Sales are growing, yet the business still scrambles to pay suppliers, advertising bills and payroll. This often happens when inventory must be paid for upfront and sales proceeds arrive weeks later.
Profitability is only part of the investment case. A growth plan must answer two questions: does the additional business generate an attractive return, and can the business fund it?
01Start with the economics of an order
Consider an order with VND 500,000 in net revenue. The selling price already reflects promotions. Assume COGS of 35% of net revenue and combine platform charges into a single fee line.
| Item | VND | % of net revenue |
|---|---|---|
| Net revenue | 500,000 | 100.0% |
| Cost of goods sold — COGS | (175,000) | (35.0%) |
| Platform fees | (101,500) | (20.3%) |
| Contribution before Ads and Affiliate | 223,500 | 44.7% |
| Affiliate commission | (50,000) | (10.0%) |
| Advertising — Ads | (50,000) | (10.0%) |
| Contribution after Ads and Affiliate | 123,500 | 24.7% |
Figures are rounded illustrations, not a platform fee schedule. All percentages use a consistent revenue and tax basis.
After COGS and platform fees, VND 223,500 remains to fund Ads, Affiliate commission and the remaining business costs before generating profit.
With Ads and Affiliate each at 10% of net revenue, retained contribution is VND 123,500. This is not net profit. The business must still account for costs omitted from this example, such as packaging, seller-funded shipping, return-related losses and fixed operating overhead.
The example assumes the order incurs both Ads and Affiliate costs. In practice, use the actual costs of each order group rather than applying a blanket commission rate to orders that incur none.
Contribution is the revenue remaining after a clearly defined set of costs. Always state which costs have been deducted.
02Platform payouts are not profit
In this example, VND 398,500 remains after platform fees. With no other adjustments or deductions, this is the amount the platform pays the business.
It has not yet covered COGS, Ads or Affiliate commission.
Keep three measures distinct:
| Measure | Meaning |
|---|---|
| Net revenue | Sales after seller-funded discounts and returns, on a consistent tax basis |
| Settlement proceeds | Cash paid by the platform after fees, deductions and adjustments |
| Profit | The result after recognising revenue and the corresponding costs |
This distinction prevents two errors: treating platform payouts as profit, or recording revenue net of platform fees and then deducting those fees again.
03Positive contribution does not close the cash gap
Order economics show whether a sale generates contribution. They do not show how long the business must wait to recover its cash.
Consider this simplified operating cycle:
Pay first. Collect later.
The business pays for inventory roughly eight weeks before receiving the sales proceeds. Other payments continue to fall due during that period.
As sales grow, the next inventory order may need to be larger and placed before cash from the previous batch has been collected. Growth can therefore generate profit while increasing the amount of capital the business needs.
A simple calculation illustrates the scale:
- Expected additional net revenue: VND 1 billion per month.
- COGS: 35%, or VND 350 million per month.
- Required average inventory: two months of COGS.
Under these assumptions, inventory alone requires approximately VND 700 million of additional capital. This is not the total funding requirement: collection timing, supplier credit, available stock and other payments must also be considered.
Supplier credit may reduce the cash advance required. Slower sell-through or delayed platform settlements may increase it.
Projected profit is therefore not a reliable measure of cash available.
04Evaluate incremental economics, not historical averages
A plan to grow revenue by 20% does not imply that profit will also grow by 20%.
Additional sales may require higher advertising bids, deeper discounts, a lower-margin product mix or more warehouse and fulfilment capacity.
Evaluate incremental economics: the contribution generated by additional revenue after the costs caused by the decision.
Assume VND 100 million of incremental net revenue with a 44.7% contribution margin before Ads and Affiliate:
| Item | Ads at 10% | Ads at 22% |
|---|---|---|
| Incremental net revenue | 100.0 | 100.0 |
| Contribution before Ads and Affiliate | 44.7 | 44.7 |
| Affiliate — 10% | (10.0) | (10.0) |
| Ads | (10.0) | (22.0) |
| Incremental contribution after Ads and Affiliate | 24.7 | 12.7 |
VND millions. All other factors are held constant to isolate the effect of advertising spend.
The same additional revenue can produce substantially different contribution. If the plan also requires extra warehouse space or staff, deduct those incremental costs where they are not already included.
Conversely, do not add an allocation of existing fixed overhead to the decision if that cost is unchanged across the alternatives.
The 44.7% margin is not a default for every new order. Recalculate it when average order value, product mix, discounts, fees or return rates change.
05Identify how much cash is needed—and when
Once the economics have been assessed, translate the operating plan into a cash forecast.
A rolling 13-week cash forecast should connect:
- Inventory purchasing with supplier payment dates.
- Sales plans with platform collection schedules.
- Ads, Affiliate and operating budgets with payment timing.
- Capital expenditure, taxes and other payment obligations.
The objective is to identify when cash reaches its lowest point and whether it falls below the minimum balance the business needs to maintain.
Suppose the forecast, including opening cash and all receipts and payments, reaches a low of negative VND 600 million. If the business requires a VND 200 million cash buffer, the plan needs VND 800 million of additional funding or cash-flow improvements.
Do not add a separate working-capital requirement for inventory purchases, receivables and payables already captured in the forecast.
Alongside the base case, test at least three risks:
| Risk | Financial effect to model |
|---|---|
| Sales below plan | Inventory remains unsold for longer and cash receipts fall |
| Lower contribution margin | Each unit of revenue leaves less to fund the business |
| Delayed collections | Payments fall due before the expected cash arrives |
A longer-term monthly model adds visibility into seasonality, investment and capital recovery beyond the 13-week horizon.
06Approve growth with a funding plan
A growth proposal should address four questions:
| Area | Decision question |
|---|---|
| Economics | How much contribution will the additional business generate after costs? |
| Funding | How much additional cash must be advanced, and when? |
| Capital recovery | When is the investment expected to pay back, and under which assumptions? |
| Risk limits | What results would trigger an adjustment or a stop to further investment? |
If the economics are attractive but cash is insufficient, management can adjust purchasing schedules, negotiate supplier terms, arrange financing or phase the investment.
If incremental economics are weak, borrowing more may solve an immediate payment problem. It does not improve the underlying business case.
Finance helps leadership distinguish between these two problems and choose a scale and pace of growth the business can support.
Key takeaway
Profitable growth and fundable growth are two separate tests.
Before committing to more inventory or a larger marketing budget, establish that the additional business creates value. Then quantify the capital and time required to turn that performance into cash.
All figures and timings are illustrative. Apply the model using complete cost data and the actual purchasing terms, settlement schedules and operating conditions of the business.
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