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How Companies Can Learn from Costly Mistakes

How Companies Can Learn from Costly Mistakes

This can be a touchy subject and perhaps a lesson we can all learn from. A company named Seer was running well and had no pain to share for quite some time. But in December 2018, just as an awesome year came to an end, everything changed.

The first biggest change was brought about by the loss of a long-time client. It was a great run, but the client decided to call it quits. You can expect 2019 to be a slower year for the company and everyone concerned. Thankfully, the client prepared Seer for this inevitable situation and the owner sincerely appreciated the heads-up. After all, the company still had a strong nest egg. At the back of his mind, he thought he got everything under control.

The company CEO took care of paid vacations since the team had been working hard. He thought there was enough profit to deploy.

However, towards the end of 2018, although everyone knew a big client was leaving, the CEO promised bonuses. Again, he was under the impression profits need not stay in the company and the nest egg would provide sufficient coverage. He sincerely wanted to deploy revenue to his staff in “a meaningful way.”

And life happens when you’re busy making plans. The CEO got a call from his assistant.

He was told that the company overspent for the client which incurred a tremendous loss of $200k within one month and one week. And the realisation struck: he wasn’t going to make it back in two years’ time. Worse, it was impossible to waive fees. It’s a catch-22 dilemma and he was stuck in a black hole.

The client was leaving and it was already a transition period, moving to a new agency. Bonuses had not been announced yet so theoretically he could withdraw them and use them to cover for the 200,000 overspending. But somehow, it felt wrong.

Seer renegotiated with the clients and offered to set things right. It was only fair. Returning the money was the last thing any company would do.

Business owner, entrepreneur-in-the-making or not, there are lessons we can all learn from Seer’s experience:

(1) Is it worth it to fire people?

While firing people can ease some of your budget concerns, it’s not a guarantee of total recovery. Seer’s CEO said that he believes people responsible for an issue actually have more dedication to fix it. Letting go of people who know the issue first-hand is preventing them from making it up to you and solving the problem they’re very well acquainted with.

As a business owner, you also have the responsibility to build a place where your employees can safely innovate. And innovation always comes with risks. Firing people because of mistakes that can be corrected is counterproductive – especially if you’re a company that advocates innovation.

(2) Timeline is important

Let people know how grave the situation is so it triggers a sense of urgency. If people don’t know what’s wrong in the first place, they will just carry on at a leisurely place thinking everything’s all right with the company. Help them understand where the company stands profit-wise. Give them a clear timeline and the opportunity to double their efforts.

Work on the weekends if needed to recover your losses. $200k is a big loss and it’s only fair to work extra days. Not to mention, extra hours of work also help you gain more skills.

Feel the atmosphere.

(3) Growth and pain are two sides of the same coin

Growth has its fair share of problems. Ever heard of the phrase “birth pangs”? When mothers give birth to babies (especially their first-born), there’s so much pain to contend with. Birth pangs come with every growing company.

That is why in the process expansion, you must learn to weed out the necessary from the unnecessary. How much of your plans should you actually carry out? Which plans would only cost you? Which ones are more cost-efficient?

Your number of clients will only grow bigger the longer you remain in the business. You must, therefore, prepare yourself for growth but proceed with caution. Balance is important – from your financial investments to the staff you hire to the amount of work you undertake to your marketing plans. Putting in too much or too little can backfire and your company will have a hard time extinguishing the fire.

(4) Look for early signs

When building a business, always anticipate the worse and have a back-up plan ready. Every plan you make must have a corresponding solution just in case things don’t work out as hoped.

So how do you know things are not going well? There will be warning signs. And you need to be on the lookout before outcomes take a turn for the worse.

For instance, the mistake of overspending was also an oversight on the part of Seer’s management. If you’re spending a lot for a client when you shouldn’t have, maybe it’s time to step back and ask yourself: Is this much spending really necessary?

What if I were to look for less costly alternatives? Would it be possible to achieve the same results without spending too much? If the answer is yes, then give it a go.

Conclusion

It's not so much on the problem (because problems happen to businesses of all sizes). Look at Facebook and Google. These are big companies yet the problems they encounter are even bigger. Basically, the price of growth. The bigger your business, the bigger the problems you face.

So it's not so much on the problems you face but on how you address them. As a business, are you willing to address these problems ethically? If the problem is financially related, do you have to spend more to cover your losses? If you're able to come up with creative solutions while maintaining your integrity as a company, you're actually on your way to becoming a self-sustaining business. And you could thrive in your chosen industry for a very long time, regardless of how big your competitors are.


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