One of the most dangerous assumptions a successful software company can make is:
“The numbers look good, so the product must be healthy.”
Revenue is growing. Customers are renewing. EBITDA looks strong. Churn is manageable. The sales pipeline looks promising.
From a financial perspective, everything appears to be working.
Meanwhile, Engineering is struggling to release changes. Support costs are creeping upward. Developers are spending more time maintaining existing functionality. Customer-specific workarounds are multiplying. Innovation is slowing down.
Both things can be true at the same time.
A software business can be financially healthy today while becoming technically unhealthy tomorrow.
Success Can Hide a Lot of Problems
When a business is struggling financially, everyone starts asking difficult questions.
When a business is growing, we tend to ask fewer of them.
That's understandable. Growth validates a lot of decisions. Customers are buying the product. They're renewing. The company is making money.
Something is clearly working.
But success can also give an organization enough financial momentum to carry technical and operational problems for a surprisingly long time.
The platform gets harder to maintain, so we add people.
Support volume increases, so we add support staff.
Development slows, so we hire more developers.
Infrastructure becomes inefficient, so we spend more on infrastructure.
Each response solves the immediate problem.
But eventually someone should ask:
Why does it keep taking more people, more money, and more effort to produce the same result?
That's where the financial conversation and the technical conversation begin to intersect.
Revenue Doesn't Measure Platform Health
Revenue tells us customers are paying us.
It doesn't tell us how difficult the product is to operate.
EBITDA tells us something important about financial performance.
It doesn't tell us whether developers are afraid to deploy on Friday afternoon.
Customer retention tells us customers are staying.
It doesn't necessarily tell us why they're staying.
That's particularly important with mature business software.
Replacing an established platform can be expensive, disruptive, and risky for a customer. Data has to move. Employees need training. Integrations need rebuilding. Business processes need changing.
Sometimes customers remain because they love your product.
Sometimes they remain because leaving is painful.
Those are not the same kind of customer loyalty.
Low churn is valuable, but low churn alone doesn't prove that a product is healthy.
Watch the Cost of Producing Revenue
One metric I think deserves more attention is the effort required to support continued growth.
Imagine revenue increases 20%.
That's great.
But what happened behind the scenes to support that growth?
Did support staffing increase 40%?
Did infrastructure costs increase 35%?
Did Engineering add people while release velocity stayed flat?
Are implementations taking longer?
Are developers spending more time maintaining customer-specific functionality?
Are production incidents becoming more frequent?
Revenue growth is important, but so is understanding what it costs the organization to produce and sustain that revenue.
Growth that continuously increases operational complexity eventually compresses margins.
And at that point, technical debt has stopped being an Engineering problem.
It has become a financial problem.
Technical Debt Behaves a Lot Like Financial Debt
I've always thought the term “technical debt” is useful because the comparison to financial debt is surprisingly accurate.
Debt isn't automatically bad.
Businesses borrow money all the time to accelerate growth. If the return on that investment exceeds the cost of the debt, taking on debt can be perfectly rational.
Technical debt can work the same way.
Maybe you need to ship something quickly to win an important customer.
Maybe you knowingly choose a simpler architecture because speed to market matters more right now.
Maybe you delay some modernization because the business has a critical opportunity.
Those can all be reasonable decisions.
The problem begins when the organization keeps borrowing and never starts paying anything back.
Eventually, you aren't just carrying the original debt.
You're paying interest on it.
In software, that interest appears as longer development cycles, increased testing requirements, more production incidents, higher support costs, slower onboarding, increased infrastructure costs, and engineers spending more time understanding old decisions.
The debt may never appear as a line item on the balance sheet.
But the company is paying for it.
Adding Developers Doesn't Always Make Development Faster
This is another place where financial and technical thinking sometimes collide.
When product delivery slows, the obvious business response is:
“We need more developers.”
Sometimes that's absolutely correct.
But adding people to an unhealthy platform doesn't automatically increase velocity.
New developers have to learn the system. Experienced developers have to train them. Institutional knowledge may exist primarily in people's heads. Development environments may be difficult to configure. Automated testing may be incomplete. Architecture may be inconsistent.
Now the experienced developers who were already overloaded have another responsibility: helping the new developers understand everything.
You increased Engineering expense.
But you didn't necessarily increase Engineering output.
That's an important distinction.
More capacity doesn't fix the friction that consumes capacity.
Sometimes the better investment isn't another developer.
It's making the existing development organization easier to scale.
Innovation Is an Asset Too
There's another cost that's much harder to see.
What isn't getting built?
A company may be profitable while competitors are improving faster.
Customers may still renew while increasingly asking when certain capabilities are coming.
Sales may still close deals while encountering more feature gaps.
Engineering may still deliver releases while spending 80% of its capacity maintaining what already exists.
None of those conditions necessarily create an immediate financial crisis.
That's what makes them dangerous.
By the time declining innovation clearly appears in revenue, the organization may already be several years behind.
The financial impact of technical stagnation often arrives long after the technical warning signs.
Don't Wait for Technology Problems to Become Financial Problems
This is why technical health belongs in executive conversations.
I'm not suggesting CEOs need to review source code or CFOs need to understand deployment pipelines.
They shouldn't.
But leadership should understand whether the technology supporting the business is becoming easier or harder to operate and evolve.
There are some useful questions executives can ask:
How much Engineering capacity is spent maintaining the existing platform versus improving it?
Are support costs growing faster than revenue?
Are releases becoming easier or harder?
Is customer onboarding becoming more standardized or more customized?
Are infrastructure costs scaling predictably with revenue?
How long does it take new developers to become productive?
Are recurring production problems actually being eliminated?
None of these questions require an executive to be deeply technical.
They require leadership to recognize that platform health is business health.
Durable EBITDA Requires Operational Maturity
Cost cutting can improve EBITDA.
Reducing Engineering investment can improve EBITDA.
Delaying modernization can improve EBITDA.
For a while.
But there's a difference between improving a financial metric and improving the underlying economics of the business.
The strongest SaaS organizations don't simply control costs.
They make the platform itself more efficient to operate, support, change, and scale.
That creates a much more durable advantage.
Engineering can deliver faster without proportionally increasing headcount.
Support can serve more customers without proportionally adding people.
Infrastructure scales predictably.
Implementations become repeatable.
Customers receive improvements faster.
That's operational leverage.
And operational leverage is ultimately what turns technical maturity into financial performance.
The Question Behind the Numbers
When leadership reviews the financial performance of a software business, the conversation naturally focuses on revenue, margins, churn, growth, and profitability.
Those numbers matter.
But I'd add another question:
What is happening underneath them?
Are we becoming more efficient as we grow?
Or are we simply throwing more people, money, infrastructure, and workarounds at increasing complexity?
Because those can produce remarkably similar financial results for a while.
The difference becomes obvious later.
One creates a business capable of scaling.
The other creates a business that eventually discovers just how expensive its success has become.
A profitable software company isn't automatically a healthy software company.
The best organizations make sure they're building both.
Thanks,
Michael Cronin
Website: https://www.michaelcronin.info
LinkedIn: https://www.linkedin.com/in/michaeltcronin/details/experience/
