My father-in-law Don McFadden told me a story about a big mistake he once made. He bought an apartment building in his city and borrowed most of the money to do it. After he took ownership, he learned that many of the tenants were moving out and there was no way to stop them, because they had never signed leases. He was facing an emptying apartment building and a large monthly mortgage payment – a bad combination. Worse, he got surprised: he hadn't done the research to know that it was coming.
So, how did it turn out? It turned out just fine. It turned out better, in fact, than if he had never done the deal in the first place. He and my mother-in-law re-negotiated their loan with the bank. They took the opportunity to clean and paint the vacant apartments, and were able to fill them with tenants of their choice, for higher rents. And one-year leases. My in-laws owned that building for 30 years.
In a similar vein, James McCann, the founder of 1-800 Flowers, related this story about the early days of his company:
In 1986 I bought the assets of a failed floral company in Texas called 800-Flowers and took that name. I thought I was smarter than everyone else and neglected to hire lawyers and bankers to do due diligence. I unknowingly signed for all liabilities, which I later learned was a debt of $7 million. People advised me to file for bankruptcy. Then my grandmother took me aside and said: "This bankruptcy thing? We don't do that. Find another way."
And he did. The Texas company's sterling assets were its name and its 1-800 number. McCann built his company around technology – first phone ordering, then the internet – to upend the floral-delivery business and create a market leader with over $600 million in annual revenues.
We often confront situations where we have to make a decision without all the information we'd like to have. Do we jump? Or wait and see?
Many of us err on the side of "wait and see," using due diligence as a way to put off risk, or to avoid it completely. Yet, the above stories tell us that even big mistakes can turn out successfully. It all depends on your mindset.
Most of our decisions have limited risks and rewards. Nevertheless, if we know that with hard work, perseverance, and resourcefulness we can make even a bad situation into a success, we can approach any decision we face with that confidence. As my father-in-law said about his experience buying that apartment building: "Failure is an opportunity."
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John Caddell is the curator of The Mistake Bank, a site that collects stories of business mistakes and articles on learning from mistakes and failure. You can follow him at @jmcaddell.