Has the Black Hole Moved? What Growing Businesses Need to Know Now

For years, business owners have been warned about the black hole, that dangerous stretch of growth where revenue increases, but profitability and cash flow seem to disappear. Traditionally, that black hole lived between $1 million and $5 million in revenue, with the most pain hitting around $3 million.

But, according to the newest data, that old rule of thumb is no longer accurate.

In this episode of Profitability Playbook: The Simple Numbers Podcast, hosts Brandon Gray and Mike Maxson are joined by Greg Crabtree, CEO of CRI Simple Numbers, to answer a critical question many entrepreneurs are asking right now: Has the black hole moved?

The short answer is yes, and it’s bigger than ever.

The New Black Hole: $3 Million to $10 Million

Based on ongoing analysis of real-world client data, Greg explains that the black hole now starts closer to $3 million and can extend all the way to $10 million in revenue. What used to be a temporary dip has become a much longer and more difficult stretch for growing businesses.

This shift has come as a result of inflation dramatically increasing the cost of doing business, non-labor operating expenses growing faster than revenue, and businesses being forced to invest in management and infrastructure earlier than they can comfortably afford. The result is a longer runway of financial strain before scale actually starts working in your favor.

Why Government Data Misses the Real Story

One of the most important insights from this episode is why traditional economic indicators often fail to reflect what business owners are experiencing on the ground.

Government data relies heavily on publicly available information, yet private businesses account for roughly 65–70% of U.S. GDP. That means most real operating data, especially for small and mid-sized companies, never shows up in official reports.

To close the gap, the Simple Numbers team analyzes a proprietary 100-company model, representing $1.3 billion in revenue across industries and geographies. This data provides a far clearer picture of where businesses actually struggle and why.

The Cost Shift That Changed Everything

One of Greg’s biggest takeaways in this episode is a correction to his own long-standing advice.

In the past, business owners were told to focus almost exclusively on gross margin and not worry too much about non-labor operating expenses. That guidance no longer holds.

Over the last three years, non-labor OpEx, especially technology spend, has become a major profitability killer. Software subscriptions, platforms, and systems often sound necessary, but many fail to deliver margin improvement proportional to their cost.

Today, managing profitability means paying close attention to management labor ratios, non-labor operating expenses, and whether each investment actually increases contribution margin.

Market Share Matters More Than Market Growth

Another major shift highlighted in the episode is that growth is no longer coming from the market itself.

Greg estimates the real economy is closer to -1$ GDP, meaning businesses can no longer rely on rising demand to carry them forward. Growth now requires actively taking market share, which demands a very different sales and marketing strategy.

Businesses that fail to adapt risk stagnation, or even moving backward, despite working harder than ever.

The Return of “Scrappy”

One of the most practical messages from this conversation is a call to bring scrappiness back.

For more than a decade, the dominant mindset has been “invest and grow.” In today’s environment, that approach often leads to bloated cost structures and delayed profitability. The businesses that will win are those that question every expense, demand real ROI from technology, focus on execution rather than expansion, and protect cash and margins at all costs.

As Greg puts it, this is no longer a growth economy; it’s a street-fight economy.

What This Means for Business Owners

The rules have changed, and what worked a decade ago may now hold you back. The black hole hasn’t disappeared, but instead, it’s moved, widened, and deepened. But with the right data and strategy, it’s still possible to make it through stronger than ever.

If you’d like help adapting your strategy for today’s economic reality, contact us.