businesses of all sizes, ranging from £40K to £40M.

Financial Resilience: The Missing Ingredient for Sustainable Business Growth

By Shishir Khadka, FCCA.