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11 Mistakes Billionaires Learned the Hard Way

11 Mistakes Billionaires Learned the Hard Way

It’s been said it’s easier to learn from your mistakes, but you don’t always have to, particularly in business. Working your way to the top can be extremely difficult and mistakes in the business world can be costly. It is important for the entrepreneur to learn not only from their successes, but also from their failures. Although there’s much to gain when it comes to experience, you can save a lot of time and money by learning through the mistakes of others.

Even today’s top grossers have had their dull moments. Here are 11 mistakes billionaires learned to avoid the hard way:

The 1 Percent
    1. Failure to research.

    When making an acquisition or starting a new business, research is essential. Is there competition? Is there a big enough market? Is your acquisition worthwhile? In 1999, the world’s richest man, Carlos Slim, did not do his research and acquired CompUSA for $800 million, only to see the company’s value plummet because desktop computers were quickly being replaced by laptop computers and other emerging technology.

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    2. Fixation on the wrong investments.

    Few things are worse than a missed opportunity. Focusing on the wrong investments can bring disastrous results. Take Bill Gate’s mistake of ignoring search engines, for example. Focusing on the loss of profit that came from piracy lead Microsoft to completely ignore the development of the search engine. This neglect left plenty of space for other companies, such as Google and Yahoo, to fill the gap. By the time Gates realized he had made a mistake, it was too late. Presently Bing has picked up some of the search engine market, but in 2011 it cost Microsoft $2.5 million more than it earned.

    3. Lack of communication.

    When offering goods or services, communication from the top directors to the employee team and from the employees to the customers is vital. You cannot expect the members of your team to immediately know what you are thinking and this is a mistake billionaire Larry Ellison experienced first hand. After acquiring Island Air, Paul Casey was quickly appointed as CEO. The lack of communication that ensued regarding the changes resulted in various flight delays (one of which was seven hours long) and many disgruntled customers.

    4. Cutting vital costs.

    Maximizing profits and cutting unnecessary costs is a natural part of business. However, it’s easy to get lost in the profit frenzy and so one should be careful such costs do not damage quality or the brand. Take for example the case of billion-dollar company Hewlett Packard. Once known for innovation, everything started to go wrong once innovation was replaced by cost cutting. Current owner and CEO Meg Whitman has seen stock price plummet 39% from one year ago.

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    Billionaire Status

      5. Letting good opportunities go.

      If you think you have a good idea or your research has proven your idea to be a sound choice, go for it. Do not let a good opportunity go by, because just like you are capable of coming up with great ideas, so are other people. Larry Page of Google learned this the hard way. In 2003, after he noticed the success of Friendster, he offered to purchase the then social media giant instead of focusing on developing his own. The offer was turned down and the result was disastrous, as Facebook swooped in to take the social media market by storm. Google+ was eventually released in 2011, and to this day has yet to match the social capital and earnings of Zuckerberg’s giant.

      6. Refusing to explore other options.

      Not all acquisitions are in great shape, and sometimes the industry you want to focus on may be shrinking. These things can difficult to accept but it is important to know when to explore other ventures. Billionaire Warren Buffet admits to having made this mistake when purchasing Berkshire Hathaway on emotional impulse in 1964. A New England textile company at the time, he kept the original business running at a loss for 20 years, before finally giving up and focusing on the company’s other, more profitable ventures.

      7. Cultivating a negative image.

      When you are a billionaire and have a brand to protect, you must behave like it. Anything negative that is said about you will reflect badly in your company and this is a mistake Alice Walton, heiress of the Walmart empire, has committed. Walmart is already involved in numerous controversies regarding the giant’s effect on small businesses and wages paid to workers. Walton’s own Texas escapades, which included a DWI, are negative publicity and include a mug shot no PR executive can wipe from Walmart’s already negative record.

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      8. Allowing credibility to plummet.

      A lot of business ventures depend on credit lines. It is important to remember that this is not only about paying your bills, but also about paying them on time. Used-to-be billionaire Eike Batista saw his oil and mineral empire plummet from more than $30 billion to a mere $200 million once key stakeholders lost trust in him after he failed to deliver the results he’d promised. Once Batista lost credibility in one area, he quickly lost it in all of them, and was forced to watch his empire shrink.

      9. Hiring the wrong people.

      Hiring is an important part of every business. Human capital is what makes a company prosper, but when hiring, keep in mind the ideals of each new hire and whether or not they fit with the company. A bad hire in an important position could be disastrous. Billionaire philanthropist Manoj Bhargava admits the worst business mistake he’s ever made is hiring the wrong people—those who enter his charity wholesale business hoping to help themselves instead of helping others.

      10. Being afraid of postponing.

      It is important to jump in to big opportunities; however, it is also important to do self-assessment to know whether or not you and your team are prepared for the next move. Billionaire Oprah Winfrey cites her TV network, OWN, as one of her biggest mistakes. Her blunder? Launching when she wasn’t ready to launch and doing so only because she said she would.

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      11. Taxes? What taxes?

      It hasn’t been proven whether or not billionaires avoid taxes more than the average citizen. However, a tax scandal is one of the most difficult things to recuperate from. The Beanie Baby creator, billionaire Ty Warner, barely escaped jail for allegedly owing $25 million in taxes, a report that will undoubtedly damage both his brand and reputation.

      Billionaire Make It Rain

        These are 11 mistakes that forced billionaires to clean up their act. As an aspiring billionaire, you should be able to learn from the mistakes of others and take these eleven points to heart as you continue your journey.

        Have you hit a stumbling block before that taught you a valuable lesson? If so, I would love to hear about them in the comments below.

        Featured photo credit: Flickr via flickr.com

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        Joel Goldstein

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        Last Updated on January 6, 2021

        14 Ideas on How to Measure Productivity to Make Progress

        14 Ideas on How to Measure Productivity to Make Progress

        Everyone has heard the term productivity, and people talk about it in terms of how high it is and how to improve it. But fewer know how to measure productivity, or even what exactly we are talking about when using the term “productivity.”

        In its simplest form, the productivity formula looks like this: Output ÷ Input = Productivity.

        For example, you have two salespeople each making 10 calls to customers per week. The first one averages 2 sales per week and the second one averages 3 sales per week. By plugging in the numbers we get the following productivity levels for each sales person.

        For salesperson one, the output is 2 sales and the input is 10 sales: 2 ÷ 10 = .2 or 20% productivity. For salesperson two, the output is 3 sales and the input is 10 sales: 3 ÷ 10 = .3 or 30% productivity.

        Knowing how to measure and interpret productivity is an invaluable asset for any manager or business owner in today’s world. As an example, in the above scenario, salesperson #1 is clearly not doing as well as salesperson #2.

        Knowing this information we can now better determine what course of action to take with salesperson #1.

        Some possible outcomes might be to require more in-house training for that salesperson, or to have them accompany the more productive salesperson to learn a better technique. It might be that salesperson #1 just isn’t suited for sales and would do a better job in a different position.

        How to Measure Productivity With Management Techniques

        Knowing how to measure productivity allows you to fine tune your business by minimizing costs and maximizing profits:

        1. Identify Long and Short-Term Goals

        Having a good understanding of what you (or your company’s) goals are is key to measuring productivity.

        For example, if your company’s goal is to maximize market share, you’ll want to measure your team’s productivity by their ability to acquire new customers, not necessarily on actual sales made.

        2. Break Down Goals Into Smaller Weekly Objectives

        Your long-term goal might be to get 1,000 new customers in a year. That’s going to be 20 new customers per week. If you have 5 people on your team, then each one needs to bring in 4 new customers per week.

        Now that you’ve broken it down, you can track each person’s productivity week-by-week just by plugging in the numbers:

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        Productivity = number of new customers ÷ number of sales calls made

        3. Create a System

        Have you ever noticed that whenever you walk into a McDonald’s, the French fry machine is always to your left? 

        This is because McDonald’s created a system. They have determined that the most efficient way to set up a kitchen is to always have the French fry machine on the left when you walk in.

        You can do the same thing and just adapt it to your business.

        Let’s say that you know that your most productive salespeople are making the most sales between the hours of 3 and 7 pm. If the other salespeople are working from 9 am to 4 pm, you can potentially increase productivity through something as simple as adjusting the workday.

        Knowing how to measure productivity allows you to set up, monitor, and fine tune systems to maximize output.

        4. Evaluate, Evaluate, Evaluate!

        We’ve already touched on using these productivity numbers to evaluate and monitor your employees, but don’t forget to evaluate yourself using these same measurements.

        If you have set up a system to track and measure employees’ performance, but you’re still not meeting goals, it may be time to look at your management style. After all, your management is a big part of the input side of our equation.

        Are you more of a carrot or a stick type of manager? Maybe you can try being more of the opposite type to see if that changes productivity. Are you managing your employees as a group? Perhaps taking a more one-on-one approach would be a better way to utilize each individual’s strengths and weaknesses.

        Just remember that you and your management style contribute directly to your employees’ productivity.

        5. Use a Ratings Scale

        Having clear and concise objectives for individual employees is a crucial part of any attempt to increase workplace productivity. Once you have set the goals or objectives, it’s important that your employees are given regular feedback regarding their progress.

        Using a ratings scale is a good way to provide a standardized visual representation of progress. Using a scale of 1-5 or 1-10 is a good way to give clear and concise feedback on an individual basis.

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        It’s also a good way to track long-term progress and growth in areas that need improvement.

        6. Hire “Mystery Shoppers”

        This is especially helpful in retail operations where customer service is critical. A mystery shopper can give feedback based on what a typical customer is likely to experience.

        You can hire your own shopper, or there are firms that will provide them for you. No matter which route you choose, it’s important that the mystery shoppers have a standardized checklist for their evaluation.

        You can request evaluations for your employees friendliness, how long it took to greet the shopper, employees’ knowledge of the products or services, and just about anything else that’s important to a retail operation.

        7. Offer Feedback Forms

        Using a feedback form is a great way to get direct input from existing customers. There are just a couple of things to keep in mind when using feedback forms.

        First, keep the form short, 2-3 questions max with a space for any additional comments. Asking people to fill out a long form with lots of questions will significantly reduce the amount of information you receive.

        Secondly, be aware that customers are much more likely to submit feedback forms when they are unhappy or have a complaint than when they are satisfied.

        You can offset this tendency by asking everyone to take the survey at the end of their interaction. This will increase compliance and give you a broader range of customer experiences, which will help as you’re learning how to measure productivity.

        8. Track Cost Effectiveness

        This is a great metric to have, especially if your employees have some discretion over their budgets. You can track how much each person spends and how they spend it against their productivity.

        Again, this one is easy to plug into the equation: Productivity = amount of money brought in ÷ amount of money spent.

        Having this information is very useful in forecasting expenses and estimating budgets.

        9. Use Self-Evaluations

        Asking your staff to do self evaluations can be a win-win for everyone. Studies have shown that when employees feel that they are involved and their input is taken seriously, morale improves. And as we all know, high employee morale translates into higher productivity.

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        Using self-evaluations is also a good way to make sure that the employees and employers goals are in alignment.

        10. Monitor Time Management

        This is the number one killer of productivity in the workplace. Time spent browsing the internet, playing games, checking email, and making personal calls all contribute to lower productivity[1].

        Time Management Tips to Improve Productivity

          The trick is to limit these activities without becoming overbearing and affecting morale. Studies have shown that most people will adhere to rules that they feel are fair and applied to everyone equally.

          While ideally, we may think that none of these activities should be done on company time, employees will almost certainly have a different opinion. From a productivity standpoint, it is best to have policies and rules that are seen as fair to both sides as you’re learning how to measure productivity.

          11. Analyze New Customer Acquisition

          We’ve all heard the phrase that “It’s more expensive to get a new customer than it is to keep an existing one.” And while that is very true, in order for your business to keep growing, you will need to continually add new customers.

          Knowing how to measure productivity via new customer acquisition will make sure that your marketing dollars are being spent in the most efficient way possible. This is another metric that’s easy to plug into the formula: Productivity = number of new customers ÷ amount of money spent to acquire those customers.

          For example, if you run any kind of advertising campaign, you can compare results and base your future spending accordingly.

          Let’s say that your total advertising budget is $3,000. You put $2,000 into television ads, $700 into radio ads, and $300 into print ads. When you track the results, you find that your television ad produced 50 new customers, your radio ad produced 15 new customers, and your print ad produced 9 new customers.

          Let’s plug those numbers into our equation. Television produced 50 new customers at a cost of $2,000 (50 ÷ 2000 = .025, or a productivity rate of 2.5%). The radio ads produced 15 new customers and cost $700 (15 ÷ 700 = .022, or a 2.2% productivity rate). Print ads brought in 9 new customers and cost $300 (9 ÷ 300 = .03, or a 3% return on productivity).

          From this analysis, it is clear that you would be getting the biggest bang for your advertising dollar using print ads.

          12. Utilize Peer Feedback

          This is especially useful when people who work in teams or groups. While self-assessments can be very useful, the average person is notoriously bad at assessing their own abilities.

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          Just ask a room full of people how many consider themselves to be an above average driver and you’ll see 70% of the hands go up[2]! Now we clearly know that in reality about 25% of drivers are below average, 25% are above average, and 50% are average.

          Are all these people lying? No, they just don’t have an accurate assessment of their own abilities.

          It’s the same in the workplace. Using peer feedback will often provide a more accurate assessment of a person’s ability than a self-assessment would.

          13. Encourage Innovation and Don’t Penalize Failure

          When it comes to productivity, encouraging employee input and adopting their ideas can be a great way to boost productivity. Just make sure that any changes you adopt translate into higher productivity.

          Let’s say that someone comes to you requesting an entertainment budget so that they can take potential customers golfing or out to dinner. By utilizing simple productivity metrics, you can easily produce a cost benefit analysis and either expand the program to the rest of the sales team, or terminate it completely.

          Either way, you have gained valuable knowledge and boosted morale by including employees in the decision-making process.

          14. Use an External Evaluator

          Using an external evaluator is the pinnacle of objective evaluations. Firms that provide professional evaluations use highly trained personnel that even specialize in specific industries.

          They will design a complete analysis of your business’ productivity level. In their final report, they will offer suggestions and recommendations on how to improve productivity.

          While the benefits of a professional evaluation are many, their costs make them prohibitive for most businesses.

          Final Thoughts

          These are just a few of the things you can do when learning how to measure productivity. Some may work for your particular situation, and some may not.

          The most important thing to remember when deciding how to track productivity is to choose a method consistent with your goals. Once you’ve decided on that, it’s just a matter of continuously monitoring your progress, making minor adjustments, and analyzing the results of those adjustments.

          The business world is changing fast, and having the right tools to track and monitor your productivity can give you the edge over your competition.

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          Featured photo credit: William Iven via unsplash.com

          Reference

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