David De Miko

3 Ways to Avoid Costly Business Mistakes

2020 was a year of massive change.

COVID exposed the weaknesses of big corporations & small, nimble e-commerce stores have been winning big time…

Or at least it seemed like it.

I was personally in a very lucky situation where I was working with multiple 8-figure entrepreneurs who were scaling their businesses by 200-300% in a matter of months.

And while their revenues were growing, the number of problems that they had to solve grew exponentially.

Every decision of theirs was crucial, and they had to be making lots of them.

However, most of these entrepreneurs were first-time entrepreneurs, which means that they didn’t have experience dealing with these sorts of problems. As a result, a lot of mistakes were made.

Some of them you could see immediately, some of them have caught up only now. In this article, I’ll focus on how to avoid these mistakes.

1. Seek people who disagree with you.

This is a really big one.

Our brains are wired in a way to be confirming everything we think about. We feel we’re worth building businesses to 8-figures, and we’ll find everything that confirms that belief. We believe in one type of religion – we’ll find every evidence to confirm it.

What happened in 2020 was very interesting. Founders I was working with were making the decisions based on their current numbers.

On one occasion, we managed to scale one business from $1.5M to $6.6M in monthly revenue.

Hence our thinking was “ok, this will continue as we go throughout the year”. Having this opinion, we’ve ordered enough inventory to last till the end of the year. We also started hiring enough staff to keep up with the growth. And did it very fast.

What happened surprised us big time.

After 2 months, our revenues started declining and we ended the year generating $3-4M in monthly revenue.

Still a lot. But not enough to keep all of the staff and to sell all of our inventory.

This means we’re still sitting on millions of dollars worth of inventory and have serious cash-flow problems.

But what if we had someone who was either experienced in these kinds of situations or would’ve simply questioned our decisions?

Maybe we would’ve made the same exact decision… Or maybe not.

Yes, it feels uncomfortable when people are not agreeing with us… But you want some serious growth in your business, you really need to be looking for people who will challenge your thinking.

As a result – you’ll become a better decision-maker.

2. Think about what you’re missing out on.

There’s a law in microeconomics.

If you focus on one thing – you can’t focus on another.

Simple as that.

Yet entrepreneurs are wired to forget about it. We find out about this brand new opportunity, FOMO kicks in, and we jump straight into it.

Months later, we realize that we don’t have enough time to work on the projects we’ve previously been working on.

Here’s an example from our business from last year. We’ve decided to launch a few products and were working hard to make it happen on a very tight deadline.

The project took almost 4 months, and all of our teams were working on them. Developers, content creators, influencer marketing team, designers, email marketing team…

And while we were focusing on making sure we hit the market with these products…

We couldn’t focus on our current products and sell them.

The worst was that we couldn’t create the product on time and had to delay it for 2 months.. This means that we were re-working the strategy and were focusing another 2 months to push this product out in the market.

6 months. That’s how long it took us to launch this product. As a result, our sales of the current products have gone down.

Fortunately, our new product hit the market and we were able to increase our revenues and open up a brand new audience to our brand.

But here’s another question I want to pose to you – imagine if we made a mistake in the first place by selecting the wrong product to push out to the market? What if our customers didn’t want it in the first place?

In that case, we would have spent 6 months on launching this product, focused all of our resources on them losing focus from our main products…

We would have lost 6 months’ worth of work, money that we spend on employees, along with the revenues…

3. Inverse. Always inverse.

This is one of the best frames of thinking I’m using almost daily.

This mental model shows what you need to avoid at all costs so you achieve your outcome.

Let me explain.

Let’s say our goal is to sell our current brand for $500M (which is truly our goal). We now have to state the opposite of that. What’s the opposite of selling a company?

Going bankrupt.

So now that we have our “inverted goal”, we ask ourselves a question about how to achieve it. “How can we go bankrupt?”.

I’ve done this exercise with this particular question and came up with at least 15 things we should do to go bankrupt.

And as you have this list of the things that will get you to bankruptcy… Now you should avoid it at all costs.

What’s beautiful with this mental model is that you can adapt it to any life circumstances.

Want to earn money by investing? List out all of the things how you can lose money by investing.

Charlie Munger is using this mental model at all times. His first rule of investing money successfully?

“Not to lose any money”