Kevin O'Leary Calls This 'One of the Deadliest Killers of Small Businesses'

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

KEY POINTS

  • Small businesses face many obstacles to success.
  • Kevin O'Leary recently pointed out something that can be a game-changer for entrepreneurs by reducing these costs.
  • O'Leary believes that high customer acquisition costs can harm small businesses.

Could this cost affect your small business?

If you want to succeed as a small business owner, there are a lot of different things that have to go right. You'll need to have a solid business plan, a product or service that people are interested in, and a way to reach potential customers and let them know you can meet their needs.

Recently, Kevin O'Leary, better known as Mr. Wonderful, addressed one of the hardest issues for burgeoning businesses to address. He indicated that this could make or break your company's success.

Kevin O'Leary warns this could kill your small business

O'Leary is a Canadian businessman and entrepreneur who was also featured on the popular TV show Shark Tank. He provides lots of financial and business advice, including on Twitter where he recently addressed an issue that is very important in determining if a company will be successful or not.

"One of the deadliest killers of small businesses is high customer acquisition costs," O'Leary explained in a tweet.

Customer acquisition costs refer to the costs of actually getting a customer to come through the door for the first time. If it costs you more to get a customer interested in buying your products or services than the customer will generate over the course of their relationship with you, your business can't possibly be viable.

Unfortunately, it can be expensive to find the right customer base -- especially if you have to pay for targeted advertising through expensive channels, if your profit margin on each product sold is low, or if clients don't tend to be repeat customers due to the nature of the products or services you're offering.

O'Leary correctly warned that many small businesses end up not being successful due to high customer acquisition costs. And he's absolutely correct that this issue can hit startup or newer companies harder than established businesses.

Smaller businesses don't have a lot of cash in their business checking accounts to put out to try to attract customers -- especially when they are first getting started. If a company can't pay what's needed to attract customers, the business will fail even if those potential customers would have eventually bought enough to cover their acquisition cost and then some.

O'Leary has a suggestion for lowering this potentially damaging expense

O'Leary indicated there was some good news for small businesses worried about high customer acquisition costs. There's a way to reduce those expenses dramatically, according to his tweet.

"A following on social media has completely changed the landscape in lowering this cost for entrepreneurs," O'Leary said.

This is true because it can cost little or nothing to send out a tweet, make a post on Facebook or Instagram, or upload a TikTok. If you have a lot of followers, you can attract potential customers to your business simply by using these free mediums and dramatically slash customer acquisition costs.

Of course, to follow O'Leary's advice, you would need to actually build up a large social media following. You can do this by taking steps such as using available data to determine when to post and what content attracts followers, posting regularly, engaging with your audience, and collaborating with other influencers in a similar industry.

While this can take time, as O'Leary pointed out, the value of a large social media following is substantial if it saves you from having to spend a fortune on soliciting customers to give your company a try.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

Our Research Expert

Related Articles

View All Articles Learn More Link Arrow