Introduction: When to Grow Sustainably—and When to Fuel Growth with Investment
Every founder wants to grow—but how you grow matters just as much as how fast. In fact, according to a U.S. Bank study, 82% of businesses that fail cite cash flow issues as a primary reason—often a result of scaling too quickly or inefficiently. That’s why choosing your growth path strategically is so critical.
Sustainable growth is steady and self-funded. Externally funded growth via equity investments or loans can be faster, but comes with more risk. And raising money too early—or for the wrong reasons—can leave you over-diluted or saddled with debt, putting your entire business at risk.
In this blog, we’ll explore the key differences between these two paths and how to choose the one that maximizes your long-term wealth as a founder. Spoiler: it’s not always the fastest route that gets you the furthest.
What Is Sustainable Growth?
Sustainable growth is when your business expands at a pace supported by its own internal cash flow. For example, imagine a small e-commerce brand that reinvests a portion of its monthly profits to steadily increase inventory, hire part-time help, and boost marketing spend—all without taking on any external funding. While it might take longer to double revenue, the founder retains full control and keeps all profits, growing the business in a financially healthy and stable way. Instead of borrowing or selling equity, you reinvest profits back into operations—marketing, hiring, product development, and more.
This path may be slower, but it’s far more stable. You maintain full ownership and don’t carry the pressure of repayment or investor expectations. It’s about building strength from within.
💡 Getting technical, in financial terms:
Here’s what that means in plain language: Return on Equity is how efficiently your business turns your own or retained profits into more profit. Reinvestment Rate is the percentage of those profits you put back into growth.
If your business is profitable and you reinvest wisely, you can grow steadily—at the sustainable growth rate—without outside funding.
What Is Externally-Fueled Growth?
Externally-fueled growth happens when you raise outside money to grow faster than your business could support on its own. This funding can come from selling equity or taking on debt. It’s a strategic way to accelerate your growth trajectory—but it needs to be used wisely.
When executed properly, investment can unlock powerful opportunities. You might break into new markets, scale your team quickly, broaden your product offering, or dramatically increase your marketing spend to capture more market share. It can compress years of slow organic growth into months.
But there’s a tradeoff. Raising equity means handing over part of your company—along with a portion of your future profits and decision-making power. That said, in cases where speed-to-market is essential, or you need a competitive edge that requires rapid scaling (like launching a tech platform or capitalizing on a fleeting market opportunity), bringing on investment might be the smartest strategic move. In these cases, you might be wealthier as a founder by giving up a portion of your future profits and decision-making power to grow faster.
Taking on debt brings its own risks, with repayment schedules and interest burdens that can add pressure to your bottom line and could even put you at risk of bankruptcy, but it can also add an injection of growth capital while leaving your ownership intact.
Some important considerations, if your growth assumptions are off or your plans don’t deliver quick returns, the consequences can be severe. You may find yourself facing mounting pressure from investors or struggling to make loan payments, all while trying to maintain momentum. It also maybe costly in time, effort, and money to find investors.
Which Path Leaves More Money in Your Pocket?
Here’s the key question too many founders overlook:
Which growth path results in the most money in my pocket as the founder?
Let’s break that down:
- Sustainable growth keeps 100% of the business (and the profits) in your hands but may be slow.
- Equity Investment-fueled growth may build a bigger business faster—but with a smaller piece of the pie for you.
- Loans allow you to retain control but are costly and add bankruptcy risk.
The answer to these questions isn’t always clear and depends on many variables, best-guess predictions of the future, and individual concerns of the entrepreneur. One thing that is certain is that a bottom-up financial model analysis of the situation will bring clarity to the founder by allowing them to compare on paper (or a spreadsheet) the different possible paths so that they can decide for themselves what’s best for them.
You can use your financial model to run both scenarios:
- What do your projected dividends look like over 3–5 years with self-funded growth?
- What’s your equity worth if you raise funding? And how much of it will still be yours?
- Does investment grow the company and your personal wealth—or just one of those?
If you’d like an entire post explaining how the financial model can answer these questions. email me at andrew@fsadvisors, or message me on LinkedIn and I’ll put one together for you.
‘Bottom-Up Modeling: Your Personal Growth Blueprint’
The answer to your growth strategy shouldn’t be based on emotion or guesswork—it should be grounded in numbers. A bottom-up financial model gives you the clarity to simulate each major decision before you make it.
With real data and clearly defined assumptions, the model can show you how key choices—like hiring new staff, opening a second location, or launching a new product and how to finance them—affect not just your revenue, but your profit, cash flow, valuation and ultimately, your personal wealth.
You’ll be able to track how much cash your business can generate, how much of that you can reinvest, and what kind of return you’re getting on those reinvestments. Most importantly, the model helps you forecast dividends—real money you can put in your pocket—and assess how much of the business you’ll still own if you take outside funding.
Instead of relying on best guesses or copying someone else’s trajectory, leverage a bottom-up financial model tailored to your specific business. You’ll be using your own operational data to plan a growth path that is specific to your business and goals. Whether that path is self-funded or backed by investors, you’ll know exactly what you’re trading off and what you’re getting in return.
Final Thoughts
Growth is good. But not all growth is equal.
The smartest founders don’t just ask, “How fast can we grow?” They ask, “Which path builds the most wealth—for me and my business?”
If you’re considering scaling, the right strategy depends on your goals, your risk tolerance, and your data. A clear model helps you see what’s possible—so you don’t just grow, you grow smarter.
Curious what your sustainable growth rate is—or whether investment would really accelerate your path? Let’s build a model that puts the numbers on your side.