Why Barbara Corcoran Says This Popular Way to Finance a New Business Is a Bad Idea

Building a business on your own dime means you're the only one in charge.

Barbara Corcoran has built a reputation as a savvy businessperson. Speaking with the Rachael Ray Show, Corcoran shared her hard-earned business lessons with other soon-to-be entrepreneurs.

One might think that Corcoran's role on Shark Tank makes her partial to taking on business investors, but according to the real estate mogul, you should avoid looking for an investor if you're planning to start a new business.

A terrible idea

Corcoran calls taking on an investor "a terrible idea." She explains that once you've allowed an investor to own part of your business and their money is in your business account, you have someone telling you what they envision your business to be.

According to Corcoran, once you get the guy's money -- because investors are almost always male -- he tells you how he wants your business to operate. She wants entrepreneurs to remember that "opinions come with money." If you take someone's money to start or grow a business, you need to be prepared for their opinions.

Corcoran describes the situation as having "two gods to serve." You'll continually be pulled between what the investor wants and where you want to go. It's always a bad idea.

What to do instead

Not surprisingly, Corcoran suggests taking control of business finances yourself. "Bootstrapping is the best way to go," she said. It's okay if you can't build your business as quickly as you might have hoped. She says new business owners should slow it down a little and use only their money. Doing so means remaining in charge of how the business is built and what it becomes.

Not taking on investors' money means getting to make important decisions on your own. This includes everything from what your business will be called to whether you want to open a business credit card.

You're not alone

First-time entrepreneurs started one-third of new businesses in 2022. Each of these business owners has faced the same challenges you're facing. They've had to learn what works and what doesn't, along with the best ways to advertise their enterprises. And if you plan to operate your business from home, you're also in good company, as 69% of all small businesses are home-based.

Like entering a serious relationship or becoming a parent, going into business for yourself calls for on-the-job learning. You can expect to make mistakes and learn from them. You'll also learn what works well for your business.

Where to find help

Dozens of credible organizations offer support and advice to new business owners. Here are three examples.

• Small Business Administration (SBA): SBA has district offices in all 50 states. Those offices provide resources, training, and specialists to help start and grow your business. SBA also offers contracting opportunities with the federal government.
• Small Business Development Centers (SBDCs): SBDCs offer advice and training to new business owners through nearly 1,000 local SBDC locations. Their services are provided free or at cost. SBDC help is available to both new and existing businesses.
• SCORE Association: SCORE is the largest network of volunteers and business mentors in the U.S. The group is dedicated to helping new small businesses get off the ground, grow, and hit their goals.

All-important advertising

When asked how to expand and grow a business with a small marketing budget, Corcoran points out that social media provides a free way to get the word out. While paid advertising is fine, Corcoran says that paying for advertising is often a waste, telling Ray that you get more bang for your buck if you know how to use social media.

Corcoran's overall message is simple: Start small, use your own money, and take advantage of free advertising through social media.