It is said that failure contains more lessons than success. The most successful people in the world have failed time and time again. They became successful because they were keen to learn from their failures.
In finance and business, mistakes can be very costly. Thankfully, you don’t have to learn the hard way. Your journey to financial success can be a lot easier if you’re willing to learn from other’s mistakes. Let’s discuss some financial and business mistakes that billionaires have made – so you don’t have to make them.
Do you have a great business idea? Are you thinking of investing in something? Stop second guessing yourself and go for it. Always be on the lookout for great ideas. Do your research and take a calculated risk. Many people have great ideas and loss out by not pursuing them, only to see someone else implement a similar idea and become wildly successful.
Larry Page, one of Google’s founders learned this lesson the hard way. In 2003, he noticed that an early social media site called Friendster was gaining success. He offered to buy the social media site but his offer was turned down. Being the most popular search engine in the world, Google should just have developed their own social media site. They’d have dominated the social media market.
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Page only realised what a great opportunity he had missed when Facebook swooped into the scene in 2004. In a bid to catch up, Google released Google+ in 2011…but it was too late. Google announced the closure of Google+ in 2019, after unsuccessfully trying to compete in the saturated social media market.
To open your eyes to opportunities around you, look for problems to solve. Is there a problem you and the people around you encounter frequently? How can you provide a solution? Research your idea and implement it as soon as possible.
Failure to research
Having a good business idea is great, but you should always research before taking the leap and investing your money. Whether you’re starting a new business or making an investment acquisition, research should always be your first step.
How viable is the idea? Is there competition? Is the market big enough to make sustainable profits? Is the acquisition worthwhile. Research helps you answer these questions before you risk your money. In your research process you can make your own observations, talk to mentors, survey your target audience, and perform a SWOT analysis.
In 2000, Mexican business magnate Carlos Slim (who was ranked as the world’s richest man in 2010 and 2013), had an expensive lesson on the importance of research in business. He failed to adequately research before acquiring CompUSA for $800 million. But at the time, desktop computers were being rapidly replaced by laptop computers and other emerging technologies. The result? CompUSA value plummeted and closed down in 2007, after costing him an estimated $2 billion.
Skimping on vital costs
The main goal of every business is to make money. In order to maximise profits, it makes sense to cut unnecessary business expenses. However, you must always be willing to spend money to make money. When cost-cutting is overemphasised, it can hinder your business’ financial growth. You should never lose your focus on providing value to your customers.
Hewlett and Packard made this mistake. The American multinational IT company became obsessed with cost cutting instead of focusing on improving their products. Previously known for innovation, the company has been plummeting over the years.
Some important business costs you shouldn’t skimp on include hiring qualified employees, creating high-quality products, providing customer service, safety measures, and having the right equipment and tools. Think through every cost-cutting decision carefully. Make sure that you only cut costs on components that aren’t essential to your business success.
Refusing to diversify
After making an investment or starting a business, you might feel reluctant to explore other opportunities. But even the most seemingly stable industries can be affected by unforeseen changes, ultimately costing you money. Every wealthy individual has learned that it is smart to always have a diversified investment portfolio. That way, when one investment underperforms, you will be cushioned from losses by the other investments.
Billionaire Warren Buffet has admitted to failing to diversify his investments, which led to losses. When he bought Berkshire Hathaway in 1964, it was a textile company. He kept the original business running a loss for 20 years. The company started making profits when he decided to focus on other profitable ventures, with Berkshire Hathaway as the holding company.
Choosing the wrong partner
Many entrepreneurs choose to go into business alone. But facing the challenges of business with good partner significantly improves your chances of success. An ideal business partner can inject more cash, expand your network, and bring a unique set of skills into a business. Many of today’s most successful businesses are a result of powerful business partnerships.
However, a bad business partner spells doom for a business. Therefore, you should be careful about whom you choose to be your business partner. Facebook almost failed due to a bad partnership between Mark Zuckerberg and Eduardo Saverin. The two met at Harvard and collaborated on the first iteration of Facebook and ultimately founded the business together.
But reportedly, while Zuckerberg spent most of his time working for the business, Saverin was more focused on a leisurely lifestyle. Zuckerberg slashed Saverin’s shares in the business, which led to a contentious legal battle.
Before settling on a business partner, analyse them carefully. Do they share your passion for the business? Do they have the character traits it takes to start and run a successful business? Do they have financial muscle? Are you compatible with them? Consider these questions before approaching anyone to be your business partner.