This blog is the first of two posts and covers the first five lessons.
Half-centennial companies are getting rarer by the year, like 50-year wedding anniversaries. The average lifespan of a U.S. S&P 500 company has fallen by 80% in the last 80 years (from 67 to 15 years), and 76% of UK FTSE 100 companies have disappeared in the last 30 years.
As I have worked with founders/operators of businesses of 50 years or more, I have noticed some common traits, despite industry and geographical differences, that provide resiliency or grit—ideal for repelling COVID. These are instructive for other business leaders and those who advise them and wish to understand them.
First, these companies are focused on their core business – they don’t get distracted. Success is sometimes defined as focus in a single direction over time. Know what you are good at, perfect it, and increase income by efficient operations. For one property developer client they know their home market inside out, an aggregation of 50 or so years’ experience. Yes, diversification has its place, but at the core don’t forget the engine of the company. Why are people buying from you and why will they continue to buy from you?
Second, they work the plan – they figure out how they make money and they methodically keep doing it. They have figured out the systems, procedures and how to organize their financial and human resources. If they are manufacturing, selling and leasing recreational vehicles then they3. know the minutiae of all aspects of the business. They have confidence in their team and the strategy. They don’t panic and second guess themselves under pressure. When riding out the storm—or the pandemic—they don’t change strategy when the waves are too high.
Third, leadership is committed to the company—it’s bigger than the individuals leading it. Leaders are prepared to step up at crisis moments. One client, with retail shops across the county, recounted that when COVID first struck his business lost 75% of its revenue within one month and all but a handful of hundreds of staff were laid off. A nearly 50-year-old retail business was on the precipice of being shuttered. They rode out the year and ended up not far from the previous year’s revenue. If they would have thrown up the white flag at that point, no one would have faulted him.
Fourth, they are not trying to impress anyone – they don’t create a burdensome narrative they need to sustain. The leaders of these companies are often down-to-earth individuals, like those profiled in The Millionaire Next Door. They are not focused on a narrative of steady, unending growth. They don’t need to grow rapidly, beyond prudence, to impress anyone. Instead, focus on the reality of the business and the rest will take care of itself.
Fifth, they are focused on profit – while these long-standing companies are typically generous corporate citizens, they do not lose sight of the bottom line. They are very clear on the need to run a profitable organization. What makes money and what doesn’t? What expenditures are wasting money? They watch their inventory carefully. Not surprisingly, perhaps, there are many businesses that don’t generate much profit, but those are the ones that cannot withstand much change.