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Read time: 3 mins
WeWork officially filed for bankruptcy this month.
A $48 billion valuation in 2019 is now worth less than $50 million.
WeWork is an office-space leasing company that offers flexible workspaces to individuals and businesses.
It pitched itself as a tech disruptor to the real estate industry; as Facebook was to social media, Uber to transportation and Airbnb to accommodation.
But it struggled with questionable management practices, a lack of profitability, and a change in work culture through the COVID crisis.
Its future looks pretty bleak right now.
And there’s LOTS we can learn from it.
While it’s still early, we wanted to share 2 critical lessons that you can apply to your business today.
Let's get into it!
2 CRITICAL LESSONS FROM WEWORK’S DOWNFALL FOR SMALL & MID-SIZED BUSINESSES
1) A Profit Plan is King:
Since it was founded in 2010, WeWork has never turned a profit.
And it might be surprising to hear, but that's not the reason they went bankrupt.
It’s okay to be scaling up a business and losing money.
When you peel it back, WeWork went bankrupt because they had no realistic PLAN to make a profit.
Lenders and investors won’t keep backing you if there's no believable plan.
For your company, watch out for these common pitfalls:
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No clear business model: You need to be able to clearly state how you'll make money based on a clear target market and pricing strategy.
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No growth strategy: You need a solid plan for acquiring new customers and growing sustainably.
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No financial projections or milestones: You need detailed revenue & expense forecasts and realistic milestones that show how and when you plan to make a profit.
Bottom line:
Follow the number 1 rule in business: don't go to zero.
Don't be the company with no profit plan.
2) Balance is Queen:
Always remember:
Nothing is ever as good as it seems.
And nothing is ever as bad as it seems.
In WeWork’s case, they totally overestimated good:
- Unrealistic valuation: their value should never have been based on a technology-based company, but as a real estate firm.
- Questionable management practices: internal audits should have been scrutinised and addressed (private jets, buying delivery robots, and other extravagant items were just silly).
Now that they’ve filed for bankruptcy, they (and the market) risk totally overestimating the bad.
There are still some amazing assets and a potential real estate community business with a subscription model (SAAS) on top of it.
It’s important to find balance by looking at your situation objectively, and considering different (and realistic) perspectives.
Here’s what we suggest:
When things feel too good, ask yourself and your team great questions, like:
- How could this go wrong?
- What existential risks exist?
- Where could we improve?
And when things feel too bad, ask yourself and your team:
- What opportunities exist?
- What is the best case scenario?
- How could we take action in 1/10 of the time to turn this around?
Bottom Line:
Always take a balanced view, especially when things are really good or really bad.
It will help you take smart, measured action that will keep your company stable.
We're confident you won't be losing billions of dollars next year.
Regardless, there's lots of wisdom in avoiding a WeWork-style downfall by having a solid profitability plan and maintaining a balanced mindset.
Time to get to work!
Speak soon!
Lynne and Steve
TLDR:
- Having a profit plan is king: make sure you have a believable plan to grow a profitable business, especially if you're scaling.
- Balance is queen: always take a balanced view of your situation so you make smart, measured decisions that keep your company stable.
When you're ready, here's how we can support you further:
▶ Join the Unlock Your Network course
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▶ Work with us
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