How +271% Growth Turned Into a Loss of $1.3 Million. 7 Insights that Will Save Your Business

Imagine: in six months, your business grows from $17,500 to $65,000 in projected revenue — everything looks great. You have a team, experience, and a model that works. 

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But in a year and a half, you lose everything: investments, prepayments, trust — and the amount of losses reaches more than $1.3 million. More than a million dollars disappears before your eyes, even though it seemed that everything was under control.

It wasn't just a business — it was a blow to my pride and the realization that even the best skills won't save you if you don't see the real picture of the business. — Valeriy Chalyi, entrepreneur, guest on the podcast "If Only I Had Known Earlier"

This story is not about failure, but about a lesson that can save your business and your money. It's about how the scale of a business without the owner's big-picture thinking is a step into the abyss. How the lack of transparent financial control and wrong decisions lead to significant losses.

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Valeriy lifts the veil on real entrepreneurship: mistakes that are not usually talked about, important conclusions, practical tools, and tips that will help you:

• Save money, even if your business is growing rapidly.
• See the real state of your finances, not illusions.
• Make decisions that won't kill your project.
• Develop as an entrepreneur, because you are the main driver of the business.

Red flags: Do you recognize yourself?

• You only look at your bank account, not your financial statements.
• You make plans based on accounts receivable ("they'll pay soon").
• You don't have a reserve for at least two months of fixed expenses.
• You confuse markup and margin.
• Business no longer excites you; you see it only as a source of income.

If you've checked at least two of these points, this article is definitely for you.

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Read on if you are ready to see your business without rose-colored glasses and start real growth.

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Insight 1. Three reports without which a business is doomed to chaos

Many entrepreneurs are used to looking only at their bank account. If there is money, then everything is fine. But this is an illusion. Only three financial reports give an honest picture of what is really happening.

These three reports are the foundation: cash flow, balance sheet, and P&L. If you don't see where the money is going, how much is actually left, and what the profit is, you are not managing your business. — Valeriy Chalyi, entrepreneur

Even if a business looks profitable, a cash flow gap can occur at any moment. Without transparent reports, an entrepreneur cannot see:

• whether there is money to pay salaries and taxes;
• how much is actually left after loans and debts;
• which products or areas are eating into the margin.

The result is wrong decisions, lost opportunities, and the risk of bankruptcy even at the peak of growth.

How the three reports work in practice

Imagine a company that sold $50,000 worth of goods in a month. At first glance, this seems like a great result. But what do the reports show?

How to avoid financial chaos

1. Keep track of your cash flow every day. This will tell you whether you will have enough money tomorrow.
   
   
2. Review your balance sheet every month. You will see how resilient your company is to debts and liabilities.
   
   
3. Analyze your P&L weekly or monthly. This will give you an honest answer: is the business making money, or is it just circulating money without profit?
   
   
4. Combine the three reports. Only together do they show the truth: the money in the account, the structure of assets, and the real profit.

Finance is monitoring your business. Without reports, you are running in the dark. With them, you can see where the real money is and where the illusion is. — Valeriy Chalyi, entrepreneur

Insight 2. Cash is king: count only the money in your account

In the financial world, there is a simple but uncompromising truth: cash is king. The money that is actually in your account is the only thing you can count on today. Everything else — accounts receivable, customer promises, signed contracts — is just numbers on paper.

Use only the money you have in your account and count only on that money. All your accounts receivable, all the "he promised to pay me" — will not cover your bills right now. Cash is king. — Valeriy Chalyi, entrepreneur

What is the problem?

• The illusion of money. An entrepreneur looks at accounts receivable and considers them an asset. But this is not yet money.
• The "almost paid" trap. The business spends money, counting on payment that may not come on time.
• Double planning. The same money is already "earmarked" for taxes, salaries, and purchases — but in fact, it is not there.

Why is this dangerous?

When you make decisions based on expectations rather than facts:

• the risk of a cash gap increases;
• the company may be left without money for critical payments (salaries, rent, taxes);
• the business quickly becomes dependent on loans.

How to avoid this

1. Keep track of actual balances. Record how much money is in the cash register and in accounts every day.
   
   
2. Separate reserves. Taxes, salaries, and mandatory payments are no longer "your" money.
   
   
3. Be skeptical. Until the customer has paid, assume that you don't have the money.
   
   
4. Make decisions based only on facts. Look at the balance sheet and cash flow, not Excel spreadsheets with forecasts.
   
   
5. Do a weekly liquidity analysis. How much money is actually available today, tomorrow, in a week?

Table: "Money on paper" vs. "Money in business"

You can't put your business on hold and wait for others to pay you. Money in business is like blood in the body: if there isn't enough of it right now, the body dies. — Valeriy Chalyi, entrepreneur

5 rules for managing money in your account

1. Check your balance every morning.
   
   
2. Divide your money into categories: yours, others' (taxes, obligations), and reserves.
   
   
3. Don't spend future money — plan only with actual money.
   
   
4. Enter all expenses and receipts into the management accounting system.
   
   
5. Look at cash flow more often than turnover and P&L.

Insight 3. Reserves and liquidity: business resilience

Most businesses close not because they have no customers or profits. They close when they run out of money here and now. 

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The only protection against this is reserves and liquidity. This is the financial cushion that makes a company resilient: it withstands shocks and even becomes stronger after crises.

A company must have insurance capital — the most liquid thing possible. That is, money that you can take and put into the business as quickly as possible. A must-have — at least two or three break-even points should always be in the account. — Valeriy Chalyi, entrepreneur

What is the problem?

• Entrepreneurs spend everything "to zero," believing that money will always come in on time.
• No reserves are formed while the business is growing — and at the worst moment, there is no cushion.
• Without liquid reserves, even a temporary cash flow gap can kill a company.

Why is this dangerous?

• One unforeseen month (customer delay, tax surprise, equipment breakdown) can put the business on the verge of bankruptcy.
• The owner is forced to take out loans at 24–60% per annum, which "eat away" at the margin.
• Control is lost: the business begins to be driven by debt rather than strategy.

How to avoid this

1. Build up insurance capital. The minimum is 2-3 months of fixed costs (rent, salaries, taxes).
   
   
2. Maintain liquidity. Some of the money should be available "here and now," not in the form of goods or accounts receivable.
   
   
3. Separate reserves. Insurance (for force majeure) ≠ reserve (for development).
   
   
4. Use the "other people's money" rule. You can raise capital at interest, but only if you have a clear plan for repayment.
   
   
5. Be disciplined. Do not touch your reserves. They exist for crisis situations.

What does anti-fragility look like in finance?

I know of at least three businesses that went bankrupt not because they were unprofitable. They simply did not manage to find money at the right moment. A reserve is not a luxury, but a condition for survival. — Valeriy Chalyi, entrepreneur

5 practical steps for creating a financial cushion

1. Calculate your monthly burn rate (minimum living expenses).
   
   
2. Multiply it by 2–3 and put that amount into a separate account.
   
   
3. Automate reserve deductions — as soon as money comes in, set aside a portion immediately.
   
   
4. Keep your reserve in currency or highly liquid instruments.
   
   
5. Enter your reserve into a financial system (such as Finmap) to see the real picture, not the "illusion of money."
   
   

Reserves and liquidity are your insurance policy against bankruptcy. 

Insight 4. Distinguish between markup and margin and calculate the price of money

Many entrepreneurs confuse markup and margin. As a result, the business appears to be profitable, but in reality, money is disappearing. And when expensive credit is added to the mix, the business may be operating at zero or even at a loss.

The markup must be 300-400% for the business to survive. And the margin is what remains after all expenses. For example, if you sell a product for $30 with a cost price of $10, it seems that the margin is 200%. But after advertising, salaries, and operating expenses, only 16.6% may remain. And if the loan is expensive, the profit is completely eaten up. — Valeriy Chalyi, entrepreneur

What is the problem?

• Markups are often perceived as profit, and money that does not actually exist is spent.
• Loans at 24–60% per annum can eat away at even a good business.
• The owner does not see the real profitability because they do not keep management P&L.

Why is this dangerous?

• The business may grow in terms of turnover, but decline in terms of profit.
• If the margin is calculated incorrectly, entrepreneurs can easily find themselves in a cash flow crisis.
• Credit obligations turn growth into a trap: the company becomes a hostage to debt.

How to avoid this

1. Separate the markup and the margin. The markup shows how much you have added on top, while the margin shows what is actually left after all expenses.
   
   
2. Keep a P&L report. Without it, it is impossible to understand true profitability.
   
   
3. Calculate the cost of money. Before taking out a loan, see how much of your margin it will eat into.
   
   
4. Assess the transaction cycle. If you are returning the money in a month, a high percentage is still bearable. If it is a year, it is fatal.
   
   
5. Be honest with yourself. Consider only what remains "net" after everything as profit.

Table: Markup vs. Margin + Impact of Credit

Financial literacy is not about Excel. It's about survival. If you confuse markup and margin, or don't count the cost of money, your business may be killed not by the market and competitors, but by your own mistakes in calculations. — Valeriy Chalyi, entrepreneur

5 practical steps

1. For each product, calculate the cost price, markup, and margin.
   
   
2. Include all costs in the price: advertising, logistics, salaries, taxes.
   
   
3. Before taking out a new loan, check whether the margin is enough to cover the interest.
   
   
4. Use P&L in Finmap or another system to see the truth in the numbers.
   
   
5. Teach your team to distinguish between markup and margin — this is basic financial literacy.
   
   

Properly understanding the difference between markup, margin, and the price of money is like having a map and compass on a hike. Without them, you can walk for a long time, but you are likely to end up in a dead end.

Insight 5. Market Fit: why it is the entrepreneur, not the product, that determines the fate of the business

In business, it is customary to look for Product Market Fit — when the product and the market coincide. But Valeriy Chalyi's experience shows that this is not enough. A business can grow by hundreds of percent and then collapse in a year and a half, even with a strong team and a proven model.

I realized that there is such a thing as entrepreneur market fit — the relationship between you as an entrepreneur and the market you are entering. In Ukraine, I could launch anything because I had the contacts, understanding, and culture. In Portugal, however, that same knowledge did not work. — Valeriy Chalyi, entrepreneur

What is the danger?

Focusing solely on the product creates an illusion of control. You can:

• Find a niche with demand.
• Launch a strong product.
• Assemble a team and set up processes.

...and still lose hundreds of thousands of dollars. Why? Because the entrepreneur himself did not "fit" into the market, since he does not understand local rules, does not have the necessary partnerships, and does not see cultural barriers.

This is exactly what caused Valeriy to lose $1.3 million:

• From $17,500 in projected revenue → to $65,000 in 6 months.
• And after a year and a half — complete loss of business and money.

How can this be avoided?

You need to think beyond "will people buy my product?" You need to honestly assess yourself in the context of the market.

Product Market Fit vs. Entrepreneur Market Fit

Practical steps for entrepreneurs

1. Audit the market and yourself. Before you start, ask yourself: do I have the resources, network, and knowledge for this environment?
   
   
2. Adaptation. Invest in local connections, study the culture, work with local partners.
   
   
3. Combine the two fits. The product is in demand, and you, as the owner, have trust and authority in this market.
   
   
4. Check your finances regularly. Management accounting will show whether your Market Fit really works or whether the business is only profitable "on paper."

The scale of a business always equals the scale of the owner's thinking. If you don't fit the market, it will simply "eat you alive." — Valeriy Chalyi, entrepreneur

Insight 6. A business survives only when you love what you do

For most entrepreneurs, business starts with energy — the idea drives them, a team appears, and each new deal energizes them. But over time, this can turn into a "routine money farm." The entrepreneur begins to see the company only as a "money button." And that's the beginning of the end.

As soon as you start treating your business like a "money button," everyone feels it. The team feels it, and the business itself starts to fall apart. — Valeriy Chalyi, entrepreneur

What is the problem?

• The owner's burnout. The business loses its meaning, and energy is spent only on putting out fires.
• Team demotivation. People feel that the owner is working "without enthusiasm."
• Loss of strategic vision. Decisions are made solely to make money here and now.

Why is this dangerous?

A business without ideas and meaning cannot withstand a crisis. When problems arise (cash flow gaps, falling sales, competitors), the owner does not have the strength to fight. The result is rapid stagnation and loss of the company.

How can this be prevented?

1. Formulate the "why." Write down why your business exists (besides money). This is a benchmark for you and your team.
   
   
2. Set "game goals." Business is a game with levels. Set steps for 3-6 months: a new market, a new product line, increased margins.
   
   
3. Be present in the process. Don't just take profits, but also develop the product, team, and service.
   
   
4. Measure the energy of the business. Hold regular meetings with the team, listen to customers, and look at the quality of decisions.

"Passion for business" vs. "Money button"

The entrepreneur sets the energy. If he loves his business, the company grows. If he sees only money in it, the business dies. — Valeriy Chalyi, entrepreneur

Insight 7. Rapid growth can destroy a business

Rapid growth is every entrepreneur's dream. But in reality, it can be the biggest threat. When the numbers are flying high, it seems like everything is under control. However, rapid growth often hides weaknesses that explode a year later.

We took an account that brought in $17,500 and made $65,000 in six months. And then it seemed that we could do anything. A year and a half later, we lost both our business and our money — over $1.3 million. — Valeriy Chalyi, entrepreneur

What is the problem?

• The euphoria of growth. The owner feels an "omnipotence effect" and starts taking risks without analysis.
• Financial trap. More sales mean more inventory, expenses, and liabilities. If there is no reserve, growth will devour the business.
• Loss of focus. The entrepreneur launches new directions instead of stabilizing the main one.
• The team cannot keep up. Scaling overloads people and the management system.

Why is this dangerous?

Uncontrolled growth is not success, but a fast track to bankruptcy. When a company grows too fast:

• accounts payable and cash flow pressure increase;
• the owner starts counting "paper profits" instead of real money;
• any crisis (returns, supply disruptions, falling sales) becomes fatal.

How to prevent collapse during growth

1. Count, don't feel. Instead of "we are growing," measure real cash flow, liquidity, and liabilities.
   
   
2. Build up reserves. At least 2-3 months of fixed costs should remain untouched.
   
   
3. Stay focused. Don't open new areas until you have worked out and consolidated the previous one.
   
   
4. Control your margin. High turnover with low margins = the illusion of growth.
   
   
5. Regularly check your financial health. Cash flow, balance, and P&L should show the same picture.

Table: "Healthy Growth" vs. "Dangerous Growth"

We believed we were immortal. And that belief destroyed us. — Valeriy Chalyi, entrepreneur

5 steps to counteract dangerous growth

1. Every week, look at cash flow, not turnover.
   
   
2. Divide the money in your account: what is yours and what are your obligations.
   
   
3. Set aside at least 10-15% of your income as a reserve.
   
   
4. Before investing in a new direction, check it on P&L.
   
   
5. Regularly ask yourself, "What if sales drop by half tomorrow?"

Financial transparency is an entrepreneur's main superpower

Valeriy Chalyi's story is not about losing $1.3 million. It's about how even an experienced entrepreneur can make mistakes if they don't see the real financial picture. And most importantly, these mistakes can be corrected if the right conclusions are drawn.

What does this case show?

• Business is not just about money. When the owner loses his love for the business and sees it only as a "money machine," the team and the business begin to fall apart.
  
  
• Rapid growth is more dangerous than stagnation. Without a financial control system, even explosive growth can lead to disaster.
  
  
• Cash is king. Only money in the account can be considered real. Everything else is an illusion.
  
  
• Reserves make a business resilient. A cushion of 2-3 months' expenses can save a company in a crisis.
  
  
• Financial literacy is a must. Understanding the difference between markup and margin, knowing how to calculate the cost of money and evaluate loans determines whether a business will survive or not.

Management accounting is not bureaucracy. It is a navigator that allows an entrepreneur to see the way forward rather than moving blindly. It allows you to see how much money you really have, how much you need to reserve, where cash is "leaking," which projects are profitable, and which ones only create the illusion of profitability.

Finance is insight. It is the ability to run a business with your eyes open. Without it, you are simply driving in the dark and hoping you don't crash. — Valeriy Chalyi, entrepreneur

If an entrepreneur makes finance the center of their attention, they gain three key advantages:

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1. Resilience — the business does not collapse at the first crisis or cash flow gap.
   
   
2. Speed — decisions are made based on numbers, not intuition.
   
   
3. Control — you understand where every hryvnia goes and how it affects your profits.
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Therefore, the main lesson is simple: you cannot leave control over your money to chance. You can rebuild your business, but you cannot get back lost time, nerves, and reputation.

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Financial accounting is about the future of your business, your freedom as an entrepreneur, and your confidence in tomorrow.

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Frequently asked questions

1. If my business is growing, why is there less money in my account?

Because growth requires investment: in warehousing, production, marketing, and your team. Sales are increasing, but funds are "stuck" in inventory or accounts receivable. If you don't take this into account in advance, it's easy to end up with a cash flow gap.

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2. How much reserve capital should an entrepreneur have?

The minimum is a reserve equal to 2-3 months of the business's fixed costs. If your break-even point is $30,000, your reserve should be at least $60,000-90,000. This makes the business resilient and allows it to survive a crisis.

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3. Why is it important to distinguish between markup and margin?

Because margin shows real profit. Markup is simply an increase in price above cost. For example, a product costs $10 and sells for $30. Markup = 200%. But after expenses, only $5 may remain — that is, the margin is only 16.6%. Without proper calculation, it is easy to break even or operate at a loss.

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4. What reports are essential for a business?

Three basic reports:

• Cash flow — shows where the money is going.
• Balance sheet — shows what the business has at a given moment.
• P&L (profit and loss) — shows how profitable the company is.

Together, they provide a 360° picture and allow you to make decisions based on facts.