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5 Pieces of Bad Advice That Could Derail Your Business — Sidestep Disaster By Doing This Instead. Not all well-meaning advice is created equal. Learn from these time-tested guidelines to help you scale faster and avoid the pitfalls.

By Pedro Sostre Edited by Maria Bailey

Key Takeaways

  • 1. Bad advice: Raise money to start your business
  • 2. Bad advice: Split the business 50/50 with a cofounder
  • 3. Bad advice: Create a formal business plan
  • 4. Bad advice: Focus on your product first
  • 5. Bad advice: Hire a C-level or exec assistant as your first hire

Opinions expressed by Entrepreneur contributors are their own.

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 defaulting to equal splits.

Deciding how to split equity can be uncomfortable, but if you're not comfortable working through this with your cofounder, you may have bigger problems. Having this difficult conversation now may give you some insight into how you'll work through difficult situations in the future.

Related: How to Write a Business Plan

3. Bad advice: Create a formal business plan

Writing a beautifully crafted, 30-page business plan is part of the fun for many entrepreneurs. It's where you let your dreams of target audience and sales projections run wild. But in reality, those lengthy documents are rarely useful. You don't need to write a novel; you just need to be able to communicate the business clearly.

Rather than getting bogged down in lengthy pages of written content, create a simple deck with 8 to 10 slides that cover the core elements: Problem to be solved, target customers, your solution, business model, go-to-market strategy and key financial projections. This should be enough to convey the critical information needed to evaluate, refine and communicate your business.

Keep in mind that this document should change over time. There is no such thing as a bulletproof business plan, so as you learn more about the market, you can continue to revise and expand on your original.

4. Bad advice: Focus on your product first

Even though this is number four on the list, it's probably the one I see most often. Most founders love thinking about their product and telling everyone they meet about it. They spend months (sometimes even years) designing how it looks, how it will work, and what it will feel like, all before a potential customer has even had the chance to use it.

They want to make sure it's perfect before they release it to the public. This is a massive mistake.

We all know the famous line from the movie Field of Dreams, "If you build it, he will come." But this Hollywood-crafted platitude shouldn't be applied to the world of business today. In fact, focusing too much on your product in the early days is likely a waste of time. Most companies that reach $10 million a year in revenue are selling a product substantially different from what they started with.

Instead of worrying about your product, focus on the problem you are trying to solve and the audience you are solving it for. One framework I've used for working through this is the Jobs to be Done theory by the late Havard professor Clay Christensen. In it, we are encouraged to look less at our product and hone in on what the customer hopes to accomplish by using our product. The theory states, "When we buy a product, we essentially "hire" it to help us do a job. If it does the job well, the next time we're confronted with the same job, we tend to hire that product again."

5. Bad advice: Hire a C-level or exec assistant as your first hire

Our final myth is about who your first hires should be.

Too often, the advice is to hire a C-level team member. If you're a non-technical founder, the advice is to hire a CTO; if you're on the tech side, the advice is to hire a CMO. The problem with hiring for this role is that C-level employees are usually great at strategy and managing teams of people. This is useless when you're just starting out, and there is no team to manage.

What I've seen to be successful in the early stages is hiring someone who is hungry to work, hands-on and passionate about the business. In the early days of a business, one passionate developer who spends his days writing code is much more effective than a CTO managing a small team of devs. And it will save you tons of money. On the growth side, a jack-of-all-trades marketer who can write copy, create ads and jump on a sales call will bring more value for the money than a CMO who needs to hire a full team or an agency to accomplish the same tasks.

Conversely, I see a lot of advice that says to work with an executive assistant or chief of staff as your first hire. In theory, this frees you up to focus on business growth.

However, in those early days, you need every dollar to go towards impacting growth and revenue directly. Hiring administrative support roles early on creates more costs without driving revenue. As the founder, you may need to wear many hats in the beginning. But adding team members that don't contribute to the bottom line can become a financial drain when you're least equipped to handle it.

Instead, your first hires should directly generate revenue — whether it's sales, marketing or development. These roles will provide a positive ROI from day one. I like to hire people better than me at critical functions to grow the business, even if I'm really good at it myself. That way, they not only pay for themselves but accelerate top-line revenue faster than I could alone.

Adding "doers" who just cost money before "makers" who drive revenue is a common rookie mistake. Prioritize hiring people who directly impact growth, revenue and cash flow from day one.

Final thoughts

The path to small business success isn't following generic advice — it's rigorously testing assumptions and then focusing limited resources on what will have the greatest impact based on your unique business model and goals. With the right strategic foundation in place, you can build a profitable, sustainable company without chasing arbitrary startup milestones. These lessons from my experience help you avoid some of the most common pitfalls I see derail countless entrepreneurs.

Pedro Sostre

Entrepreneur Leadership Network® Contributor

CEO of Builderall, Speaker, Author

Pedro Sostre is CEO of Builderall, an all-in-one marketing platform that has supported 2+ million businesses worldwide. He authored "Web Analytics for Dummies" and has worked with organizations including WeWork, Republic, the NFL and more. He studied disruptive strategy at Harvard Business School.

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