I am scared of Debt!
I was talking to a CEO of fast growing company in security space, solid product, good team, decent traction. After a few round I had to turn down the offer. After I shared the decision the CEO called me and asked —
“what do look for when you talk to my people? What are you scared of? what do you think can kill a business”
Debt — it is debt that I am sacred of. Debt can kill a business. When we talk about debt we either think tech-debt or financial debt. There are multiple kinds of debts, these are shortcuts, decisions that are now cathing up to us and now the question is can we pay them off (fix them) or will they be the trigger for the downfall. You have a good product and decent techstack but you have too much cultural and people debt and unfortunately, it starts with you. You would need to major changes in how you think about people or make way for others else it will be hard for you to win.
In the fast-paced world of business, companies often focus on growth and revenue, but lurking beneath the surface are different types of “debt” that can quietly cripple their success. While financial debt is the most well-known form, other forms of debt — often intangible — can accumulate, adding pressure and risk to a company’s operations. This blog explores eleven types of debt that can kill a company if left unmanaged, namely Sales debt, Operations debt, Financial debt, Technical debt, People debt, product, innovation, CX, cultural, legal,data.
Debt is different from scale challenges. We all know the rule of 3 and 10, we know the process, tech, GTM and everything about the business will keep changing and evolving. Debt is the inertia that holds you back, it is the friction that wont let you move forward, it creates an equilibrium with your momentum leading to statis.
1. Sales Debt
Sales debt refers to over-reliance on short-term sales strategies that bring in quick revenue at the cost of long-term sustainability. Offering deep discounts, prioritizing one-time customers over recurring ones, or focusing on less profitable segments just to hit targets can all accumulate sales debt. The impact? You may be hitting quarterly numbers, but you’re sacrificing long-term customer relationships and profit margins.
symptoms — High CAC with lower retention, very high S&M spend (60% of revenue) , lower NRR,
How it kills a company: Sales debt leads to inconsistent revenue streams, a weakening customer base, and ultimately, an inability to sustain long-term growth. Without careful attention, you’re left with a bloated sales pipeline that’s impossible to convert into sustained, profitable business.
Solution: Align sales goals with long-term business strategy, focus on customer lifetime value, and invest in relationship-driven sales models rather than volume-driven ones. Dont mask product or CX issues with more logos. Pay close attention to to the prospect signals, customer feedback and usage data.
2. Operations Debt
Operations debt accumulates when operational processes and infrastructure are built hastily to meet immediate demands, without considering scalability or efficiency. This often happens in rapidly growing companies that are so focused on expanding that they overlook the importance of building strong, scalable processes. For instance, using manual processes where automation is necessary or patching together multiple systems that don’t communicate effectively.
Symptoms — showup up in gross margins, scaling requires headcount to grow linearly, lots of manual processes that are error prone, process heavy org.
How it kills a company: Operations debt leads to bottlenecks, inefficiencies, and higher costs as the business grows. It also affects the customer experience due to delays, errors, or service disruptions, and ultimately makes it impossible to scale efficiently.
Solution: Invest in scalable systems and streamline processes early. Regularly review operational workflows to identify and eliminate inefficiencies before they become a larger issue.
3. Financial Debt
This is the most familiar form of debt — borrowing money to fund operations, growth, or acquisitions. While financial debt can fuel expansion, mismanaging it is dangerous. If your company is over-leveraged, it becomes harder to pay off loans, especially when facing market downturns, interest rate hikes, or cash flow shortages.
Symptoms — high interest payments, negative FCF,
How it kills a company: Excessive financial debt increases the risk of bankruptcy and erodes investor confidence. Companies burdened by interest payments and liabilities find it difficult to invest in innovation, operations, or talent.
Solution: Maintain a balanced capital structure by avoiding over-reliance on debt. Opt for diverse funding sources, including equity, to keep debt manageable and sustainable.
4. Technical Debt
Technical debt arises when companies take shortcuts in software development or technology implementation, often to meet tight deadlines or reduce upfront costs. This can involve using outdated technologies, writing quick but messy code, or implementing solutions that aren’t designed to scale. Over time, these decisions accumulate and require significant resources to fix.
Symptoms — low velocity with healthy RnD investment ( 15–30% of revenue) , constant outages, unable to expand TAM, constant timeline misses.
How it kills a company: As tech debt piles up, the cost of maintaining and upgrading systems increases, leading to slower product development, increased risk of outages, and reduced ability to innovate. This, in turn, frustrates customers, erodes competitive advantage, and exhausts your technical teams.
Solution: Prioritize refactoring and upgrading systems regularly. Incorporate tech debt management into your product development cycle so that it doesn’t become a major bottleneck down the road.
5. People Debt
People debt occurs when companies fail to invest in hiring, retaining, and developing the right talent. It can also manifest in poor cultural fit, lack of diversity, or an overworked and under-skilled workforce. Rushing to hire for growth without thoroughly vetting candidates, neglecting employee development programs, or ignoring workplace culture are common causes of people debt.
Symptoms — lower productivity, revenue/employee is below p50, lack of cross-functional projects due to conflicts/failures.
How it kills a company: People debt leads to burnout, high turnover, and low employee engagement. It also stifles innovation and hinders a company’s ability to scale because talented employees are either leaving or underperforming. Without the right team in place, even the best strategies and systems will fail.
Solution: Build a strong talent strategy that focuses on long-term growth. Invest in learning and development, foster a positive work culture, and focus on both technical skills and cultural alignment when hiring.
6. Product Debt
Product debt occurs when a company compromises on product quality or feature set to meet immediate deadlines or market demands. This can mean cutting corners during product development, releasing minimally viable products that don’t fully meet customer expectations, or neglecting proper user testing and validation. While this might help ship quickly, it results in a product that may not be as competitive or durable in the long run.
Symptoms — Lower NPS, Lower NRR, sales pipeline starting to dry out.
How it kills a company: Accumulating product debt leads to customer dissatisfaction, higher churn rates, and frequent rework to fix flaws or add necessary features. Over time, the resources needed to manage product issues drain the company’s ability to innovate, leaving it vulnerable to competitors.
Solution: Set realistic deadlines and align product releases with long-term goals. Continuously gather and incorporate user feedback, and invest in product quality and innovation even after launch.
7. Innovation Debt
Innovation debt builds up when companies neglect R&D, fail to innovate, or don’t stay ahead of industry trends. This can occur when a business focuses too much on maintaining existing revenue streams or is complacent with its current market position. Over time, this debt hinders the company’s ability to adapt to new technologies, market shifts, or evolving customer needs.
Symptoms — always late to market, lack of expansion.
How it kills a company: Companies burdened with innovation debt are often outpaced by competitors who adopt new technologies and business models more quickly. Without innovation, businesses lose relevance, struggle to keep up with changing consumer preferences, and risk becoming obsolete.
Solution: Allocate resources to research and development, and encourage a culture of experimentation and innovation. Stay informed about industry trends, invest in new technologies, and explore opportunities for disruptive growth.
8. Customer Experience Debt
Customer experience (CX) debt arises when companies prioritize short-term revenue or cost-cutting over long-term customer satisfaction. It includes neglecting customer support, failing to personalize customer interactions, or using outdated tools and processes that frustrate users. CX debt is often accumulated by overlooking the holistic experience customers have with your brand.
Symptoms — lowering gross margins, higher churn, call volume growing faster than growth.
How it kills a company: Poor customer experiences lead to higher churn rates, negative word-of-mouth, and lower customer lifetime value. Over time, a reputation for poor service can deter potential customers, making it difficult to sustain growth.
Solution: Invest in customer experience management, from support systems to user-friendly design. Regularly gather feedback to continuously improve customer touchpoints and ensure that CX is integrated into the company’s overall strategy.
9. Cultural Debt
Cultural debt is the misalignment between a company’s core values and its day-to-day behavior. This debt builds up when leadership ignores or compromises on company culture — whether through toxic work environments, inconsistent values, or poor internal communication. It can also happen when rapid growth dilutes the company’s culture because new hires aren’t properly integrated or aligned with the company’s mission.
Symptoms — lack of mission/vision or buy in from the employees, lack of metrics and ethos, higher employee churn.
How it kills a company: Cultural debt leads to poor employee engagement, low morale, high turnover, and a loss of organizational cohesion. Without a strong culture, it becomes difficult to maintain a shared sense of purpose and vision, leading to disengaged teams that underperform.
Solution: Maintain a strong focus on company values during periods of growth, and ensure leadership models the desired culture. Regularly assess employee sentiment and take steps to improve culture alignment across the organization.
10. Legal/Compliance Debt
Legal or compliance debt occurs when a company overlooks or fails to adhere to industry regulations, laws, or internal policies. This can happen when compliance processes are seen as a low priority, or when a company expands quickly without putting the right legal safeguards in place. Examples include improper handling of customer data, ignoring employment laws, or non-compliance with financial regulations.
symptoms — legal dept is busy with external attacks. :-)
How it kills a company: Legal debt can result in lawsuits, regulatory penalties, or reputational damage, all of which can significantly impact a company’s financial stability and public image. Non-compliance issues can also lead to operational disruptions or the inability to do business in certain regions.
Solution: Stay on top of industry regulations and ensure compliance is integrated into every aspect of the business. Regularly review legal and compliance risks, and proactively address them with the right internal policies and controls.
11. Data Debt
Data debt arises when companies fail to effectively manage, maintain, and leverage their data assets. This can happen through disorganized data storage, poor data governance, or failing to invest in tools that allow for proper data analysis. As the volume of data grows, failing to address data debt can lead to inconsistencies, poor decision-making, and missed business opportunities.
Symptoms — lack of in product reporting, decisions are made on gut not data, getting to data especially x-functional data is hard, lots of excel sheets for running the company, there is alway a person if you want to get the data.
How it kills a company: Data debt makes it difficult for a company to make informed decisions, as insights are hidden in messy, unstructured, or inaccessible data. This leads to missed opportunities for optimization, inefficient processes, and misguided strategies.
Solution: Invest in data governance, management, and analytics tools to ensure data is clean, organized, and actionable. Create a data-driven culture where decisions are based on accurate, real-time information.
Conclusion: The Expanding Universe of Business Debt
As companies grow and evolve, so too does the potential for various forms of debt to accumulate across different functions. By understanding these types of debt — Sales, Operations, Financial, Technical, People, Product, Innovation, Customer Experience, Cultural, Legal/Compliance, and Data debt — you can proactively address risks that threaten long-term success. Once understood the risk profile the next step in ensuring they don’t spiral out of control. Left unchecked, these forms of debt will slowly erode your company from within, making it difficult to compete, innovate, or even stay afloat. The key is to continuously monitor and manage these areas, ensuring that while you grow, you aren’t accumulating so much debt that you can’t pay it back.
While debt in some form is inevitable, managing it properly will allow your business to grow sustainably. It’s essential to keep a balance between short-term gains and long-term health by investing in systems, processes, and people that can scale and adapt as the company grows. This holistic approach helps businesses not only survive but thrive in a competitive landscape.
