5 Companies That Almost Failed

According to SBA estimates, 627,000 businesses start every year. From that number, a little over 500,000 businesses shut shop each year. In the time it took you to read the above sentence, about 80 businesses would have failed. Our intention is not to depress you but to give you real-world examples and information to help you avoid being a statistic.

Every superhero needs a tragedy to overcome right? 

All businesses face ups and downs but it’s how well they can bounce back that determines their longevity. Very few people can get everything right the first time!  In this article, we bring you examples of 10 companies that are wildly successful today but had almost failed at a point in time. Let’s get into it:

#1 Apple

One of the biggest comebacks in tech might just belong to Apple. Even though Apple seems to be omnipresent these days with new products that people happily line up to buy, the company was on the verge of bankruptcy about 25 years ago.

By the mid-90s, overpriced computers and failed products almost put Apple on the brink of disaster. The company was losing about a billion dollars a year when founder Steve Jobs returned to reboot the company in 1997. He whittled the Mac lineup to 2 desktops and laptops, laying off employees and eliminating failures like the Newton that weren’t making money.

A controversial $150 million partnership with Microsoft helped fund the development of the iMac, iPod, and iPhone, thus making Apple profitable. It then introduced the iBook and the iPod both of which struck gold as they addressed consumer needs and were simple to use with intuitive design. It was also around this time that Apple launched the Apple Store which means that consumers could try out their products without being exposed to any other competitors.

In 2018, Apple became the world’s first trillion-dollar company and saw a record $64 billion in revenue in its fourth quarter of 2019.

Key Takeaway: Apple is known for continuously evolving and solving problems through intuitive design and technology. In 2003, Jobs launched the iTunes store as consumers were looking for an alternative to pirated music but in an affordable package followed by the App Store in 2008. Although the gap between its competitors such as Samsung and Google is not as wide as it used to be, Apple is arguably one of the most transformative companies today.

#2 Chrysler 

Once a part of the “Big Three” American automakers, Chrysler today is not on par with GM, Ford or Tesla but it’s contribution to the American economy is undeniable. 

In 1979 high oil and gas prices drove down the sale of new cars and forced the federal government of the USA to loan Chrysler $1.5 billion to keep the company afloat. The company rebounded in the 80s by introducing compact cars and minivans that were a hit with consumers. The 2008 financial crisis forced the automaker into a tailspin once again. The Fed stepped in one more time with a $4 billion bailout.   

In 2009, Chrysler joined forces with Fiat which steered the company into a profit with the latter taking full-control in 2014.

Key Takeaway: Sometimes you can’t do it alone. Chrysler could not have achieved a turnaround without a bailout from the government using tax-payer money. While not all companies can rely on this option, the lesson here is that it is okay to seek advice or support if things are not running as you hoped. Sometimes fresh eyes on a subject, whether it is through consultants or researchers, can provide the momentum required to change things.

#3 Marvel

Before Marvel was the big multi-billion dollar company that we know and love today, they had actually gone through a variety of challenges.

In 1996, Marvel filed for bankruptcy protection and fired ⅓ of its employees. Shares that had been worth $35.75 in 1993 were now worth $2.3. While movies like Blade, X-Men, and Spiderman were successful, Marvel received only a small amount of the generated profits.

In 1998, billionaire Ronald Perelman bought Marvel for $82.5 million. At this point, he knew that the future was in films and not in cards or comics and he merged Marvel with action-figure company Toy-Biz to launch Marvel studios. Shareholders blocked this plan as they believed the financial damage to their shares would be too great. Perelman filed for bankruptcy to continue with his plan without stakeholder consent. 

This move as we know paid off! The first movie produced was Iron Man which bought in more than half a billion dollars. In 2009, Disney bought Marvel for $4 billion, turning it into the hit-maker it is today. In total, Marvel movies have grossed over $14 billion since Iron Man. Marvel has now become a sort of cultural phenomenon with the likes of Iron Man, Thor, and the Avengers leading the way. 

Key Takeaway: If you can, do it yourself In their struggling phase, Marvel had to sell the rights to Spider-man, X-men and the Fantastic Four to Universal and Fox who then made millions in profits with almost nothing going to Marvel. This changed when Marvel raised $525 million to produce their own movies. The rest is history. So if you’re making more money for your partners than yourself, you should re-evaluate your business strategy. Another important lesson is to not leave money on the table! There’s no doubt that Marvel makes loads of money through their movies but they also make a significant chunk through merchandise, action figures, board games, experiences, collaborations, and popups! Marvel has truly created a universe where every cross-sell and up-sell has been employed. “We never set out to build a universe. We set out to make a great Iron Man movie, a Hulk movie, a Thor movie, and then be able to do what, at the time, nobody else was doing: put them together,” - Kevin Feige at Vanity Fair

#4 Krispy Kreme

When you’re craving doughnuts, the first brand that comes to mind is Krispy Kreme. Their iconic glazed and fresh doughnuts are such a hit that almost 20 million doughnuts are sold each day in the USA.

It all started in 1937 when Vernon Rudolf bought the recipe from a French chef to set up a shop in North Carolina. The unique waft and taste of hot doughnuts started attracting a crowd so he cut a hole in one wall to begin a quick doughnuts stall. 

In 1999, they expanded to California and the next year, they took their company to the Stock Exchange. The next few years were a period of rapid expansion and they had about 357 stores by 2004.

During this time, Krispy Kreme used aggressive accounting methods to inflate their earnings which caught foul of the SEC. The shareholders were filing lawsuits against them and their auditors. To put it simply, they were having trouble meeting expectations and took the incorrect route to fix them.

It could be due to their rapid expansion leading to poorly planned locations. Another reason could be the sale of their doughnuts outside the restaurants. Krispy Kreme is known for its fresh, pleasant-smelling doughnuts and the sale of cold, stale ones simply didn’t attract enough people. 

Daryl Brewster and Steven Cooper who had the thankless job of picking up the pieces with a turnaround plan. JAB bought Krispy Kreme for $1.35 billion thus putting them on a path to recovery

Key Takeaway: Know what your brand stands for: Krispy Kreme is known for its hot and fresh doughnuts so adding coffee to its menu is a good compliment to it. But introducing ice cream to the menu? That may not be the best idea. This is also why the cold supermarket doughnuts failed

#5 Lego

According to Forbes, Lego is the number 91 in its list of the world’s most valuable brands, valuing it at $7.8 billion dollars today. It is certainly the most loved toy brand today and almost everyone can immediately connect the bricks with studs on top to Lego!

But 15 years ago, things were not so rosy as they had terrible debt and were looking to sell the business. This is partly because they started producing a larger variety of lego pieces that people weren’t warming up to. 

The second issue was the rampant expansion of their eponymous theme park- Legoland.  By 2002, they had 4 theme parks in Germany, USA, England, and Denmark and were more concerned with opening theme parks than making bricks! They also invested in a video game department that was quite separated from the core of their business. 

In 2003, after a particularly dissatisfactory year, Lego realized that they had to change the way their business was operating. They started making simpler sets, sold all 4 locations of Legoland for $456 million to the private-equity firm Blackstone and shut down the gaming vertical that was diluting their focus

The results were immediate and positive- the sales grew 5 times in a 10-year period. They went from the verge of bankruptcy to being one of the largest toy companies in the world. 

Their marketing in terms of the Lego movie in 2014 was also a huge success as it grossed $69 million in the box office followed by Star Wars- The Force Awakens which made a quarter of a billion dollars.

Key Takeaway: Don’t try to be a jack of all trades In the 1990s, LEGO put its hand into way too many pies such as the Legoworld, video games, Project Darwin, MovieMaker set to create stop motion animation and more. They created products that customers weren’t asking for this supply overshot demand. While innovation is the name of the game, do not try to accomplish too much at once. Assess what is important to your brand and work towards it step by step.

If you liked this post and want some more business lessons, head over to the part 2 of this blog series!

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