What makes certain entrepreneurs succeed? There’s no magic formula for the success of entrepreneurs, but there are certain things that they all have in common. A few studies done on successful entrepreneurs show key characteristics of small business owners who flourish. Here are some things that thriving business owners do right and some things they can do better.
What successful entrepreneurs do right
1. They start strong
Around 84% of respondents to a poll by Kabbage of 500 successful entrepreneurs claim their businesses became profitable in the first four years. While over two-thirds made a profit in the very first year. In contrast, only 8% reached profitability after the fifth year.
Lesson learned: Focus on getting into the black as soon as you can.
2. They always seek new customers
The number one business challenge reported by entrepreneurs in the survey is obtaining new customers. It is much more important than cash flow management or doing better than the competition.
Lesson learned: Don’t sit still. Constantly work on generating new leads and closing new sales.
3. They invest in their businesses
If you had extra cash, what would you do? In a different study done by Kabbage found that 40% of entrepreneurs said they would invest it back into their business. And 47% said they have used their personal funds to finance their business at one point or another.
Lesson learned: Successful small business owners put their business above everything else.
4. They work hard
If someone tries to tell you that all small business owners are slackers, here is some proof that they are wrong: Around 86% of entrepreneurs claim they work on the weekends. 23% say they take less than two vacation days per year, and those who go on vacation, 75% of them work while on vacation.
What successful entrepreneurs could improve on
1. They could invest more in marketing their businesses
It probably makes sense that because of their big passion for gaining new customers, according to the survey, small business owners say that marketing strategies are their top priority. However, most of them aren’t putting their wallets to their wishes. Most survey respondents admit they spend way less on marketing than they do on rent, payroll, and purchasing equipment.
Sure when it comes to choosing between marketing and meeting payroll, the choice is obvious. But that doesn’t mean that marketing doesn’t deserve more attention, time and resources. And most entrepreneurs regret not investing more in marketing.
Here is a breakdown that shows what the respondents spend on marketing and what they now wished they spent.
- Year 1: Marketing was 7% of the budget; they wish it had been 28%
- Years 2-4: Marketing was 13% of the budget; they wish it had been 25%
- Years 5-9: Marketing was 7% of the budget; they wish it had been 16%
- Years 10-19: Marketing was 5% of the budget; they wish it had been 23%
- Years 20+: Marketing was 11% of the budget; they wish it had been 23%
More than half of the businesses surveyed have $1 million or more in revenues. Can you imagine where they would be today had they invested more in marketing?
2. They could plan to seek financing
Although the surveyed business owners claim to reinvest back in their business, a lot of them don’t choose to finance as an option. Majority of the surveyed entrepreneurs said they required working capital to expand at a certain point. More specifically:
- 38% of companies borrowed capital during their first year
- 29% of companies borrowed capital in years 2-4
- 17% of companies borrowed capital in years 5-9
- 14% of companies borrowed capital in years 10-20+
If you think you can support your business growth needs from cash flow alone, you will be disappointed. You should instead be prepared to look for financing from outside sources if you will need it. Even though in the end you might not need to tap into investors or lenders, it’s always best to be prepared.