10 Financial myths every smart business owner should know  

Jump to

  1. Numbers aren’t my thing
  2. Business structure doesn’t matter
  3. I can save money if …
  4. My business can’t save money
  5. The right financial model will make you
  6. My Dad’s accountant is fine for my business
  7. Good help is expensive
  8. Xero means I can do all this by myself
  9. My business isn’t big enough for a CFO
  10. Raising capital from investors means we’re successful

Love numbers? Hate them?

No matter where you sit on that spectrum, being in control of your finances is vital to your survival as a business.

And with so many things to do, we’ve put together the top 10 financial myths to help focus your energy where it’s needed and avoid the common traps that we see startups and fast growing SMEs fall into.

Financial myth 1. Numbers aren’t my thing

Nope. That doesn’t fly in business (sorry!) especially not for startups and scaleups, which need to grow quickly and often attract outside investment.

Next to poor product-market fit, running out of cash is the second biggest reason startups fail. We’d say that really applies to all businesses, but it doesn’t have to if you commit to knowing and understanding your numbers. 

What does that mean? At its simplest, it’s about keeping an eye on your cash flow. Make a weekly date to check in with your P&L and balance statements and if you don’t know what you’re looking at, ask the friendly finance person in your life for a crash course. You also want to plot your cash flow six months out to understand what’s coming up in terms of expenses and income. 

At a more advanced level, there are a bunch of startup metrics that really help you be in the driver’s seat of your business. Things like cash burn, runway, recurring revenue, customer acquisition cost and customer lifetime value. We cover what these startup metrics mean, why they’re important and how to calculate them here.

“I find most startups take one of two strategies with finance. Some try to avoid it entirely apart from doing the bare minimum with their accountant when they file their taxes while others go completely overboard with lots of financial models, forecasts and valuations based on untested assumptions.

Rarely do I find people in between with a laser focus on the few financial metrics that will really make a difference for their startup.”
Startup mentor

Myth 2. Business structure doesn’t matter – we can fix it later

Building blocks gone wrong

This is one of the most common financial myths we hear. And we get it. It’s difficult to put the time into researching and setting up the best structure for your business in the early days when you want to get to market and figure out if you actually have something worth selling.

But by the time you’re ready to go to market, you should have your infrastructure in place for several reasons.

From a tax point of view, when you have the right structure: you can make more tax-efficient choices that save you money. From a decision making point of view, it’s important to have the right structure so you know how to make collective decisions fairly and legally with co-founders or co-owners.

The right structure is also important for all things legal. When things don’t go quite right (which is likely to happen at some point), it matters what sort of structure you have in terms of what you can lose financially or even how a rival company views its chances of winning in court. A pty ltd company sends a stronger message than a sole trader or joint partnership, for example.

And finally, changing to a different business structure can be costly and time consuming down the track.

Overwhelmingly, we recommend setting up a company and a discretionary trust (here’s why) but it’s not always the case. You might also want to download this helpful legal guide for founders from our friends at LegalVision to learn more about the different business structures.

“There are four main business structures – sole trader, partnership, company and trust. Each has advantages and disadvantages and it’s really important to understand these.

It can be tempting to go with the cheapest quickest option of setting up as a sole trader but it’s well worth thinking about which structure will have the best long-term benefits and reflect your future goals.”

Myth 3. I can save money if I pay myself as a contractor or lend myself money 

Unfortunately this isn’t usually the case. 

There’s a common financial myth that you can avoid paying employee entitlements if you pay yourself (and others) as contractors to your business. The law is smarter than that, and the ATO has a thing called personal services income. In short, this means that if you’re paying employees (including yourself) as a contractor and they (or you) are earning most or all of your income from your startup, you run the risk that your startup will  have to pay superannuation and workcover … on top of the already paid contractor fees.

There might also be a time when you want to loan company money to yourself or someone else. This is okay from a tax point of view as long as the money is paid back before the end of the financial year it was lent in. If not, it will likely come under the ATO’s Division 7A rules, which will treat it as a dividend and mean you need to pay tax on it.

Don’t just dip into your business funds as and when you need to. Set up payments for you and your employees (it may be weekly or monthly), and stick to them.

Build that into your business plan right from the start, perhaps with a rising salary as your business grows. That way you’ll get used to the amount of money you receive and won’t have to worry about taking out occasional large lump sums.

Myth 4. My business can’t save money

A hand putting money into a piggy bank disproving the financial myth that your business can't save money


It might seem like you can’t do this but it’s really important to try. 

Your cash runway is what will keep you alive (which means you need to keep it alive). Reinvest as much as you possibly can into your business’s savings account. To help do this, you need to figure out how to live on just enough – only spend on things you can truly afford. 

By consistently contributing to your business’s savings account, you’ll keep your runway healthy over time. And that means a healthy business, usually. Again, this might seem hard but it’s one of the best financial habits to build. 

“One of the easiest ways to save money is to look for alternative, cheaper options for things that you can’t do without. 

You don’t always have to pay for the most expensive equipment, marketing plans, costly office space and so on. By making smart spending decisions, you can save money all the time.”

Myth 5. The right financial model will make you successful

We wish this were the case! But while a more advanced financial model that gives you key insights into your business can be invaluable at times, especially when you’re planning to expand or attract outside investment, a watertight customised financial model is not a golden ticket to success.

We often find people suffer from paralysis by analysis when it comes to choosing a financial model, because there are different options and it can feel like you don’t want to spend the time on one if it’s not the right one for your business.

If you can relate to that, consider this. There is no such thing as the perfect plan. It’s the process of doing it – putting numbers to your operational plan – that is important. This process helps you ask yourself the tough questions about whether you can afford to do what you’re planning to do, and even whether what you’re planning to do is the best approach. And that is critical to success. 

“When we look at an early-stage financial model, the one thing we know for sure is that it is wrong.

But just because we don’t rely on financial models to determine valuation in early stage companies doesn’t mean they aren’t incredibly useful in assessing a company. A well-developed financial plan reveals the business’s fundamentals and the entrepreneur’s thought process. It illustrates how you get from here to there and how you will realise your vision.”
Alpha Edison

Myth 6. My Dad’s accountant is a bit old school but I guess he’s okay for my taxes

This brings to mind the expression: If it looks like a duck, swims like a duck and quacks like a duck … it probably is a duck.

Or in other words: If your dad’s accountant is a bit old school, then he’s a bit too old school to give you the kind of service and advice you need.

Duck on the water


Fortunately, not all accountants are created equal. There are those who will do your tax return each year, and that’s about it. There are others who will take your taxes, bookkeeping and payroll off your hands as you scale up, and also be a trusted financial adviser to help you grow and achieve your goals. No ducks in sight.

“When it comes down to it, any accountant should be capable of doing your tax return (I hope!).

But do you want ‘any accountant’? If you’re engaging someone professionally, why not make it someone who gets your type of business – who understands startups and fast growing businesses and can therefore see opportunities and provide you with insights that are outside the scope of just doing your tax return.”
Standard Ledger tax partner

Myth 7. Good help is expensive

Seeking professional help such as marketing, legal, financial or funding advice can feel a bit like going to the mechanic. 

You hand your car over knowing that whatever they say you’ll have to believe (unless you’re engine savvy), and then they’ll charge you a fee you don’t really understand.

But things are changing. You don’t need to just accept high prices for things like lawyers, accountants and R&D specialists any more. The market is much more competitive these days so you can shop around and look for services that will allow you to outsource as little or as much as you need, with prices and support that scales with you. 

“There’s not one single strategy that can transform a business overnight, even though many self-proclaimed experts will promise you exactly that.

But there is one thing business owners can rely on when it comes to growing their company.

There is one framework we apply to every business we build: We block out time to map out our marketing approach every 90 days. So while the market, the tools and the economy are ever changing, this is the one constant in all our businesses.”
Basic Bananas 

Myth 8. Xero means I can do this all by myself

Sure, we love Xero. We’ve been using it since the early days and we can confidently say it’s cost-effective, efficient and insightful. 

But that doesn’t mean you should be spending heaps of time using it. In the beginning, it’s worth having a Xero package that lets you do things yourself but as you grow, your focus needs to move away from the day-to-day. 

Which means it makes more sense to outsource your bookkeeping and payroll (still using Xero of course) so you can focus on the bigger picture of growing your business.

Woman on laptop


“Don’t let accounting and bookkeeping distract you from your core work. It’s not where you’ll add value to your business. 

On the other hand, a professional has the expertise to lower your tax burden; avoid fines, interest and audits; and eliminate unnecessary costs. They’ll free you up to work on your business, which is where you’ll be able to make the biggest difference.”
Bespoke Accountants

Myth 9. My business isn’t big enough for a CFO

We hear this financial myth a lot but there comes a time when many businesses need a CFO to grow bigger. You need someone who can look ahead and plan to get the funding you need to achieve the growth targets you need to set. 

Sure, you can’t afford a full time CFO but there are options. A virtual CFO (yes, a real person!) – also known as a part time CFO – is often within reach. This support is paid hourly (or daily, whatever you agree on) and you have access to them when you need them, even if you don’t quite know what you need them for. Spoiler: A good part time CFO will be able to help you figure that out.

“We started working with a CFO adviser early on and we’ve gone through quite an evolution with them to access different types of funding, which has been vital to our survival. 

We use them as our sounding board for anything to do with finance from fundraising to forecasting and any number of tax questions that we’re asking all the time. It’s been invaluable for us.” 

Myth 10. Raising capital from investors means we’re successful

With the time and effort that it typically takes to raise capital from investors, it’s no wonder that it seems like achieving it equals success. Full stop. 

But the real success lies in what you do with that money. 

What you do to increase your business’s value, and achieve your (and now also your investors’) goals. And what you, as founders and business owners, end up with when you reach those goals. Your dream exit? We hope so. 

“I’ve seen many founders who focus on big valuations too early in their startup: It’s fool’s gold. Some raise too much from family and friends, or create complex capital structures that make it far more difficult to raise more capital down the road.

As CEO, it is my responsibility to source our capital. The best way to ensure we raise the capital we need is to build an awesome business; this is my primary strategy. If we get this right, we will have more funding than we ever need!”

Woman standing on a cliff top looking triumphant to signify the end of the financial myths article

Well done! You’ve learned the top 10 financial myths that we see startups and fast growing SMEs fall prey to.

We’d love to know your experience. What else do you wish you knew ahead of time? Or do you see other founders and business owners needlessly stuck in a holding pattern because of something else? 

Let us know your thoughts and experiences. 

Images courtesy of Pexels: building blockspiggy bankduckwoman on laptop and woman on cliff top.

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