Scaling Our Business Has Turned Into a Nightmare

Añadido: 2026-04-29

[00:00:06][music] >> From the headquarters of Ramsey Solutions, this is EntreLeadership. I'm your host Dave Ramsey with over 30 years of experience leading in the trenches right alongside you. If you've got a question for the show, go ahead and click the link [music] in the description. Sharon is next in Dallas.

[00:00:24]Hey Sharon, how are you?

[00:00:26]Hi, I'm good. Thank you. Good. How can I help today?

[00:00:30]All right. So, we are a specialty tea and smoothie boba tea business. We have two locations.

[00:00:40]Our revenue is at one location we're about 500k a year and the other location just opened in March and it's at about 150k last year.

[00:00:53]We have about 15 employees including myself.

[00:00:59]So, my greatest question is opening this last location has gotten us into a ton of debt. We were able to cash flow the first location without much debt involved, but we opened this one and the expense cost more than we wanted it to and the location isn't exploding like it should have and we're just really drowning and trying to figure out what to do next.

[00:01:26]Okay.

[00:01:27]Well, this is of course why we open locations with cash and not debt.

[00:01:31]Because of your story. This is a typical story.

[00:01:36]Things don't turn out like we think. The old rule of business is takes twice as long. You know, we don't make as much as we thought and you're not the exception.

[00:01:44]So, is is the location growing?

[00:01:50]It is expected to grow. We are in >> Don't say expected to grow. I said is it growing?

[00:01:55]It is slowly growing.

[00:01:58]Very slowly. Yeah. What was promised is not what the construction in the area we're at was promised is just taking it's not like they promised us. So, it's not growing like it should be. No. Okay.

[00:02:10]So, the the developer that rented you the space also expected to have a bunch of offices in the area that aren't up yet.

[00:02:19]Absolutely. Yeah, they're not leased out and completed yet. That's yes.

[00:02:24]Okay.

[00:02:25]Um The first thing I would do is go back to that is is that developer the landlord?

[00:02:32]Yes. I would go back to them and ask for some concessions.

[00:02:36]Because we opened this based on growth in the area that was promised and you haven't delivered that.

[00:02:41]Mhm. And so, I would ask for some rental concessions for one thing. How much of debt did you take on to do this?

[00:02:49]So, we we cash flow majority of the build out, but it was a dark shell. So, it cost us about 350 grand to build this 250,000?

[00:02:58]350,000.

[00:03:01]What was supposed to be >> of tea.

[00:03:03]>> 250.

[00:03:05]Just yes. My yeah.

[00:03:09]It's it's been a rough. So, we had about 250 cash stored up. We did have to take on a line of credit.

[00:03:18]And any profit that came in from our first location just got sucked away and we're behind on everything right now.

[00:03:24]It's we're just waiting for them to give us an eviction notice pretty much.

[00:03:31]Wow.

[00:03:32]How much is this line of credit?

[00:03:35]It was 80,000.

[00:03:38]We're down to 50 right now, but we're paying about 5 grand a month from our other location just to to pay that which is all pretty much all the profit and my salary.

[00:03:50]>> notice you're waiting on is at the second location. It is. Yeah, we're really behind on rent.

[00:03:55]>> Okay. Have you been talking to that landlord about what's going on and We have not. So, we they owed us a um They owed us a credit for build out for part of the build out and they said just don't pay your rent. We'll add that to the credit and then we haven't My husband handles a lot of that and he hasn't contacted. He's afraid that if he stirs the water that they're going to come after us.

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[00:05:41]But you don't know how much the credit was and how much the rent is.

[00:05:45]I don't know exactly how much they were going to credit us. They didn't even have a solid number. They were like, "Oh, we'll get back to you." And then we didn't hear from them. That was like in September.

[00:05:55]So, we have paid zero rent to them since September.

[00:05:58]And the monthly the monthly rent monthly rent is supposed to be how much?

[00:06:02]It's 5,800 a month.

[00:06:06]Okay.

[00:06:07]All right.

[00:06:09]Um Well, here's the thing.

[00:06:13]One of the things that's adding stress is the unknowns.

[00:06:16]Yes. Okay. Unknown big problem doesn't give you as much stress as an unknown small problem.

[00:06:24]And so, I'm I I think you need to sit down in person with this landlord. You and your husband. And say, "We are up a creek and part of the reason we're up a creek is you all haven't delivered on the growth in the area."

[00:06:39]Mhm.

[00:06:40]We expected this thing to do what the other location is doing based on the fact that you were going to have these office buildings built out and full and there are no customers here. We're out in the middle of a damn field by ourselves trying to sell tea.

[00:06:53]Yes. Yes. And you guys, you know, we need some concessions on this rent. Not only we need an exact number of what credit you owe us so we know exactly where we stand and exactly what the concessions are.

[00:07:09]Yes. And begin to negotiate with them because guys, if we cannot come to some kind of a terms, we're going to have to hand you the keys to this building.

[00:07:17]We're going to lose 250,000. You're going to lose a tenant. And you haven't even got anything else open here right now. Mhm. So, it's really going to look bad that you all are failing before you started and it's going to look bad on us that we lost a quarter of a million dollars because we did not do a good job of our on our pro forma on this.

[00:07:35]Mhm. So, I think you just sit down and just start having some honest discussions. I'm not being belligerent with them, but I'm just going to tell them the truth. We don't have any money and part of the reason we don't have any money is we messed up and part of the reason we don't have any money is you guys didn't deliver.

[00:07:51]The vision for this building this this area it was supposed to be a real high-end space. They have a massive beautiful office building on the lot. They have they have good plans for it in the future cuz we're kind of in a small town, but it's just they haven't they haven't filled it.

[00:08:11]>> Yeah, you got ahead of the game.

[00:08:12]You got there before the people did. And you you can't do a Field of Dreams in business. Build it and they will come cuz they don't come. Oh, we've seen that.

[00:08:20]>> Yeah. So, you know, it's I'm so sorry. This is so stressful. So, what I would do if I were you guys is I would compartmentalize this in terms of how I'm how I'm running things. I'm going to keep the main location running and healthy. I'll take 100% of profits out of that to feed the other location if I can. And eat eat you know, feed our household barely. And feed the other location as much as we can cuz I don't want to lose the investment.

[00:08:50]But at the end of the day, you know, you don't want to both of them.

[00:08:54]That's that's our worry. Can I ask you so my husband recently got awarded some back pay for being he's a disabled vet as well.

[00:09:03]Do we keep that money aside and not put it into this failing business?

[00:09:08]Well, the business if the business fails, you lose 250,000 of money you put into it. Am I right?

[00:09:14]Yes, we do. Mhm. Yeah. So, if you have reason to believe that this business is going to turn around before it collapses.

[00:09:24]If you can hang on. I mean, so for instance, you sit down with this landlord, you get concessions on the rent. And you feed it a little bit and in 18 months the thing turns around starts making some money.

[00:09:33]Then it might be worth it cuz I don't lose my 250 grand.

[00:09:37]Yeah. But I I don't want to throw good money after bad. I want to have a reason to believe a logical reason to believe that this thing's going to turn and become profitable. Can't feed it indefinitely, right?

[00:09:50]Right.

[00:09:50]>> But if I have a logical reason, if I could put 50,000 from this disability money and and just from losing 250 and the thing turns the corner, well, that's a wise thing.

[00:10:01]But if I throw 50 at it and it's never going to turn the corner, then it is good money after bad.

[00:10:05]Yes. Yes, I understood. So, you guys got to look at that and part of that's going to be what kind of concessions you can get on the rent and what kind of promises maybe they can give you some news that next month, you know, XYZ company's moving in and they're bringing 4,000 employees.

[00:10:21]Um you know, I don't know. I don't know what news you don't know. You don't know that. But uh you got to give me some hope here.

[00:10:27]Uh so, Henry Cloud says that the in in the book Necessary Endings, when we end something like a business, a location, a relationship, an employee-employer, you know, relationship, whatever, we end something is when we lose hope based on all the actual circumstances, not on emotions, when we lose hope that this thing is going to get better.

[00:10:50]Okay. And if we if we cannot look at numbers that and actual data that says this is going to be here, there's a reason that that yeah, we've lost hope, then no, we don't put the disability money in it. But if we can see a logical, mathematical reason that I don't have to walk away and lose 250,000 dollars on a lesson, that's a that's an expensive lesson in business.

[00:11:13]And I've I've had a few of them over 200,000, a few of them over a million.

[00:11:16]Now, I don't want to learn those lessons.

[00:11:18]But um it's part of business. You you take a risk and you learn. Um that that you you made it worse by borrowing into it.

[00:11:27]But if you could um you know what I would do with that disability money?

[00:11:30]Wait a minute. I'd pay off that line of credit.

[00:11:32]That's what I'd do.

[00:11:34]Pay off the line of credit, get out of debt.

[00:11:36]And then try to keep the business open over there as best you can out of cash flow.

[00:11:41]But you got to pay that line of credit whether you keep that second location or not, you're going to have to pay that debt off anyway.

[00:11:47]So, I would just pay that debt with that disability money today.

[00:11:51]And um be done with it. Get get out of that. And then that increases your cash flow at both locations, which allows your uh allows you to feed the second location hopefully until it turns.

[00:12:03]Yeah, so that and some rent concessions might make you be able be able to turn the corner.

[00:12:07]Um but if not, you're going to have to take the lump on the 250K tenant improvements that you put in in cash and walk away from it. That is going to be painful.

[00:12:17]Ouch. I'm sorry, Sharon. Sorry you're facing all that.

[00:12:20]Folks, if you enjoyed today's episode, be sure to like, share, and subscribe for more great leadership content. I'm your host Dave Ramsey. This is EntreLeadership.