Knowing how you should deal with what might be an overwhelming amount of advice, especially when much of it may be conflicting.
Entrepreneurs frequently seek advice from all sorts of people–bankers, other entrepreneurs, financial advisers, lawyers, that know-it-all guy at the cocktail party and so on.
That’s a good idea because no matter how smart/experienced you are, there’s always someone out there who’s smarter and more experienced. And there are plenty of other perspectives to be had, too. Many a business has faltered because of tunnel vision.
While I always applaud (and encourage) entrepreneurs to seek out multiple sources of advice, I also caution them to be careful of biases.
Bias is something you can’t avoid. No matter how well intended that person is giving you advice, their history and own experiences are going to color how they view the financial world. Even the most famous and respected thought leaders/mentors have biases. That’s not necessarily a bad thing, but there’s no one-size-fits-all answer.
Speaking of …
That includes me (not that I’m considering myself the most famous guy around).
I’ve worked with entrepreneurs for years, though, and invariably counsel them on the benefits of taking on debt rather than giving up an equity share in the business. In my experience, debt can be better managed than relinquishing equity, which starts entrepreneurs on a potentially slippery slope that can even lead to them being forced out of their own company. Sad to say, I’ve seen it happen.
Of course, I know that some of my peers have had the opposite experience and can make an equally strong argument for giving up equity instead of taking on debt. And they’re not wrong, either.
Let’s consider some other examples of bias.
If you’re being advised by wealthy people, their solutions are more likely to be expensive rather than of the bootstrap variety.
If the adviser is a lawyer, they’re probably going to be talking about the importance of risk above all else.
If the adviser is a successful entrepreneur, they’re sure to recommend what worked for them.
And so on.
Putting it all together.
So, how should you deal with what might be an overwhelming amount of advice, especially when much of it may be conflicting? How do you sort through the noise?
Listen to it all–especially if you trust the people you’ve consulted–and be sure to take notes. Give more weight to advice that specifically pertains to your business (advisers, no matter how well intentioned sometimes get off track). Perhaps give added weight to success stories for businesses that are similar to yours.
From there, filter out all the biases and go with what makes you the most comfortable. Making money is important, but so is the ability to sleep at night. Tailor your decision to mesh with your risk tolerance level.
Finally, keep in your back pocket the thought of switching gears if your preferred plan doesn’t work. Having a backup plan is never a bad idea, especially if you have lingering doubts about your primary plan of attack.