Unit Economics

Working-capital Traps

Recognize the specific cash traps that catch profitable, growing businesses — and how owners defend against each one.

  • Beginner
  • 6 min total
  • 11 chapters

What decision this helps you make: When to say yes to a big order, how to set customer terms, and how much cushion to keep.

What this topic is

A working-capital trap is any situation where the cash a business needs to operate gets locked up faster than it comes back — big orders, mismatched payment terms, seasonal stock, and generous customer credit.

Why it matters

These traps disguise themselves as good news — more revenue, a huge order — while quietly freezing your cash. They catch profitable, growing businesses precisely because success makes the gap bigger.

Who should learn it

Any owner weighing a large order, extending payment terms to a customer, or scaling up — anyone whose cash feels tight exactly when business is booming.

What you will understand

  • Define working capital and see where cash gets trapped
  • Recognize the five classic traps before they catch you
  • Judge whether a big order will help or break your cash
  • Defend with deposits, matched terms, and a credit line

Prerequisites

Common misconception

"Winning more business always makes us safer." Often the opposite — a huge order or generous customer terms can freeze more cash than a small business has, turning a win into a crisis.