Failure is rarely fun. But it can still teach us things! Here are four lessons we learned from the incredible stories in the first four episodes of SPI Media’s latest podcast about business failure: Flops.
This post contains minor spoilers. So if you want to avoid them, just click or search on any of the title players listed below Flops on Apple Podcasts or wherever you want to listen.
All right, on to the lessons of failure!
Lesson 1: When It Seems Too Good To Be True …
(from Episode 1: “The Pyramid Scheme” with John Vuong)
In the first episode of FlopsSEO pro John Vuong talks to me about a big mistake he made in his twenties when his ambitious, risky personality led him to bankruptcy.
John became embroiled in a pyramid scheme that lost him $ 100,000. Fortunately, he was in his twenties and had a full-time job. With the help of his family and friends, he managed to escape bankruptcy and bring his life back into harmony.
On the surface, the program of selling bulk paper products for lucrative returns looked a little too good to be true. But John was delighted and betrayed by the mastermind of the scheme.
“He always sold me. He always said the right things at the right time and gave me evidence, ”explains John.
But as John later found out, that evidence – bank statements, bills – had been forged, and the whole business was just a lie to take people’s money.
As John says, “If it sounds too good to be true, it probably is.”
As an entrepreneur, it can be difficult to be vulnerable and share our struggles with others, especially when it comes to an embarrassing failure. But, as John says, one of the best ways to avoid and deal with big mistakes is to “surround yourself with really, really good people.” This will avoid the corporate isolation that can lead to loneliness and bad decisions.
Lesson 2: When In A Hole, Stop Digging
(from episode 2: “The Rock-Bottom Beach” with Colin Clapp)
Colin Clapp figured out how easy it is to integrate with your business to realize that it just doesn’t work.
In 2016, Colin and his partner Evie were living in New Zealand with their toddler. Colin worked as a business coach / consultant, and Evie did social media marketing for the owner of a local business that delivered organic products to people’s doorsteps.
She swapped her marketing skills for his fruit and vegetables – an arrangement that worked well for the small family.
Then Colin was home one day when the weekly delivery arrived.
“I opened the door and saw this ragged, amazed man on the doorstep who I knew was the father of two children. And I was a father myself and I just looked at this man and I just wanted to help him, ”says Colin.
They went into business with the owner, with Colin developing systems to streamline things while the owner was responsible for increasing sales.
But for some reason the owner couldn’t keep the end of the deal. Colin and Evie soon found themselves in a deep hole with insufficient cash flow to keep the business going.
They knew business was in a difficult position. The problem was, Colin couldn’t get it scope where the partnership failed.
“We dug a hole, but if you’re enthusiastic about a hole, you don’t know. You are the last person to see it. “
And it wasn’t just their financial health that suffered. Colin and Evie were also mentally, emotionally, and physically drained. But like many die-hard, ambitious entrepreneurs, Colin was determined to get his way.
It was only after a phone call from a concerned friend and a midnight stroll to a deserted beach that Colin could finally make out the situation for what it was.
What happened next? Listen down below.
The right partnership can help take your business to the next level. However, partnerships of any kind require a lot of work – both upfront and continuously. Listen to Pat’s interview with Darrell Vesterfelt about the power and pain of partnerships and how you can use them for your business.
Lesson 3: Don’t Chase Money
(from episode 3: “The Hotel from Hell” with Tina Cheesley)
Like John in Episode 1, Tina Cheesley put up with her ambitions. And like Colin and Evie in Episode 2, she and her family were in a hole – a hotel-sized hole.
After a successful home renovation, Tina and her husband Alan decided to jump into the big leagues. They found some business partners and bought a house near a local airport that they wanted to convert into a hotel.
When they embarked on this massive project, they saw a ton of benefits – a fully completed forty-one room hotel that would provide a healthy stream of income for years to come.
They had also structured the business to maximize their income. In many countries, including the UK, a partnership is a legal structure that offers tax benefits (i.e. money savings). Because of this, Tina and Alan decided to partner rather than a Limited Liability Corporation (LLC).
As Tina puts it, the hotel should be “my money cow”.
But they didn’t fully consider the downside. Should the project fail, they would be held liable for a potentially large loss due to the partnership structure.
The hunt for money had kept them from seeing the worst of their business plan. In the end, Tina and Alan lost roughly half a million pounds – nearly $ 700,000.
In their defense, luck and timing were not on their side; They couldn’t foresee the Black Swan event of the subsequent crash and recession of 2008.
But even without a global economic disaster, Tina and Alan’s downside risk was still substantial. A different business structure like an LLC could have mitigated the blow by reducing its liability. But they still expected a hard landing.
Hear Tina’s full story:
Tina and Alan aren’t the first entrepreneurs to focus on the monetary benefits of a project and thereby become blind to the disadvantages. Read about Pat’s experience of “hunting for the money” and what it taught him.
Lesson 4: Always sign a contract first
(from episode 4: “The Case of the Missing Contract” with Trudy Rankin)
Trudy Rankin has spent much of her professional life helping others find work and start businesses.
In 2015 she advised an organization called Vision Australia, which helps blind and visually impaired people to find employment. After helping an intern monetize his blog, Trudy saw an opportunity to help more blind and visually impaired people create income opportunities.
So she brought her idea to Vision Australia CEO who was excited to try it out. They started a pilot group of potential entrepreneurs who want to learn how to use the internet to build their business.
The pilot was a hit and Trudy worked with Vision Australia for two years.
Eventually, her success caught the attention of an organization in another country that wanted to recreate Trudy’s model.
Trudy was happy about the expansion of her program – and the organization was also enthusiastic about it.
Trudy says, “You really wanted to run the same program.”
Unfortunately, despite all the enthusiasm, to get a plan written became a lower priority for Trudy.
I’ll let you listen to the episode to hear what happened next. But let’s just say that in the business world, unfortunately, a person’s word is often only as good as the paper it is printed on.
As Trudy found, it doesn’t pay to be casual about contracts. Read about the importance of contracts – and six other common threats that can bring your business to a standstill before it gets up and running.
More stories about mitigating and navigating errors
Failure will occur as a business owner, but you can still do your best to avoid the worst types. I hope these entrepreneurs’ experiences of failure have given you an idea of how to circumvent or control similar scenarios on your own path to business building.
For more lessons from big mistakes, see Flops– Subscribe and get new episodes on Wednesdays through Apple Podcasts, Spotify or wherever you listen to them.