Transparent and accurate financial reporting helps to assess the health of the business:

• Budgeting: planning income and expenditure for a given period.
• Profit and loss statements: show income, expenses and net profit for a given period.
• Balance sheets: show assets, liabilities and equity at a given point in time.
• Cash flow statements: analysing cash receipts and payments over a period of time.

Eifos Hub experts perform detailed analysis of financial reports and business indicators to assess the financial health of the company, provide recommendations on how to optimise financial processes and select the best investment strategies.

Mistakes in profit planning
Rapid growth does not always lead to increased profits. Sometimes it can even reduce them. This is a very common situation. It is necessary to control costs, carry out constant monitoring, analyse transactions and increase margins. Revenue growth should not be accompanied by a proportional increase in costs.

Incorrect planning can make this happen:

• Incorrect cost estimation: underestimating production, marketing or operating costs can lead to losses. Costs may be higher than expected, reducing profits or even leading to losses.
• Overestimating revenues: If projected revenues are higher than actual revenues, this can lead to false expectations and financial problems.
• Ignoring changing market conditions: a sudden change in market conditions or consumer preferences can lead to unexpected losses.
• Inadequate risk assessment: underestimating financial risks (currency fluctuations, interest rates or credit risks) can affect the financial strength and stability of a company and reduce expected profits.
• Inadequate product differentiation: unsuccessful pricing strategy, mistakes in marketing strategy, failure to create unique customer-focused offerings can reduce demand and profits.

Eifos Hub's risk department carefully analyses financial reports and assesses real and potential threats to the business of the company's clients.

The golden rule of business: "profit must grow faster than sales, sales must grow faster than assets". When scaling a business, the priorities of investors and managers often do not coincide. We see a conflict of interest: investors expect high dividends, while managers suggest reinvesting profits in the development of the business. Investors fear that the funds raised will be wasted and that a balanced and clear system will get out of control. Their fears are not unfounded.

Scaling a business and attracting investment are natural stages in the life cycle of a company seeking to grow and develop. However, entrepreneurs face a number of significant challenges along the way. While demonstrating high turnover, businesses often find themselves in a trap: revenues are growing, but profits are falling.

Earnings grow and dividends fall
In this article, we look at the main issues and concerns investors have about scaling, investment, dividends, management and profit leakage. There is no linear relationship between sales growth and profit growth. Profits are always lower than revenues and earnings. Cash gaps, lack of dividends and economic crises are just some of the "surprises" that can severely challenge growth and scaling. A company's declining profitability worries investors: their investments generate less income and risks increase.

Revenue growth does not guarantee profit growth
Rapid scaling is often accompanied by significant cost increases. Complex and multi-factorial processes require careful planning and skilled management. You need to invest in marketing, hiring, infrastructure and technology. These costs can quickly eat up a large portion of profits, causing concern among investors and managers.

Business systems often unprepared for change and growth
As a business grows, management tasks become more complex. Coordinating a large number of people, integrating new departments and maintaining the corporate culture become major challenges. Management mistakes can lead to inefficiencies and lost profits. It will always be important for investors to control costs.

Technological and operational risks
The introduction of new technologies and the expansion of production capacity can be associated with technical failures and operational problems. Investors may be concerned that these problems will delay growth and require additional resources to resolve.

Market volatility risks
Scaling a business is challenging and investors' fears of loss of control, change and financial risk are justified and understandable. Rapidly growing companies may be more vulnerable to market changes and economic fluctuations. Investors may be concerned that changes in market conditions will have a negative impact on the sustainability of the business.

Financial advice from the Eifos Hub
Investing in scaling a business is an investment in the future that, with the right approach, can generate significant returns. Eifos Hub helps companies adapt to change. There's nothing wrong with a situation where investors don't fully trust managers and disapprove of some of their actions. Honest communication, transparent financial reporting and consistency in strategic decisions help to avoid misunderstandings and conflicts. The investment management specialists at Eifos Hub help to optimise the investment portfolio, develop financial models and forecasts and thereby minimise risks.