The most dreadful mistakes happen even to the best of the best. Regardless of research and projections, Investments are still made; when ventures turn into disasters, what’s left is a lesson to be learned.
Here are ten lessons that you can learn from five of the decade’s most popular Investment Disasters:
Optiva, a nano-tech company that developed a process to laminate flat-screen TV sets, had to shut down and sell its assets after it failed to continue to raise funding. Though it initially raised and spent millions of dollars in venture capital, the problem was that it took too long to discharge its product. It shifted focus while technology changed. By the time it came to market, it was already obsolete.
1. Maintain focus by having goals. Your objectives are not just the destination you’re trying to reach, it also makes sure that you don’t get side-tracked. Goals are there to guide your choices in as you plan, start, and manage your business.
2. Strike while the iron is hot. In many types of business, stopping for a while has an immediate effect. Just like when you stop hammering the hot steel, you lose the chance to shape it into what you need. Make a choice to strike while the conditions are favorable, so you can see instant results. Be always at the top of your game.
Webvan, a grocery-delivery business that was serving nine metropolitan areas, was once valued at more than a billion dollars with a plan to expend to 26 cites. Despite millions in sales, the company went bankrupt when its expenses far exceeded its sales growth. There were a lot of major purchases that expanded the company too fast.
3. Do not focus too much on sales level and company size rather than profit. The entrepreneur should learn to become a good businessman instead of showing interest only in creating and building.
4. Keep a low overhead while starting up. Even good businesses struggle when they grow too fast. Learn to step back and rethink or rewrite your plan. This will help you to reorganize your business to position it for growth at a rate that you can handle.
Amp’d Mobile; the mobile content company declared bankruptcy after it hurriedly implemented its strategy that was supposed to boost its subscribers. The mistake was to change its credit check policy, after the company’s founder pushed for the company’s growth. While other carriers checked customers’ credit record to make sure they had enough money to pay their bills within 30 days, Amp’d Mobile decided to loosen up the requirement to 90 days for its own network. It was definitely a big mistake to market to people who are already a credit risk, as they found out 90 days later, when most of them were struggling to make their payments.
5. Evaluate your risks. Many people can’t identify the risks they face and can’t examine the danger the risks pose for their business survival. As a result, they accept risks which could be fatal while ignoring those which are quite manageable and which would probably give beneficial results.
6. Know the right time to implement changes. You have to know when the best time to make changes. Always ask yourself if it is time for growth, and can your company keep up. Make sure the business and its market are resilient enough to weather the changes.
Kozmo.com was an online company that promised free one-hour delivery of various small items. Business analysts pointed out that operation costs were expensive unless they charge delivery fees. Concerned employees suggested having a minimum purchase for the free delivery. But the company refused to consider, saying in part that, in their target markets, the savings from not needing to rent retail space would exceed the costs of delivery. So it continued to follow its business model, and went out of business soon after.
7. Be resilient. Some people resist change because they don’t realize quickly enough the need for it. In business management, part of being competitive is to have the capacity to remain flexible when changes are needed. As your business grows, it will need you to make changes in order to keep up with growth and the insatiable needs of the market. If you are good at accepting change, you will learn how to react and channel it in a good way for your business.
CyberRebate.com, the online retailer which sold an assortment of goods at heavily marked-up prices, promised customers they could get a full refund of the purchase price for as long as they submit rebate forms by a deadline, and checks came 10 to 14 weeks later. CyberRebate relied on the idea that a good percentage of buyers would forget to fill out the rebate form, or fail to do so in time, leaving the company to keep the money. This did not happen. With the outrageous inflated prices that they sold the items, the customers had gone out of their way to get the rebates. This sunk CyberRebate into serious debt.
8. Do enough research on the viability of a business idea. Proven research can help you make better decisions. Don’t just do things right away without enough knowledge on the impact of your actions. Recognize the value of quality research and know that decisions made based on sound evidence are more reliable than those based on suspect intuition every time.
9. Do not underestimate the buying public. Consumers are smart; they know what works for them. They know when to give in and when to take off their gloves, so don’t expect that they’ll act the way you think they’re suppose to.
FastForward’s software and design took its downfall due to faltering profits despite investors funding millions of dollars to the company. The mistake included realizing too late that it would do better if it works in conjunction with advertising agencies, rather than trying to sell directly to customers. This ended with bankruptcy and a sell off to raise funds to pay debts.
10. Never bring in unnecessary partners. Do not rely on others to sell your products and services if you can do it better, especially if they cannot justify their presence by making an actual contribution to the growth of the business. Don’t get easily persuaded into avoiding doing something which should be considered your responsibility.
Ally is part of the team that manages Home Loan Finder, a free home equity loan and home loan interest rates comparison service in Australia. Before joining HLF, she was a Media Planner with McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign.
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