Why Groupon Needs Smarter People

By on April 3, 2012

Groupon dropped a nasty little surprise on investors before it went home for the weekend on Friday. The company had to revise its numbers down $14.3M in the fourth quarter. And now it’s under investigation by the SEC. Why?

The online coupon company failed to set enough money aside for refunds…

It seems pretty obvious that some of Groupon’s customers might be less than satisfied if you read the Digital Marketer blog. BUT the people running the company didn’t see it coming…

Groupon is guilty of one of the most sophomoric mistakes a growing company can make. They bought into the idea that their business model is magical.

It doesn’t matter if you’re products are cheap or expensive, physical or digital, incredible or under-performing; there WILL be refunds.

So don’t get offended when it happens. And don’t be in DENIAL.

Investors hate it when a company revises results in the wrong direction, especially in an emerging industry and even more so in the first quarter after that company’s IPO.

Look, overly optimistic prejections are an easy mistake to make — especially for wildly popular start-ups selling digital products. It’s easy for entrepreneurs to fall into the trap and believe that, because their model is new, or digital, that the ordinary rules of business don’t apply to their business model.

But there is a way to prevent this kind of thing from happening.

Hire People Smarter Than YOU

Most entrepreneurs fail to surround themselves with people smarter than themselves.

In Groupon’s case, it looks like the company is filled with kool-aid drinkers, including the accounting department.

Traditionally, you need the accounting department to be bursting at the seams with skeptics — leave the optimism for the entrepreneurs.

That’s just as important for small companies as it is with larger ones. For each dreamer, there must be a realist — if for no other purpose than to bounce ideas off of.

When Groupon was filing it IPO with the SEC, the company had to cut its reported revenue in HALF to satisfy government auditors.

It was pretty obvious that Groupon’s accounting department had a kool-aid problem back then…

However, they missed the opportunity to fix the problem.

Infinite Ways To Be Smart

When I say “smarter than YOU,” I don’t mean someone with a better SAT score. I mean someone who excels in something that you suck at.

Someone who will speak up and point out flaws when they see them, and not watch on passively.

If accounting isn’t you bag (and it rarely is with entrepreneurs), you desperately need to find an accountant that’s smarter than you. Preferably a LOT smarter than you.

If you don’t, then you may be forced to revise you earning down in your first quarter as a publicly traded company…

Smarts, don’t it?

About Ryan Deiss

Ryan's Google Profile

Leave a Reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>