Should I Be Growing at All? Part 2
Michael Davis
Michael Chen
Tapan Patel
Kevin Kim
Aug 18, 2025
The financial gut check every operator should do before signing on for more.
If you have already worked through the emotional side of the decision to expand, including your motivations, your personal capacity, and your team’s readiness, this is the next step.
Because even if your heart says, “Yes!”, your financial model still has to back it up. Here’s what to think through before making any big moves.
You Are Not Just Spending Money. You Are Taking on More Risk
Growth costs money. You will be spending real capital on not just a buildout, but on staffing, inventory, and rent before generating any revenue. You might invest hundreds of thousands of dollars before seeing any return on your investment.
If your current business model is already strained, expansion will only increase the pressure. Opening more locations does not fix your problems. It amplifies them.
You can try to manage that with better systems or stronger leadership, but ultimately, that complexity doesn’t go away. It grows with every new unit.
Buildout Costs Are Almost Always Higher Than Expected
Whatever number you are budgeting for a build, expect it to go up. In fact, expect to spend at least twice as much (and twice as long) to complete your next location. This is not an exaggeration. In a survey of owners conducted by Homegrown, we found that nearly three out of four buildouts ran significantly over budget, while two in four buildouts were completed behind schedule.
Buildout costs often exceed projections. Materials are expensive. Labor timelines slip. Permits take longer than planned. In the food and beverage industry, especially, delays can last for months, while rent and payroll still need to be paid. In fact, industry reporting on the restaurant industry shows that supply chain challenges and staffing shortages have extended typical opening timelines from around 4-5 months to closer to nine months in many cases.
One operator we know budgeted $350,000 for a buildout and ended up spending nearly $600,000. And this is becoming the norm for many.
What we’re saying here is: you need margin in your plan. If you do not have room for surprise costs, you are exposing your business to unnecessary risk. When your expansion jeopardizes your other locations, it’s not just your budget but also all of the team members and customers relying on your company.
For more on this, check out our op-ed on rising construction costs in the U.S. or this short video breakdown.
Can You Afford the Right Leadership?
Once you add a second location, you are no longer managing just a storefront. You are managing a growing operation that depends on people you trust to run things well, even when you are not there.
If you are not planning to franchise, you will need someone who can take ownership of the new location. That might mean promoting someone from within, or it might require hiring externally. Either way, it will cost more than you are used to paying. And even if you are planning to franchise, you will still need to have people to help with initial training, ongoing development, and reporting.
Leadership is not just a hiring decision. It is a financial commitment. A strong general manager can help protect your margins, retain staff, and reduce your own involvement over time. A poor fit can create turnover, increase costs, and pull your attention away from the parts of the business that need it most.
Plan for this up front. Include realistic salary expectations in your financial model, including regular increases. Account for the time and resources it will take to find the right person. And make sure the rest of your team is set up to support them.
Strong leadership is expensive. Weak leadership is even more expensive.
How Will You Fund Growth?
There is no single right way to fund expansion. But there are plenty of risky ones.
Some founders dip into savings. Others take on outside capital or secure loans. A growing number explore non-dilutive revenue shares or royalty agreements. Any of these can work. What matters most is how the funding is structured and whether it sets you up to succeed.
For example, a short-term loan with a 28% interest rate and daily payments may be easy to access, but can kill your cash flow before revenue ramps. We have seen this happen. It is one of the most common reasons promising businesses fail in their second year.
Smart growth is not just about raising the money. It is about giving yourself the time and flexibility to use it well. It’s also about raising an appropriate amount to keep your monthly debt service low. What is debt service? Basically your monthly debt load – the payments your business sends to a capital provider. The debt service on a $100k funding / loan is going to be far lower than the debt service on a $750k funding / loan. The more you borrow up front, the more you’ll pay back every month. Use debt responsibly.
The Bottom Line
Opening a second location is not just a bet on your concept. It is a bet on your financial model, your leadership bench, and your ability to absorb uncertainty.
If your numbers are strong, your team is ready, and your model is built to scale, you may be in a good position to move forward.
If not, it is better to wait than to overextend and risk everything you have already built.