Scaling Our Business Has Turned Into a Nightmare

Summary

Podcast Episode Summary

Podcast: EntreLeadership
Host: Dave Ramsey (Ramsey Network)
Episode: Scaling Our Business Has Turned Into a Nightmare
Date: April 29, 2026

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Overview

This episode provides an in-depth, real-world look at the struggles faced when scaling a business, especially when expansion doesn't meet expectations. Host Dave Ramsey takes a call from Sharon, a small business owner struggling to keep her tea and boba shop afloat after opening a second location. Through practical advice and direct coaching, Dave guides Sharon on handling debt, landlord negotiations, and making tough leadership decisions when growth hits nightmarish roadblocks.

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Key Discussion Points & Insights

1. The Pitfalls of Scaling with Debt

• Sharon's Situation:
  Sharon and her husband own a tea and smoothie business with two locations. The first is turning over $500k/year, while the new location opened in March and only brought in $150k last year. The expansion incurred substantial debt due to over-budget build-out costs and unfulfilled development promises in the area. The business is now struggling to pay rent and on the brink of eviction.

• Dave's Take:
  Dave emphasizes why cash flow, not debt, should be used for expansion. He notes that reality rarely meets optimistic projections:

  "This is, of course, why we open locations with cash and not debt. Because of your story. This is a typical story. Things don't turn out like we think. The old rule of business is it takes twice as long..." (01:26)

  He points out that Sharon is not an exception, as many business owners face similar outcomes.

2. Analyzing Broken Promises and Market Realities

• Location Underperformance:
  The new shop is in an area that hasn't developed as expected. Promised office buildings and customer flow haven't materialized:

  "They are not leased out and completed yet...We're out in the middle of a damn field by ourself trying to sell tea." (02:19, 06:53)

• Dave Recommends Direct Negotiation:
  He suggests Sharon should approach her landlord for concessions since the area's lack of development is hurting her business. He emphasizes the need for clear and honest communication:

  “A known big problem doesn't give you as much stress as an unknown small problem. And so I think you need to sit down in person with this landlord, you and your husband, and say we are up a creek.” (06:06)
  "[Tell them] we opened this based on growth in the area that was promised. And you haven't delivered that." (02:33)

3. Handling Uncertainty and Stress in Business

• Facing the Numbers:
  Sharon admits to not knowing how much is owed or exactly what the credit from the landlord will be. Dave insists on establishing clarity—pinning down rent, credits, and exactly where things stand to reduce stress and make rational decisions.

• Managing Cash Flow:
  Dave cautions not to let one failing location drag down the entire business:

  “I'm going to keep the main location running and healthy. I'll take 100% of the profits out of that to feed the other location if I can...because I don't want to lose the investment. But at the end of the day, you don't want to cripple both of them.” (08:20)

4. Deciding When to Invest Additional Personal Money

• Disability Back Pay Decision:
  Sharon’s husband received some disability back pay. She asks if she should invest this personal money into propping up the ailing business.

• Dave’s Evaluation Framework:
  He advises only investing more if there is solid, logical hope for a turnaround, not just blind optimism. He cites Henry Cloud’s principle from “Necessary Endings”—only continue if there is real hope based on facts:

  "We end something...when we lose hope based on all the actual circumstances, not on emotions. If we cannot look at numbers and actual data that says this is going to be here...then no, we don't put the disability money in it." (10:05)

• Action Step:
  Dave suggests first paying off the outstanding business debt with the disability money since the debt will need to be settled regardless of the business’s fate:

  "I'd pay off that line of credit. That's what I'd do. Pay off the line of credit, get out of debt, and then try to keep the business open over there as best you can out of cash flow." (10:15)

5. Knowing When to Walk Away

• Painful Business Lessons:
  Dave candidly shares his own experience losing large sums in failed ventures. He stresses that sometimes, walking away (even after big cash investments) is the only option, and it’s a painful but normal part of business:

  "That's an expensive lesson in business. And I've had a few of them over 200,000, a few of them over a million. I don't want to learn those lessons. But it's part of business. You take a risk..." (10:05)
  “If not, you’re going to have to take the lump on the 250k tenant improvements...That’s going to be painful. Ouch. I’m sorry, Sharon.” (10:55)

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Notable Quotes and Memorable Moments

• Dave Ramsey:

  "You can't do a Field of Dreams in business—build it and they will come—because they don't come." (08:11)

• Dave Ramsey on Leadership Under Stress:

  "A known big problem doesn't give you as much stress as an unknown small problem.” (06:06)

• Empathy and Realism:

  “I'm so sorry. This is so stressful.” (08:20)
  “That is going to be painful. Ouch. I'm sorry, Sharon. Sorry you're facing all that.” (10:55)

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Timestamps for Key Segments

• 00:09-01:26 — Sharon shares her business scaling challenges
• 01:26-02:33 — Dave breaks down financial missteps in expansion
• 02:33-04:23 — Delving into landlord promises and need for rent concessions
• 06:06-07:10 — Stress of uncertainty, need for face-to-face negotiation
• 07:10-08:11 — “Field of Dreams” fallacy and the danger of relying on developer promises
• 08:11-09:08 — Compartmentalizing the crisis, protecting the healthy location
• 09:08-10:05 — Decision-making on further investing personal funds and hope analysis
• 10:05-10:55 — Handling loss, business endings, and settling debts

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Conclusion

This episode serves as a cautionary, hands-on manual for entrepreneurs facing the dark side of business growth. Through Sharon’s case, Dave Ramsey delivers a masterclass on crisis leadership—stressing clear communication, rational decision-making, and ultimately, knowing when to step back. With practical advice, empathetic coaching, and memorable nuggets of wisdom, listeners will find essential insights for surviving and (hopefully) thriving when scaling a business turns into a nightmare.

Transcript

[A]

From the headquarters of Ramsey Solutions, this is Entre Leadership. 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 in the description. Sharon is next in Dallas. Hey, Sharon, how are you? Hi.

[B]

I'm good, thank you.

[A]

Good. How can I help today?

[B]

All right, so we are a specialty tea and smoothie boba tea business. We have two locations. 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. We have about 15 employees, including myself. So my biggest 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.

[A]

Okay. Well, this is, of course, why we open locations with cash and not debt. Because of your story. This is a typical story. Things don't turn out like we think. The old rule of businesses takes twice as long. You know, we don't make as much as we thought, and you're not the exception. So is the location growing?

[B]

It is expected to grow. We are.

[A]

And then say expected to grow. I said, is it growing?

[B]

It is slowly growing. 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.

[A]

Okay. So the developer that rented you the space also expected to have a bunch of offices in the area that aren't up yet.

[B]

Absolutely. Yeah. They are not leased out and completed yet. That's. Yes.

[A]

Okay. The first thing I would do is go back to that. Is that developer. The landlord.

[B]

Yes.

[A]

I would go back to them and ask for some concessions because we opened this based on growth in the area that was promised. And you haven't delivered that.

[B]

Mm.

[A]

And so I would ask for some rental concessions for one thing. How much debt did you take on to do this?

[B]

So we cash flowed majority of the build out, but it was a dark shell, so it cost us about 350 grand to build this.

[A]

250,000.

[B]

350,000. What was supposedly 250 just. Yes. My. Yeah, it's. 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 and any profit that came in from our first location just got sucked away. And we're behind on everything right now. It's. We're just waiting for them to give us an eviction notice, pretty much. Wow.

[A]

How much is this line of credit?

[B]

It was 80,000. We're down to 50 right now, but we're paying about five grand a month from our other location just to. To pay that. Which is all. Pretty much all the profit. And my.

[A]

And the eviction notice you're waiting on is at the second location?

[B]

It is, yeah. We're really behind on rent.

[A]

Okay. Have you been talking to that landlord about what's going on?

[B]

And we have not. So we. They owed us a. 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.

[A]

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[B]

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. So we have paid zero rent to them since September.

[A]

And the month. The monthly rent. The monthly rent is supposed to be how much?

[B]

It's 5,800amonth.

[A]

Okay. All right. Well, here's the thing. One of the things that's adding stress is the unknowns.

[B]

Yes.

[A]

Okay. A known big problem doesn't give you as much stress as an unknown small problem. And so 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. We expected this thing to do what the other location is doing based on the fact that you are going to have these office buildings built out in full and there are no customers here. We're out in the middle of a damn field by ourself trying to sell tea.

[B]

Yes, yes.

[A]

And you guys, you know, we need some concessions on this rent and we need an exact number of what credit you owe us. So we know exactly where we stand and exactly what the concessions are.

[B]

Yes.

[A]

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. We're going to lose $250,000. You're going to lose a tenant, and you haven't even gotten anything else open here right now. 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 on our pro forma on this. 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

[B]

the vision for this building. This area, it was supposed to be a real high end space. They have a massive, beautiful office building on the lot. They have good plans for it in the future because we're kind of in a small town, but it's just they haven't filled it.

[A]

Yeah, you got ahead of the game. You got there before the people did. And you can't do a field of dreams and business build it. And they will come because they don't come.

[B]

Oh, we've seen that.

[A]

Yeah. So, you know, 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 running things. I'm going to keep the main location running and healthy. I'll take 100% of the profits out of that to feed the other location if I can. And, you know, feed our household barely. And. And feed the other location as much as we can, because I don't want to lose the investment. But at the end of the day, you know, you don't want to cripple both of them.

[B]

That's our worry. And can I ask you. So my husband recently got awarded some back pay for being. He's a disabled vet as well. Do we keep that money aside and not put it into this failing business?

[A]

Well, the business. If the business fails, you lose $250,000 of money you put into it. Am I right?

[B]

Yes, we do.

[A]

Yeah. So if you have reason to believe that this business is gonna turn around before it collapses, if you can hang on. 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, then it might be worth it. Cause I don't lose my 250 grand. Yeah, but I don't wanna throw good money after bad. I wanna have a reason to believe, a logical reason to believe that this thing's gonna turn and become profitable. Can't feed it indefinitely. Right. But if I have a logical reason, if I could put 50,000 from this disability money and keep from losing 250, and the thing turns the corner, well, that's a wise thing. But If I throw 50 at it and it's never gonna turn the corner, then it was good money after bad.

[B]

Yes, yes, I understand.

[A]

So you guys gotta look at that. And part of that's gonna be what kind of concessions you can get on the rent and what kind of promises. Maybe they can give you some News. You know, XYZ companies moving in and they're bringing 4,000 employees. You know, I don't know. I don't know what news. You don't know. You don't know that. But you got to give me some hope here. So Henry Cloud says that 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. We lose hope that this thing is going to get better. And if we cannot look at numbers and actual data that says this is going to be here, there's a reason that 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 on a lesson. That's an expensive lesson in business. And I've had a few of them over 200,000, a few of them over a million. I don't want to learn those lessons. But it's part of business. You take a risk and you learn you made it worse by borrowing into it. But if you could, you know what I would do with that disability money? Wait a minute. I'd pay off that line of credit. That's what I'd do. Pay off the line of credit, get out of debt, and then try to keep the business open over there as best you can out of cash flow. 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. So I would just pay that debt with that disability money today and be done with it. Get out of that. And then that increases your cash flow at both locations, which allows you to feed the second location, hopefully until it turns. Yes, that and some rent concessions might make you be able to turn the corner. 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. Ouch. I'm sorry, Sharon. Sorry you're facing all that. 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 Entre Leaders.