The #1 Strategy Mistake Killing New SME Businesses

The #1 Strategy Mistake Killing New SME Businesses

Hi, I’m Aby

Welcome to The Strategic Billion Dollar PEN, your weekly business strategy newsletter designed to equip SME business owners and founders with the clarity, confidence, and competitive edge to grow and scale with purpose—successfully.

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Your First 1,000 Customers Are the Strategy

This month, we’re studying business strategy—the right way to define and execute it to achieve meaningful results. Whether it’s fulfilling a vision, delivering on a mission, or solving a specific challenge, strategy is the engine that drives business outcomes.

Strategy is architecture. A pagoda beside a skyscraper might look poetic, but mismatched tiers, floating balconies, and ornamental facades don’t make a business stand. Too many startups build like tourists—adding pieces without a blueprint. Real strategy is the scaffolding that connects vision to execution, layer by layer, until the structure holds under pressure.

There are many ways to build strategy—some good, some bad, as outlined in [²].. This week, we’re using case studies to show why SME business owners, entrepreneurs, and start-ups must get strategy right from the start.

We’re spotlighting “The Right Way to Get Your First 1,000 Customers” ^[1], and insights from the book ^[4], which outlines common strategy mistakes startups make. The key message: focus on acquiring customers—not chasing distractions.

What Bad Strategy Looks Like

According to ^[1],, many startups begin with flawed strategy. They focus on:

• Benchmarking against giants like Uber or Airbnb

• Building the “best” product or service

• Hiring top-tier talent too early

• Spending on expensive ads (Meta, Facebook)

These activities are costly and ineffective for new businesses. They don’t solve the real challenge: finding customers who want what you offer.

Instead, startups should focus on acquiring their first 10, 100, and 1,000 customers—efficiently and strategically. These early adopters become testers, feedback sources, and referral engines. They help you refine your product, validate your pricing, and shape your positioning.

This iterative approach strengthens cash flow, builds credibility, and creates assets that attract lenders or investors. That’s what defines a good strategy.

Strategy Defined

Strategy is the deliberate execution plan to overcome a challenge. In this case:
How do you find enough customers who want your product or service?

Use KPIs to signal market fit. Focus on engagement, retention, and conversion—not vanity metrics. According to ^[1] and ^[5] the number one job of a founder or SME owner is to find customers.

Bad strategy? Spending limited resources on network effects, tech stacks, office space, or prestige hires. These don’t solve the survival challenge.

The reality:

• Most startups fail due to lack of customers
• 50% fail within 3 years
• Barely 3% hit £1M revenue in their first 5 years

SME Playbook: What Good Strategy Looks Like

This playbook outlines how SMEs and entrepreneurs can build a business that survives the first year—by acquiring the right customers and creating market fit. [6]

1. Customer Acquisition
   Focus on attracting the right volume of customers and making them stick.e..
   SME Takeaway: Strategy starts with traction.
2. Market Fit
   Find underserved segments or dissatisfied customers.
   SME Takeaway: Price strategically to match value and demand.
3. Product Efficiency
   Use the 4Ps (Product, Price, Promotion, Place) to deliver value and stickiness.
   SME Takeaway: Let the 4Ps do the heavy lifting: craft a product they want, price it to signal value, promote with purpose, and place it where they’ll act.
4. Customer Advocacy
   Early customers can fuel growth through referrals and feedback.
   SME Takeaway: Turn users into marketers.
5. Early-Stage Loyalty
   Treat first customers like VIPs—they often become lifelong brand champions.
   SME Takeaway: Loyalty is earned early.
6. Operational Focus
   Use KPIs to guide growth decisions. Alicia Yoon from Peach & Lily tracked AOV, return rates, and CAC to validate her business model.
   SME Takeaway: Data drives discipline.
7. Early-Stage Loyalty
   Treat first customers like VIPs—they often become lifelong brand champions.
   SME Takeaway: Loyalty is earned early.
8. Competitor Benchmarks
   Don’t compare your start up to Hilton or Lola’s Cupcakes. Your context is different.
   SME Takeaway: Benchmark wisely—apples to apples.
9. Batch-Based Acquisition
   Acquire customers in batches (10, 100, 500), apply learnings, & build cash flow from day one.
   SME Takeaway: Scale through iteration.

Strategic Takeaway

Good strategy isn’t a checklist—it’s a commitment. For SMEs, entrepreneurs, and start-ups, it means aligning every decision with the one challenge that matters most: acquiring and retaining customers. The 4Ps, KPIs, and batch-based traction aren’t tactics—they’re levers. Pull the right ones, at the right time, and your business doesn’t just survive—it compounds.

Flight 78910™ SME Spotlight:  Holly Thaggard

VIDEO FEATURE: From $0 to $700M – How ONE Product Changed An Industry Holly Thaggard

This week, we highlight Holly Thaggard didn’t just launch a sunscreen—she rewired public perception of sun care. Faced with a product that required consumer education, she leaned into the challenge with relentless grit and strategic storytelling. Her brand, Supergoop!, didn’t just fill a gap—it created a category. Holly’s journey is a masterclass in conviction-led branding, distribution leverage, and market reframing.

Highlights for SME Business Owners

1. Category Creation Through Education
Holly had to teach consumers why daily SPF mattered—before they’d even consider buying.
SME Takeaway: If your product requires education, build the market first. Awareness is a strategic asset.

2. Mission-Led Brand Positioning
She anchored Supergoop! in a personal mission: preventing skin cancer through everyday protection.
SME Takeaway: A clear mission builds trust. Make your “why” the backbone of your brand.

3. Strategic Retail Partnerships
From Sephora to school programs, Holly chose channels that aligned with her message and scaled her reach.
SME Takeaway: Distribution isn’t just logistics—it’s brand amplification. Pick partners that reinforce your positioning.

4. Relentless Brand Consistency
She refused to dilute the brand’s purpose, even when faster growth was tempting.
SME Takeaway: Stay the course. Consistency compounds credibility.

5. Scalable Product Simplicity
One hero product—SPF—anchored the brand. Expansion came later, after trust was built.
SME Takeaway: Start narrow, scale wide. Nail one product before diversifying.

Apply the Playbook → Use this spotlight to reflect on your own SME’s strengths and gaps. Which module will you activate first?

Conclusion

Startups—and Holly Thaggard—share one strategic truth: customer acquisition is the crux. Everything must be aligned to help the business breathe its first breath and survive. SMEs, entrepreneurs, and start-ups must embrace this mindset. Otherwise, failure follows—like Webvan, Juicero, Google Glass, Jawbone ^[3], and countless SMEs that misaligned their strategy and ignored market fit.

Bad strategy = unclear customer need, weak demand, and poor execution.Good strategy = understanding the challenge, defining the crux, and aligning every resource to solve it.

As ^[4] says: “You cannot improve a failing school system unless you have a clear idea about why it is failing. ”Don’t start with goals. Start by understanding the challenge. Then activate your strategic lever: Pricing clarity, customer delight, or resource discipline.

References

1. The Right Way to Get Your First 1,000 Customers
2. Getting strategy wrong—and how to do it right instead | McKinsey
3. big startup failures due to lack of customers – Google Search
4. Richard Rumelt Collection 2 Books Set (The Crux & Good Strategy/Bad Strategy
5. Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption: Amazon.co.uk: Thales S. Teixeira, Greg Piechota: 9781524763084: Books
6. Product Market Fit: The Key to Success by The Daily MBA

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Until next week—
Set bold strategy. Set big targets. Take massive action. Measure what matters.

About the Author

Aby Rufus
Business Investor Strategy Expert Entrepreneur with an MBA in Strategic Planning—offering billion-dollar strategic solutions for SMEs.