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Most Canadian entrepreneurs think the way to become more successful is to grow their business. One would expect growth and insolvency to be on opposite sides of the business spectrum; however, more often than not, they seem to be right beside each other. We have all heard the saying “cash is king”; however, cash flow and financing requirements are often disregarded or not properly accounted for. From the lender’s perspective, the cushion, unknowns or overruns should come from the equity of the business. Unfortunately, in most cash flow crunches I have seen, the shareholders do not have the capital necessary to inject into the operations.  Like it or not, these two ends of the spectrum seem   to be   linked together, and not linearly, with   insolvency on the left   and growth on the right as   shown in Table 1. Growth and   insolvency are more   like a seesaw, where the addition of just   one more   pound, or new force, can bring down the other side. Table 2 illustrates the need for capital required to undertake a growth initiative. This hits home on the above “cash is king” expression. The required capital portion of this table is not linear, as the more extensive the growth, the more capital needed to ensure you do not slip below the “line”. While this table does not assume any of the other factors that are required for successful growth, such as implementation and proper execution, it does show the very fine line between the two positions of growth and insolvency. This fine line, and the understanding of the capital requirements, were demonstrated to me when I was looking at providing financing to a company requiring liquidity due to overruns and a poorly implemented software program. This company, two years prior, paid a well-deserved dividend of $5 M to its shareholders. Consider this example I have seen a number of times: An entrepreneur creates a successful business which manufactures “widgets”. The business has revenue of $500 K and net income of $50 K. The entrepreneur believes doubling sales will double net income or if the business opens a second location, it will do the same. However this is not the case in most situations, as there are a number of factors the entrepreneur is not thinking of, the biggest ones being labour costs and the entrepreneur’s own time and energy. I am the first to admit that I do not have the mindset of an entrepreneur, as I would be far too pessimistic to be successful; however, such changes to your business need to be made with eyes wide-open and with analysis of all plausible and possible outcomes. A recent study completed by Ernst & Young entitled “Canadian Executives Pursuing M&A at Record Pace” found that 78% of Canadian executives plan to pursue an M&A transaction versus 52% of global respondents in the next 12 months. The average age of a Canadian entrepreneur continues to rise, and many of the Baby Boomers are looking to cash in on the equity they have accrued in their companies. These statistics and trends lead me to believe that the next round of Canadian entrepreneurs need to be better prepared when looking at growth and expansion opportunities. The market will be saturated with opportunities, with still a reasonably low interest rate and a competitive financing market; financing institutions and private lenders will jump at the opportunity to provide financing. Our economy needs more strong Canadian entrepreneurs; this is what has created the Canadian economy that we have today, which supports our GDP. Tomorrow's entrepreneurs need to look more carefully at their companies, and not just assume they know all the answers. They need to understand that growth and insolvency are not on different ends of the spectrum. An addition, or a poorly executed growth strategy without the proper capital structure could have them slipping below the “line”, and have them staring insolvency in the face. The opinions expressed in this article are those of the author and are not necessarily those of his employer.