MOBE Matt Lloyd: Books are great. Videos are very helpful, too. But when it comes to learning the business lessons that stick with you for a lifetime and make you a better businessperson, nothing else compares to the power of experience.
It’s All Relative
When you are just starting out in business, a loss of $500 can seem catastrophic.
When your business is generating six-figure revenues, a $500 loss won’t cause too much concern but a $50,000 loss might.
Sometimes you have only yourself to blame; other times you have the luxury of pointing the finger at others.
In either circumstance, you have received a lesson better than any book or lecture could ever provide. It doesn’t even matter how many times someone warned you something like this could happen and you said, “Yes, alright.” You don’t really understand until you’ve received a vivid, three-dimensional experience, impinging against all of your senses. This kind of lesson is indelible; you know it and won’t forget it.
But in order for it to truly be a lesson learned, you have to put systems and procedures in place that will prevent it from happening to you again.
One of My More Expensive Goofs
I’ve made several mistakes that cost the company more than six figures. I could probably write a book about the mistakes I’ve made since I went into business.
One that immediately comes to mind happened a few years ago and ended up costing me more than $50,000.
It was at a time when MOBE was expanding very rapidly, following the release of MTTB.
What happens is that when you’re growing very quickly, your gross income is going up, up, up. If you rely on gross income figures to tell you how you’re doing, you will end up with an inaccurate picture of your finances.
Rapid growth invites inefficiencies to creep into your operations. You or one of your staff may incorrectly estimate what is needed in terms of supplies, service, staff, etc. You can end up spending more money, and spending on things that you don’t actually need. And it can eat into your profit margin.
If you only keep your eye on the gross, you will completely miss it.
This is why you must monitor the net—gross income minus expenses and overhead—rather than the gross. It will tell you your profit margin—not how much you’re making but how much you’re keeping. It’s how much cash you actually have.
Now, I knew it was important to monitor the net income, as that is a far more accurate measure of a business’ condition. So, I would check all of our various accounts every couple of weeks. I’d log in, check the numbers, convert them all to one currency (U.S. dollars) and check it against the numbers I’d calculated the last time I checked. This was how I could detect if the margins were going up or down and, if they were going down, I’d correct the situation quickly.
But I broke this routine. During a particularly busy season when we were building up the live event side of MOBE, I spent a lot of time away from the office, traveling and checking out venues, as well as appearing at many of the events. During that time, for about two months, I stopped doing the “net income checks.”
When the event-related activity slowed down, I logged back in and got a not-very-nice surprise. Almost immediately, I could tell something was wrong. Money was missing that, by all indications, should have been there. What I found was that one of the accounts had been defrauded—money was taken out in a fraudulent manner—and I discovered a problem with one of our merchant accounts which was preventing revenue from reaching our bank account.
I’d been doing it right, but the one time I let it slip, I got burned.
My solution, put in place immediately, was to monitor cash every single day. I gave this task to someone on my staff who I trust a lot, but I still check their numbers regularly.
The embarrassing part is that I had been advised by other people—people more experienced than me—to check cash daily but I figured every couple weeks was good enough. When you get to be as big as MOBE has, it’s not.
That was a pretty expensive lesson and there have been others.
On the other side of the coin, sometimes you pay for the lesson ahead of time. I’m talking about money that I’ve invested in professional consulting to continue to scale MOBE. One set of services has cost me $10,000 for a few hours of consulting a month. In 2015, I paid $22,000 to attend a week-long consultation at a castle in Scotland. I’ve paid as much as $150,000 in a single year for business education services.
It’s not the same as losing money by getting burned but do you think I am going to spend that kind of money and then not implement what I learn?
So, I guess my message is actually two-fold: (1) As a business person, you can’t avoid all possible mistakes, but you can learn from them and then put systems in place to prevent them in the future, and (2) smart business people continue to get educated and apply what they learn to expand their businesses.