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Chasing Growth and Debt as a small business

Let me start off by congratulating anyone out there who has managed to grow a business from the ground up without major early investment or going into credit card debt. On Shark Tank you sometimes see business that have not only plenty of funds to reinvest but even profits for the founders to take our early on.  That is an incredibly difficult thing to do and as impressive as it is rare. Unfortunately, I do not have a business like that. I have been grinding at this business for 7 years now and have had varying amounts of credit card debt that entire time. At times that debt was uncomfortably high for the revenue we were taking in but by growing our revenue and paying down some of that debt we have been able to get it at a far more comfortable spot. When you start a business without a massive seed fund of money one of your most important responsibilities is to balance debt with growth. Finding the money to invest into product development, marketing, sales growth investments, raw materials, finished inventory, business overhead and operations is a real challenge. Early on I made some serious inventory mistakes in that I made way too many of some designs that did not sell and was stuck with those belts on our books for many years. Those belts were in part paid for with debt as when I bought a large quantity of thread, leather, canvas, or belt buckles I was generally putting that charge on a credit card. To have inventory sitting on your books for too long while paying interest on the money you used to buy it is painful and can be disastrous for your business. When you buy too much inventory you not only get stuck with products it may take you years to sell but also tie up capital that you could have used to invest in growth. 

I have felt that growth is the most important metric for the success of Good Threads since I started the company.  I believed that if I continued to grow revenue that my business would continue to get stronger, more attractive to investors and more secure. I figured that if I grew revenue to an impressive or somewhat impressive number, I could start prioritizing profit over growth. Looking back at this I probably should have focused a bit more on profitability early on as a couple times I pushed the company to the breaking point debt wise in my quest for growth. Going a bit slower, relaxing and focusing on profitability and what we did well would in retrospect have been the wiser plan.

I wanted to augment the number of needlepoint stitching jobs so much that I have at times let that desire lead me towards poor inventory decisions.  When you know the person you are laying off has no other income opportunities or social net and you know their children the decision to not give them work anymore is not easy or light. Knowing how many people need work and how positive of an impact a job stitching needlepoint for us has on their family has also led me to chase growth for the sake of growth. What I didn’t fully realize was that you can break your company while growing it.  I was lucky enough to avoid that fate but it is a real danger for small businesses.