Creating customer value, retaining an economic share and receiving cash in time are separate achievements. Growth can strengthen the business or amplify a loss. A profitable contract can still create a cash crisis when suppliers and employees must be paid before the customer pays.
Use this principle when: setting price, accepting custom work, subsidising adoption, hiring to deliver demand or raising capital against a growth plan.
What to do
- Choose the right unit: customer, contract, transaction, installed machine or licence. Record revenue and attributable delivery costs, including implementation, service, infrastructure, quality failures and recurring human effort.
- Show acquisition separately and make founder effort visible. Distinguish one-off learning costs from work that recurs for every customer. Explain the specific mechanism expected to improve the economics.
- Map when cash leaves and arrives under a base case and a downside case. Include working capital and capacity investments. Test price, scope and payment structure as seriously as product features.
Evidence that changes the decision
Proceed: the next commitment has a credible economic purpose: an attractive contribution, a justified learning investment or a demonstrated path towards better economics. The cash required can be funded.
Change the plan: sales grow but delivery effort, cash exposure or customer concentration grows faster. Reprice, narrow the offer, redesign delivery or change payment terms before multiplying the pattern.
Stop this route: the viable price and achievable cost do not support the intended model, and no credible improvement or strategic reason justifies continuing the subsidy.
Where founders misapply it
This principle does not demand immediate profitability. Deeptech development, network creation and product discovery can require substantial investment before attractive unit economics are observable. Make the investment thesis, milestones and funding dependency explicit. “Scale will fix it” needs a mechanism and evidence.
A positive customer contribution still has to support R&D, overheads and investment. Lifetime-value estimates are fragile when history is short. Track observed contribution and cash alongside longer-term assumptions. Skok’s definitions are useful; SaaS ratios are not universal thresholds for every business. [14]
Connect it to the whole venture
BOM’s Business Model and Plan building blocks connect the offer to the resources needed to deliver it. Keep the economics of distinct value propositions visible, then combine product, customer and team investment needs into the funding plan. Check for double-booked people and costs that one roadmap quietly passes to another. [18]
Next decision: calculate what one representative sale earns and consumes today, then identify the assumption that makes the growth plan economically credible.