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Don't be too thrifty - invest in yourself and your business.
- Only half of small businesses survive the first five years and beyond, the US Small Business Administration found in 2018.
- There are common mistakes to avoid to keep your company viable, these entrepreneurs who overcame them said.
- Don't be afraid to spend on things that'll support your business, like outsourcing tasks outside of your wheelhouse and keeping up with new technology.
- Also, remember to trust in yourself - you're the primary investor in your company's success.
- Click here for more BI Prime stories.
You've no doubt heard some version of grim statistics for the new business survival rate. 2018 data from the US Small Business Administration's Office of Advocacy revealed that while over 20% of new businesses tanked in their first year, only around half of small businesses were still alive five years or longer after launching.
With entrepreneurs facing such high rates of potential failure, it's important for company founders to know what mistakes to avoid. Business Insider polled a wide range of small business owners and entrepreneurs across diverse industries to learn about the biggest faux pas they've made on the job. Here are their tips for how others can steer clear of their errors to boost their own business' chances for longevity.
1. Being too thrifty to invest in growing your business
Faith Mariah, founder of the blog Radical Transformation Project - a mental health blog that generates money from affiliate marketing, course sales, and advertising - revealed that her biggest mistake when building her business was being "way too cheap."
Faith Mariah
Faith Mariah.
"I wasted months of my time trying to teach myself how to do everything by using Google every time I had a question," Mariah said. "On top of that, I was too cheap to hire out the tasks that I wasn't good at."
Mariah said that her business started to grow once she invested in the right mentors and started contracting out small tasks that she either wasn't good at or gobbled up too much of her time.
Kathleen Lucente, CEO and founder of PR agency Red Fan Communications, said that one of the most important lessons she learned after starting her business was to "separate church and state" to avoid the mistake of doing too much admin directly with her clients.
"I love to get in the trenches with clients, but oftentimes administrative work like sending out invoices gets in the way," Lucente said. "Setting up this infrastructure as much as possible by hiring an accountant or a lawyer will help free up time to do great work."
Kathleen Lucente
Kathleen Lucente.
When Lucente was doing this administrative work on her own, the result was that she would be up until 11 p.m. getting financials out.
"That wasn't sustainable and not my skill set," said Lucente, who noted that this approach was needed as the business scaled, but as soon as she felt that her financials were strong enough to add a CFO, she did. Also, because the demand on her calendar is intense and she receives upwards of 150 emails a day, she also hired an administrative assistant.
"If I'm swamped with [admin details], I'm not getting to the senior consulting work that my clients value," Lucente said. "Having an incredible assistant is essential and someone that I can truly trust."
As a result of investing in her business with these new hires, Lucente reported that her PR firm managed to change their receivables from over 45 days to just 10 days.
"I'm focused on working [as] CEO versus chasing down invoices," said Lucente. "I am able to take on the meetings that make the most sense, as my assistant is screening for the right fit and making recommendations for people who might be better off with a different service. I have the best force field around me, and as a result, my clients get the best of me and I can do what I'm best at! Also, my staff gets my time and mentorship."
Similarly, Chris Facey, owner of third-party freight shipping company Freightsavvy.com, once went way outside of his skill set to personally pick up and deliver a shipment for a client.
Chris Facey.
Chris Facey
"While the customer loved the effort, it was extremely foolish and highly illegal (as the DOT officer who pulled me over informed me)," Facey said.
Rather than getting discouraged about the debacle, Facey said the experience taught him to view everything as a learning opportunity.
"Despite the potential disasters (safety, fine/jail time, missed deadline), I took away so much from this nightmare," he said. "I viewed it as a learning experience and I grew from it, so it was a net positive."
Facey advised small business owners and entrepreneurs to be mindful and value their zone of expertise. "Be resourceful and find your thing, then lather, rinse, and repeat over and over!" he shared.
2. Failing to market to your target audience and keep up with changing times
Mark Aselstine, founder of Uncorked Ventures, which specializes in wine clubs and gift baskets, admitted that his biggest mistake was the largest check he has ever written.
"We signed a national radio deal to create branded wine clubs for a series of conservative talk radio hosts," said Aselstine. "Honestly, we didn't feel great about it ... but figured that business was business."
After a few months of the radio ads running and having basically nothing to show for it, Aselstine and his team made a realization: Wine isn't sold over the radio for a reason.
"It doesn't really work," the founder said. "Tasting notes and talking wine can be boring enough in writing, let alone via spoken word."
Aselstine said that the "sad thing" was that the company would have likely gotten "at least 100 times as many customers" from that same expenditure on Google Ads.
With this lesson under his belt, he advised other small business owners to have a good understanding of what new marketing methods could work for their business, and to make sure that their selection is sensible.
Mitch Goldstone, CEO of ScanMyPhotos.com, noted that his biggest mistake as an entrepreneur was falling behind with technology. He explained that his business began by providing DVD data discs to store archive photos. But as technology changed, his company was slow to reinvent and upgrade their product category, which slowed the growth of the business.
Mitch Goldstone
Mitch Goldstone.
"This is an important lesson to constantly monitor and keep up with technology," Goldstone said, adding that he learned from his mistakes. Now ScanMyPhotos.com provides customized flash drives and instant uploading so that customers can view their pictures the same day as digitized.
3. Believing that someone else has all of the answers
Brittany Hovsepian, cofounder and owner of real estate investment company The Expert Home Buyers, shared that early on after starting her company, she and her cofounder (her husband Nathaniel) fell into the classic guru trap. They heard about a company leader's program about motivated sellers on a podcast and signed up.
For the first few weeks, the cofounders were happy and excited to be embarking on their new adventure, but quickly realized that they were just a number in the program's system. The mentorship wasn't there and their business wasn't getting better.
Brittany Hovsepian
Brittany Hovsepian.
Her takeaway for other budding entrepreneurs is that there is nobody out there who can or will do the work for you.
"Maybe what they were having us do worked great for them and their clients out on the West Coast, but out here in the South, it wasn't working at all," said Hovsepian. "We knew after three months that what we were doing [with them] wasn't working, and that these people didn't know about our specific market and the needs that the sellers out here had."
That is when Hovsepian realized that the person she had entrusted as a "guru" truly didn't have all the answers, and that she and her cofounder would need to trust themselves to test the market and figure out what worked in their area.
Since leaving that program, Hovsepian and her cofounder have taken over marketing for themselves and have closed three deals, with two more in the pipeline. They are also continuing to work 20 solid leads and hope to turn a couple into deals in the coming months.
"There is no 'get rich quick' scheme," she said. "There is only hard work and learning that will get you where you want to be."