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:
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.
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.
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.
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.
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.
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