Every entrepreneurial journey comes with a learning curve—one that is likely to include both missteps and victories. Experience may be the best teacher, but it doesn’t necessarily have to be one’s own personal experience. By getting advice from others who have taken the journey before them, entrepreneurs can gain insights that smooth some of the bumps in the road ahead.
Following the right advice can save you from making some of the big mistakes that have cost other entrepreneurs wasted money, time, and energy—and help you make smarter decisions that will shorten your path to success. Below, 16 members of Fast Company Executive Board share the financial advice they wish they’d received prior to starting their businesses.
1. ENSURE YOU HAVE A FINANCIAL CUSHION TO FALL BACK ON.
There’s no such thing as an overnight success. It will take time to figure things out as you go. To give yourself room to operate and do that, you need a financial cushion, whether that comes from an investor, a working spouse, or your own savings. This may seem obvious to some, but way too many entrepreneurs skip this step thinking they’ll be cash-positive right out of the gate. – Kevin Namaky, Gurulocity Brand Management Institute
2. DO YOUR HOMEWORK DURING THE PROTOTYPING PHASE.
I see many founders fail during prototyping. Not only do they fail to validate that the product works and meets user expectations, but they also neglect to gather insights that are essential to the business model—for example, how will users find and purchase their product? What will the decision-making process be? What operational requirements are implicit in their expectations that will influence how the organization needs to be shaped? – Amy Radin, Pragmatic Innovation Partners LLC
3. TEST EVERYTHING.
Don’t just assume something will work; conduct testing first. This applies to many different aspects of the business. Testing and analyzing data allows you to have proof that a concept works. It can also prevent you from making an expensive mistake. – Kelley Higney, Bug Bite Thing
4. BUILD WITH THE END IN MIND.
Build with the end in mind—that is, acquisition. I built my first lifestyle company on gut instinct and luck. And while it survived six figures in the black for 10 years, I never broke seven figures. When we formed Vengreso, we did so with an acquisition in mind, which allowed us to scale to seven figures (and more than 30 employees) in two years. Every decision we make answers the question, “Does this make us more acquirable?” – Viveka Von Rosen, Vengreso
5. HOLD ON TO YOUR SAVINGS.
Put some savings aside. Unexpected things will happen along the way, and you don’t want scarcity to influence you to make short-sighted decisions. Another one that I personally experienced but doesn’t necessarily apply to all: Business partners who are parents will make very different strategic decisions than people who aren’t. This alone may lead teams to break apart. – Phnam Bagley, Nonfiction Design
6. DON’T RELY ON VENTURE CAPITAL.
Venture capital is a tool, not an end goal. While it’s useful, the best way to get an infusion of capital is to not need it. Build your business into something that can survive on its own so that once you do get some capital investment, you won’t need to spend it and can instead utilize it only on things that will multiply your business. – Noah Mitsuhashi
7. AVOID GROWING YOUR LIABILITY.
When starting out, avoid building unnecessary liability and pay good attention to your budget. Investing in building a great team also pays in the long run. Further, maintaining accounts through accurate sales forecasting will increase the conversion rates in your sales funnel. This information can prove useful when identifying and targeting good business prospects. – Irfan Khan, CLOUDSUFI
8. PRIORITIZE LONG-TERM GROWTH
Think growth, not short-term ROI. I’m running a fast-paced startup company that is blitz-scaling, and as the CEO it took me some time to get used to the fact that we’re spending money not to make money in the short term, but to create a long-term powerhouse. – Yoav Vilner, Walnut
9. CHOOSE YOUR TEAM CAREFULLY.
Invest in people who believe in the business and who have values and vision for the betterment of the company. Anybody can take on a position or job, but only a few will have a genuine concern for the business. Remember, skills can be taught; values and character matter more. – Lane Kawaoka, SimplePassiveCashflow.com
10. FOLLOW YOUR GUT
Listen to your gut, even if it doesn’t make financial sense on paper. Early on, I wanted to offer customer support services, but I was told it was unscalable and would lead to financial ruin. I cut the service. It hurt our retention, so we reinstated the practice. Our retention jumped up, and my company has grown every year since, proving both the service’s scalability and that I should have listened to my gut. – Jason VandeBoom, ActiveCampaign
11. INVEST IN SELF-DEVELOPMENT.
Invest in your growth and well-being. As an entrepreneur, you will need to continuously grow your skills to inspire your team and to have the foresight to take risks even when you may not have all the information in your hands. Also, make sure you and your team maintain a healthy lifestyle—including getting enough sleep, eating right, and exercising—so you’ll have the mental resilience to tackle any challenge. – Andreea Vanacker, SPARKX5
12. FIGURE OUT THE KPIS THAT MOST MATTER TO YOUR BUSINESS.
Figure out the true KPIs that drive your business, and keep testing to find the ones that matter the most. By optimizing toward a basket of KPIs, you can keep a keen eye on what really drives long-term financial performance in the business. In addition, you can take data-driven steps to maximize your goals in a more cost-efficient manner. – Fehzan Ali, Adscend Media LLC
13. MEMORIZE KEY METRICS.
Understand all the key metrics to run your business, and know them cold. If somebody asks, you should have the answer for any metric ready, off the top of your head, without having to look anything up. In running a software as a service company, for example, you should know your churn rate, monthly recurring revenue, annual recurring revenue, and acquisition rate—among other metrics—off the top of your head. – Ryan Anderson, Filevine
14. FOCUS ON SUSTAINABILITY.
I wish someone had told me to focus more on the sustainability and scalability of any innovation or new company. Sustainability encompasses the environmental impact, societal footprint, and governance of your company. There is so much more to sustainability than climate-related issues. Focus early on long-range sustainability within the context of where you want to make the most impact. – Dianne Dain, World Humanitarian Forum
15. GET HELP ORGANIZING YOUR FINANCES.
Whether your goal is to attract investment, sell the company, or just build a solid business, you must have your finances organized. Hire the proper accounting professionals and prepare financial statements. Hire good lawyers and have them create proper contracts. As you build the company, build the infrastructure that facilitates stability. It will protect you from some major fire drills later on. – Ximena Hartsock, Phone2Action
16. RESEARCH YOUR TARGET GEOGRAPHICAL AREA.
If you’re thinking about starting a business, study the population and demographic income data of the geographic area that you intend to serve. Make sure that your market is large enough and wealthy enough to support the kind of clients or customers you want to attract. – Laura Kerbyson, Laura Kerbyson Design Company