Ramit Sethi: 5 Red Flags That Starting a Business Is a Waste of Your Money

©Ramit Sethi

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Have you ever considered starting an online business? If so, you’re not alone. According to the U.S. Small Business Administration Office of Advocacy, there are over 33 million small businesses in the U.S.

But starting a business isn’t right for everyone. In a recent newsletter, Ramit Sethi explained the five signs that starting an online business might be a waste of your money.

As you weigh your options, ask yourself if any of these apply to you. If so, you might want to consider an alternative way to build wealth instead.

Red Flag #1: You Don’t Want To Work Hard

Starting a business is hard work, so if you find yourself shying away from the idea of spending long hours on your venture, that’s probably a sign that you should consider something else.

Red Flag #2: You Expect To Earn Millions and Quickly

Businesses can be extremely lucrative, but it typically takes time — often years or even decades — to rake in millions of dollars. Some businesses never get there at all.

“Starting from scratch and expecting to make $1,250,000 in eight weeks is just crazy thinking,” wrote Sethi. “There’s no online course called ‘How to Become a Millionaire in 24 Hours.’ And for good reason.”

For Sethi, whose net worth is approximately $15 million, it took a good 20 years to get to where he is now. If you’re not willing to take the time needed to build something truly successful and profitable, a business might not be worth the investment.

Red Flag #3: You Can’t Be Coached

If you’re not someone who’s willing to learn from others, adapt and make changes along the way, that’s another sign that it’s not the right path to building wealth for you.

“You shouldn’t take advice from just anybody. But if your business is struggling to get any traction, or it hits a snag along the way… be open to coaching,” wrote Sethi.

“Seek advice from business owners who have been in the trenches, can save you time and can help steer you away from catastrophic decisions. Because NO ONE in business — including me and my students — has succeeded by ‘going it alone.'”

Red Flag #4: You Keep Waiting for Inspiration To Strike

Success is a combination of many things, but inspiration alone isn’t it. You also need the motivation to succeed, and to be willing to take the necessary action.

“Think about this quote from William Faulkner: ‘I write when I’m inspired, and I see to it that I’m inspired at nine o’clock every day,'” wrote Sethi. “Maybe you get up at noon as part of your Rich Life. That’s fine. But you can’t wait for a muse to show up and inspire you with brilliant business ideas. You need to get started.”

It’s okay to start small. Even small wins will get you far over time. You just need to be willing to do something rather than waste time and, depending on the initial investment, money.

Red Flag #5: You Believe You Need Something More

It’s easy to feel like you need X, Y, and Z to start a successful business, but that’s not the case.

According to Sethi, you don’t need a fancy website, personal branding expert or venture capital funding. You also don’t need to spend hours a day grinding on social media.

All of these things can come later. If you’re waiting for the stars align, that time may never come.

Signs You’re Ready To Start a Business

So, how do you know you’re ready to start your own business? These are the key signs, according to Sethi:

• You’re excited by the idea of working for yourself (and you love the control and flexibility running a business will give you over your own income and future).
• You dread your current job and are ready to make a change.
• You don’t expect the business to suddenly pay for everything.
• You’re prepared for the ups and downs of business ownership.
• You’re ready to make your first sale.

Alternative Ways To Build Wealth

You can build wealth through a business you own, or you can do it in other ways. If you decide not to pursue the entrepreneurial route, here are a few other suggestions by Sethi:

• Max out your 401(k) and take advantage of employer-matching contributions.
• Pay off your debts (and stop paying interest).
• Contribute to another tax-advantaged account (like a Roth IRA).
• Start investing in other areas (like further education, the stock market or mutual funds).
• Automate your bill payments so you don’t miss anything or get hit with late fees.
• Automate your investments and savings to ensure you’re setting aside as much as possible (as consistently as possible).
• Focus on the big wins (like improving your credit score, getting a lower mortgage interest rate and capping out your retirement account contributions).

You can do all of this with or without a business. What matters is getting started and sticking with it so you can build wealth over time regardless.

Share This Article: