Robert Herjavec and the rest of his co-stars of the popular reality show Shark Tank have unique insights into small businesses after having worked with so many over the years. They know what makes or breaks small businesses and why they’re so important to the American economy.
“Small businesses are near and dear to my heart, both from the show and my personal experience,” says Herjavec. He and his fellow “sharks” recently talked to Business Insider about the five biggest challenges small businesses face.
1. Thinking big. "The biggest challenge for a small business in a small town is the same as a small business in a big town: thinking big, being able to compete with large-scale competitors, and at the same time staying relevant," Herjavec says.
"People start a small business to do dry cleaning or be a bake shop, or to take care of dogs, or whatever their passion was. And you’ve got to find that help, because if you can’t have a brand on a small town, you can’t have a brand on a global scale."
2. Don’t get a big head. "Once a small business is up and running and entrepreneurs have a mini-hit on their hands, the biggest challenge is keeping the entrepreneur’s head on their shoulders. There’s something about instant fame and quick success where people get a big head and you have to squeeze it in. That’s the biggest problem with my entrepreneurs,” says Barbara Corcoran.
3. Don’t confuse successful crowdfunding campaigns with success. "Small business owners have seen people create large amounts of revenue from crowdfunding, but they don’t see a lot of the backstories," says Daymond John.
"If you were fortunate enough to have a large amount of people crowdfund your product, were you able to deliver to them afterward and deliver on that promise? Because after you sell that first piece, you have a lot of business to do after that," he said. "You can make anybody buy once, but can you do two, three, seven times? They think they just need a million dollars, but that’s just the beginning of their problems."
4. Know your numbers. “Another big one is small business owners' inability and ignorance of accounting. If you don’t know your numbers, you’re going to go out of business. Nobody likes accounting. I don’t like accounting. I don’t even like my accountant — super-nice guy, but I don’t really like him, I don’t want to talk to him. But accounting and finance is the language of business. You have to understand that stuff,” says Herjavec.
5. Realize the importance of backup cash. “The biggest challenge is cash flow. Once a business is up and started, they have to have the cash to buy the product to sell it — even if they have a hit on their hands. They have to pay the patent when someone is trying to steal it and they don’t have the cash,” says Barbara Corcoran.