“Shark Tank” investor Kevin O’Leary (AKA Mr. Wonderful) discusses discusses the post-pandemic key to success and how data collection in any form is the most valuable tool for small businesses.
What are some key qualities that distinguish successful small businesses from those that are struggling right now?
The key to the answer here is to understand how the economy has changed in the last three years. A lot of it has to do with a post-pandemic world. Let’s just start with some of the data that no one saw coming. Obviously, working remotely was brand new for everybody. Now, it’s commonplace. A lot of technology was adapted. A huge portion of the economy had not digitized their preferences or purchasing strategies. However, if they didn’t change that during the pandemic, they’d starve to death. So, everybody is incredibly savvy now in ordering products and services online. The pandemic basically doubled the size of the digital market in 36 months, which is probably the most profound change.
Now, if you look at the distribution pie chart for businesses selling consumer goods, it was 50% to big box retail, classic retail distribution, and that’s a 50 cents on the dollar business. Then, 40% was going through Amazon, which is 60 cents on the dollar. Only 10% of sales were through the website of a company, so it was never profitable for them. That’s all changed today.
Now, most of these companies are 50% direct-to-consumer. Even Amazon had to shut down for 18 months during the pandemic, so businesses figured out how to sell directly to their customer base. So, the difference between a successful company and one that’s struggling is that the successful ones have figured out customer acquisition cost and return on ad spend.
Are there any specific technologies that new business owners should be investing in to better run their businesses?
That’s a very good question because the big challenge now in terms of customer acquisition cost is understanding the power of social media and how to harness it. It has become a combination of art and data science because we spend in aggregate millions every month on every platform.
TikTok is completely different than Instagram, which is completely different than Twitter and completely different than Facebook. You have to coordinate all of that, so you produce a 15-second video for TikTok, and then a five-minute video for Facebook and Instagram. Then the resolution of the piece for Instagram has to be different than for Facebook. I mean, all of these little things change engagement in a huge way. To help manage this, we created a tool called Wonder Engine. Wonder Engine is an AI dashboard that aggregates a whole bunch of services that would normally cost you thousands of dollars a month down to $99 a month.
Another huge marketing tool for businesses beyond social media is streaming ads. We created Wonder Ads, where we aggregate the buys and you decide what you want to use and where. Then, we give you the dashboard and show you what performs, so you can have 50s and 30s placed anywhere in the country.
What were some pivotal moments or lessons that influenced your growth as a business professional?
Direct-to-customer ended up being the game changer for me when I realized that, in a nutshell, data is the new oil. If you know the preferences of your customers — when they buy, where they buy, flavor, size, etc. — it changes your world.
You know, the first time I really saw this happen was almost 10 years ago with a company that I partially own called Wicked Good Cupcakes. Most cupcakes are total commodities. There are probably 250,000 kitchens making commercial cupcakes as we speak. You can buy a cupcake on every bodega corner everywhere in America. How did Wicked Good Cupcakes become such a behemoth? Because Danny and Tracy, the mother-daughter team, went to social media and told the story of their family journey of creating this business — the ups, the downs, the daily trials and tribulations. They talked about the development of flavors, and what worked and what didn’t.
The arguments between a daughter and her mother resonated so much with people that they connected with this family going through the hell of building a business, and they became advocates for them. They only wanted to buy cupcakes from Tracy and Danny. They formed a community. I’ve never seen anything like it.
Before there was any AI at all, they started to detect their customer preferences. A family would like red velvet at Thanksgiving, but they wanted something else at Halloween. They had all this data, and they would push offers based on the preferences of these people. The response rates were insane. They were just off the charts. That was the one that taught me that direct customer relations are everything. Now, everybody tries to do this, but Wicked Good Cupcakes was authentic. They were honest. They constantly communicated with their customers and made them part of their community, and it was crazy successful. That is a story that I’ll tell for the rest of my life as an entrepreneur. You can do what Tracy and Danny did.
What advice would you give to small business owners looking to optimize their financial management practices and achieve sustainable growth?
Don’t believe your own forecast. Never ever live and die by every cent you can make because saving money is very, very hard to do. Also, get ready to pivot. You’re going to have to pivot so many times during the day. Finally, above all, learn to differentiate the signal from the noise. So much comes at you every day, so much noise, and yet there’s only one signal. Decide what the three things are that you have to get done that day, and don’t lose the signal. Don’t get distracted by something else, because there’s always something that will distract you. You can’t let that happen. You must differentiate the signal from the noise. That’s the key to success.
