5 Pieces of Money Advice Small Business Owners Should Ignore

Posted on July 7th, 2015

When starting a business, entrepreneurs typically find there’s no shortage of advice. Everyone you meet will likely have words of wisdom, whether it’s based on their own personal experiences or their own observations as outsiders.

But some of the tips business owners receive aren’t best for their own businesses. Others aren’t a good idea for anyone at all. Here are some common financial-related pieces of advice that entrepreneurs should consider carefully, weighing them against their own goals and values.

Ask Friends and Family to Work for Free

What could be a better deal than free labor? Your friends and family members will likely be asking how they can help. They may even pitch in for free in the early days, assuming you need the help. But even if the experience will benefit them by allowing them to get the experience they need to build a great resume, it could lead to problems in your own business.

Whether you pay your loved ones or they work for free, their presence on your team can be a problem for your business. Primarily this is because you can’t manage your friends and family members objectively. You’ll feel bad about being direct when these employees neglect their duties or somehow fall short of your expectations. Instead, if you’re looking for inexpensive help, consider outsourcing the work or hiring an intern from a local university.

Go Into Debt

“You need to spend money in order to make money.” That’s the conventional advice when starting a new venture. It can feel tempting to take out thousands of dollars in loans to get your startup going. This gets your business off to a bad start, since it could take years to pay off that debt. If your business fails, you’ll be tasked with paying back those loans from your personal earnings long after you’ve closed up shop.

Instead of going into debt, try to keep your expenses to a minimum in the early days. Delay renting office space as long as possible, choosing instead to work from home or out of a shared office space like a coworking center. If product manufacturing is necessary, consider an option like a Kickstarter campaign to get the pre-orders you’ll need to pay for the items to be made. Something like this will also show you whether or not there is enough consumer interest in your product to justify moving forward.

Funding Is a Must

Shark Tank has given TV viewers the misconception that they need to take their great business ideas to a team of angel investors to land startup money. While a big round of funding can certainly jumpstart a business, it isn’t necessary to get started. In fact, only a small percentage of small businesses use investment money to get started. Many of them start slowly and frugally and gradually build.

Instead of rushing out to get funding, focus first on creating a growing business that will capture the attention of venture capitalists. Once you can document customer support of the product you’re selling, you’ll have a better pitch when you finally stand in front of investors. Even if this means putting a small amount of your own money into the business, it will be well worth it in the end.

Play It Safe

It can be tempting to pursue a business in a field that is extremely familiar to you. This is the safe plan, since you have the experience you need to make a successful business out of your idea. However, playing it safe can actually lead to burnout, especially if you don’t feel passionate about the business you’re pursuing. If you’ve worked as an insurance agent for 12 years and your big dream is to open a restaurant, you’ll be cheating yourself if you instead choose to open an insurance agency because it’s the safe option.

If your passion is in an area in which you’re unfamiliar, spend time researching the field before you make the leap. Gain experience in the field if possible through working part-time or shadowing someone who already works in that industry. For your restaurant dream, for instance, you could take a cooking class and work in a restaurant for a while to get the ins and outs of the business if you lack experience in the field.

Don’t Quit Your Day Job

In the very early years of building a business, entrepreneurs often work nights and weekends to build up enough income to replace a day job. A day job can serve as a security blanket in those early days, providing the income a professional needs to survive on until money starts flowing through his business. Over time, however, it can be tempting to rely too heavily on that day job and the security it provides. When a professional only has a few hours each day to put toward building his business, it will quickly stagnate.

If possible, set the money your business brings in aside for a while and build up a savings that you can lean on once you go full time. Once you feel you have some forward momentum going, take a chance and leave your day job for your business. This may require cutting corners in your personal spending or putting in long hours, but it’s only through wholly committing to your business that you’ll be able to push it to the next level.

Small business owners are usually subjected to a combination of advice, both good and bad. Learning to distinguish between worthwhile advice and that which should be discarded. Over time, most entrepreneurs learn to quickly identify pieces of wisdom that are useful to their own business model and put that wisdom to use in the decisions they make each day.

Angela Ruth

Angela Ruth

Angela Ruth is a financial writer at Due. She has a passion for helping people get out of debt and live a better life.

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More