In short: Before a big growth spurt, know your unit economics: the margin and contribution of what you sell. Grow a business with poor margins and you just have a bigger margin problem. Once you’ve committed to growth, don’t squeeze costs to protect margins. Protect your cash flow, price for what you’ve invested, and work on margins again once growth settles.

Most business owners have a business problem, then they overexpand. They triple growth, and they don’t realise the problem they started with has just tripled.

So there are two halves to this. What you fix before you scale, and what you leave alone while you’re scaling.

Why does scaling make a margin problem worse?

I think the most important factor when scaling a business is to scale with the right profitability.

A lot of professional service and trade businesses grow for the sake of it. The business isn’t that profitable, and the assumption is that tripling it will fix that. Some of it will, because fixed costs get shared. But if you grow bad margins, you just have a bigger bad margin to deal with.

E-commerce and product businesses tend to do this best. They know each product’s profitability and the contribution it makes to the bottom line. Service businesses should get down to the same unit economics.

What should you know before a growth spurt?

Be cautious before you have a big growth spurt. Know your current unit economics, your margin and your contribution. Then when you scale, you have positive cash flow to keep scaling, and you don’t hit those tipping points of burnout or cash flow burn. (A good place to start is tracking the profitability of each service.)

Should you protect your margins while you’re growing?

Once you’re in the growth phase, trying to protect your margins is often a flawed process. You made the decision that revenue growth was the most important thing, so focus on that. Think about cash and your cash balance, because you don’t want to run dry.

Go through your profit and loss and there are two sets of levers:

• Revenue levers: you can increase price, or you can expand revenue.

• Cost levers: all the costs below that line, which you can reduce to expand your margin.

Which one you pull depends on your growth. If you’re fuelling growth by hiring, putting systems in, opening and expanding, make sure your revenue is coming in and it’s priced accordingly.

Should your price go up when you hire senior people?

What often happens is people put expenses into the business to grow, and they don’t change their price. They just try to do more clients. That’s where margins really compress.

Ask yourself: if I’ve hired three great senior designers, senior specialists or senior recruiters, there’s a cost to my business. Yes, they’re meant to win more work. But collectively, is my business smarter? Is it better? Should that show in my unit economics, and in my price? Most founders never update it. (More on when to raise your prices.)

When should you work on margins again?

In the optimisation phase, post-growth, when you’re consolidating a little. That’s when you ask:

• Are we going to cut costs?

• Are we going to lean the team?

• Are we going to restructure parts of the business?

• Should we reprice undervalued clients and get margin back?

While you’re growing, margin is still part of the pricing conversation. I just wouldn’t compress expenses to grow margin. Grow, grow hard, and think about margin in the second phase.

Watch the two short videos this post comes from: protect cash flow, not margins, while you grow and grow bad margins and you just get a bigger margin problem.

Key takeaways

• Know your unit economics before you scale, or you’ll triple the problem.

• In growth mode, protect cash, and price for the people you’ve invested in.

• Cut, lean and reprice once growth settles, not during it.

Read next: revenue up, profit flat, the costs of growth, or how we help with cash flow management.

Working out when to push growth and when to tighten up is a big part of what we do in advisory. Want to talk it through? Book a chat with Shehan.

Frequently asked questions

Does growing a business fix poor margins?

Partly, because fixed costs get shared across more work. But if the unit economics are poor, growing just gives you a bigger margin problem, so know your margin and contribution before you scale.

What levers can I use to improve my profit margin?

There are revenue levers, such as increasing price or expanding revenue, and cost levers, which are the costs below them in your profit and loss that you can reduce.

When is the right time to work on margins?

In the optimisation phase after a growth push, when you can look at cutting costs, leaning the team, restructuring or repricing undervalued clients.

Last updated: 9 November 2026.

General information only. It does not take into account your circumstances, so get advice on your own situation before acting.