Terrifying Tales Every New Entrepreneur Should Hear: 4 Business Owner Horror Stories





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Business owner horror stories exist! Some might experience turbulence during the growth years, while others might hit the waters harder than most. Unfair franchising practices, unmitigated disasters, and legal entanglements can obliterate an entrepreneur’s dreams of financial security. How about we look at the following business owner horror stories to learn more?

Quality Control Issues Put Shark Tank-funded Product into the Landfill

Business name: Fly Babee (CoziGo)

Business owner: Emma Lovell

Estimated loss: $25,000

Key takeaway: Hire a reputable manufacturer with trustworthy quality control mechanisms, even if it means paying a higher price for manufacturing.

 

Fly Babee’s horror story became a blessing because owner and founder Emma Lovell learned her lesson and sought never to repeat the same mistake. Lovell drew admiration from Shark Janine Allis, allowing the former to gain the latter’s backing in manufacturing Lovell’s baby stroller sun covers. Unfortunately, instead of bidding her time evaluating candidate manufacturers, Lovell teamed with a Chinese company to produce the world’s first commercially available Fly Babee products. Sadly, four of five items had poor quality, leading to brand launch delays because the manufacturer had to fix the issues. Even with the so-called “fixes,” 80 percent of Lovell’s offerings proved sub-standard. It prompted the mother-turned-entrepreneur to dump the products in a landfill and write them off as a $25,000 loss. To make matters worse, the Chinese manufacturer refused to refund Lovell for the mishap. Lovell’s advice to business owners? Vet your business partner. Just because they offer exceptional savings doesn’t mean you get good quality outcomes. If partnering with a reputable company isn’t financially feasible, at least have a third-party quality control expert overseeing manufacturing processes.

Australian Law Firm at the Crosshairs of Cyber Criminals

Business name: HWL Ebsworth

Business owner: Multiple partners

Estimated loss: Undisclosed

Key takeaway: Everyone connected to the internet is at risk of cybersecurity threats. Even with robust measures, hackers and scammers can steal information and siphon money off the business.

Cyber criminals don’t discriminate. Old and new businesses are at the crosshairs of these digital underworlds. It doesn’t even matter if you’re providing legal services. One of Australia’s oldest and most respected law firms, with a heritage of excellence spanning over 120 years and featuring nearly 270 partners serving multiple Australian businesses, learned this the hard way. In May 2023, the Russian cybercrime group, ALPHV/Blackcat, attacked HWL Ebsworth and stole four terabytes of critical digital information. It included credit card information, financial reports, employee curriculums vitae, identification cards, client documentation, and accounting data. HWL Ebsworth kept mum about the cyber attack to preserve its integrity. After all, many government agencies and leading financial (i.e., ANZ) and commercial institutions are the law firm’s clients.  Unfortunately, the cyber attackers taunted HWL Ebsworth and revealed they were behind the hacking. This event prompted the law firm to acknowledge the data breach to its clients and the Australian public. Although the law firm committed to improve its cyber security and collaborate with the Cyber Security Centre, things aren’t looking good for the besieged company. Dark web users can still access HWL Ebsworth’s stolen data.

Fine Dining Delivery No More

Business name: Providoor

Business owner: Shane Delia

Estimated loss: Undisclosed, leading to business closure

Key takeaway: It pays to study a business’s viability in the long-term.

COVID-19 disrupted modern life beyond humankind’s imagination, with many businesses closing shop because of public health restrictions. A silver lining to the pandemic is the sprouting of new companies offering safer solutions to customers wishing a sense of normalcy. One such organisation is Providoor, short for “provider at the door,” a delivery service for fine dining meals. The concept is straightforward – allow fine dining customers to enjoy delicious meals not in a fancy restaurant but in their homes. Customers never worry about the ingredients or cooking the meals. Providoor teamed up with Melbourne, Sydney, and Brisbane fine dining establishments to prepare the dishes, while the company delivered the meticulously curated meals to customers’ doorsteps.  Even with the lifting of COVID-19 restrictions, Providoor found its service adored by loyal customers. Unfortunately, it wouldn’t last long. In April 2023, Providoor’s founder, Shane Delia, announced the company’s collapse, requiring the business to enter liquidation. Experts can only speculate about Providoor’s failure, although Australia’s hospitality industry still reels from the pandemic effects.

A Builder’s Demise

Business name: Porter Davis

Business owner: Anthony Roberts

Estimated loss: Undisclosed, leading to financial collapse

Key takeaway: Increasing costs can bring even the most robust businesses to their knees.

Australia’s 12th largest and most trusted home builder collapsed in March 2023 after it failed to secure additional funding for its ongoing projects in Victoria and Queensland. Although its owner infused $20 million into the company, it wasn’t enough to avert a disaster. A rescue was on the horizon, however. Mig and Sons’ founder and chief executive, Amit Miglani offered to buy the beleaguered company. Unfortunately, the organisation failed to satisfy the liquidator’s requirements.  There was no saving Porter Davis. The company’s liquidator, Grant Thornton, said increasing labour costs and construction materials drained Porter Davis financial reserves. It jeopardised over 1,700 home building projects and left 800 people unemployed. Unfortunately, early home buyers suffered, too. They had their dreams of having good quality homes dashed almost overnight. And communities where Porter Davis projects were bristling with activity are at a loss about the negative ramifications of such company closures. Porter Davis was optimistic it could turn its fortunes around and make headway for its projected $555 million 2023 revenue. Alas, none of that will ever materialise.

Conclusion

Some business owner horror stories result from bad decisions, while others are the inevitable consequences of uncontrolled and unforeseen circumstances. Our case studies show companies can fold regardless of size, history, and reputation.

Businesses can take corrective action without any guarantees the measures will pull them out of their financial nightmares.   Although business insurance solutions cannot prevent these horrors from happening, a trustworthy insurer can lessen financial losses and help companies recover from the missteps quicker. That’s peace of mind you’ll be happy to wake up to after a nightmarish event in your business.


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