Small Business

SMALL BUSINESS DECEMBER 2019 | FUTUREOFBUSINESSANDTECH.COM

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John Paul DeJoria The Paul Mitchell co-founder on how he went from homeless to billionaire

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How entrepreneurs can network effectively and win customer loyalty The top five mistakes small businesses make that lead to failure

What Small Businesses Do When the Going Gets Tough Small businesses do not need to struggle alone when faced with challenges. Resources and communities are out there to help small businesses succeed.

Small businesses are the backbone of our nation’s economy. From the fifth generation owner of the manufacturing plant to the refugee-turned-entrepreneur to the owner of Waban Hardware, who inspired my love for small business as a child, these folks contribute to the national economy every day.

They infuse money into local economies

and promote vibrant and diverse communities across the country. Yet they consistently need to overcome challenges.

Through my work, I often meet with these creators and innovators — the ones keeping a family business alive or those dreaming up a new way of life and opportunity.

Businesses — no matter their type, size, or location — share many similar challenges. Their struggles are real, but so are the paths to success. Here are two ways to keep going: 1. Find your tribe I admire the hard work, grit, and can-do attitude

Tom Sullivan Vice President, Small Business Policy, U.S. Chamber of Commerce

of entrepreneurs. But I know they don’t, and can’t, do it alone. It takes a village, board, or tribe.

Whatever you want to call it, small businesses need

and are always looking for trusted and honest advice.

I am biased, but the first place to look may be your local or state chamber of commerce. Or consider national organizations like the U.S. Chamber of Commerce or trade-specific associations like the National Retail Federation and the National Association of Manufacturers.

When choosing your informal “board,” look for furrowed brows rather than constant head nodding — typically, constructive criticism is more helpful than praise. And then meet in person as much as possible to build trust.

2. Focus on values Hiring folks that share your company’s values gets you one step closer to having happy and fulfilled employees.

It’s no secret that there’s currently a workforce shortage. But did you know, according to LinkedIn’s Workplace Culture report, that 86 percent of millennials are willing to take a pay cut to work at a business that aligns with their values?

Each of your employees is your brand. Happy employees and those that feel vested tend to stay longer and are better for your brand and bottom line. n

Publisher Sloane Ackerman Business Developer Stephanie King Managing Director Luciana Olson Lead Designer Tiffany Pryor Designer Celia Hazard Lead Editor Mina Fanous Copy Editor Sydney Scott Director of Sales Shannon Ruggiero Director of Business Development Jourdan Snyder Director of Product Faye Godfrey Content Strategist Vanessa Rodriguez Cover Photo Courtesy of Paul Mitchell All photos are credited to Getty Images unless otherwise specified. This section was created by Mediaplanet and did not involve USA Today.

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The No. 1 Strategy for Finding and Keeping Customers in 2020 Entrepreneurs just starting out or looking to grow their business should focus on networking — with a plan.

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ou’ve heard it a thousand times for a reason: networking is key. That’s because it works. Entrepreneurs who know how to network effectively establish a deeper connection between their business and the community they serve, and tremendously increase the exposure of their brand, ultimately leading to more — and more loyal — customers and greater overall business support.

Reach out According to the “Megaphone of Main Street: Startups” data report published

by SCORE, the nation’s largest network of volunteer, expert business mentors, new entrepreneurs across the country reported that in their first year of operations, the most successful marketing tactics were networking-based and involved directly engaging with customers.

Specifically, reaching out to a professional or personal network had the highest perceived marketing success rate (65 percent), followed by speaking at events (60 percent) and formal networking groups (54 percent). Clearly, networking is a no-brainer when it comes to spreading the word about your small business.

Network with a purpose For networking to be most effective for your small business, it’s best to make a strategic plan. Networking at endless local events may not be the most useful investment of your time. Instead, consider exactly what it is you want to achieve and search for events that cater to the customers or investors you want to reach. Create a target contact list and get to work. For assistance creating a networking plan, visit www.score.org and connect with a free expert SCORE business mentor. n Betsy Dougert, Vice President of External Relations, SCORE

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Believing in these five myths about how to run a business causes many entrepreneurs to fail.

Every year, Americans start businesses with the hope of achieving financial success, independence, and personal fulfillment.

Unfortunately, many times those dreams are never realized. Too often the enthusiasm and energy that small business owners put into their business isn’t matched by the planning and skills needed to survive.

Too many businesses believe marketing is their key to success, but hemorrhaging cash is the secret silent killer. So to the aspiring entrepreneurs, here are five myths small businesses fall prey to: 1. Don’t ask for help “You’re smart, you’ve got this.” Nobody has got it. There are so many free resources out there, and the biggest mistake many small business owners make is not using those resources. There are nearly 1,000 small business development centers nationwide — why would you ignore free help?

2. Don’t sweat your cash flow Money is the lifeblood of your business.

There are so many platforms out there to help you manage, including Intuit, Finagraph, and others. A whole industry is geared to keep your finances on an even keel — ignore them at your peril.

3. Don’t engage in social media “It’s noisy, it’s messy, and I don’t understand it.” Really? It’s out there in every customer’s purse or pocket. Why would you avoid your customers?

4. Don’t worry about hiring “You just need warm bodies; you’ve got a business to run.” More problems arise from poor hiring practices than almost anything else. One careless employee can cost more than you can imagine.

5. Don’t sweat the details Keep details under control and you’ll succeed. Paperwork is tedious, but lost opportunities and lost money are far worse. A license snafu here, a tax bill there, and you’re suddenly spending all your time catching up instead of moving forward.

C. E. “Tee” Rowe, President and CEO, America’s SBDC 6 • FUTUREOFBUSINESSANDTECH.COM

Billionaire John Paul DeJoria on What It Takes to Be a Successful Entrepreneur John Paul DeJoria is an inspiration to entrepreneurs. An army veteran, he hustled to make money and his own success. Now the self-made billionaire — his wealth is valued at $3.1 billion — is sharing his tips with entrepreneurs to help them make their business dreams a reality.

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tarting out, DeJoria sold encyclopedias, pumped gas, and worked as a janitor. For a while he was homeless. Then, in 1980, he and his friend Paul Mitchell used $700 to launch John Paul Mitchell Systems®, a company for hairdressers, salons, and the beauty industry.

Stay competitive “We were very resourceful and used the available funds we had to position ourselves as an established brand to attract business,” says DeJoria, chairman of the board for the company. “For example, we had an answering phone with another person’s voice, a P.O. Box, and a custom letterhead with all of our contact information to ensure the company looked official.”

They also initially priced product with only a five percent markup. That gave distributors a discount and ensured they could pay for the product upon delivery, instead of in advance.

“We knew we were successful at the two-year mark when we were able to pay our bills on time and each have $2,000 left over,” says DeJoria, who is 75. “We were frugal with every dime coming

PHOTO: COURTESY OF PAUL MITCHELL

These 5 Myths Cause Small Businesses to Fail

in because we knew it had to go right back out.

We didn’t have loans, so we were able to build the business responsibly.

It doesn’t mean we didn’t lose money, but in most cases, we were ahead of the game.”

Passion and patience DeJoria, also a co-founder of Patrón Spirits, says a successful business has services or products that you don’t have to sell. Consumers love your products and will buy them over and over again and tell their friends about it.

He warns entrepreneurs not to advertise until you have the distribution to support the demand for your product. When DeJoria was selling encyclope-

dias door-to-door on commission only, he received his best career advice: “Be prepared for a lot of rejection. If the first 100 doors are slammed in your face, be just as enthusiastic on door 101.”

He advises aspiring entrepreneurs to make sure they’re doing it for the right reasons.

“You have to be passionate and patient. If you’re prepared for rejection, and you believe your product or service is the best there is, do it,” he says. “If you’re only in it for the money, don’t do it. It was handto-mouth for me for two years, but we were passionate and believed in what we were selling.” n Kristen Castillo MEDIAPLANET

Entrepreneurs Share Strategies for Failure-Proofing Small Business Hear from four Entrepreneurs’ Organization members about their best advice for starting a company.

The statistics on small business survival are daunting: Only 50 percent of new companies will survive for more than five years in the U.S. marketplace.

We asked members of Entrepreneurs’ Organization, a global, peer-to-peer network of 14,000-plus influential business owners, what lessons they wish they’d known to ensure ongoing success before starting their companies. Here’s what they shared: Linger before launch “So much of an entrepreneur’s success relies on figuring out your true target prospect, the right pricing, and the winning product mix.

We didn’t realize how much of this we could accomplish before launching,” says Heidi Rasmussen, EO Dallas member and co-founder and COO of freshbenies.

Validate product-market fit “Do whatever legwork is possible to validate your product-market fit before investing everything in your concept. The more confident you are, the clearer your path becomes — and the lower your risk,” says Chris Cardinal, EO Arizona member and principal at Synapse Studios. “Go beyond just asking friends and family what they think; they won’t be honest, and they’re probably not your customer base.”

Leverage others’ experiences “Join an executive group — it empowers you to develop leadership skills and knowledge, which is nearly impossible to do alone. Learn from the successes and failures of others — leverage their experiences instead of reinventing the wheel!” says Nicolle Cannon, EO San Francisco member and CEO of Cannon Quality Group.

Fail and learn “Experiment frequently, fail fast, and learn from it. It’s okay to put bold ideas into action as long as you’re not afraid to jump ship quickly on experiments that aren’t producing results.

Just move on to the next experiment,” says Marcia Zaruba O’Connor, EO Philadelphia member and CEO of The O’Connor Group.

Gigi Thompson Jarvis, Vice President of Content and Marketing, Entrepreneurs’ Organization 8 • FUTUREOFBUSINESSANDTECH.COM

How One Female Entrepreneur Disrupted the Sleep Industry With the help of an entrepreneurial foundation, Kathrin Hamm launched a sustainable business to let customers have the sleep of their dreams.

When Kathrin Hamm started her company Bearaby, she sought to fill a void in the wellness industry that could have far-reaching benefits for her customers’ health — and the environment.

The only issue? She had trouble finding a partner to help launch her dream: to create sustainable weighted blankets that would address the sleep epidemic in the United States.

That’s where the Tory Burch Foundation came in. Started by fashion designer Tory Burch, it’s an organization that helps make female entrepreneurs’ ideas a reality through loans, education, and mentorship.

Investing in women “Women are a great investment,” Burch says. ”We know that if women entrepreneurs were more empowered economically, the global GSP would skyrocket — the latest studies say by $5 trillion. It’s a win for us all.”

Indeed, Burch’s foundation gave Hamm the confidence and resources

that she needed to get her business off the ground.

Searching for a solution Hamm’s business idea was born of a personal struggle with lack of sleep after moving to India and leading a fast-paced lifestyle. “I became one of the 68 percent of adults in the U.S. who have either a sleeping disorder or some type of sleep issue,” she says. “After looking for a natural sleep solution, I found weighted blankets.”

Weighted blankets can help reduce stress and anxiety, aiding sleep. A good night’s rest can boost mood and focus, and even lower risk for obesity and chronic disease, according to the U.S. Department of Health and Human Services.

Yet none of the weighted blankets on the market met Hamm’s expectations.

“I saw that most weighted blankets were made with artificial fillers, like small plastic beads,” she says.

“This is very bad for the environment.”

Perfecting a sleep aid Bearaby’s weighted blankets are made of organic fabrics instead of typical artificial filling materials like pellets and plastic beads. “Our Tree Napper is made from Tencel, which is sourced from raw wood pulp in a closed-loop pro-

cess and then hand-knit together into a chunky blanket that is completely biodegradable.”

Ultimately, she hopes Bearaby enables sleep seekers to feel good — not just because they have gotten enough snooze time, but also because their purchase is making a difference on a global scale.

Empowering others Burch feels the same way about her foundation: “Championing women is a community responsibility, one that we believe starts with ambition,” she says.

Hamm leaves other aspiring female entrepreneurs with a piece of advice she credits with her own success: “Stay determined.

Don’t be afraid of pursuing an unexpected path,” she says.

For Hamm, the reward has been worth the effort.

“Wellness products don’t have to be complex, over-designed, or even electronic for you to know more about your body’s needs and help you feel calmer,” she says. “I’m proud to offer a naturally simple and sustainable self-care solution that uses beautiful design and organic materials to encourage a calmer, more collected world.” n Melinda Carter MEDIAPLANET

Building an “A-Team” Takes Your Small Business to the Next Level To build the right team, entrepreneurs should focus on finding people with prior experience, soft skills and competencies, and passion for the work.

W

hile many small businesses are started by a solo entrepreneur, it has become increasingly difficult to grow and scale a new venture without a team. So what makes a successful team that can help take your business to the next level?

Prior experience Prior startup experience, together with product and industry knowledge, predicts new venture success and growth.

Oftentimes, small business owners bring on board their business

friends, family members, and co-workers who share similar backgrounds and experiences, resulting in a fairly homogeneous human and social capital within the team.

While this strategy can be beneficial to promote faster and unified decision-making in the team, it also constrains the team’s pool of resources, creativity, and willingness to explore. As such, diversity in the team members’ functional experiences is more beneficial for enlarging the scope of action of your small business.

Advice for Starting Your Own Business from a Small Business Expert How can aspiring business owners set themselves up for success? Jeanette Armbrust, board chair of the National Association of Women Business Owners, offers expert insight into what it takes to start your own business.

What advice do you have for someone looking to start their own business?

First, research, research, research. I did a lot of research before I started my first business. I researched my local market and competitors, and I interviewed fellow business owners in the field to learn more.

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Competencies Entrepreneurial skills and competencies (i.e., soft skills such as vision and resilience) of the team members are positively related to the successful performance and potential growth of small businesses. When two or more people create interdependent relations with the common goal of growing a small business, their individual capabilities are heightened, refined, and enhanced as a team competence.

Passion Finally, team passion matters for

Develop a business plan. I developed a two-year business plan over the course of about three months before I even took one step in starting the company. The time and energy it took to develop this roadmap was invaluable.

I received this advice when I started my company: “It will take more time and more money than you think to start your company. Plan accordingly!” To get you through the initial start-up phase, you need to make sure that you are well capitalized with more money than you plan to last you longer than you think you will need.

Find a support group. For me, it was the National Association of Women Business Owners. Through this network, I learned ways to better navigate the issues that face all business owners.

Is there anything you wish you had known before starting a business?

Honestly, you are better off not knowing.

If everyone knew how hard it was to start a business, no one would start one. I would say you are better off diving in headfirst knowing that it is going to be challenging and exhausting but rewarding.

the performance of your business. Higher levels of positive collective emotions and shared identity among team members are related to better team processes and improved outcomes.

Regardless of how any particular team member experiences their individual passion, the critical question is how passionate the team is for growing and expanding the business. n Susana C. Santos, Senior Vice President, Conference Organization, United States Association for Small Business and Entrepreneurship

How did you navigate growing your team?

The fundamentals of hiring a team never change. I find that my teams work best when I hire for core values and mindset over skill set.

I can teach skills, but I cannot make someone a hard worker or fit into our culture of values.

What was the biggest challenge in getting your business off the ground?

People are not patient, and the daily grind can get to the best of us. We have to put the time in at the very beginning and stay strong and focused during the early years when our business is the most volatile. I always like to tell people to remain patient until around the five-year mark.

What qualities do you think make for a successful leader?

The strongest leader thinks of others before herself. A leader must lead with integrity and vision, honest in words and actions, while also creating the big picture and future goals for the team. Moreover, it takes credibility and trust within the team. And finally, you must inspire. n MEDIAPLANET

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