Businessman, investor, and “Shark Tank” star Robert Herjavec offers advice and insight on how to most effectively equip your small business for success.
What are the key factors that small business owners should consider when developing their initial business strategy?
Number one is market fit. Is their business aspiring or vitamins (i.e., do they have to create demand or fill an existing demand)?? Both have completely different go-to-market strategies. Second, capital. How much capital are they going to need to get traction? Make sure you can stay for the long run. If you need to raise capital before you get any market traction, you will pay a steep price in terms of giving up too much equity.
In your experience, what are the most common mistakes that new entrepreneurs make, and how can they avoid them?
Most entrepreneurs are enamored with building their own business and focus on everything else but the most important thing when you start is sales. Another common misconception is time. It is going to take far longer and cost far more than most people think.
Another common mistake is that they don’t add enough value to the client. In the day of YouTube and Google, clients can get access to almost any information they need. Are you adding something to clients that they don’t know?
Can you share some strategies for managing cash flow effectively, especially for businesses that are just starting out?
Get paid early. Offer discounts, ask for a down payment, and get some sort of cash commitment sooner. Same thing for vendors — offer them a discount. Tell them you need help with extended terms, but you will only focus on their product or give them something in return.
Finally, don’t spend money whenever possible. Every dollar you spend is a dollar gone. Make sure you are spending on stuff that moves the business forward and not for paint on the walls.
What are some effective ways for small businesses to scale their operations without compromising quality or customer satisfaction?
Sell more to existing clients. It costs 70% less to sell to an existing client than to find a new one. Also, verticalize — the narrower your client base, the greater your expertise can be and the cheaper to market to them. Focus on healthcare, for example, or a certain type of client before selling everything to everyone.
Finally, hire business catalysts. The first few hires should be people that drive sales, not admin or support.
What motivates you to continue investing and mentoring new entrepreneurs, and what do you find most rewarding about it?
Life is a journey, and if we are blessed enough to find some success, I believe we need to reach back and help others, as others have helped me. Also, curiosity is energy, and it is one of the keys to longevity, in my mind. The curious mind is the active mind; I like to learn from others.
Also, business and people are fascinating. As my pastor once said to me, “You will never find anything in life as fascinating as another human being.” I just love people.
What advice would you give to someone who is hesitant to start their own business due to fear of failure or uncertainty?
Failure is a response, but so is success. Are you worried about failing for emotional reasons (e.g., ego) or are you truly worried about the merits of the business? It’s a fool’s game to look for certainty. Instead, get comfortable with making constant, small adjustments and being able to pivot.
Finally, believe in yourself. A great business is an entrepreneur who has their act together — get your life in order before you try to run a business.
