When to ignore advice

In 1995, when I was just a little over five years into running my business, my accountant advised me that I should register as a Limited company.

“It will be tax beneficial,” he said.

Although I have always been pretty financially savvy, back then I simply took my accountant at his word and did not look too deeply into it. It did not occur to me to question the advice from this apparent expert. I told him to go ahead, signed the paperwork and became the proud ceo and managing director of a limited company.

For a while.

Three months later my accountant went bust! He was only a small, one-man-band business and clearly had not been up to much. I then had to cast around to find a replacement accountant, though this time I took a little more care with my choice, after being let down by one supposed expert. Then, the bombshell hit.

After handing over all my financial affairs to the new firm I had chosen, my accountant asked if we could have a meeting.

“Why did you become a limited company?” he asked, looking perplexed. “There is no advantage to you whatsoever at this stage. In fact, the only business that will benefit is your auditor.”

He went through the reasoning in detail and I could see he was right so I began the process to revert to my original status. I’d like to say that that was the end of it. It wasn’t. Although things were pretty straight-forward with Companies House and I didn’t even have to file accounts because I had been Limited so briefly, a major publication in the insurance industry picked up the story that my company had stopped trading as a Limited company. They put two and two together and made five, splashing with the headline that my business had gone into voluntary liquidation.

Almost 100 per cent of my business dried up overnight because the insurance brokers I worked with read the magazine and assumed I had ceased trading altogether. It was a complete mess which took months to unravel, my first five hard years of business lost, gone. All because I had chosen to blindly follow the advice of an ‘expert’. I couldn’t even sue anyone because I didn’t have the money to pay lawyers.

I did, of course, eventually recover, but the experience taught me a valuable lesson. Always, always question the advice given to you – even if the person giving it is an expert in the field. Although it is great to use consultants now and again (see Week 26 – Real Approach to Business) that doesn’t mean you no longer need to keep your wits about you. It is not a way of passing the buck.

Everyone in business is always bombarded with advice and a lot of it can be very useful. The trouble is, as I have found, a lot can be pretty destructive too. I have, over the years, compiled a mental list of the most common (and most useless) pieces of advice which I have been given. I have included them here and would say that if you hear any of the following phrases, take them with a large pinch of salt.

– That’ll never work.
This statement has been trotted out to entrepreneurs around the globe for centuries. The President of the Michigan Savings Bank advised Henry Ford’s lawyer that ‘the automobile is only a novelty, a fad’ and would never replace horses. Ken Olson, the founder of Digital Equipment Corp said in 1977 that no one would ever want a computer in their home. JK Rowling was rejected by a publisher because children are not ‘interested in witches and wizards anymore’. Enough said. ‘That’ll never work’ is a very bad piece of advice and should always be ignored.

– You need money to make money
No you don’t. The best entrepreneurs make money out of their own ingenuity and wit. I started with less than nothing and built a successful business. If you want to do something badly enough, you’ll make it happen.

– Don’t leave the day job till your start-up has revenue
Similar to above, this well meaning advice is followed by so many poor souls who do their 9 to 5 and then work into the wee hours of the night on their business. This is rubbish. If you are going to start a business – start it. Otherwise you are just not taking it seriously and simply playing around.

– It works for me
It is great to hear the advice of others who have been there and done it (and I know that is what I am doing in this diary – before you say anything). Just remember though to make sure that it is the right advice for you. Every business is different, our goals are different and our clients are different. Before rushing head long to follow an expert, make sure it works for you too.

– Cut your prices to increase your customer base
Well meaning advisors say if you slash your prices in half, you could double your client base. Great – so you will be working twice as hard for the same money? That just doesn’t make sense. Set your prices according to the value you provide.

– Grab every customer you can
That sounds great for some businesses, but it doesn’t work for everyone. If you only have the capacity to look after X number of clients, shouldn’t you go for the reliable/big payers first? There is no point scrabbling around to keep the numbers up.

– Never give up
Dogged determination is great. Flogging a dead horse is not. If there is something wrong in your business, don’t keep slogging away in the belief that if you work hard you will get your due rewards. You won’t. You are just gonna get knackered and probably go out of business. Instead, stop, take a breather and work out what is going wrong. Then, work hard at putting it right.

– You are growing too quickly
There is no such thing. If you are growing fast and have everything under control, such as your infrastructure and profit margins, what right has anyone got to tell you that? I sacked my first business bank when they said that to me.

Remember – everyone has an opinion but not all of those opinions are always based on facts and sometimes those opinions are fuelled by self-interest. Plus, just because someone appears to be highly knowledgeable, you should always be the best judge of what works best for you.

I always listen to rational expert advice, but I also always take the lead in dictating which direction my business goes in. Make a point of challenging the status quo and be wary of the supposed ‘rules’ which others vaguely refer to when they are trying to tell you something can’t be done.