5 Pieces of Bad Advice That Could Derail Your Business

It is reported that nine out of ten startups fail. That’s a staggering, frightening and depressing 90%. Yet, while the reasons for this are many, even though the number is high, don’t let it discourage you. Most people who get into business are misguided by well-meaning advice that sets them up to fail.

As a serial entrepreneur and CEO of Builderall, an all-in-one marketing platform that has supported over 2 million companies, I’ve seen thousands of well-intentioned entrepreneurs set themselves up for failure by following common myths and bad advice. They hear success stories from companies like Uber and try to model their business the same way. But what worked for a mega-funded startup won’t work for a small business.

I once sat in the audience while a dynamic speaker explained how Zillow had achieved its amazing growth over the years. Her talk was compelling, insightful and full of actionable insights. While the audience sat there captivated and taking notes, I could already see them dreaming about what they could do with all their newfound business success.

Then it hit me.

None of this advice would work for the business owners in this room. The advice was excellent — but it was excellent for Zillow, a venture-backed company with $87 million in funding. Perhaps more importantly, a company that has recorded a net loss in income each year since 2012, including a loss of $528 million in 2021.

None of it applied to the entrepreneurs and small business owners in the room who couldn’t afford to burn hundreds of millions in capital to fuel rapid experiments and blitzscaling.

Over the past ten years, I’ve lost count of how many times I’ve been approached by wide-eyed entrepreneurs in that same position. They were excited about some great advice they had recently heard from a reputable source, and I just knew that it would spell disaster for their business.

In this article, I’ll share the top pieces of bad small business advice I often hear and what you should do instead if you want to set your company up for sustainable growth.

Related: 25 Entrepreneurs Share the Worst Advice They Ever Received

1. Bad advice: Raise money to start your business

Raising startup capital seems like an essential rite of passage for any new entrepreneur. But here’s the reality — you probably don’t need it. In fact, it can sink you.

One of the biggest myths is that you need outside funding to start and grow a business. I’ve started multiple successful companies with $0 of outside capital. Too often, entrepreneurs think they need hundreds of thousands or even millions of dollars to launch their ideas. But here’s the reality — raising capital doesn’t make financial sense for all businesses.

The venture capitalist business model requires massive returns — in some cases, as high as 100 times their investment. Most investors can’t back a company aiming for $50 million in value because, realistically, they could never get the return on investment that they seek.

Because VC investors require their return on investment to be so high, by asking for VC money, you’re signaling that you plan to build a business that will meet their exit expectations.

There are tons of great businesses that generate between $10 to $50 million per year — and they make their owners very rich. Just understand that a profitable, $20 million per year business isn’t aligned with VC goals and can set you up for failure.

Additionally, when you take startup capital, you’re committing to a journey that will continue to dilute your ownership while you strive for the potentially unattainable billionaire unicorn status. Your chances of building wealth are statistically much higher if you create a profitable small business that generates significant free cash flow while you retain majority ownership.

The right approach is to validate your assumptions and business model with the least amount of resources possible. If you put the same amount of effort into bootstrapping that you would put into fundraising, it will likely pay off in the long run. Also, you can always raise money later — once you have proven product-market fit and a path to scale.

2. Bad advice: Split the business 50/50 with a cofounder

Don’t get me wrong, a strong business partner can be invaluable, but structuring your partnership correctly is critical. Novice entrepreneurs often think bringing on a “cofounder” means splitting everything 50/50.

However, not all contributions are created equal. Before signing any partnership agreements, evaluate what each person brings to the table across criteria like the original business idea, startup capital, industry expertise, marketing abilities, etc. Then, allocate equity and roles accordingly.

I’ve seen lopsided splits like 85/15% work fine when properly structured. Having the right partner is fantastic, but avoid leaving equity and control on the table by…