By Dave Ramsey
Should a new small business that’s still growing seek out investors?
I would not advise a small business to seek out investors—period.
My advice is to grow small businesses with organic cash, meaning you earn the money with which you’ll grow. It may mean you grow slower, and it might mean you turn down some “big deals” you thought were going to be the biggest and best things of your life. You know what? That’s okay. I’ve turned down deals like that over the years, and I’m firmly convinced it’s better to be the tortoise than the hare.
When you sell a piece of your ownership to people who are looking for a return instead of caring about your dream, you’re creating the potential for a serious mess. A lot of times they’ll seem like silent partners, which I think is an oxymoron in small business. Most of these people can’t keep silent because they’ve put money into your deal. They’re all going to have different ideas and opinions, and there’s a good chance these are going to clash with the vision you have for your company.
Cash flow your growth, D.G. Cash flow your equipment purchases and the markets you enter, also. Does this mean you might miss an opportunity? Sure, it does. It also means you’ll be missing opportunities to fail. Too much success too soon is the second biggest reason small businesses shut down.
When you grow too quickly, you run the risk of outgrowing your human resources, your financial resources and your infrastructure. Do what you can to ensure that growth is steady, but play it smart. Don’t grow so fast that you crack the foundation of the company!
Dave Ramsey is a personal money management expert and national radio personality. His three New York Times best-selling books – Financial Peace, More Than Enough and The Total Money Makeover – have sold more than 6 million copies combined. His latest book is EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank.