The Wall Street Journal recently reported that several family-owned businesses have been struggling during the recession, and that some are making the difficult decision to close up shop for good. This could have far-reaching effects on the economy: according to the Small Business Administration (SBA), as many as 90 percent of all U.S. businesses are family owned, from the small businesses to the Fortune 500 companies. The Bureau of Labor Statistics estimates that 4.3 million small businesses (with 19 or fewer employees) have closed from the end of 2007 to the end of 2008.
So, how do some family-run businesses perish while others survive – or even thrive? Experts say it has to do with tradition – many of these types of businesses are not flexible and/or don’t have plans for crisis situations. Many turn to offering specials or steep discounts to drive up traffic, but the decreased profit ends up hurting the bottom line. However, some family-run businesses are at an advantage because the have older family members, who have been through previous recessions, to turn to for advice, and because they don’t have as much debt as a start-up or younger biz.
In the garage door industry sector, there is talk that some dealers are strategically pooling their resources and merging companies to keep up with the changing economic climate. Others believe more stable and established dealers will completely buy out other businesses. Others are simply quitting. This has also led to companies offering to buy parts of businesses from those who have experienced setbacks. Established telephone numbers, Web addresses and customer databases are the most actively sought-after resources.
It can be challenging to navigate a company through a sluggish economy, and many dealers are forced to go on the offensive. This cooling period is driving many to reevaluate how they do business and focus on the most successful areas. In effect, it’s forcing them to get their heads in the game. Those on the defensive are losing.
Historically speaking, recessions have been relatively short-lived. It is the door dealer who plans to succeed over the long haul that will “recession-proof” their business. There is a common pattern among door dealers who are doing more with less as they face mounting pressure to stay afloat — and profitable. Most dealers have learned to keep things in perspective and positioned themselves to survive. They have the experience to know that the ways of the past are not necessarily right for the future. These dealers tend to meet challenges with similar solutions and consequences.
So what are some assumptions we can make for 2010?
• Many dealers will continue to be frustrated by their competitors’ lower price points, resulting in losing sales and earning less; money that could have been earned and “left on the table.”
• More successful dealers will manage to overcome the economics as they are more prepared for economic downturns as they’ve seen them before. They still believe in high quality at a fair price.
• We will see the merging of more dealer business and closure of several more.
• Employees released of employment from companies will enter into the market and offer products and services at prices that established companies cannot compete with.
• Manufactures will find it increasing difficult to meet the pricing demands of their dealer base, impacting loyalty to a particular product and company.
What will the New Year hold for you?