Don’t Go Into Personal Debt, And Other Tips For Small Business Owners Who Are Just Starting Out

The United States is in the midst of a surge of small business formation. In 2022, about 1.7 people filed to start new businesses, according to the U.S. Census Bureau. That’s up more than 28% over pre-pandemic levels in 2019.

Including businesses not likely to employ others, the number of new business applications was 5.1 million.

Two years ago, I published a book with Seth Levine. The New Builders, that looked at the next generation of American business owners. They’re more likely to be women and people of color, and to own businesses in service sectors, and in retail and restaurants. Today’s small business owners are navigating a landscape in which the biggest obstacles are a lack of access to capital and an uneven competitive landscape, where big businesses dominate. But it is cheaper to open businesses today, mostly because you can test your ideas on an online platform for a few thousand dollars. And there are new sources of funding and aid available to help.

Here are seven lessons from The New Builders and other small business owners about how to be successful as you’re getting off the ground.

It’s OK to start small, but have a vision for growing bigger.

Chances are your company will need to grow from revenue; fewer than 15% of companies are able to find a bank loan or venture capital to start. That means you’ll need to start small and price your products at a high enough level so that you can take what’s left over to reinvest in the business. By definition, that means you’ll be starting small and probably using your savings to launch. But, have a vision for what your company looks like as it grows. If you see yourself in three to five years at the helm of a company with, say, five or 10 employees and multiple locations, you will be more likely to develop the plan that helps you get there.

Don’t go all in on one idea, or even all in on your business.

There’s a funny myth that perpetuates the world of business, that success is tied to your persistence or “going all in.” You do need to persist, but a more valuable quality is your ability to pivot. If an idea isn’t working, move on. One of the business owners we interviewed was Fred Sachs, an Alexandria, Va., entrepreneur who had founded two successful companies, a hardware company and a lumber company, and in his later years was producing organic flour to supply restaurants and bakeries.

“Sometimes you have to create a solution to a particular problem; and in other situations you have to innovate in order to get around a particular hurdle,” Sachs said. “And if you’re not going to deal with the problem, you’re going to be left behind. You have to continue to change.”

Don’t go into personal debt

Your first idea might be to get a bank loan. But business bank loans are surprisingly hard to come by, because banks are unlikely to approve a business for a loan until it’s showing that it has enough revenue to make the payments (community development finance institutions, which are nonprofits, can be a little bit easier).

Sometimes, entrepreneurs turn to borrowing against their personal assets. But in today’s fast-moving economy, borrowing against your house or on a credit card puts you at a significant financial risk. Don’t borrow your startup capital. Make sure you know whether your company is a going concern – with customers, revenue and profits — before you borrow. Test your ideas, bootstrap and seek other sources of funding.

Your most important guide is your customer

When you’re tempted to stick to your great idea, remember that entrepreneurship is often a service industry. You’re there to make life easier or better for your clients and customers. If they’re not buying what you’re selling, it’s time to change.

Don’t waste money on marketing

In the early days of your business, as you are fine-tuning your product or service, one of the best uses of your time and money will be testing the market. But don’t confuse testing the market with marketing, which comes later.

Find the cheapest way possible to put your product or service in front of potential clients. If you’re using a big tech platform like Amazon, Etsy, or Instagram to test a product, remember that they typically charge hidden fees and are apt to increase them without warning. You might want to investigate other options to reach potential customers. Many of the big tech platforms are facing new competition from smaller, more niche or locally owned versions.

After you develop a profitable business model, then you can put money toward marketing.

Be professional in your bookkeeping

• Establish a bank account in your business’s name, not your own.

• Hire a bookkeeper. Unless you have a love and a talent for keeping track of finances, you’re better off finding a bookkeeper or an online version for a few hundred dollars a month. You might not do this right away, but do it as quickly as you can. It’ll help you at tax time, too.

• Spend at least one day a month (or a week) catching up on your paperwork: doublechecking your bank accounts, paying invoices and issuing bills of your own.

Is there a local version of DoorDash in your area, or a retail platform that sells goods and services in your city?

Likewise, companies that provide services to small businesses, like accounting platforms or finance

Know what kind of funding options are available

Your own savings, and friends and family capital, are the best and cheapest ways to get started. Community development finance institutions (search those in your area here: and nonprofit lenders can provide small loans or working capital. Bank loans are for when you’re already off the ground and can show revenue and profits; your best chance at getting approved is probably at a community bank, which are also great sources of advice for small businesses. In Nike founder Phil Knight’s biography of his entrepreneurial journey, Shoe Dog, he recounts the benefits of being able to walk across the street to talk face-to-face with a banker and ask for credit.

Many other entrepreneurs recount similar stories.

Venture capital only funds fast-growth businesses (typically those whose business models show revenue in the millions in the first five years). On top of that, venture capital is usually only available to well-connected people. Unless you have an “in” or a tech-driven business model, don’t waste your time.

If you want to develop a venture backable model, it may pay to seek out an accelerator like TechStars, Camelback Ventures, Y Combinator, or Ad Astra Ventures, which can help you get ready to pitch venture capitalists. EforAll is an incubator that helps entrepreneurs connect with banks and other lenders.

Seek out free information

There are many influencers and other kinds of marketers offering insights and training classes – if you pay. But first look at the free information available.

SCORE (the Service Corps of Retired Executives) is one great resource.

Verizon and the Association of Women’s Business Centers are offering a free program to help small business owners learn more about digital tools.

And, look at the resources available at local colleges and universities.

Rebecca Brady, the founder of Buffalo, N.Y.-based Top Seedz, started off her cracker company by going to the Small Business Development Center at Buffalo State University, which gave her some basics of how to launch a food business. Investing $5,000 of her own money, she rented space in a shared kitchen and started selling in farmer’s markets. This year, only four years later, she is aiming for $4.5 million in revenue. Her advice?

Don’t waste energy looking at what your competitors are doing, or looking over your shoulder at the past. Keep your eyes on the goal ahead, and stay focused on what you want to be.