Lessons on failure from Shark Tank investors: How to take control of your business when things aren’t quite going right
Friday, August 17, 2018/
It’s an unfortunate reality of business that things go wrong, usually at the worst possible time, and nearly always without warning, but it’s the lot of an SME owner or startup founder to pick themselves back up and keep on trucking, no matter the weather.
Failure doesn’t always mean a business falling over, though it can often be the result — it’s pretty well accepted that about 80-95% of SMEs and startups fail in their first few years.
Failure can mean a deal gone awry, or an idea not playing out quite like you thought it would. It can be a star employee leaving, or a computer system crashing. It can even be something as seemingly inconsequential as an awkward meeting with a client, or a bad night’s sleep.
Nevertheless, things going wrong in business is generally something founders would prefer to avoid where possible, as the general paces of running a business is likely stressful enough already.
Some of Australia’s most successful businesses were built through failure, with some of our most prominent entrepreneurs taking multiple stabs at starting a winning business before getting the formula right.
These entrepreneurs have gone on to do some big things, and a handful of them have even been in front of the cameras for the past four years making investments and advising entrepreneurs on Australia’s version of Shark Tank. These founders are grizzled entrepreneurs, with an in-depth knowledge of what it takes to make a business succeed in Australia’s — at times tumultuous — business landscape.
SmartCompany spoke to some of the sharks from Shark Tank about failure, the times they’ve seen things go wrong in business, and how they got back up on their feet and kept moving forward.
“People can rush into business opportunities” — Naomi Simson
A couple of years ago, Naomi Simson’s management team decided to split experience-gifting company RedBalloon in two, creating Wrapped.com to focus on selling retail goods, or “physical experiences” as Simson puts it.
This was at a time when Simson wasn’t in an operational role at the company, and upon RedBalloon coming under Simson’s new umbrella company The Big Red Group, the entrepreneur knew the retailing business was a poor fit.
“When Wrapped.com came out of previous management, it wasn’t in line with the Big Red Group’s purpose, because ‘shipping stuff’ wasn’t in our purpose. We didn’t see it as part of our core business, it wasn’t in our heart,” Simson told SmartCompany.
“We battled away with it for a year before I had a really straight conversation with myself and realised it really wasn’t in our future or one of my passions.”
Despite Wrapped.com having a perfectly respectable $2 million turnover, Simson decided she needed to cut the business loose, though admitting in doing so it did cost her some money.
She was able to absorb much of the business into RedBalloon, and set up a “friendly deal” with fellow online gift buying store Hard To Find, which sees all traffic to Wrapped website’s redirected to Hard To Find. But despite the headaches and costs associated with the winding down of the business, Simson doesn’t view it as a failure.
“We just decided we didn’t want to be in this business anymore, but is that really a failure? We stayed true to our beliefs, and it was clearly not scaling the way RedBalloon was, or other businesses in the Big Red Group,” she says.
“I think people can rush into business opportunities when they don’t fully believe in it, and that can make it really hard. We get our passion from people having a great experience — Amazon’s in the business of shipping stuff and we didn’t need to be in that business.”
Simson says she knew it was time to make the hard call about Wrapped by listening to herself and thinking about what parts of her day-to-day actually made her happy.
“I think the power of observation is key in situations like those. It’s important to watch yourself and where your energy goes,” she says.
“I felt the best when I was working in the experiences space … when life was a grind and I was worrying it was when I was dealing with other parts of the business.”
“Failure can happen when success is just around the corner” — Glen Richards
Glen Richards is a man of many talents. A veterinary physician, shark, founder and chief executive, Greencross founder Richards has overseen or been involved in almost every aspect of business, from big and small, and from public to private.
With all those years of experience under his belt, Richards tells SmartCompany one of the main causes of issues for business and startups he’s owned and advised can actually be caused by a business blowing up and getting a bit too much success.
“Probably the number one thing I see hurt businesses is working capital deficit,” Richards says.
“This is when businesses are finding success, and perhaps more retailers want to take them on. But then orders come through, and they don’t have the capital capability to go to the factories, get the product made, and deliver it to the customer.”
This can leave SMEs out of cash, despite having received a huge order from a client, and often waiting up to 60 or 90 days for capital from contracts with suppliers and other clients to come through. Richards says he’s seen this happen numerous times to a company’s great detriment, and sadly often happens “when success is around the corner”.
To fix it, Richards says businesses often need strong financial controls, either externally, or from within the business.
“You need someone who’s going to do the analytics and cashflow mapping, looking at the money going in and the money going out, rather than someone suddenly going ‘holy shit, I have no money’,” he says.
“They can predict how things are going to fall through, and look at the business from a balance sheet, profit and loss point of view.”
“For plenty of companies, if you get an open order from a retail chain of 200 or more stores, that order can actually hurt a lot until they get paid in full for it, so you need to predict what happens as much as possible.”
“It’s what you do with it” — Andrew Banks
Just like Sal Kerrigan’s chicken rissoles, renowned investor and talent professional Andrew Banks thinks it’s all about what you do with it.
Along with being the appointed ‘Dad’ of the tank, Banks is the founder of recruitment company Morgan and Banks and talent company Talent2, which was listed on the ASX before it was acquired in 2014.
Over his 40-plus years in business, Banks says the main time he’s seen businesses fail is when the execution hasn’t followed an idea, even when the idea has been a winner.
“I’ve seen businesses with a great market, quality product and strong goals, but because it had the wrong people delivering or selling it, it didn’t do what it hoped to do,” Banks told SmartCompany.
“For example, Talent2 had a very large training business that worked all around Australia. In the end, it was not as successful as we would have liked because we were quite reliant on government grants, and the rules around what companies wanted kept changing beyond our control.”
“But in the end, we didn’t deliver and we didn’t execute on the business as well as we did in other areas of Talent2.”
Banks says he’s also seen a number of business deals fall through, putting many of them down to misaligned requirements and principles of the companies that weren’t explored properly beforehand.
He says businesses should not be afraid to be upfront with potential partners about what they want and what they value, otherwise they could find themselves wasting a lot of time for nothing.
“The times when deals haven’t happened is when I didn’t get clarity up-front and early about key things that were likely to be important to both sides. We were doing a deal with an American company, a licensing deal, and in the end, some of the key requirements they had for the deal to go through were actually total dealbreakers for us,” he says.
“So don’t do what we did and spend three months going around in circles. Get everything out in the open upfront at the head of the agreement, way before you get lawyers involved. If you don’t you might find yourself partnered with a company where you both don’t agree on basic principles.”
“If you do things right all the time, business would be boring” — Janine Allis
Finally, Boost Juice founder and franchising queen Janine Allis has a contrarian take on when things go wrong in business, telling SmartCompany she’s never viewed hiccups in her business journey as failures, instead treating them as learning opportunities.
“I don’t really look at things as having gone wrong when I think back on them, because without that thing going wrong maybe I wouldn’t have been able to do something else that went right?” she says.
“So I think that everything that goes wrong is kind of right anyway.”
Allis encourages entrepreneurs to fail, believing that without failure not only would business be “boring”, we wouldn’t have the developments and aspirational companies we have today.
“Business is the sum of all the things we do, not just one thing. If you do everything right all the time, business would be boring, and we’d be probably be going backwards,” she says.
“In actual fact, it’s the things that go wrong in business that make your business succeed.”
Drawing on the example of Elon Musk’s companies SpaceX and Tesla, Allis says without Musk blowing up numerous rockets, we’d never have a chance to get to Mars, saying it’s “about embracing mistakes as ‘not mistakes’”.
“It’s not even about the brighter side, it’s about how we learn and adapt to use those learnings for the bettering of our business. If they cost money, it’s about how do we not do that again, and what were the insights we got from it, and how we can adapt and get better,” she says.
|Passionate about the state of Australian small business? Join the Smarts Collective and be a part of the conversation.|
Lunchtime singing and awards for failure: The best perks from Australia's most innovative companies Amantha Imber Inventium founder
Your future customers: How to crack the gen Z code Simon Slade Affilorama co-founder
Why you should stand up for your staff (and buy a Porsche 918 Spyder) Ian Whitworth Scene Change co-founder
Why corporate content will send your customers running Luke Buesnel Story League director
How to write the perfect job advertisement Alex Hattingh Employment Hero chief people officer
How to outshine the millions of websites ranking poorly on Google Adam Rowles Inbound Marketing founder