Case study: when a business goes sour - Family Business: Case Study - Panel Discussion

Nation's Business, Nov, 1996 by Leonard Geiser, Ernesto J. Poza

Going from being an employee to running your own business is often viewed in positive terms: You get to be your own boss, call the shots, decide your hours, and have more independence. At least that's what Larry Simon thought 15 years ago when he quit his supervisory job at a manufacturing company to become the third-generation owner and manager of Simon's Department Store.

Larry's grandfather started the store more than 60 years ago, and his father worked there most of his life. Larry had worked off and on at the store during his teenage years, so when his father wanted to retire, Larry took over.

Once a thriving enterprise, the store has fallen on hard times. A large discount operation in a nearby town, part of a national chain, began draining away business several years ago. A deteriorating economic base in the Simons' rural community has eroded their business even further. Larry, 4Y,. and his wife, Jan, 40, try to make ends meet with only six full-time employees. They tried to sell the business last year and, not surprisingly, found no takers.

The Simons are frustrated by the long hours, government regulations, and constant cash-flow problems. "Jan and I are close to burning out," says Larry.

Nonetheless, they need to continue the business because they have two young daughters to care for and are still a long way from retirement. "A 9-to-5 job sounds awfully attractive to us both, but we can't afford to just walk away," says Jan. "What can we do?"

Response 1

Now Is The Time To Make Changes

Unfortunately, owning and running your own business doesn't mean you'll really be able to "call the shots" and be free to work when you want. Smaller, service-oriented businesses almost always require full-time attention from their owners, as the Simons have discovered.

Larry and Jan need to do some brainstorming together about their options and weigh each possibility carefully. To a great degree, the options will be based on their personal goals and on their objective assessment of area business trends, population patterns, and the competitive situation. If they choose to redefine and reposition the business, most likely they will be recommitting themselves to long work hours, added financial commitments, and continued pressures.

The Simons sound like they would be happier working for someone else, with more-regular hours. If they determine that is what they want, along with providing for their daughters and their own retirement, now is the time for Larry and Jan to make some changes, while both are of a more employable age. they still have time to prepare for their retirement years, and they should be able to provide for their children's needs.

Selling a marginally successful business in a declining market may not be possible. Simply closing the business now would probably be the best option and would be less costly than continuing to run it until there is little value to be recovered.

Closing a family firm is difficult, but unless it is financially solid and has a promising future, it might be better to let the store go and move to other employment.

Response 2

An Antidote For Burnout

The essence of this case is a family with income needs and a couple of breadwinners who are burning out.

Burnout, in my experience, doesn't come from working too hard but rather from not doing what you truly enjoy doing. When I started my own business 17 years ago, I discovered that enjoying a significant portion of my work is what kept me energized.

Should Larry and Jan sell the business and work for someone else, or find a way to turn the business around and make it more fun to run?

What would give them some satisfaction or a sense of making a contribution? I personally would look for a new growth opportunity in a focused, niche business and give it my all.

Of course, it would take more than a 9-to-5 day for years to come. But I would turn the department store into a unique restaurant and novelty-goods store or a combination antique store, coffee shop, and bookstore, or even become a specialty retail franchisee.

I have seen local merchants affected by competition from the national chains do all of the above conversions and do well, even in economically depressed areas. Financing for the conversion could come from refinancing the underlying real estate and, one hopes, from a well-cultivated, multigenerational relationship with a local bank.

The answer lies in choosing an option that passes this test: Will it both provide personal satisfaction and enjoy a competitive advantage? If it does, go ahead and burn in that new growth opportunity with hard work and the satisfaction that comes from doing something you love to do.