Kevin O’Leary, also known as “Mr. Wonderful,” joins TheStreet to discuss why he thinks failure makes for better business leaders.
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00:00 As we know, you're known for giving advice and helping small businesses grow.
00:07 And you said you like to work with entrepreneurs who have experienced failure.
00:11 Why does failing make somebody a better leader or business creator?
00:15 The sting of failure is extremely motivating.
00:18 And usually you've learned your lesson.
00:21 You know, most people don't know what they don't know when they start out.
00:24 So I always tell people, be an apprentice for a couple of years.
00:27 If you love a sector, work for somebody in it and then break out on your own.
00:31 But if I meet somebody that's had two failures in a row, I have no trouble investing in them again.
00:35 Because I've done that too.
00:37 I mean, if you're an entrepreneur, you're going to fail.
00:40 And the ability to just get up and keep competing is what really matters.
00:44 I don't believe people can do it right out of the gate.
00:48 It's very rare. It never happens quite that way.
00:51 You may have a plan, but that doesn't mean you're not going to hit valleys and peaks.
00:55 And I just prefer people that have been, call it, tempered by the extreme pressure of failure.
01:05 It's very hard.
01:07 And entrepreneurs that have been stung by it have learned a lot.
01:12 And I appreciate that.
01:14 And what's the biggest mistake you see entrepreneurs making early on in their ventures?
01:20 Inability to pivot when facts change.
01:24 And I see this--I have to swap out a lot of CEOs in what I do.
01:29 I've got to fire a lot of people.
01:33 It's very challenging to get your first million in sales.
01:38 Really hard.
01:40 When you get to five million, you've proven demand for your product beyond your uncles and sisters.
01:46 You've got real market information about what you've created as a good or service there's a need for.
01:56 Because you're solving a problem.
01:58 Great entrepreneurs find problems and they solve them.
02:00 But the ability to scale from five to 50, that's rare.
02:05 That is when you actually have to find talent and give them their ability to make their own decisions.
02:11 And very few founders can delegate authority.
02:18 And so when I see them get stuck at five, which happens a lot, I have to make a change.
02:27 And this is when I have a control position, not through debt or equity.
02:30 But I explain to them it's not a bad outcome for them.
02:34 They're still a great founder.
02:36 They will remain a shareholder, but they will stop trying to create value because they don't know how to get to the next level.
02:45 It is a very difficult conversation, but I can recognize it almost immediately.
02:51 And it is what it is.
02:54 And if you don't make that change, it's a cancer inside the organization.
03:01 You're doing surgery.
03:03 You're keeping the whole organization alive, protecting the customers and the shareholders,
03:08 and doing the right thing for that entrepreneur.
03:11 But it's not without pain.
03:13 [silence]