Joshua Lee is a strategic coach, author of (Life)4 and co-founder of Stand Out Authority.

Imagine a man in his early 20s at a club in Las Vegas with a few industry associates after they all had a few drinks. (Not the best setting for a business deal, but that’s how I started this particular business mistake.) One of my business associates said he had a fantastic software platform and challenged me to use it. I bet big on this; bigger than I should have. But he had a good reputation in the industry at the time and this deal looked like it would take my already successful business and skyrocket the profits through the roof. If I'd done my due diligence--even just a tiny bit more than I did--I would have quickly seen this deal was doomed from the start.

This decision would ultimately slash 90 percent of our revenue. Clients left because we couldn't get this $1.3 million software platform I purchased working, and we were spending big aiming to fix the software platform. There were cascading negative effects between my team and myself in just about every way, too. We were close to ceasing operations.

I endured many sleepless nights trying to figure out what to do. I knew I could go the legal route, but it would be a $100,000 retainer based on a couple of quotes I got. I also knew turning the business around would take my complete focus, and if I went down the legal rabbit hole I'd be making the business worse before it got better, as I wouldn't be able to devote the time that was needed of me. It was emotionally exhausting, but I decided to let go of the past and concentrate on the future by growing the business again. Here’s how, and some big takeaways for anyone considering a similar deal.

Rethink Your Allotment of Time and Resources

The first crucial step I took was to reevaluate where I was devoting my time as well as where each team member was devoting their time. I had to make tough decisions on where I felt our best opportunities were. Many team members didn't like letting go of the software platform we'd invested so much in already, but we had to go back to the white-label solution we knew worked. Many were also hesitant to let go of some of the other opportunities they had been working on.

But tough decisions were necessary to save the company. One key was my transparency communicating with my team: it was scary, but I shared with them the big financial trouble we were in and that it could not continue. We had exhausted the company's "rainy day" fund and I had also dipped into personal savings (a big no-no) to cover some company expenses and payroll.

We looked at all aspects of our business to find the commonalities, evaluated current opportunities and narrowed the list to those we felt could scale profits the fastest or better an opportunity where we could form a strategic alliance to scale.

Do Your Due Diligence

I could have done a minimum of due diligence to find out this software platform was not ready.

Even before the due diligence stage of a deal, the context and setting of where you start the deal is important. It seems like common sense, but you'd be surprised how many business deals start under less-than-ideal circumstances. Get outside perspectives or a company to help you vet any big deal and be a neutral third party to do objective due diligence.

Trust a Board of Advisors

I had a few trusted individuals I could have reached out to, but I didn't. Since this painful emotional and financial lesson, I've recruited and built an official board of advisors. I put in front of them any major decisions I'm considering for the company.

It may seem like a gargantuan task to recruit top-flight businesspeople to your board, or you may not feel your company is "significant" enough to be attractive to top leaders. But you'd be surprised how many business leaders are willing and even love to serve on company boards. I encourage you to ask, because you definitely won't know unless you ask.

As I look back at that time in my life now, I see so many tiny decisions I made that led up to that moment. I could have stopped the whole situation--or even turned it into a huge positive--just by doing one or two little things differently. I've put safeguards in place to prevent this from happening again. It still stings a little to retell the story, but it's a great reminder for me to never repeat bad history.

Published on: Sep 9, 2015