Blog & Resources

How fast can your business afford to grow?



Many of the clients that we work with wish to grow their business. Growing a business although very desirable can also place a large amount of pressure on the financial resources.


Your affordable growth rate assumes that you can only grow as fast as your assets do. 


To fund a business’s growth a certain amount of assets are required. That is a certain level of receivables, inventory, WIP, fixed assets are required for each dollar of sales generated.


The formula for affordable growth is:


(Net Profit – Dividends) / Tangible Equity.


For example, last year your business achieved the following results:

Net Profit of $500,000 

Pays dividends of $100,000

Has a Tangible Equity Position of $2,000,000


The Affordable Growth Rate is 20%


If you would like to discuss further please contact us:
 McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
 www.mcnamaraandcompany.com.au/contact-us
 Phone +61 3 9428 1062
 Email admin@mcnamaraandco.com

Please refer to disclaimer at the bottom of the page.