What do successful entrepreneurs do right? There’s no magic recipe for entrepreneurial success, but there are some things that successful small business owners have in common. A couple of studies polling entrepreneurs reveal key characteristics of small business owners who thrive.
Here’s what successful business owners do right and a few things they could improve on.
Some 84% of respondents in a poll by Kabbage of 500 successful entrepreneurs say their companies became profitable within their first four years, and more than two-thirds turned a profit in their first year. In contrast, just 8% became profitable after their fifth year.
Lesson learned: Focus on getting into the black as soon as you can.
Entrepreneurs in the survey report that finding new customers is their number-one business challenge; it’s a much greater concern than managing cash flow or staying ahead of the competition.
Lesson learned: Don’t rest on your laurels. Stay laser focused on generating new leads and closing new sales.
What would you do if you had surplus cash? Forty percent of entrepreneurs in a different study by Kabbage say they’d put it back into the business. And nearly half (47%) say they’ve used their personal savings to finance their business at one point or another.
Lesson learned: Successful small business owners put their business first.
If anyone tells you small business owners are slackers, here are some facts to refute them: A whopping 86% of entrepreneurs work on the weekends; 23% take fewer than two vacation days per year; and of those who do take vacations, 75% work while on vacation.
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There are a couple of areas where entrepreneurs could do better.
As you might expect, given their passion for finding new customers, small business owners in the survey say putting new marketing strategies in place is a top priority. However, they’re not putting their wallets where their wishes are. Survey respondents acknowledge they spend much less on marketing than they do on payroll, rent, and purchasing technology and equipment.
Of course, when you’ve got to choose between meeting payroll and marketing, the choice may seem obvious. But entrepreneurs know that marketing deserves more time and attention—and also regret not investing more money in their marketing.
Here’s a breakdown showing the percentage of their budget that survey respondents spent on marketing, and what they wish they had spent instead:
- Year 1: Marketing was 7% of budget; they wish it had been 28%
- Years 2-4: Marketing was 13% of budget; they wish it had been 25%
- Years 5-9: Marketing was 7% of budget; they wish it had been 16%
- Years 10-19: Marketing was 5% of budget; they wish it had been 23%
- Years 20-plus: Marketing was 11% of budget; they wish it had been 23%
Over half of companies surveyed have revenues of $1 million or more. Where would they be today if they had invested more money in marketing? I can only imagine.
Although the small business owners surveyed do reinvest in their businesses, they’re too quick to rule out outside financing as an option. Most of the entrepreneurs in the study say they needed working capital to grow at a certain point. Specifically:
- In their first year, 38% of companies borrowed capital
- In years 2-4, 29% of companies borrowed capital
- In years 5-9, 17% of companies borrowed capital
- Years 10-20-plus, 14% of companies borrowed capital
If you assume you can finance your business growth needs from cash flow, you may be in for a rude awakening. Instead, be prepared to seek financing from outside sources if you need it. You may never need to tap into lenders or investors—but it’s best to be prepared.