Barbara Corcoran’s Advice for Scrappy New Founders

Key Takeaways

• Data from the Bureau of Labor Statistics shows roughly 20 percent of small businesses fail in their first year, making cash management your top priority.
• Barbara Corcoran recently highlighted that while a business might be too small to invest in, the scrappiness of the founder is what determines long-term survival.
• You can apply for a free Employer Identification Number (EIN) at IRS.gov to separate your personal and business identity from day one.
• Small Business Development Centers (SBDCs) offer free consulting to help you move from a solo operation to an investable company.

According to the Bureau of Labor Statistics (BLS) 2023 data, about 20% of private sector businesses fail within their first year of operation. This number is a sobering reminder that starting a business involves more than just a good idea; it requires a plan for staying power when the initial cash runs out.

Barbara Corcoran, known for her sharp eyes on Shark Tank, recently shared a moment of brutal honesty about what makes a business worth the effort. In a recent post, she noted that while a business might be "too small to invest in" for a celebrity mogul, the founder’s ability to pass the test of grit is what actually matters. For someone running a 2-person landscaping crew in Georgia or a solo bookkeeping service in Tampa, this is the most important lesson you can learn. You don't need a million dollars to be successful, but you do need to be scrappy enough to handle the 4:00 AM problems.

The Scrappy Phase vs. The Investable Phase

When you are in your first six months, you are in the "scrappy phase." This is when you are doing everything yourself. You are the CEO, the janitor, and the person who handles the angry emails. Barbara Corcoran often looks for people who don't have a backup plan because they are the ones who will work the hardest to make the business work.

However, being scrappy doesn't mean being messy. Many founders mistake "scrappiness" for "disorganized chores." To move from a tiny side hustle to a real company, you need to treat your business like it’s already big. This starts with your paperwork.

One of the biggest mistakes a 4-person print shop or a solo consultant can make is mixing their lunch money with their client payments. You can get an EIN (Employer Identification Number—basically your business's Social Security number) for free via the IRS website. This allows you to open a business bank account. It is the first step in moving from a person with a hobby to a founder with a business.

What this means for you: Being small is a temporary phase, but acting like a professional business from day one prevents the IRS from knocking on your door later.

Why Being "Too Small" is Actually a Strength

Corcoran’s point about some businesses being too small for her to invest in is not an insult. For a 12-person HVAC shop, having a venture capitalist or a "shark" as a partner might actually be a nightmare. Those investors want 10x growth, which usually means taking on debt and stress you might not want.

When you are small, you can pivot fast. If a local competitor drops their prices, you can change your marketing by the afternoon. If a vendor raises their rates, you can find a new one by tomorrow. You have zero "red tape." Use this time to build a core group of customers who trust you.

If you need help building those foundations, the Small Business Administration (SBA) provides free local advisors through SBDCs. They can help you look at your profit margins to ensure you aren't just "busy," but actually making money.

Managing the Fear of Running Out of Cash

Most founders Barbara Corcoran likes have one thing in common: they are terrified of running out of money, so they watch every penny. This isn't about being cheap; it's about being efficient.

Before you spend $5,000 on a fancy website or a new truck, ask if it will bring in more than $5,000 in profit this year. If the answer is "maybe," don't buy it. A solo bookkeeper doesn't need the most expensive software to start; they just need a reliable way to track time and invoice clients. You can Ditch the Spreadsheet for a CRM once you have enough clients to justify the cost.

If you have already started and realized your prices are too low, don't panic. You can Use the Hormozi Offer Framework to Raise Your Local Prices without losing your loyal customers. Scrappy founders know that raising prices is often the only way to survive a spike in material costs.

Protecting Your Personal Assets

Being a scrappy founder shouldn't mean putting your house at risk. As you grow, you should consider moving from a sole proprietorship to an LLC (Limited Liability Company). This creates a "corporate veil" that separates your personal savings from your business lawsuits.

If you are still working a day job, you can Calculate Your Quit-Date Runway to ensure you have enough cash to pay your rent while you build your dream. Barbara Corcoran would tell you that the best time to grow is when you have no other choice but to succeed.

What this means for you: Small businesses are the backbone of the economy, and yours is worth protecting with the right legal structure and clear bank accounts.

Related free tool

First 30 Days After Forming Your LLC — Walk through the 10 steps every new LLC owner has to knock out. Free, no signup to start.

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📋 Disclaimer

This article is for informational purposes only and does not constitute legal, tax, financial, or professional advice. Laws and regulations change frequently, and the information presented may not reflect the most current legal developments. Always consult with a qualified professional (CPA, attorney, financial advisor) before making business decisions based on this content. MyBizNerd may receive compensation through affiliate links, but this never influences our recommendations.

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