Top Five Small Business Mistakes And How To Fix Them

Our business culture revolves around studying successes. Read any tech blog and you will drown in a sea of stories of founders who made it. Therein lies the survivorship bias.

As entrepreneurs, we over-attribute success to things done by the successful. We need to also study the strategies that did not work to make better business decisions. Let's take a short break from the winners and learn from the wisdom of what Nassim Taleb, author of The Black Swan, calls the “silent grave.”

The five mistakes below are so common that every entrepreneur has made at least one of them.

1. Not Knowing Who Your Best Customers Are

When you're starting a new business, any customer is a good customer. But as you grow, you need to be more strategic by looking at your data.

Identify who your best customers are by looking at return on investment (ROI), who you love working with and which people are easy to work with. Factor in hidden costs like customer service resources for those customers.

Keep an updated list of customer personas that you revisit at least once a quarter. The smartest businesses owners understand their ideal customer is always evolving.

Your goal then becomes to adjust your marketing efforts to bring in more prospects that match your ideal persona.

Pro tip: The trick is to make sure to create, share and solicit feedback on these marketing personas. You want to do this efficiently. Here is a great example of how one company creates these personas.

2. Blowing Through Your Marketing Budget Too Fast

Even the most seasoned tech entrepreneurs fall into this trap. I have seen far too many small businesses do a little keyword research, set up some Facebook Ads and call it a day. Sure, the ads received clicks. But they did result in customers?

Do small tests and keep an eye on ROI.

Identify two to three marketing channels that you want to test. Allocate a small budget to these tests and track conversions to ensure they are profitable. Only then scale them to spend your budget on channels that worked.

Pro tip: Always have retargeting campaigns set up for prospects that visit your website. The cost to keep those campaigns going is cents on the dollar as compared to your base ad campaigns.

3. Not Understanding The Importance Of Having Working Capital

Far too many small businesses defer looking at the finances on a regular basis. Unless you raised $100 trillion dollars from venture capitalists (VCs), your leeway for throwing things at the wall to see what sticks is much shorter. Without the needed working capital, a business owner won't be able to grow their company or pay bills, employees and vendors.

Identity if you need extra working capital besides the cash you already have. If you do, you can either trim down on the needed resources, seek out investors or apply for a business loan.

Each option has its pros and cons.

Getting a business loan can seem overwhelming at first. There are many options you need to be aware of. The biggest benefit with a business loan is that you maintain full ownership of your company and call all the shots.

Pro tip: Get your financial documents in order prior to seeking funding. That will speed up the process so you can focus on the business.

4. Hiring The Wrong People

Be aware of the halo effect: The pitfall of liking a potential candidate based on a few traits while glancing over red flags and missing skills.

Your job as the owner of a tech business is to hire people smarter than yourself.

Craft job postings that are unique to what you need in a candidate and fits your company's culture. Don't copy another company's job description.

Pro tip: Always ask for references and follow up with them. Small businesses often overlook this when starting out. Reference checks remain one of the best sources of information about candidates.

5. Underpricing Your Product

Speak to any small business and 9 out of 10 times they will say, "I wish I charged more from the start." You should test out different pricing strategies to maximize profitability.

You will also see a side effect of increasing the prices of your software or services -- better customers. The lower your prices, the more likely you are to attract prospects that eat up customer support resources. Contrary to common belief, customers who are willing to pay more money are often easier to work with.

Pro tip: Use an A/B split testing tool like Optimizely or VWO to safely try out different pricing and conversion rates.

Conclusion

Every business owner makes mistakes. The key is being aware when something is not working and taking conscious steps to fix it. Even though every industry is different, most problems you come across have been solved for in the past by another entrepreneur.

Failure serves as the greatest lesson in business and in life. If you remain persistent about recognizing and proactively fixing problems, the world is your oyster.

Why Trump's Tax Reform Will Spark Continued Small Business Growth

When President Donald Trump signed the Tax Cuts and Jobs Act on December 22, 2017, the new legislation was met with mixed reviews. In today’s volatile and highly partisan political environment, it’s no surprise that some celebrated it as a landmark accomplishment while others criticized the plan as possessing gaping holes.

From where I stood, as the CEO of sweetFrog Frozen Yogurt, I was delighted that the new tax was signed into law. In fact, I was proud to play a small role in the process, as I had asked for much-needed tax reform in a November 2017 Op-Ed that ran in Virginia Business. I firmly believed that small business owners needed tax reform to thrive, and I was happy to see our government work together to pass mission critical legislation.

Now, regardless of what you think of President Trump as a man and a leader, I’d like to offer some reassurance that the Tax Cuts and Jobs Act will help small-business owners build on the fantastic momentum generated by the American economy in 2017. The stock market is up, jobs are up, sales are up, and this tax reform may help small business owners do even better in 2018.

Here are four reasons why I believe Trump’s tax reform will provide economic jet fuel for small business owners from coast to coast:

Tax rates have been reduced.

As you likely are aware, small businesses will be receiving a deduction of 20% for qualified business income. But, back in the day (that is, before December 22, 2017), income from a small business would pass through to the proprietor on their own taxes, and these individuals were sometimes saddled with income tax rates as high as 39.6%.

The new tax rates are certainly fairer to the business owner, which should encourage more people to take the leap and start their own business. There have always been countless reasons that interested entrepreneurs have wanted to join the sweetFrog family, but, at the same time, I can’t help but think that we and every national franchise now have another selling point. We can remind interested owners that they’ll pay a lower rate on their taxable income than they would have if they had purchased a franchise a year earlier.

But, that deduction does more than just help the business owner. It helps the business itself, and now owners will have more money freed up to hire more people and to invest more in infrastructure.

How Amazon Is Impacting Small Business Finance

As has proven the case throughout 2017 and the early part of 2018, small business loan approval rates for big banks hit another new high last month, according to the Biz2Credit Small Business Lending Index™ (February 2018 figures). Big banks, defined as institutions with assets of more than $10 billion, are granting more than one-quarter of the small business loan applications they receive. The 25.4% approval percentage, up one-tenth of a percent from January 2018, represents another new post-recession benchmark for big banks.

We have come a long way from the doldrums of the credit crunch in 2010-11. During the second half of 2011, for example, loan approval rates never went past 10 percent. Thus, more than nine-of-ten small business funding requests were rejected by big banks. In fact, banks were denying the requests of long-time customers with whom they had deposit relationships.

As this happened, small business borrowers looked for other funding options. Some found willing lenders in small banks, others in credit unions. Entrepreneurs also looked to non-bank “alternative” lenders and quickly learned that they could search for the best deals on small business funding online, just as they had embraced Amazon and other sites for online shopping.

Gradually, the economy improved, and we saw big banks and other funders steadily increase the number of funding requests they granted to small business owners. Approval percentages reached double digits since January 2012 and have not dropped below 10 percent since. Less than a year ago, big banks crossed the 20 percent benchmark, and now more than one-quarter of applicants receive funding.

The solid economy of the past year is a big reason for this good news. Consumer confidence is high, as is small business owner optimism. At the same time, fuel prices are still low, and more jobs than expected were created by the economy in February, according to the most recent Jobs Report issued by the Labor Department. Meanwhile, the Federal Reserve has begun to raise interest rates from the near-zero levels of a few years back. This makes lending more profitable for banks.

Another reason that lending figures have climbed is because of the revolution of online retail that is led by Amazon. There is a lot of demand to fund commercial real estate. While mall construction has essentially halted, ecommerce has caused a boom in the construction of warehouses and other industrial buildings. Additionally, companies involved in transportation and logistics are servicing Amazon and other online retailers.

Many of the loans processed by small banks are SBA loans, which lowered the down payment requirements for commercial real estate from 20 percent to 10 percent. That has spurred SBA lending, one of the nation’s leading experts in small business finance. Another factor is that SBA loan defaults are less than one percent. Meanwhile, the SBA’s 75 percent guarantee is still in place.

Small business: Why Soccer Shots’ owner chose to franchise

It didn't come as a surprise when Soccer Shots owner Jeremy Sorzano started a business teaching kids how to play soccer. He was a defender on the Charlotte Eagles Soccer Club from 1996-2003.

Sorzano, 43, like most of the Eagles players, supplemented his income by running soccer camps and clinics for children. In 1997, Sorzano realized that offering elective soccer instruction at childcare facilities across Charlotte was an untapped niche market.

Soccer Shots, a program for children, ages 2-8, introduces soccer to young children. It also helps out parents who may not have the opportunity to bring their child to another location for a soccer program.

In 2005, Soccer Shots started to franchise. Sorzano owns Soccer Shots Charlotte with Dustin Swineheart and Matt Uher. Sorzano and three other partners own the franchised branch of the business. Currently, they have 110 owners in 180 territories, including one in Canada.

Sorzano spoke to CharlotteFive for the Small Business Series:

Why did you decide to franchise?

"I was running the local business here in Charlotte. As it was growing, my friend and business partner introduced Soccer Shots up in Harrisburg, Pennsylvania. We were both running a program, and a few friends wanted to do the same thing in the cities they live.

"In order to do that, we decided to franchise. Just like with any franchise, they get to use our name, the curriculum and the marketing materials we produce."

What makes Soccer Shots different from other similar programs?

"One is obviously the curriculum. We tailor the sessions to the various age groups we serve. Our goal is for children to find success and hopefully fall in love with soccer and want to continue to play.

"We also work hard to communicate with parents. We send session summaries home with (the) skill of the day and the character word we taught so parents are aware of what their child is learning."

How important are the coaches to your business?

"Soccer Shots actually pays all of our coaches. With that comes about 20 hours of training. Then we try to monitor how they are doing and make sure we have coaches that know how to work with those age groups and that they are fun and energetic.

"We are serious about finding coaches who really want to have an impact on children and are committed to being prepared and deliver a great experience."

Soccer Shots has several owners. How do you manage these business relationships?

"There are some pretty sobering stats out there showing that most partnerships don't last. They take work. Maybe it's a little bit like a successful marriage. It takes communication, it takes being honest, knowing your goals and making sure that you clearly define who is responsible for what parts of the business.

"I think you have to be able to step back and let people do their job."

What do you do for fun?

"I've got twin 3-year olds. My fun these days is spending time with my wife and them and watching them grow up. We are hoping to get them more interested in hiking and camping, which we really enjoy doing. But that's a work in progress."

6 Ways to Think Outside the Box When Marketing Your Small Business

Sometimes budget limits small businesses from executing their marketing ideas, but not every successful strategy requires a lot of money. Here are six outside the box ways to market your small business that are both inexpensive and effective.

1. Get personal.
Customers love the opportunity to make something their own. Studies have shown that 56 percent of consumers said receiving a personalized incentive would improve consideration of the brand. Think Personalized M&M'S and Share a Coke. If there's a way for you to allow customer customization, give it a try and see how your audience responds. Not sure how to add a personal touch to your business? Anything that gets your customer's name on your product works -- using frosting to write the order name on your donuts, or offering free monograming on your inventory of purses or apparel.

2. Promote customer engagement.
In today's social world, whatever you can do to make your small business more shareable is good for marketing. What is something you could implement that your customers would find Insta-worthy? Create an opportunity for photo opps and increase your social reach without spending a cent. A "selfie campaign" is a great way to encourage posting and sharing. You can even add a prize component to entice people to use your custom hashtag or tag your business in their posts.

3. Say thanks.
How often do you let your customers know that you appreciate them? You'd be surprised the power a simple "thank you" can have on creating customer loyalty. A study by TD Bank found that 77 percent of consumers like when brands demonstrate their appreciation. While a card can often be effort enough, let's try to remember that we're thinking outside the box and go for something bigger. How about hosting a special event where guests can sample new menu items, or showcase the season's new arrivals with a fashion show? Any event that builds excitement and celebrates the customers will do the job. Try utilizing Meetup.com or another event website that can gain the attention of new customers as well as current ones.

4. Develop a loyalty program.
If you're losing customers, you need to establish a way to cultivate repeat business. Eighty percent of U.S. Generation Z consumers are willing to sign up for loyalty cards in exchange for deals or discounts Your loyalty program can be as basic as a punch card or as elaborate as a membership that rewards customers based on how often they visit or even how much they spend. 

5. Utilize LinkedIn.
LinkedIn is one of the most frequently skipped social media networks for small businesses. But why? While not the most exciting platform, it does provide unique opportunities for marketing your business. Without even spending any money, you can connect with people in your community by creating a group and reaching out to other small business owners and potential customers in your area.

6. Survey your current customers.
If you're not sure what types of marketing or promotions your customers will respond to best, ask them. A simple survey can provide endless insight into what you're doing right and wrong, and what you're not doing that you should be. Include a raffle-like component, where one participant will win a prize (such as a $100 credit to your business) to encourage your audience to take part.