Should Wondwoson jump at the opportunity to take out a second loan and expand his business? Read his story, and the expert advice that follows on what to watch out for when taking a start-up from a one-person show, to the next level.

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Distracted, Ethiopian refugee Wondwoson looked up from his computer, where he was entering monthly expenses into his new Quicken program. Health and car insurance payments took big chunks out of his bottom line every month, and he always worried about making the loan payment to Mercy Enterprise Corporation (MEC) on time. Despite the stress of running his own company, Overall Medical Transportation, it was better than what he used to do, working in high tech fab. It was good to have your own business in the U.S.—the best place for business in the world—and it was great not having a boss to answer to.

A contract with the city, previous training as a driver, knowledge of the city streets, and a willingness to put in some of his own equity to make the down payment on the van were among the key reasons the MEC Loan Committee decided to fund Wondwonsen’s risky start up venture, to the tune of $10,000.

Of course he did have to answer to the city office of transportation, with whom he had a contract to deliver disabled and elderly citizens to medical appointments in his retrofitted 1991 Dodge van. His relationship with MEC, and his business, had launched less than two years prior with the purchase of the van (of which he had previously been 1/6 owner). A contract with the city, previous training as a driver, knowledge of the city streets, and a willingness to put in some of his own equity to make the down payment on the van were among the key reasons the MEC Loan Committee decided to fund Wondwonsen’s risky start up venture, to the tune of $10,000.

Since then, Wondwoson had developed into a model MEC client. He had not found it necessary to take part in their other programs, like business training classes for refugees, or seminars on saving. The on-time arrival of Wondwoson’s monthly loan payment was all the contact MEC needed. When new federal funds for refugees became available at a lower interest rate than Wondwoson’s outstanding loan, an opportunity presented itself: Wondwoson was ready to grow. With a second loan at lower rates, and an extended payment term he was eligible for because of his good payment record, he would have the capital to purchase another vehicle and hire a driver. His income would double, (along with those health and car insurance payments!) but his loan payment would only increase $15 a month.

Wondwoson decided he should take a chance and see if he could manage the expansion. If it worked, he was already thinking about what it would take to add a third vehicle to the Overall Medical Transportation fleet. He had learned a lot since starting this business. His life had changed too—he had been able to move into his own apartment, and was even thinking about purchasing a house sometime soon, “to keep up his equity level” and truly live out the American dream.

Turning back to his computer, Wondwoson resolved to run a help-wanted ad in the paper, and meanwhile, to finalize his application for the next MEC loan. Recruiting, evaluating, and training staff was not anything Wondwoson had done before either, not to mention the details like running criminal background checks on potential employees to satisfy his city contract, or the pressure of meeting payroll every month.

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What would you do? Read on to see what our experts advise. Then let us know if you agree by sending in your comments for Wondwoson, or his advisors.

From Brad Robertson, Director of the Business Outreach Program (BOP) at Portland State University's School of Business, which provides mentoring and technical assistance to businesses in North and Northeast Portland.



A less expensive interest rate may be an attractive reason to expand your business, but it should certainly not be the only one. Just because cheaper money is available does not mean a business should incur more debt.

Wondwoson is smart to recognize the added tasks (managing people, making hiring decisions, worrying about payroll) that expansion would entail. One assumption I am not sure is so sound is the notion that if he buys another van his income would double. Is there evidence that the market is there to support a second (or third) vehicle? I would want to answer that question first.

As a business seeks to expand, it is best to do so at a pace at which the owner can learn how to manage the increasing complexities of a larger firm. Why not take one of the MEC classes about business expansion as a first step, and then look to place a help-wanted ad and get a loan? The more
you know about the issues you will be facing, the fewer headaches you will have later.

From Diana McKnight, MEC Board Member, Entrepreneur, and Owner, Diana’s Boutique in Portland, OR.

Wondwoson, like most small business owners must be overwhelmed by his success in a short period of time, however that should also serve as a red flag to him when it comes to growth. He should curve his borrowing and instead concentrate on servicing his existing clients by being prepared to offer special services not ordinarily offered in his business, for example; shorter pickup and delivery times, discounts for prepaid customers, etc.

It would be smart to downplay his growth during the country's economic upclimb and concentrate on setting up a reserve of 3-6 months working capital from his existence cash flow. I recommend he sign up for any business training programs and seminars that are available to him through MEC and perhaps the local community colleges.

Running a business is a large risk that Wondwoson is already taking. Expansion too fast could also cost him, especially if he does not have the tools to manage his growing business and train additional personnel.

To read another success story, see Inspiration Meets Opportunity.

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