Money & Career

Thinking about starting a business? Advice from The Wealthy Barber

I recently wrote a post about my conversation with Dragons' Den's star Arlene Dickinson who offered her best business tips for women. When I met with her, I also got a chance to sit down with the newest dragon on the set, David Chilton, author of the popular personal finance book, The Wealthy Barber. We talked about his views on entrepreneurship, money and what makes a business idea worth investing.

CBC's Dragon's Den, David Chilton Wealthy Barber

Courtesy of CBC

I recently wrote a post about my conversation with Dragons’ Den’s star Arlene Dickinson who offered her best business tips for women. When I met with her, I also got a chance to sit down with the newest dragon on the set, David Chilton, author of the popular personal finance book, The Wealthy Barber. We talked about his views on entrepreneurship, money and what makes a business idea worth investing.

Q: As author of The Wealthy Barber, are you bringing a personal finance perspective to the show?
A: I haven’t been able to wrap my personal finance knowledge into the show because these entrepreneurs are, for the most part, past the point of no return when it comes to money. They’ve already cashed out the RRSPs and the RESPs in order to roll the dice on this opportunity. You can criticize them but there’s no point. Many entrepreneurs take an excessive amount of risk when they start their business. I actually cashed out my RRSP to print The Wealthy Barber, even though the book says you should never do that. But I did – and I’m glad. When you’re scrambling for seed capital you do things like that.

Q: As an entrepreneur is it important to have a lot of start up capital?
A: One thing I’ve observed is that more entrepreneurs benefit from less capital than those who start out with a lot. My friends who are entrepreneurs have prospered with smaller amounts of capital. One reason is it makes you keep your costs down and work harder. Overfunding a business isn’t a good idea – it’s too easy to spend on stuff like fancy desks and an office. I am drawn to businesses where people are struggling a bit.

Q: You look for businesses where the owner is struggling a bit – what else do you look for as an investor?
A: One thing I am focused on is how much detail we get back when we ask about metrics or financing. Kevin is always focused on that too – there are so many things that could go wrong so you need to be on top of it to deal with it. Being a successful entrepreneur is all about being able to overcome obstacles so I look at the people who come on the show and look at whether they’re articulate and passionate.

Q: What’s the number one flaw you see with pitches on the show?
A: The one big error I see is that there is nothing proprietary about it – they bring a relatively good idea with no way of protecting themselves against competition. The second mistake is I see is that they come looking for capital to expand a successful business by increasing inventory but they have no capital for marketing. And it takes money for both. They need to understand both sides.