giddings_ag_06 said:
What are the most common reasons for long running companies shutting down? Doesn't seem like it's usually selling out and riding off into the sunset counting $100's. Is it usually rent or taxes? Is it just "retirement time" for most sellers? The product doesn't sell anymore?
I was a business major at A&M and just sitting here thinking, I don't remember ever going in-depth on this topic and now I'm wondering what the most common reasons are.
Smoking meat while I thought of this so here's a picture.
You should have to deliver some of that food to those who respond! Looks good.
I have lived in my hometown (7 or 8 thousand people) all my life except for my time at A&M and five years in The Woodlands, and had my own CPA practice here for over 30 years. Because of the years in this town and the nature of my business, I became familiar with many companies and have often reflected on this topic. The value of small businesses, the number of millionaires (not only in terms of net worth but also in terms of million dollar plus annual incomes) is mind boggling. Even in relatively smaller towns.
I have seen many reasons that businesses didn't continue. As others have mentioned, the founder of the business was the one who stuck his or her neck out and took the risk to get things started and then worked like a dog to build it to what it became. Many times his or her children saw the hours the founder put in and decided there was an easier way to make a living. The second generation typically had it pretty good lifestyle-wise and income-wise relative to the effort they put in, and in instances where the business was continued to the second generation, more often than not they did not have a fraction of the work ethic the founder did. In one business I know of, the second generation guys (two brothers) went to they gym most every day at lunch, so took 2 to 2.5 hour lunches (while the parent or parents held down the fort). And more often that not, the second generation "worked" at the business, were highly overpaid, and didn't really contribute much to the business in terms of duties and responsibilities. That is the fault of the founders/parents and a reason so many of them continue to work into their 70s and 80s, i.e., they know the next generation can't handle it and they don't want to turn over their baby, their life's work, to their kids.
Another example of this is that the second generation folks always (I cannot think of a single case where this was not true) always got new vehicles, company vehicles. Seldom kept one more than 2 or 3 years, then it was handed down to another employee and a new vehicle acquired. And yet the parents, the founder(s) drove company vehicles 2 or 3 times as long as did their offspring.
The first generation worked hard because they did not want to fail. There was nobody to turn to if it failed. The second generation had their parents/the founder to fall back on should things go bad. That results in two different kind of mindsets.
Then, once the founder or founders died more than a few times the second generation was a bit overwhelmed at what really running a business involved, and the business itself was a valuable asset, so they sold it and continued to live the good life, without really having much in the way of work to do.
