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Ask Dave

Should My Small Business Seek Out Investors?

DG asks if a small business that's still growing should seek out investors. Dave doesn't recommend investors at all.

QUESTION: DG on Twitter asks if a small business that’s still growing should seek out investors. Dave doesn’t recommend investors at all.

ANSWER: No. I would not advise a small business to seek out investors period. I advise small businesses to grow with organic cash, meaning earn the money to grow with. It means you may grow slower. It means you may turn down some “big deals” that you thought were going to be the best of the best and your life was going to be changed if you could just get that deal kind of a thing. That’s okay. I’ve turned those down over the years. Be the tortoise. Don’t be the hare. When you sell out a piece of your ownership to people who don’t care about your dream and they’re just looking for money as a return, you are getting yourself into a potential serious mess.

I don’t recommend investors. They sound like “silent partners,” which I think is an oxymoron in small business. A silent partner is almost impossible to have. They can’t keep silent because they put their money into your deal. You are much better off to maintain control, grow slower, grow organically. In other words, make the money to grow. Cash flow your growth. Cash flow your purchases of equipment. Cash flow the markets that you’re going to walk into. Does that mean you don’t grow as fast or “miss an opportunity”? Yes. That’s exactly what it means. You might be missing the opportunity to fail. The second largest reason that small businesses fail is too much success. They grow too quickly, and they outgrow their human resources, their financial resources and their infrastructure. Grow slow enough that you don’t crack the foundation on the thing.