Small business owners face tighter competition than ever, and “Shark Tank” investor Kevin O’Leary lays out the tools and habits that help them rise above it.
How can small business owners leverage their strengths and unique selling points to stand out in this competitive market?
What matters now for small business is the use of social media to tell a story about their product or service, and the ones that are differentiated from failure versus success have figured out social. They figured it out in a way where they can acquire customers at no customer recognition cost because they’re able to do creative storytelling on TikTok or Instagram, or any other platform.
It’s about connecting with the customer directly, and even if that’s just a community-based business, you sort of geo-lock for that and you focus on that community. That’s what’s differentiating winners and losers right now. The storytelling aspect is the ability to create content in very short times of 15–30 seconds, 60 seconds. Once that starts to happen, you form a community where customers talk to each other, and that becomes extremely powerful. That’s how it’s done.
What’s one key piece of advice for entrepreneurs looking to successfully grow their business venture?
This is where AI comes into it. AI used to be unaffordable just two years ago. That’s not the case anymore. There are so many subscription services that are, you know, $125 a month or less that let you do things like create content.
Enhance your messaging. Obviously, everybody’s using ChatGPT to do that and testing multiple versions of their ad. Also, agents matter, so you can now create a customer support agent for a pretty low cost. That is a lot better than putting people on a website where they have to look up answers to questions.
This first started with the hotel industry. When you’re trying to make a reservation, or you want some information from the concierge, or you want to book a reservation at a restaurant before you get there. All of that is done with AI agent bots, and it’s actually quite compelling. You’re talking to a bot, but you’re getting the information quickly in a way that you couldn’t before. That’s all you care about. Time is money.
In small business, customer service is a very competitive weapon, and so investing dollars in providing a much more elegant experience at the customer service level is a great investment in your business.
What common operational challenges tend to hold back small businesses, and how can they be overcome? What routes can people take?
The biggest problem a small business has is logistics — trying to determine how much inventory they have on hand of each product and getting it to the customer in a timely manner. There are a lot of tools to do this. Shopify has helped quite a bit. Facebook, TikTok Shop, all of these things are now working together so that when someone sees a product on social media or sees it online, you just “click here” and buy.
You want to get it to them in a couple of days. You don’t want them waiting. In terms of repeating growth, that’s probably the biggest one. People are nervous about buying direct from you; they’d rather go to Amazon and find your product where you’re going to lose up to 40% of your margin. However, if you get a reputation for shipping on time and having great customer support, you never even have to put your product on Amazon, because if people have to buy it directly from you, they will do it.
But, you’d better ship it, track it, and tell them that it’s arriving. All of that stuff can be automated now, but that’s the biggest issue small businesses face. I would say that companies between 1 and 5 million in sales are really failing in that area.
Which emerging technologies should small businesses use to stay competitive?
Content creation. The cost of doing that has come down quite a bit; the equipment itself is no longer expensive. However, the ability to do it right and understand how the algorithms work and how to present that data is getting much more costly. All of the different platforms are subscription services now. They’re all apps that let you do what it takes to make a message very compelling, including inserting text in multiple colors, speeding up or slowing down the video, and editing the video itself. You can do it on your phone now, versus having to buy an expensive editing product.
However, while the cost of the technology has gone down almost 60% in the last two years, the cost of finding somebody who knows how to use it has quadrupled. If an editor used to get $50,000, it’s $200,000 now. That is the dilemma. Getting a partner in the business that’s very good at content creation is kind of imperative.
It’s not the tools that are expensive anymore; it’s the creators. That is something people should focus on a lot. Some people say, “Well, I’m just going to pay $5,000 a month to a service.” That’s a bad outcome. They don’t give a damn about you. They have 50 other clients. You need to find someone embedded in your business who is 100% dedicated to telling your product story, or your service story, or the story of the company, and connecting with people and building up your community. You just look at your successful competitors and you’ll see what they’re doing. They’re producing really good content, and that’s why they’re kicking your butt.
What is the most important financial practice that small businesses can focus on for growth?
Monitoring daily cash flow — funds in, funds out. The dashboard that says, “What did I sell? What did I collect? How much cash do I have in the bank?” It’s the most fundamental metric you could have, and many people don’t do it. They have really poor accounting.
You can use a commercial product or subscription service like QuickBooks for up to $50 million in sales, and you can put all of your data on there. There are a lot of apps that are attached to QuickBooks that easily download your records from your bank, credit cards, everything.
This is crucial. It’s absolutely crucial. If you don’t know a snapshot of where your business is every day, you will definitely fail. Use technology to your advantage.
What areas of investment are most critical for small business owners right now?
Well, they can invest by paying off their debt. Many small businesses take out a loan, and you need to get rid of that. You need to take some portion of your profits and pay down your loan. You have to be debt-free.
A giant corporation is accessing the capital markets, but small businesses generally are begging and borrowing from people at very high interest rates. The worst thing you can do is put it on the credit card at 23% interest.
You have to pay up the balance of the credit card every month, because that money is so expensive. I find a lot of small businesses carry balances over their credit cards every month, and that’s a disaster.
Some people talk about “good debt.” Can debt ever be good for a small business?
There’s no such thing as good debt. There’s only risk. You may be able to manage it, but if there’s a downturn in the market, you go bankrupt. Debt is a very powerful instrument of destruction. If you don’t respect it for what it is, you’ll get into trouble.
People use it too often. It makes an assumption about stability of cash flow to pay it off, but very often that stability does not exist. When you start missing payments, you get a foreclosure. Properties are taken away from you when you lose all your equity.
There’s no such thing as good debt. Debt is just risk. How much risk do you want to take? Generally speaking, in my real estate portfolios, I never put on more than 30% of the value of a property in debt. That means even if the value gets cut in half, I’m not wiped out. However, if you put 60–70% of the value of a building or a home or an apartment in debt and there’s a correction, you get wrecked.
What’s one small area of business that you can focus on every day to keep growth on track, besides things like managing daily cash flow?
Customer support. The most valuable customer is the disgruntled one that you’ve made peaceful, that you’ve actually solved for. They become an advocate. When you take care of a customer, people say, “Well, that’s just customer service.” No, that’s an opportunity. When you have somebody that’s really mad at you, and you can turn that around, that actually becomes the most valuable customer you’ve ever had. They will say, “I had a bad experience with this company, but they really made it right when they shipped me a new product or repaired what was wrong.” That really matters.
