Some companies are slowed down by lack of capital – unable to produce because they can’t access affordable or sufficient credit to pay their suppliers. Others are flush with funding but lack urgency or discipline around working capital deployment – when you have money to throw at problems, why focus on putting each dollar to work with intention? If you’re already good at product development and sales, it seems more compelling to put your energy there instead.

But there’s a simple truth that has become more important than ever to recognize in today’s uncertain business environment: The faster and more efficiently a business can turn orders into cash, the stronger and more agile it becomes.

Velocity of Capital measures the speed at which you can generate revenue from every dollar of working capital, and then use those earned dollars to do it again. The faster you do this, the faster you grow and the more growth you’ll be able to achieve with a given amount of capital. Another way to look at it is that dollars in motion are always better than dollars at rest. Ideally, every dollar in your business should be hard at work earning you more dollars all the time.

In uncertain times, capital speed becomes strategy

Volatility, persistently higher interest rates, long payment terms, and risk-averse investors have made capital more constrained and more expensive.

As a founder or CFO, you can’t control macro conditions. What you can do is become really smart and strategic about how you use capital in your business, which will in turn make you smarter and more strategic about what you need from outside capital providers. Seeing your business through the lens of the velocity of capital can instantly refocus you and your team in this direction.  

In the era of nearly free money that we’ve left behind, founders and CFOs could survive without paying much attention to the velocity of capital in their businesses. Now, getting good at this has become table stakes for success. Those companies that master working capital efficiency and build it into how they think about sales, operations, product and finance will not only grow faster, but also become more adaptable, resilient, self-reliant and fundable. 

Why founders must think in turns, not totals

Thinking in “turns” means focusing on how many times you can invest and redeploy (or “turn”) the same dollar in a given time frame. This thinking informs strategy and tactics for sales, ops, business processes, and of course, finance. 

The basic math behind turns is simple compounding. It’s multiplicative: If your business process takes $1 and turns it into $4 in revenue and you can redeploy that $4 back into production faster, $4 can become $16, then $64, and so on, within a shorter time frame. Speeding up that cycle (called the cash conversion cycle) has the potential to address many working capital challenges and reduce the need to raise or borrow. An awareness of how that math works in your business also gives you what you need to begin to effectively leverage working capital solutions to grow and maintain healthy profit margins while also increasing the value of your company. 

Totals thinking, on the other hand, is based on addition and subtraction – trying to match cash in and cash out all the time. If you’re not a finance person, it’s natural to see the total capital required for each project as the sum of all the payables you’ll need to cover in order to get the project done and invoiced. You know you’ll get paid eventually if you can just get the next project delivered. The strategy becomes to look for more customers and/or more outside capital to bridge any gaps in cash flow, but the problem is, you can never really catch up. Bigger orders just increase the stakes, with greater risk of destroying key customer relationships or even worse, the business itself. 

The flaw in the “totals” perspective is that it fails to factor in time – how long it takes to turn each dollar deployed into usable cash and the impact that has, both on available cash and the effective rate of return on working capital across a whole portfolio of projects. With time missing from the picture, it’s easy to overestimate how much capital you really need and for how long. The difference can be game changing. We recently spoke to a CEO who was looking for $4 million to complete a large project, and when factoring in turns, we realized they only really needed $700K four times – a very material difference when considering options to source capital. 

Compared to thinking in turns, the totals approach is like flying blind. You may consider external solutions like debt, selling equity, or factoring. These are time consuming and costly to pursue and often result in rejection. When timing is short and reputation and survival are at stake, turns-thinking can make the difference between making confident, informed, sustainable decisions versus feeling pressured to take whatever capital you can get regardless of cost just to keep things moving. And it’s not just founders and CFOs who are affected. Your team makes countless decisions every day that affect how capital is deployed in your organization. A commitment to increasing the velocity of capital in your business is a unifying objective that can align your sales, finance, operations and product development teams with a common focus that clearly drives growth, profitability and company value. 

Velocity of Capital — the next Mission Critical Skill

If you’re serious about scaling, building resilience, and attracting customers, investors, and talent, you can’t afford to stick with a cash-in/cash-out mindset. The leadership mandate is clear: allocate capital to grow shareholder value — but doing that well takes more than instinct.  Most tools growing businesses use don’t support this shift, and few founders have been trained to think this way.

In our next newsletter, we’ll show what improving capital velocity looks like in action — with examples, diagrams, and real-world insights.

Learn more at klearbusiness.com.