It might seem like Arjun Kumar, winner of the BMO-sponsored AIR MILES®† For Business Small Business Achievement Award, has it all figured out when it comes to running a small business. But he didn’t get here without facing some adversity.
Kumar, CEO at KAI Innovations, created the first smartcard in Ontario, allowing individuals (and their doctors) to access their entire healthcare history with a single swipe. While the product was undoubtedly innovative, he admits to having made a few rookie mistakes. But he learned from those errors and went on to create a healthcare technology company with seven-figure revenues.
We asked Kumar to share a bit about his missteps — and his thoughts on ways other entrepreneurs can dodge these common mistakes.
5 common small business mistakes to avoid:
1. Getting carried away with capital:
Be mindful of how much capital you raise in the early stages. “One of our businesses raised close to $2 million right out of the gate,” says Kumar, “and so we were spending like a company that had $2 million.”
The problem with raising too much capital from the get-go? “If you can’t get your revenues to catch up to that money fast enough, you basically hit a dead end and have to scale back.” And, as Kumar says, “the worst thing you can do when you’re starting to develop momentum is to scale back.”
Instead, Kumar suggests entrepreneurs start out by building a customer base. “Once you have enough money to sustain your core business,” then it’s a great time to consider raising capital, especially if there’s an opportunity to expand geographically.
2. Depending too much on others:
The sad reality of starting your own business is that you can truly only count on one person — yourself. It’s not that other people don’t mean well, explains Kumar, it’s just that they aren’t as committed as you are. “At the end of the day, in order to get your business on its feet, you’re going to have to do a lot of the work,” he says. “You can’t rely on anyone else.”
3. Making sky-high projections:
Kumar believes projections can get in the way of buckling down and getting the job done. “Everybody creates projections about how they’re going to generate $20 million in the first two years of business,” he says.
However, there’s a problem with adopting such an aggressive outlook: “You get in the habit of skipping the milestones you need to hit along the way,” he explains, “and that’s just a really bad habit to create when starting your business.” Make sure you know which milestones you need to achieve in order to make your projections a reality.
4. Taking a short-term perspective:
When building your business, think beyond each individual sale and prioritize the potential for recurring revenue. Kumar explains that many businesses in the past have focused on “one customer at a time, one sale at a time,” and that could limit your long-term revenue potential.
“What we found really successful is entering a market space that has recurring revenue,” he explains. This way, when you win a new customer, those customers “are going to pay you again next year, so every year you’re compounding on your business and you can get to a point of sustainability.”
5. Trying to reinvent the wheel:
Kumar encourages small business owners to take advantage of current opportunities. If you’re creating a new business, consider taking a piece of the existing pie: “You already know customers exist in the market space and they’re already spending money in the marketplace — and you just come in to take a small percentage of it.”
That’s the approach Kumar took with his new business, which offers an end-to-end solution for small health clinics in a category dominated by vendors servicing large-scale organizations.
In other words, Kumar found his niche — and it worked in a big way. To hear more advice from Arjun Kumar, watch this video on his top tips for hiring.