Nine Industry Leaders Share The Worst Advice For Scaling A Business

Business owners seeking to scale up can be inundated by financial advice. However, not all commonly heard advice may be good. Some words of wisdom may not be wisdom at all but advice that is not applicable to your company or has outlived its time.

You need to know what to look out for in order to avoid it. So, what are the common pieces of advice on scaling a business that can potentially do more harm than good to a business’ bottom line? And what should be done instead?

Below, nine members of Forbes Finance Council share commonly heard poor advice and their suggestions on how to avoid corresponding poor results.

Members discuss the adages business owners shouldn't follow.All photos courtesy of Forbes Councils members.

1. Grow The Bottom Line

Too often, people are told to focus on "growing the bottom line" and "growing revenues." What they lose track of is managing cash flows. Generating revenues and profits is great, but if you're not managing your cash, then you can't pay employees, vendors and lenders. Everyone expects to be paid with your cash -- not your profits. - Chris Tierney, Moore Colson CPAs and Advisors

2. Throw Caution To The Wind

The obvious answer here is to proceed with caution. When business is good, owners tend to use their lines of credit more, hire rapidly, expand in space and invest in technology. These are all great moves. The problem is that businesses have an enormous amount of risk in everything. Every growth decision made by an entrepreneur must be considered with a "worst case scenario model." We all get complacent in good times. We need to appreciate and celebrate the upswings, but stay practical. - David Podell, Podell Financial Group

3. Focus On Scaling

Many articles and advice columns advise that, when scaling, you should only be focused on scaling and the overall bigger picture. On its face, this advice is correct, provided that your day-to-day workflow and processes are solid. If your day-to-day business workflow can’t function correctly without you involved, then you should work on that issue before allocating your entire focus to scaling. - Jared Weitz, United Capital Source Inc.

4. Spend Money To Make Money

There is the old adage that you need to spend money to make money. However, you need to make sure that you truly have the cash or capital to spend. Therefore, don't go out and borrow money or start a plan that you won't have the cash to follow to completion. With a growing business, it is important to make sure that you have the capital to keep it going. - Scott Bishop, STA Wealth Management

5. Revenue Matters The Most

A lot of awards and attention come from revenue numbers as you are scaling. This attention fuels the entrepreneur as they grow and seek those competitive wins. Revenue cannot be the only number reviewed, however; we need to be looking at scaling back variable and overhead costs as that number grows. It costs more to sell more, and your bottom line will tell if you can survive the growth. - Marjorie Adams, Fourlane

6. Free Services Can Help You Grow

The freemium strategy where a company offers basic services for free can be a potent tool for building a large user base and facilitating adoption. However, the conversion rate from free to fee-paying customers in a freemium strategy is very small and can limit a company’s revenues and profit growth. We must remember that a large user base is no guarantee of success. - Wei Ke, Simon-Kucher & Partners

7. Sell, Sell, Sell

One common piece of advice is to sell, sell, sell -- and everything will fall into place. But what happens when your sales are on credit (due to be paid in 30 days) and you need cash to pay your employees today? Instead, business owners should focus on building systems and generating cash. Once you have the right system in place, replicate it to scale up sustainably. - Vlad Rusz, Vlad Corp. USA

8. Don’t Reinvent The Wheel

It is very common to be told not to "reinvent the wheel" when strategically planning or growing your business, because others are seemingly successful. There is nothing strategic about this advice at all. Challenging what you know and why you think you know it is how you differentiate your strategy and business from the competition. Being different on purpose may be exactly what is needed. - Scott Karstens, NFG Brokerage

9. Sell Fast And Expand No Matter What

A common piece of "wisdom" is to sell fast and expand no matter what, but this can end up costing you in the long term. If you don’t have a rock-solid product, or can’t deliver what you’re selling, then your business will implode before it gets off the ground. Every customer needs to be a referenceable customer. That can’t happen if we sell a product that doesn’t delight or we can’t deliver. - Corey Gross, Sensibill