mistakeWith little cash, and even less wine industry experience, Michael Houlihan and Bonnie Harvey launched Barefoot Wine in – where else – their laundry room. They built the brand and later sold it to wine giant E&J Gallo.

Now the business owner duo share what they learned along the way with other business owners. One of their major lessons: Improving your business by admitting mistakes. Houlihan believes that customers judge you more by how you react to mistakes than how you behave when all is well. “Every business makes mistakes,” he says. “Denying that they’ve happened only makes an already awkward situation worse.”

In short, dodging responsibility hurts your reputation more than if you’d owned up in the first place.  (In this vein, my posts on avoiding the accountability blame game and how to create a winning business culture might also be of interest.)

Since they knew almost nothing about wine making or the wine business at the outset, Bonnie and Michael – who’ve written a book called “The Barefoot Spirit” (Evolve Publishing, 2013) – made their share of doozies. Some even threatened the entire business. So they quickly resolved not to fret errors, but rather make them opportunities to grow.

For example, Barefoot once put the wrong bar code on a store’s shipment of Cabernet, causing it to ring up at a lower price. Barefoot itself caught the mistake and Michael quickly showed up at the store’s corporate office with a check for the store’s loss, plus extra for the expense of dealing with the mistake. He then informed the manager in detail how Barefoot was changing its internal processes to make sure the bar code problem would not happen again.

Here are five things that must happen for mistakes to make your business better:

1)    You own up

This can be tough, and uncomfortable. But you need to utter the mea culpa and acknowledge that you are, in fact, not perfect. The sooner you own up, the easier it is. There’s less drama and you can get on with fixing the situation faster. Besides, says Houlihan, people actually like a little imperfection now and then. It shows a level of authenticity, vulnerability and humanity. And it’s hard to be angry with someone who says, “You’re right – I messed up.”

2)    You figure out how it happened

Admitting fault, however, isn’t enough. If you simply try to put it behind you you’ve just increased the chances it will happen again. Dig into it. Find out why the mistake occurred so you can fix the faulty procedure or process. That’s why Barefoot Wine made sure its employees weren’t afraid to make or report mistakes – those that involve technical errors, that is. Houlihan is adamant that bad behavior or inability to perform should not be overlooked. “Real progress in progressive companies is often built on the backs of mistakes and the improvements they spark,” he says.

3)    You don’t blame, you aim

Sometimes it might be easy, and temporarily satisfying, to point the finger at someone for a mistake. But if it happened on your watch, and you are accountable for the finished product, you ultimately share the blame in the customer’s eyes. So get to the bottom of what happened and aim your focus on what you and your business can do to prevent the mistake from happening again.

4)    You write it down

This is an important but often overlooked step. If you successfully resolve whatever sparked an error, pat yourself on the back and say, “Well, that’s cleaned up!” you’re making another mistake. If you don’t write down or record it in some way, even you (not to mention others) are in danger of repeating the original error. Says Houlihan, “When you’re still smarting from the pain of a mistake it’s easy to think you’ll always remember what went wrong. But over time things get fuzzy and you won’t.”

5)    You resolve it won’t happen again

Along with your apology, assure the injured parties that it – whatever “it” was – won’t happen again. Voluntarily describe how the mistake happened and what changes you are implementing to prevent its recurrence. And most importantly, tell the other party how you and your business are going to make things right. Handling an error this way will reinforce the feeling that you are, ultimately, a trustworthy company.