During a recent episode of the “EntreLeadership” podcast, personal finance expert Dave Ramsey went full throttle on a small business owner from Dallas who called in with a tough question about growth and debt.
Sarah, who owns a pediatric therapy private practice with 18 employees, told Ramsey she expects to bring in around $1 million in revenue this year. But there’s a problem: her team has outgrown their current leased space, and every new location she’s considering would require $250,000 to $300,000 in buildout costs. She doesn’t have that kind of money and wanted to know how to keep growing without going into debt.
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Ramsey Slams Expansion Without Profit
“I wouldn’t do it. That’s my recommendation,” Ramsey said immediately. “I’m not going to go $250,000 in debt for leasehold improvements in somebody else’s building. That’s dumb. No, I’m not doing that.”
He pressed Sarah on whether she was even turning a profit on a million dollars in revenue. Sarah admitted margins were extremely thin, citing the high cost of clinical staff. That's when Ramsey dropped the line that stunned her: “Are you not making a profit on a million dollars?”
“Why would you want to expand it if you’re not making money?” Ramsey continued. “I don’t want more of this.”
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Sarah explained that her motivation was to help more children, but Ramsey said that good intentions don't excuse bad business math. “You don’t grow a business model that’s broken.”
According to Ramsey, Sarah either needs to raise her rates, cut costs, or both. Until she does that, expansion shouldn't even be on the table. “Then you'll have the money to expand,” he said. “You'll have this magic thing called profit.”
A Better Way Forward
Instead of jumping into an expensive new lease, Ramsey suggested she negotiate with her current landlord to extend the lease for a year. That time, he said, should be used to fix the business model and get the practice running with healthier margins.
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He also advised Sarah to look for landlords willing to cover buildout costs themselves, saying that’s how he handled his first few office moves. “I told the guy, ‘I’m not going to fix up your building unless you reduce my rent by that much.'”
Ramsey emphasized the importance of walking away if a deal doesn't make sense financially. “Don't fall into the trap of, ‘There's only one way to do this.'”
His final takeaway is to get the business profitable first, then look at growth options without adding stress or debt. “You’re going to get yourself in a world of hurt,” he said. “You’re too smart to do that.”
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