How do you decide when a task has outgrown Excel and needs a proper database or BI tool?

Showing you know Excel's limits is more impressive than claiming it can do anything.

Signs it has outgrown Excel:

• Data volume. Excel's limit is roughly a million rows per sheet, but practical trouble starts far earlier — files that take minutes to open or recalculate are already past the point.
• Multiple concurrent editors. Excel handles this poorly even with co-authoring; conflicts and overwritten work follow.
• The same report rebuilt repeatedly. If the workbook is refreshed and distributed on a schedule, that is a BI tool's job — Power BI with a scheduled refresh.
• Real relational structure. Once you are managing several related tables with keys, a database will do it better and more safely.
• Audit and access requirements. If you need row-level permissions or a change trail, Excel cannot provide them.

The pragmatic middle ground is worth naming: Power Query and Power Pivot handle far more than plain worksheets, and keeping Excel as the presentation layer over a proper data source is often the right compromise.

Note: Say that migration should follow a real problem rather than a preference — recommending a rebuild for a file that works fine is a bad trade.