How to Recover from Big Mistakes in Business

Summary

• Everyone messes up in business, including employees, bosses, and customers. It's inevitable.
• Reacting to mess-ups as if they never happen will only make things worse.
• I have a big gym with 85 unique equipment pieces bought individually because I love quality gym gear.
• A company sent me a messed-up piece of equipment and refused to fix it without extra charges. It was awful customer service.
• In contrast, the Ritz-Carlton in Orlando turned a bad dining experience into a fantastic one by going above and beyond, including upgrading our rooms and giving complementary amenities.
• Good customer service means turning a negative experience into a highly positive one.
• Disney teaches that it takes 37 magic moments to make up for one tragic moment, emphasizing the importance of avoiding major mistakes.
• Offering a simple refund isn't enough. Customers want more effort to resolve their issues.
• Taking accountability immediately and expressing significant concern helps in managing customer dissatisfaction.
• If you mess up, be the first to show you're upset and are working to fix the issue.
• Convert mistakes into learning experiences and steps to ensure such mistakes don't recur.
• Turn angry customers into brand champions by resolving their issues genuinely and effectively.
• Employees should own their mistakes openly and actively work to resolve them instead of downplaying them.
• In high-volume businesses, empower employees with specific solutions to customer problems.
• Addressing customer complaints effectively may include compensations like free meals, upgrades, or personalized services.
• Always aim to make customers feel validated, showing that their concerns matter.
• Our approach to fixing issues has helped turn one-star reviews into five-star reviews by going above and beyond mere refunds.
• Ultimately, good customer service has a long-term payoff by creating lifelong fans out of disappointed customers.

Video

How To Take Action

Implementation Strategies for Small Businesses, Entrepreneurs, and Personal Growth

Here are some simple yet highly effective strategies you can implement to better handle mistakes and boost customer satisfaction based on the lessons learned:

Acknowledge and Own Your Mistakes

A good way of dealing with mistakes is to own up to them immediately. This means not pointing fingers at others or minimizing the problem. You need to show your customers that you understand their issues and care about fixing them.

React Quickly and Show Concern

When an issue arises, you need to address it as quickly as possible. Be visibly upset about the problem and express significant concern. This signals to the customer that their issue matters and you’re committed to resolving it.

Go Beyond Simple Refunds

Offering a refund isn’t enough. Try to go the extra mile by offering additional compensations like free products, upgrades, or special services. This shows that you value the customer's time and effort.

Empower Your Employees

Train your staff to handle customer complaints effectively by giving them the authority to offer certain fixes on the spot, like free drinks, meal vouchers, or room upgrades. This reduces the need for escalation and ensures swift resolution.

Create Memorable Positive Experiences

If a customer has a bad experience, aim to turn it around by creating highly positive experiences. Remember, small gestures like a personalized note or an unexpected upgrade can leave a lasting impression and turn a negative experience into a positive one.

Learn and Improve

Convert every mistake into a learning experience. Analyze what went wrong and develop steps to ensure it doesn’t happen again. This continuous improvement will minimize future errors and improve overall customer satisfaction.

Follow Disney’s “Magic Moments” Rule

It takes many good interactions to make up for one bad one. Aim to avoid major mistakes, but when they do occur, be ready to create multiple positive moments to balance out the negative.

By following these strategies, you can not only resolve customer issues effectively but also turn disgruntled customers into loyal advocates for your business.

Quotes by Alex Hormozi#### "Everybody messes up it's part of business"

– Alex Hormozi

"I like to think about a lot is like I never want to become someone's project"

– Alex Hormozi

"A refund to a customer is an apology but you have to do better than that"

– Alex Hormozi

"As a customer or one of your customers has one of these experiences it's like dude refunding them is not enough"

– Alex Hormozi

"Feel seen you want them to feel heard you want them to feel felt you want them to feel felt"

– Alex Hormozi

Full Transcript

everybody messes up it's part of business your employees are going to mess up you're going to mess up as a boss your customers are going to think you messed up even when you didn't mess up messing up happens and so if you act every time like you have never had a mess up before then you are going to mess up even worse and so I'm going to talk you about three different stories about big mess ups that I have done and been an experiencer of and some tactical things that you can do that have made our businesses so much better and turned onear reviews into five star reviews and the step-by process thinking through that what do you do when you mess up right cuz you're going to you're going to mess up in business you're going to mess up with a customer you're going to you're going to BU build someone the wrong amount you're going to give someone the wrong date you're going to forget to onboard someone you're going to have a package that doesn't get delivered it gets delivered to the wrong address you're going to you're going to onboard someone put the wrong company's logo on it um and every one of those examples that I just said is something that we have done at some point in my career and so I want to tell you two stories um and then I to drive home a couple of principles that have served us well um use them if you want but they have worked pretty well for us and so I'll tell you two kind of polar extremes so I I uh I buy a lot of gym equipment um even though I'm not even in the gym industry technically anymore um I have a massive gym that is in our headquarters that's really sweet I'll just put it that way we've got like 85 unique pieces in the gym and it's just just for me and the team um and so I uh all the pieces are bought from Individual people I kind of put the pieces together that I like and so it's not just one distributor and so I had a piece of equipment that that I bought and I was really excited about it cuz I was like oh man I love this piece it's going to be awesome and when it showed up it was bent like the frame was bent um and the and the weight stack was kind of off and so one of the main polls was bent so then it was like this whole ordeal and when we called the company up he was like well uh I mean you you accepted the shipment and I was like yeah cuz the truck guy was like what do you want me to do this I was like all right we'll drop it off he's like well as soon as you accept the shipment it's your liability and I don't know if it like it happened before after that and I was like well I'm telling you it happened before and I just wanted to help the guy out who was the truck driver like complete his complete the runs that you had for the day and he was like sorry dude um and I was all right well I mean can we can we get like the pieces or something like a new frame that you can ship out just that piece and he's like well that's going to be extra and I'm like dude I bought this thing it arrived not the way that I bought it and now I'm incurring additional costs in terms of financial cost but I also have the additional cost of now I'm talking to you when I'd rather be using the piece of equipment and so the tldr of that is I basically just threw the piece out and I hate the person who I did business with and I will tell anybody who ever considers buying from them that they suck now let's take the alternative example so um last year I went to uh Orlando for jimc con and we stayed at uh the rits and when I went to the rits we had our team with us and so we went out they have a a Michelin star restaurant there which by the way I found out was actually named after Michelin tires totally random I saw like the Michelin tirean at the front of the restaurant I was like this feels weird but it's actually what it is anyways and so we go in there and it's this this really nice restaurant or whatever but it took three and a half hours to eat our entire meal we didn't get drinks for like 45 minutes we didn't get the appetizers until minute 990 and I was like dude this is ABS I was like I honestly just want to go get Chick-fil-A like I don't even care right and so anyways we finished the whole dining experience if you want to call it that and um the manager of the hotel you know our team was like hey just letting you know like this was pretty pretty tough and as soon as the manager found out about that he was so upset he was like oh my God I can't believe this happened we had just switched staff over we're training some team up and I think we were under you know short you know store sa that day whatever and he said but that's 100% our fault he said please let me make it up to you and so for the remainder of the trip like one he comped the dinner that we had there which was expensive uh then we got upgraded uh I think rooms for the rest of our stay they he said please like they delivered like fruit baskets and drinks and other stuff to our room throughout the day and my teams room so it's not just me like we had eight people with us staying in four or five rooms um and so so all of everybody got taken care of he made us reservations at two different restaurants the next basically every other night for us to choose from and then he met us at the restaurant to seat us at the table he got us the appetizers and drinks at the restaurants that he met us at to make sure that we were okay now I'll tell you this since then if I go to Orlando I stay at the rits and I talk and I talk to Javier because Javier is my dude and Javier goes above and beyond and the other guy at the other company I don't say anything about now I don't even want to say the name of the company because I don't want to give them air time all right and so I think there's some really interesting principles about this um that we've taken from uh for our business so Disney says that there's 37 magic moments that it takes to make up for one tragic moment and I think there's two kind of levels to thinking about this so the magic moments it means that it takes so many good things to make up for one bad thing so by all for all intents and purposes avoid the tragic moment because it's going to take you so many to make up for it but if you do have that tragic moment then you have to do a ton and I see that on kind of bir directionally now one of the things that um I like to think about a lot is like I never want to become someone's project and what I mean by that is like if if you piss someone off or you do something wrong and you know you did something wrong you don't you don't want that person to Stew and just think like how am I going to destroy this person like you don't want to become someone's project and so I've talked about the angry boat and I'm going to get to that in a second but I actually want to hit on this point because I think it's really important which is that a refund to a customer is an apology but you have to do better than that if you hit your wife and then you apologize it's not just like oh we're neutral it's just as if I hadn't hit her it's like and I'm doing this as a natural extremity hyperbolic but like you wronging someone and saying I'm sorry is not enough and so let me let me prove the point if you accidentally kill someone in manslaughter Society deems you saying sorry family isn't enough so what do what does the government do they sentence you and they put you in prison so they say you have to say sorry and you have to pay 10 years because of involuntary manslaughter they say sorry isn't enough and so refunding someone isn't enough if if Javier at the Ritz had just refunded me the meal I wouldn't be like stoked I would have been like well you wasted 3 and 1 half hours of my night and it's and like the food was cult like all these other things like I'm not like I'm not back to neutral right like one tragic moment he gave me a magic moment okay give me a refund and so one of the things that you have to wrap your head around and this took me some time is like you actually are going to go negative on refunds meaning like you're going to lose money you're not just going to be like oh well you paid me 100 bucks I'm going to pay you $100 back now we're even it's no because there's additional cost that they incur and so like they got dressed up like or like if we got dressed up to go out this nice restaurant we have expectations of the evening that are going to be really good and so not only did we pay money but we paid time and every person you know the the the gals of my team got all dled up and all that stuff and all of this is for it goes completely into the tragic perspective and so as a customer or one of your customers has one of these experiences it's like dude refunding is them is not enough hey real quick guys if you guys are enjoying this don't be a square share I I'm going to come up keep doing rhymes for this but um if you can screenshot this right now wherever you're listening and post it and tag me I'm going to share as many of these as I can on soci media and I will certainly make more of them if you tell me that you like them and so screenshot share tag and I will see you in five seconds and so we have to do have to go above and beyond and so one of the issues that happens though is that when when it happens and this is this is now me talking to the teammates so people who work in businesses like what you can't do and I'm just I'm just please I'm begging you what you can't do is try and minimize it to the customer right like Javier could have been like oh I mean like basically by saying you're being ridiculous don't be a victim like that's what the like that's whatever you say when the person's like hey the food was late the what all you're doing is trying to invalidate them you're basically saying you're lying or you're not telling the truth or I mean pick pick your poison and you're basically saying that you don't matter that's what you're saying and so what happens is is that people then escalate to be like yes I do matter and you don't understand and not only that but I'm gonna punish you and so what do you think onear reviews are think about it for a second a one-star review is a customer's way of being the judicial system and saying okay this person refunded me but they needed to do more and so I'm still going to jam them I'm still going to put them in prison even though they apologize for killing my husband in manslaughter right even though they apologize that wasn't enough so I'm going to punish them with a review because that's all I can do those are the things that they have control over and so we have to go above and beyond and so I'll give you an example recently and so we had a we had a scheduling mishap um and we had seven people who were going to fly out to our headquarters and basically they came here and there was nothing happening that day because the sales team messed up times and so it's like and and five of these are international think about this you you travel across the country across the world to you get your expectations up some people have to apply for visas like big big big like expectations big work big money all of these things like beforehand right and they show up and like nothing's happening there was a scheduling mishap right and so what do you do right like that's a big big mess up that's a big mess up it's absolutely unacceptable so here's what you don't do you don't say hey you should have checked the email or hey we sent some other correspondents that that might have you know conf conflicted like you don't go into any of that because it doesn't matter they don't care what matters is that it's always immediately your fault and you have to be angrier about it than they are and this is the angry boat the thing is is that even though I preach this it's still hard to do when you're in the moment because no one wants to accept fault because fault is associated with all these negative things in our past because in the schooling system if you say your fault you go to detention like you get punished by saying it's your fault so you always want to blame hey Timmy is the one who who turned the music up not me so Timmy gets punished but the reality is that in business you always always want it to be your fault because if it's your fault it's under your control which means you you have the power to fix it that's what's key and so as soon as you have that instance you jump in the angry boat as fast as you can you want to be quicker to the draw at getting angry than the other person and a lot of times customers will have one of these experiences and they'll shoot out the situation to wait to see how you respond because they want to they want you to be upset about this because they are already angry and they're trying to contain themselves trying to contain their emotions and what you need need to do is be the one who gets emotional for them that is the ultimate validation is that something bad happens and you say that's ridiculous that's unacceptable oh of course we're going to give you your money back of course I'm going to refund all of your travel expenses which by the way is what we did we give them their money back give the travel expenses but that's still not enough it's not enough because if you traveled across the world you're like okay well great my flights but like I just lost 4 days of travel and I had these expectations that weren't met and so so we're taking the whole the you know the seven people out for 3 hours we're going to go to dinner we'll I'll probably I'll probably end up doing three hours of personalized Consulting for each of these businesses which is not something that I would normally do um in an effort to go above and beyond to make up for something that that otherwise shouldn't have happened and the reality is is this like let's be let's put our let's put our hats on for a second is this my fault Alex's fault was I the one who took the call was I the one who messed up the scheduling no but guess whose fault it is it's mine right I pay the people I'm the the buck stocks with me and so the idea that sometimes I see business owners saying things like well that you know my team messed dude you messed up like that's the thing about the entrepreneurship game is like you get you get the upside but you get the downside you get it both and you've got to be able to be comfortable with that and the thing is is like you have to accept and I want like this is the thing as soon as I go in my mind is like I flip this switch or it becomes a game of how can I blow these people away all right that as soon as I have like a clear and obvious Rong and it happens we mess things up we're human and humans work for us and humans make mistakes and so when as soon as as soon as that happens it becomes this game of oh Ro Y is out the window I'm already going to lose money on this duh right like you're going to give the money back plus extra cost that they incurred plus now you're still going to incur the cost that you would have normally done to to do deliver whatever it is that you do right but the thing is is I am an advocate of the Ritz Carlton and Orlando and Javier I tell everybody when they're like hey where should I go I'm like go there go to Javier he's the man and I tell everybody that and so I'll bet you they have more than made up for the transgression of the one restaurant experience and him meeting me at the other restaurants and sitting us down and taking 5 minutes before two or three or four other experiences we had while we were there those little minutes meant the world to me because I know what kind of business owner what kind of entrepreneur what kind of operator operates that way it's somebody who gets it you get the game which is that did Javier mess up he's not even he's not even responsible for the restaurant it's not even his division but he did it because he knows that I don't care and he had the power to fix it so even if it wasn't his fault for the transgression he had the power to fix it and so it becomes his responsibility to make it right and side note here with the angry boat is one you want to confront it headon you don't want to foot around it you got to say like this was our mess up and I'm super pissed about it second you want to get in fast third validate validate validate you want them to feel seen you want them feel heard you want them to feel felt you want them to feel felt you want them to feel like you you you feel their pain more than they feel their pain because here's the here's the reality and this is the this is the this is the underling Highlight point there is no way that you can minimize someone's pain only they can minimize it you cannot invalidate away someone's feeling about being wronged the only person who can say you know what it's not a big deal is them and so the only way for that to happen is for you to be more upset so that they say hey it's not that big of a deal calm down and then they said it not you because if you say hey it's not that big of a deal calm down they're going to be like r yes it is you need to validate me and then you're like oh my God you're right I should kill myself they're like d don't kill yourself and you're like right and they're like it's not that big of it de like okay fantastic they come back down and I say the I use I use hyperbolic extremes to make a point which is if you want someone to feel better about something that you did that wronged them they have to initiate it and the only way they're initiate it is if you make it a bigger deal to you than it is to them and so I want to I want to do a quick transition into um employee stuff around this so if you were the person who messed up like you're the actual person now of course it's the entrepreneur it's it's always our fault for sure but on some level if you're the person who messed up on the team let me tell you what not to do don't try and skirt along don't try and pretend like it's not a big deal when you say to the team don't try and minimize and be like oh yeah I kind of messed up the the dates on on that thing don't do that because it's the same thing in reverse because the like the owner your manager Your Leader the entrepreneur he's the customer she's the customer in this incident and I'll tell you what I want to see I want to see you losing your mind over how upset you are at this mess up because the thing is is if you're not upset enough I'm going to make you upset and so one of us is going to make you upset and you want it to be you not me being really real with you and so what I I'll tell you what I I'll tell you what I told um the individual I said listen I know because I know I know I know the person you know like obviously multiple parties blah blah blah but at some point sometimes the buck can stop with somebody I said listen I know that you're beating yourself up over this and you're beating yourself up over it in silence I was like but the thing is is like no one cares no one will give you credit for beating yourself up in silence they will give you credit for two things making it right and making sure it never happens again that's it that's all that matters and so there is there's no more useless emotion than feeling sorry for yourself it changes nothing like no one gets better by feeling sorry for themselves at all and so if you did mess up just skip past the guilt part skip past the shame part skip past that and go immediately into the what can I do to make it right what can I do to make it better than right sure you hit your wife sure you said sorry but now what we got to take her out to dinner get her a nice necklace get her some flowers and then go to anger therapy and make sure that you know like whatever like you you do all the things to go from tragic to neutral and then you go above neutral to try and make them into a champion and then you do all the things to make sure it doesn't happen again that's the point and so too many businesses basically think that a refund is the highest level of what they can do to make it right they're like I gave him his money back what else does he want a shitload more that's what that's what they want way more and the thing is is I'll tell you this is that if you incur the cost of the refund plus the additional cost is then you lose actual money actual resources trying to make it right guess what you try not to do you try not to up so much in the future because you know the real cost of it isn't just like and like don't even get me started on companies that won't give a REV like go don't give a refund on something like if people if if a a huge percentage of your customers are asking for refunds fix your or stop selling it like either you're selling it wrong and you're setting crazy expectations that no one no one can no one can live up to or your just delivery sucks but like if you're getting lots of re refund requests and then you you're like well I can't give the refunds otherwise I won't be in business then maybe you shouldn't be in business fix your and I get I get I get I get I get jazzed about this I like I came into the team this morning I was like oh I know what I'm G talk about because this is hot because we just mess this up we just had this mess up happen and like you have to own it and you have refunds Aren't Enough refunds are apologies no one cares about apologies people want more than an apology because they will punish you and society believes that too you don't just say I'm sorry I killed somebody I'm sorry I was in a I was a drunk driver and I killed your kid I'm s sorry is not enough a refund is an apology a refund is sorry and people want more than that and so you got to get them to neutral and then and here's the cool part so this is my silver lining for this is that if you do turn a tragic moment into a series of magic moments afterwards you can create brand Champions you have a higher potential to take somebody and make them A True Believer in what you do if when you mess up you own it and you make it better than right because they're like these guys messed up but they went so far out of their way and if anybody's ever had this experience and I hope you have at least one time in your life we a business owner went above and beyond they didn't just make it right they made it better than right and then what happens you become a customer for life you have a higher potential for being a customer for life and I remember there was a um an acquaintance of mine who was in the hot sauce business just kind of random and he had a c so he had um he had sent them a hot sauce kit or something and it didn't have caps and so he couldn't they couldn't use the hot sauce because it didn't have a cap in the kit and so he sent a handwritten note to them and he sent extra caps uh not just enough but like more of them just in case or whatever and they said um they they sent him back a note being like wow that was so nice of you like you went above and beyond whatever and so he actually started sending the kits with handwritten notes with an extra cap because of that experience because that person then went change their one star to a five star because of the great experience and I don't know if you've ever done this or you've seen this like updated reviews where people say hey I left this one star the the founder reached out to me he got on the phone with me he made it right the thing is is that people want to punish you when they feel invalidated and you can absolutely you can you can make them feel validated like the reason malpractice so they did a bunch of research like because both my parents are Physicians um there's a ton of ton of research on malpractice the people who get sued for malpractice are doctors that people hate not people who make the most mistakes isn't that interesting so they tell this story of a lady who uh had some sort of thing that happened that was wrong in like a clear lawsuit and she had had like two or three Physicians that she was going for like cancer or something whatever it was and when the uh she hired this male practice Journey because she wanted to go after this physician and so after doing more research the lawyer was like hey it's not this guy who actually technically made the mess up it's this one your primary care you're your general physician and the lady was like oh Sarah oh I love Sarah no it's it's fine and so it had nothing to do with the transgression it had to do with the fact that they actually hated the person and so the thing is is like people people people want to punish you if they don't like you and you you increase the likelihood that they do like you by going above and beyond and so here's one tactical thing one more last tactical thing uh from my notes that I'll give you if you deal in a business that has lots of transactions high volume transactions every day what you want to do is you want to give someone a box of responsibility you want to give a box of decision-making power and so they do this in in the hotel industry and this is why I like stealing things from one industry and putting to another and so for example if someone wakes up in the middle of the night because they smell smoke right and they come they call to the front desk they say hey I Smell Smoke I can't sleep blah blah blah that front desk person if they have no power to fix it the customer still holds them responsible so they basically you give them a losing card they can't do anything but if you say these are the things that you have within your responsib that within your power you can give someone free free drink credits you can give someone a free meal you can give someone a free upgrade all right so these are the three things you can do based on the level of the the mess up right if if someone had to wait 20 minutes for a bell hop okay is that like end of the world probably not here's here's two drinks uh just in case you're waiting or for tonight to make it special before you go out all right now if someone can't sleep because there's smoke and they shouldn't have had smoke in the that's a pretty big mess up so what do we do well if the front desk person has the power to upgrade them for the next room for the next night then you probably refund them for the night before and give them a free upgrade for the next night but you have to give people you have to give your team the two or three things that they can do and then just say listen if we're if you're using up more than five of these a month then like we need to fix a process here but these are things that you can give out as freebies that you bake into the profit margins of the business so that you know that you can make things right when things do inevitably grow wrong because people are human and humans dealing with humans leads to mistakes so um what to do when you mess up is don't just refund someone that is not enough go above and beyond and if you do that you might just turn a hater into a lifelong fan be awesome take care of your customers all that good stuff oh by the way share this if you can uh mean a lot to me and all that stuff otherwise I otherwise I'll stop doing these not really I won't stop doing them but it would just mean a lot more um if you did that because then I'll know that you do like it and then I will actually I will I will probably make more if you share it how about that rather than stop or start I will probably make more if you share it these um anyways keeping awesome catch you soon bye