Six-Figure Mistakes

Six Figure Mistakes

Every employee I’ve ever hired has screwed up. Big mistakes, small mistakes, sometimes due to lack of effort, but other times they tried their best and it didn’t work out.

In nineteen years of business, no employee has ever compared to me. No matter how big their mistakes were, the biggest and most expensive mistakes were mine.

Our business was growing in 2017. We recorded $3.4M in revenue, which was our highest ever at that point, but we lost $60k that year. I wasn’t focused on the bottom line and it would nearly put us out of business in the coming months.

We had been pouring resources into our YouTube channel and partnering with influencers to send customers to our website. But in the spring of 2018, YouTube began shutting down the accounts of cannabis content creators. Our sales dropped 30% overnight and we began losing money at a rapid pace.

We laid off a third of our staff and cut every non-essential expense, but not immediately. Because of my hesitancy to do the hard thing, we lost over $100,000 in a ninety-day period.

It took months of hard work, but we were able to stop the bleeding and get the business to break-even and then to profitability.

During this time, I made a second six-figure mistake that would rear its ugly head two years later.

In the summer of 2018, the Supreme Court ruled in South Dakota v. Wayfair that states could collect sales tax from out-of-state retailers who have no physical presence in their state.

We’ve always collected and remitted sales tax for the state where we were located, first Arizona and then Texas, but this felt like an unfair burden on small businesses. There was no easy or cost-effective way to implement the different sales tax rules for every state, especially with many cities and counties having their own taxing jurisdictions.

I was busy trying to save my business and this felt like too much to take on, so I ignored the problem. Big mistake.

Two years later, the issue came across my radar and I learned that A) states were starting to enforce sales tax collection and B) back-taxes never go away: they only grow larger with penalties and interest.

Fortunately, 2020 was our best year in company history and there was plenty of money in the bank to address the issue. I hired a firm called TaxValet to do a full audit and bring us into compliance.

The total cost to pay all our back-taxes, penalties, and interest was over $250,000. Have you ever made a quarter-million-dollar mistake? It doesn’t feel good, especially when it’s not just your money. That was Gary and Sarah’s money too.

If one of my employees had been responsible for our finances and made either of these two mistakes, I would have fired them.

As painful and expensive as these lessons were, I’m stronger for having gone through them. I’ve been able to share these experiences with other entrepreneurs and have hopefully helped others avoid my mistakes.

- Matt

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