“Shark Tank” investor Kevin O’Leary shares actionable advice on marketing, funding, and resilience for small businesses navigating today’s challenging landscape.
What are some of the biggest mistakes small business owners make when trying to secure funding, and how can they position themselves to be attractive candidates for investments or small business loans?
It’s always the same: They overestimate revenues and underestimate expenses, and they go bankrupt. That’s why 7 out of 10 go to zero in 36 months. There’s so much variability, there’s so much unknown, there’s so much variance from whatever your plans are, that when you start to make plans and spend capital at a rate that you know is based on some pocket stick forecast on sales, invariably you’re wrong and you run out of the one thing you have — particularly in that first 36-month period. So if you’re planning on starting a business, you must be conservative. You must hoard cash, keep every cent you have all the time. This is crucial, absolutely crucial.
Marketing budgets can be tight for small businesses. What’s the most cost-effective way for entrepreneurs to build brand awareness and attract loyal customers?
You know, the small companies that have been successful, particularly during the pandemic, when the market moved to almost 50% direct-to-consumer, have figured out social media. That’s what they’ve done, and a lot of them have figured out a way to reduce their customer acquisition costs (CAC) dramatically through really good storytelling and 60-second stories using the advantages of different algorithms. The one that’s been the most successful has been TikTok. Although it has a lot of controversy around it currently, and we don’t know what’s going to happen, it’s the lowest CAC.
Hiring experts and consultants can also be a huge investment. How do you think small business owners can decide when to bring in outside help versus tackling challenges in-house?
Most companies tend to go look for someone to set up their TikTok, LinkedIn, Instagram, and other platforms for them, right? However, that doesn’t usually work, because you need to be embedded in the DNA of the business to understand how to have an authentic story that continues to develop through product and relationships. Most of these people charge between $5,000 and $15,000 a month, and most of them get about a 90-day gig before they’re fired, because they’re not moving the needle at all. I highly recommend that all small businesses internalize this position and build a community by storytelling their journey.
How can small businesses build the resilience to withstand economic downturn, supply chain disruptions, or just unforeseen disaster?
Build a community. Have top quartile customer service. Be honest, authentic, and transparent with your customers, and they will never abandon you, even in tough times. In today’s world, the community that supports small businesses wants authenticity and transparency. They smell bull a mile away, and the minute they feel you’re dishonest, they will leave you immediately. It’s like a marriage; that’s what I find. You have to treat it like a relationship you’re trying to maintain. There’s going to be rough patches, but you don’t get divorced just because you had a fight.
