The #1 Business Health Metric Entrepreneurs Ignore

TL;DR: Growth is not a health metric. The clearest sign your business is truly healthy is distributable cash, real cash that could be sent to owners while still funding reinvestment and sustainable growth. Revenue can be inflated. EBITDA can be adjusted. Cash cannot be faked for long and growth without cash creates dependence. Growth with cash creates freedom.

For the last decade, growth has been the headline metric.

Revenue growth. User growth. Valuation growth, but growth is not a health metric.

You can grow yourself into oblivion. I’ve seen companies double revenue while quietly burning cash, reinforcing inefficiencies, and becoming dependent on capital infusions just to survive.

On paper, everything looked impressive. Underneath, the foundation was weakening.

Growth hides problems. Profit exposes them. So if we strip this down to a simple question:

“What is the single best indicator that your business is actually healthy?”

Not impressive. Not hyped. Healthy.

Why Most “Health Metrics” Aren’t Enough

When people think about business health, they often default to familiar numbers.

Net Promoter Score. Revenue per employee. Cash on hand. Debt ratios.

All of them are useful. None of them are definitive.

NPS tells you how customers feel. It measures perception. It can also be gamed. Revenue per employee measures efficiency, but says nothing about whether the business is generating real profit.

Balance sheet metrics are snapshots in time. They can look strong on December 31 and completely different on January 1.

Health is not a snapshot, health is durability and durability shows up over time, not in a single moment.

The Investor’s Lens Changes the Answer

Operators often look at their companies emotionally. It’s their baby.

They think about growth, brand, momentum, vision. Or they think in survival terms: how much can I take out, or how much do I need to reinvest to keep this alive?

Investors look differently.

They ask: Does this business generate real cash? Can it fund its own growth? Can it reward ownership without starving operations? Is profitability compounding over time?

That shift in perspective matters. Because if a business cannot sustain itself without constant external oxygen, it is not healthy. It is dependent.

And dependence is fragility.

The Stronger Signal: Distributable Cash

If I had to choose one metric that signals real health, it would be distributable cash.

Not accounting profit. Not adjusted EBITDA. Not theoretical “free cash flow” defined differently by every CFO.

Real cash that could leave the business while you still fund necessary R&D, maintain disciplined testing, support the team, and continue growing responsibly.

That distinction matters.

You can inflate revenue. You can massage EBITDA. You can justify almost any reinvestment as “strategic.” But you cannot consistently produce distributable cash unless the machine works.

If sales are strong, operations are disciplined, pricing is sound, hiring is thoughtful, and capital allocation is measured, distributable cash appears naturally.

If it doesn’t, something underneath is inefficient.

And here’s the deeper nuance: truly healthy businesses can both reinvest and distribute. They don’t have to choose.

If you must sacrifice all profitability just to maintain growth, you’re not as healthy as you think.

Why Trends Matter More Than Snapshots

One good month of cash doesn’t mean much. A single year doesn’t either.

Health shows up in trend lines.

If distributable cash is compounding over time, that’s durability. That means the business isn’t just surviving — it’s strengthening. It means your structure can handle volatility. It means you’re not relying on capital injections to fund basic operations.

Cash over time tells the truth in a way P&Ls sometimes don’t, because P&Ls can hide inefficiency. Cash forces discipline.

Growable Is Not the Same as Scalable

Every company is growable. You can always spend more to acquire more customers.

Not every company is scalable. Scale requires profit. Scale requires cash flow. Scale requires discipline.

Growth without cash creates dependence. Growth with cash creates leverage.

In this market especially, profitability is becoming relevant again. For a season, durability matters more than acceleration. Because growth without margin eventually collides with reality.

Growth with cash creates freedom.

The Real Test

If revenue stopped growing tomorrow, would your business still generate meaningful cash?

If capital markets tightened, would your company stand on its own?

If you had to pick one number that defines the health of your business, would it reflect durability or expose fragility?

That’s the test.

— Roland

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