When you start a business it can seem like everyone has an opinion on how you can be successful. They explain how to accelerate the growth of your business, how to attract more customers and how to handle things in general. While good mentoring is helpful, it’s important to recognize that not all the advice you get is good. Sometimes even very successful and well-meaning people can lead you astray. Here are the thoughts of ten entrepreneurs recalling the worst advice they received on their way to success.
- Become a non-profit organization
If you are starting any type of social business, you might hear that you had better become a nonprofit. While there may be advantages to the nonprofit structure, this decision should not be taken lightly. Being a nonprofit will prevent you from raising funds for investors, which can spell the end of a startup. As Sacha Nitsetska, Founder and CEO of Mavenli.com recalls: “The worst entrepreneurial advice I have ever received was from a potential investor. He told me to just register my business as a non-profit organization because “no one would ever pay for mentoring services”. Before I even finished developing the product, I had corporate clients ranging from world-class law firms to the big four consulting firms. We also had unpaid mentors on board, including the founder of Shazam! as well as senior advisors to CEOs of Fortune 500 companies. My advice is to only seek advice from people who believe in what you do and are on the same page as you.
- Get a chic office
When you’re just starting out, money is king – and it can be difficult to decide what’s worth spending the money on. Rafe Gomez, co-owner of VC Inc. Marketing, tells this story: “When I started my business, a colleague I met with a booming consultant
company told me that I absolutely needed to operate in an awesome office space. He said all my competitors had offices,
and that if I wanted to be taken seriously, I couldn’t survive without having
an office of mine. I ignored his recommendation and operated from a home office, then a co-working space. As it turned out, none of my clients ever asked me if I had an office: all that mattered to them was the results and solutions they expected from me. Fast forward a few years: The guy who insisted I needed an office to be credible has gone bankrupt. His overheads were too high, and when his sales fell, he was unable to generate the receivables to support his business.
3. Outsource as much as you can
Nadya Rousseau, CEO and founder of impact-based digital marketing agency Alter New Media shared her “outsourcing nightmare”. As she recalls, “The worst piece of advice I ever received was to start outsourcing all my work right from the start so that I could just focus on sales and growing my business. The final result ? Poor quality results for my clients, reduced profits and a wasted chance to learn needed. My clients started to wonder why their projects weren’t treated with the same care as before (when I was doing EVERYTHING on my own!). In short, working with an outsourcing company to save time, whether white label or using their business name, can be a recipe for disaster. Don’t assume that you will automatically earn by working with an outsourcing company. You are best served by doing as much of the work on your own as possible and then bringing in quality team members. Today I have my own digital marketing agency, with a team that I handpicked for their experience and compatibility.
- If you build it they will come
- Go collect some money
If you live in a startup-focused part of the country or operate in tech circles, the default funding approach is often venture capital. However, securing venture capital funding can be a blessing or a curse – and shouldn’t be undertaken without serious consideration of other options. As NYU professor Kristina Libby and co-founder of SoCu explains, “Every time I launch a new project, I get the same advice: you should go and raise a round of venture capitalists. While this advice sounds good, it is actually awful advice. So few see their startups funded this way – and even fewer women. Very few people can just go out and take a turn to start their business. Most people need to start a profitable business first.
- Get financing before you start
Knowing when to get started is more of an art than a science, but sometimes startups are afraid to go into the market without funding because they think it will ruin their chances of getting funding down the road. As Sukhjot Basi, CEO of Bank Yogi, recalls receiving this advice: “Our start-up advisor suggested that we raise capital before the launch and wait until we have the full product. While we were working with him on investor presentations, a few other competitors came in, offering similar products. The advice not to go without capital was bad because it didn’t allow us to test the market upstream. We could have been the first actors and suddenly we were titular. The advice for building the complete product was even worse. This would have left no room to iterate, and would have been very expensive. Fortunately, we ignored this suggestion.
- Just incorporate
Deciding what type of company you should be depends on how you plan to finance and run your startup. While you can legally change the forms once, it’s best to do it early on. Gene Caballero, co-founder of GreenPal, had issues with this. “When we started we were told we only had to incorporate as an LLC, which turned out to be totally incorrect. When we tried to raise an angel, they practically laughed at us because we weren’t a C-Corp. If you are considering going public, be sure to form the right company. Our initial advice informed us that we don’t need to create a C-Corp in Delaware, even though Delaware is the most tax-efficient state for startups. It literally cost us our first round of funding as we had to change status – a $ 15,000 mistake that nearly cost us our business. “
- Pay to play
Jessica Postiglione, CEO + co-founder of Olika, makers of Birdie and Minnie, a premium hand sanitizer in a bird-shaped container, notes: “We were told people would never buy Premium hand sanitizers when they can buy $ 1 options. Still, the company has sold tens of thousands of its premium units and is currently sold by major retailers nationwide. However, the worst advice they received was that they “should pay [the very large] placement fees at large retailers just to get on the shelves. In other words, they were advised to “pay to play”. But Postiglione notes: “This is not a viable long-term strategy for a young startup with limited funds. Moreover, it is a strategy that does not reflect the digital age and the power of e-commerce. The bottom line is that you have to learn very quickly as an entrepreneur to be careful with the advice you take. Listen to the comments, then identify the tips that apply to your business situation. As a Founder, you are the expert in your field and you have to trust your instincts.
- Build to sell
If you’ve taken venture capital funding, you’ll have to move towards an exit strategy, or you’ll have some very unhappy investors. However, for most businesses, sustainability is a better goal. Dr Joni Carley, a consultant who has worked with many entrepreneurs, reports that “the worst piece of advice I have ever seen from startups follow is to build a business that they can sell in five years with big profits. This is bad advice because:
1. it is highly unrealistic;
2. it creates myopia in decision making;
3. it indicates serious questions about commitment and passion.
She continues, “What happens as a result of joining this board is unnecessary stress, people working in companies they don’t really care about, entrepreneurs feeling trapped, success framed by unrealistic expectations. and failures framed by myopia. so that they cannot be fully processed. The founders’ lack of long-term commitment spills over to employees and customers, and ends up having negative effects that can be profound.
- Hunt whales
A big customer can make a huge difference when you have a small business, but they can also sink you. As Mario Peshev, Founder, CEO and WordPress Architect of DevriX, notes, “When you’re little, hitting a big customer feels like winning the lottery. Chances are, 120% of your time is spent trying to persuade them to stay with you for a while. Developing a diverse customer base is very important. Putting all your eggs in one basket could rock your business as the big whale customer chooses another supplier. Diversifying and scaling up with safety nets in mind may take a little longer, but this strategy prevents you from betting your entrepreneurial business on just one relationship. After all, you quit your daily job to expand in the market, right? Stay the course and don’t let a whale distract you.
Anyone who’s ever started a business receives an incredible amount of feedback from friends, family, and even strangers. Sorting out good advice from poor or bad advice is a crucial skill that entrepreneurs must cultivate within themselves. The advice of being open to advice but judicious to act on it can save many startups from death by a thousand cuts.