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Mark Cuban, one of the “Sharks” on the TV show Shark Tank, is a multi-industry entrepreneur and best-selling business author. He appeared on “Swimming With the Sharks” on “Good Morning America” where viewers asked him about his biggest business failures. Here’s his story and what we can learn from it.
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Mistake #1: Being cruel
Believe it or not, the businessman said his biggest mistake as a young entrepreneur was thinking he “had to be mean.” When he started his first company at age 25, Cuban tried to compensate for his youth by being antagonistic.
Years later, Cuban learned that wasn’t the case.
“Nice sells,” he told his viewers. “Nice makes more money.”
The Rise of Kindness in Leadership
Cuban is one of many entrepreneurs who have made this observation. In 2023, Big Change founder Martin Port wrote about the rise of a culture of kindness in entrepreneurship. He observed that a few decades ago, people viewed business as a battlefield, where ruthlessness ruled.
Great leaders today understand the detrimental effects that a negative attitude can have on a business or workplace. Leading from fear is unsustainable, and people need positive feedback to thrive. This doesn’t mean avoiding criticism altogether, but it does mean approaching things with more kindness.
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The negative impact of meanness on businesses
Research backs up Cubans’ appreciation for kindness. Being kind is good for business. Plain and simple.
Research shows that when people in the workplace are critical and mean, teams feel more stressed and fatigued. Being surrounded by mean people makes you tired and less productive.
Meanness also stifles the innovation and collaboration that are essential to entrepreneurial success: No one wants to share their ideas with leaders or colleagues who might block them, especially if that blockage involves mean comments.
When a company has antagonistic leaders, the negative effects ripple through to everyone. It lowers morale, causes widespread stress, and demotivates. A disengaged and stressed team is not going to perform at their best.
Cultivating kindness as an entrepreneur
Cuban’s right: Embracing kindness as a business leader is strategic — but as the online business learning center INSEAD recently pointed out, the advice can be frustratingly vague.
The story continues
INSEAD writer Nadav Klein dug into the research and found a simple but effective interpretation: practice basic human courtesy. If you show compassion and empathy to your employees, colleagues, and customers, they will see you as a caring person.
James Lee, chairman and former CEO of Ashley Stewart, agrees. He believes kindness in business means showing genuine consideration for the people around you. It’s about showing understanding, being tolerant and believing in goodwill. It’s no wonder Cuban got better results with this approach.
Mistake #2: Prioritizing sales over profits
Besides being too spiteful, Cuban’s other big mistake was being too obsessed with revenue and profits.
Revenue is the total amount a business makes from a customer. If you sell a $500 sofa, you make $500 in revenue.
Profit is the amount you have left over after your expenses are subtracted. If you spend $450 to rent a showroom, buy a sofa, ship it, and hire a salesperson, you’ll only make $50.
Revenue Limits
High sales are an incentive for any business owner. It feels good to make $1,000 in sales one month, $5,000 the next, and $10,000 the month after that.
Increasing revenue is important. Only with increasing revenue can you maintain a healthy business. But if your revenue doesn’t cover your costs, your business won’t be as successful as you’d like it to be.
Why profits are more important
Imagine you’re a startup owner whose revenue is skyrocketing. As your revenue increases each month, you reinvest that money back into your business. You hire dozens of employees and start developing more products. Those products bring in more revenue, and the cycle repeats.
The numbers look great on social media, but what about your balance sheet? If your revenue is high but you can’t cover your expenses, your business is unstable. That’s a risky situation, especially in an economy that most people consider unstable.
As Cuban learned, and as many other business experts would argue, the way to achieve stability is to focus on profits.
Pursuing profits
Revenue is a tempting vanity metric, but companies need to know their profit numbers, too. There are three numbers to consider:
Gross Profit: Total Revenue minus Cost of Goods Sold
Operating profit: Gross profit minus operating costs such as employee salaries and marketing expenses
Net Profit: Gross income minus all expenses, including taxes.
Tracking all three numbers gives you the most accurate picture of the health of your business. If one number is good and the other isn’t (for example, high gross margin but low operating margin), it’s a sign you need to make cuts somewhere.
Start tracking your profits as soon as possible and your business knowledge will improve exponentially.
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This article originally appeared on GOBankingRates.com: Mark Cuban’s Two Biggest Business Mistakes and How to Avoid Them
