The Costly Consequences of Bad Advice

When bad advice cost him millions

00:00Bill Gallagher: Have you ever had a week when you're completely slammed, but somehow nothing actually moved? Is this one of those weeks? That's not really a time problem. It's a busyness habit problem. My new book, Busy Is Broken, Do Less, Scale More, is all about growing by doing less, not more. Read or listen to a sample chapter over at busyisbroken.com. That's busyisbroken.com. It's also on Amazon and other booksellers.

00:51Bill Gallagher: Well, Sophocles said no enemy is worse than bad advice, and I learned about this one the hard way. Sophocles was one of the great Greek tragedians. He wrote stories, plays, a whole bunch of them. And he said, No enemy is worse than bad advice.

01:07Bill Gallagher: So I was growing the company at one point, and I had a vision for making this company really big. It took me some years to kind of get the strategy dialed in right and to get the product mix and that kind of thing to align the team and so on. Anyway, suddenly we found ourselves growing and I went to seek advice about how to grow the business. I got a lot of different advice, right? I convened a board of advisors and I laid out our situation, that kind of thing. And there were two big pieces of advice that I got and I chose one, not the other. It cost me millions and I never got it back. There's no happy ending to the story, except that I've advised many others to learn from this mistake and what the underlying good advice was and what to make from it, which I think is actually really powerful.

Two opposing recommendations on raising capital

01:57Bill Gallagher: Anyway, so I'm growing this company, and I see this big, big future. And I realize it's gonna be worth a lot of money to me, and I'm gonna need help to grow it. So I go to grow the company. I get this board of advisers around, and we have some winning products, things like that. I lay out the situation. I lay out the future vision, and the current situation is driving towards that future vision. And I got two pieces of advice. One of them is sell now. Like, raise money now. When you've got a good story to tell, now is the time to raise some money to put some investment into the company and get some partners to help you because you have no idea what you will see.

02:38Bill Gallagher: The other advice I heard was, at the same time, at the same advisory meeting, was, yeah, actually, you need to hit a certain revenue milestone. Otherwise, your company's not going to be worth a whole lot and it's going to cost you personally. And, like, so you really should wait, and you should get to the next little bit on your own and then bring in the other money. Well, I listened to that. It sounded technical. It made sense. It was logical. There was details with it. Right? So the details and the technical nature of the advice and the specificity of it, it all sounded very serious. And if I think about it now, it also played to, like, greed. Like, okay. Well, I'm not gonna get as much for the business now. I'm gonna lose control quicker and not get as much for it. And so I didn't take the path. I said, okay, I'm gonna wait before I raise money.

Choosing to wait and losing the opportunity

03:30Bill Gallagher: Well, we encountered all kinds of challenges and situations, and I did not have then a partner with deeper pockets and more ideas to navigate some of those challenges. And then the company wasn't worth as much. So the decision to wait for this technical event to happen when I hit another milestone cost me dearly because I was at a time when the company was sexy, when the story was good, when the current circumstances lined it up to a bigger future vision, and I missed that moment and I never got it back. We were not successful in selling that company, and we had to essentially wind it down. That's a painful, painful story, and it cost me dearly.

04:21Bill Gallagher: So I think there's a few things about it. Right? So the one is like taking advice at face value, and when to sell your company, and advice versus experience. Right? So what I didn't do is ask, Tell me about your experience. I treated it as straight advice. So I didn't say, Well, tell me about what you've seen. Why do you say that? What have you seen? How's it gone? What are the, you know, like, Tell me more stories. I just took it like, okay, that makes sense to me. So in both cases, from both of the two camps, there were more than two people in that meeting, but there were two people with two sort of specific sets of instructions. And I listened to one and not the other, and I didn't probe, like, the experience that went behind that.

05:06Bill Gallagher: I also missed the fundamental human thing that, like, there's a key moment to sell a business when there's a good story. You don't have to sell all of it, but what I should have done in that moment now with the wisdom of time is take some money, sell some part of the company, and now get other people invested in the company who'd help me navigate the problems that were soon to arise and be an issue for me. So by the time we got to the next revenue threshold, I already had bigger problems and I didn't feel like I was in a position to try to raise money anymore. So but, you know, like people want to raise money when they see a big future for the business. And you don't want to take the money when it all looks dire, right? That's you're going to get peanuts for it.

05:53Bill Gallagher: So separating advice from experience or taking the advice or listening to the advice and then probing for experience would have made a massive difference. It seemed really appealing because I saw the next milestone as being achievable and close at hand. And so it was like a matter of waiting a little bit, being patient, continuing to grow the business on my own. But I wasn't paying attention to the company values and our goals. And I wasn't thinking about all the challenges. I was minimizing the challenges that I might encounter along the way and the fact that I really would need help to navigate that.

Seeking confirmation instead of honest counsel

06:26Bill Gallagher: I also sought in my interaction with mentors and advisors that time, I posed it, the situation and the advice that I'd gotten from a place of looking for confirmation. So I was, without thinking about it, really seeding, like, what I wanted to hear back from them. So I heard this and I got this and I'm going to go with this direction. Do you think that makes sense? I was essentially selling them on what I wanted to hear instead of laying it open and making it hard for them to give me really straight advice.

06:58Bill Gallagher: I have turned this into a learning moment for myself as a coach and to our clients in turn. And I think I've figured out this one thing, that you really wanna start to look for partners in the business. Now it comes with some strengths. So you wanna think about your values and your goals and that kind of thing. You want partners and investors, and you wanna get out of the company, in some significant way as soon as it makes sense to do it. And the time to sell is when you have a happy story. When things are going well and you don't actually need the money, the partner, but you are going to a bigger future, you will encounter many bumps along the way. It's inevitable.

07:40Bill Gallagher: Whatever kind of business you're in, and it's hard to say when they will occur, no one can really say. But when we have a good story to sell, that's the time to take in some additional money. Whether it be debt or equity, you take in money in those good times so that you have some resources and some partners when things get difficult later, as they inevitably will. And I think that's the biggest thing that I've learned is instead of trying to wait to that peak moment or the top of the thing and then sell at that point, building right to that and selling on that. Create a big future along the way out. As soon as you start to fulfill on it, getting some evidence, you've got a happy story to tell, that's the time.

Evaluating advice based on experience, not certainty

08:21Bill Gallagher: So I think two things. One is when's the right time to sell the company? As soon as you've got a happy story and a bigger future out there that you're working on. People want to be part of that. The second one is don't take advice at face value. Dig into the experience that went into the advice and think about it more critically. Are you evaluating this from a selfish standpoint or being charmed by some technical something that seems impressive to you? Or are you really getting kind of in your gut what makes sense? In my case, like would I need partners and resources with the problems that were going to come? Was I thinking that I wasn't going to have problems?

09:00Bill Gallagher: Right? So time and again with our coaching clients, that's the way that I'm thinking about it. So diving into the experience, right? I'm really reluctant today to give straight, like direct unwavering advice to people. It's like, well, it could go this way, it could go that way. I might advise my gut kind of says like this. Here's a couple of examples of things, some things that feel like it. Sharing personal experience, sharing client experience, sharing any kind of experience so that somebody can sort it out for themselves because ultimately you are the one that has to live with the advice, has to make sense of it. So experience is more powerful. It helps you to sort it out and having a range of opinions, not being, and being wary of anyone who's too certain of their situation or too technical in some nature. And those are the big things that I have to say about this.

09:53Bill Gallagher: I hope it's useful for you. I hope you could apply it and think about the kind of advice you take and for what situation and also about when the right time is to bring in investment, new money, and new partners into the business. Those are couple of things that I think make a massive difference. Hope that's helpful for you. I want to give a big thanks to my friend and mentor, Verne Harnish, who created the whole Scaling Up framework. I want to tell you if you'd like to be in a workshop and talk through your business with me, I do workshops every month. You can find those workshops and the more than 600 of these shows back at scalingcoach.com. You can like, subscribe wherever you're looking at the show, listening to the show right now. Like, subscribe, turn on your notifications, share it with somebody else if you think they could benefit from it. And of course, thanks to our partners at Storion who get our show ready produced every week. We'll talk to you again next time. Keep scaling.

10:50Bill Gallagher: Thanks for listening today. One last thing. If anything in this episode hit home, my book digs into it further. Busy Is Broken. Do Less. Scale More. It's all about how to stop drowning in work and build a business and a team that scales without you. Available right now with content samples at busyisbroken.com. Go grab it. Be less busy.