Shark Tank investor Kevin O’Leary is cautioning young entrepreneurs to play it safe and not jump into a project before they amass a certain amount of money. And that amount, according to him, is $5 million.
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“When you have money, you can take risks. I tell young entrepreneurs all the time, you have to get to a place where you have $5 million in the bank,” O’Leary recently wrote on X, the platform formerly known as Twitter.
According to a video he posted, O’Leary believes that once you reach this $5 million amount, only then you can take financial risks.
“You have to get to a place where you have $5 million in the bank,” he said in the video. “You can survive the rest of your life no matter what happens, and your family. You can take care of a lot of people making 6% or 7% of $5 million. When you make that, you have to set that and you don’t risk it. Then after that, you can start to take risk capital and put it to work.”
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O’Leary, a millionaire himself, has other tips to start a business. For instance, he recommends doing your homework.
“Money may go to bad people, but it never goes to bad ideas,” O’Leary told The Motley Fool. “If you’re talking about something like a hot sauce, or a food product where the ability to get shelf space is practically zero — that’s not really interesting for me. I tend to be focused on the product, the service, the market and of course, the people. But right out of the gate, if it’s an overly competitive space: that’s a huge negative.”
His other tips include being frugal, focusing on sales, knowing when to quit and building a great team.
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This article originally appeared on GOBankingRates.com: Kevin O’Leary: Once You Have This Much in The Bank You Can Start Taking On More Financial Risks