Self-Fund or OPM? 4 Reasons I Am Choosing Other People’s Money to Grow

In All, Business, Center Stage Preschool, Entrepreneurship, Investing, Money by Don Alley0 Comments

I opened Center Stage Preschool in Ashburn in the fall of 2016, and now, six months later, we have broken even! My marketing plan worked extremely well, I did some pretty  unconventional things, I’m quite infamous in Ashburn now, and we are almost full for the fall of 2017. It’s funny to me…I’ve been here for 5 years teaching karate, and was only recognized in public by my students. But in the last 6 months, random people point at me and say, “You’re the Center Stage guy!” Yeah…I am 🙂

So naturally, it’s time to start looking at opening the next locations. And the question that has rolled around in my head for the last 6 months is, self-fund, or use other people’s money?

And I am pretty confident that I will use OPM. I have talked to many professionals in my circle, and of course they all have different opinions. I ran the idea by my lawyer, who was strongly against the idea that I was proposing. His words: “Don, all of a sudden you are accountable to other people, they could sue you for mismanagement, etc, etc. Do yourself a favor and use your profit to expand, or just borrow from the bank.”

He made good sense, but I am still going to use OPM, at least for the next several locations. After that, we will see. Here is why:

  1. One of the biggest reasons that I want to open up Center Stage to investors is the speed at which I can grow. If I solely use the profit from the first location, I will be significantly limited in how fast I can open more. The reality is, I have my systems in place. I have my curriculum in place. We have navigated through the process of being licensed, and our operating procedures are solid. My marketing plan is badass. I simply need more capital so I can grow. Enter OPM.
  2. Another reason I want to attract other investors is deal flow. I first heard this term a few years ago listening to an angel investor talking about where to put his money, and the concept intrigued me. He said that based on his own dealflow (and with his celebrity status, it’s quite large), he was able to pick and choose which investments he wanted to be a part of. I want that same ability. I am interested in meeting new investors and creating a lucrative opportunity for them. And I am banking on the idea that they will remember me, and pass on deals they have or find to me.
  3. I want to ask for bigger money. When I teach and consult other martial arts instructors how to run their business, asking for money is a big topic. “If you’re going to make big money, you have to be able to ask for big money.” To a martial artist running a school, asking for $5,000-$10,000 is a big deal. I help them appreciate the amount makes no difference. Asking for $1 is the same as asking for $1,000. The largest amount of money I have ever been able to ask for is only $15K. I got it. I want to ask for more 🙂 I want to sit across from someone and ask them for 6 million. I need about 600K per location, and I want to start with another ten. And I also know that this isn’t my last hurrah. There will come a day when I get to ask for 100M…and I want to start practicing my pitch, now.
  4. Another reason I am open to the idea of attracting investors at this stage in the growth of Center Stage is to rebalance my portfolio. I have invested a lot of my own money in this business, and it has been very rewarding. However, Center Stage was built on the backside of another child care operation that opened successfully, and I haven’t invested in a slow growth vehicle in several years. It may feel great to put your money where the growth is huge, but it’s important to make sure that your portfolio has balance. I need something not so sexy. More secure. If all of my profit always goes into a businesses, what happens if (gods forbid) the business tanks? The market crashes?  As a businessman, I am tempted to keep reinvesting my money back into more of my businesses. But from a longevity perspective, and as an investor, I need to make sure that my entire portfolio is protected by slow growth deals. Slow growth being something safer. Less sexy. 6-8% per year, but not going anywhere. It’s time for me personally to rebalance. But I don’t want to stop opening businesses…so, OPM is my answer.

Ultimately, it’s your call. Do you want more control? Less accountability to investors? Self-fund. Just know that it might take you longer with a more conservative approach. These four reasons above are also part of my pitch to investors…I want them to know why I want their money. I want to be completely transparent.

Don Alley
Don Alley is an entrepreneur, athlete, musician, speaker, writer, marketer, and is always on the move. And if you can catch him, he will give you his undivided attention.

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