This blog is the second of two posts and covers the second five lessons. See Part I >>
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.
Here are lessons 6 - 10.
Sixth, they reflect incremental and opportunistic growth. These companies are growth-oriented, but in an opportunistic way, when the time is right, and not rapid and high risk. As one entrepreneur put it, the companies in the industry that pursued a deliberate growth strategy were overleveraged, couldn’t sustain the debt servicing, and imploded. For a couple of years, they may have been lighting up the market, but it could not be sustained. For one patient client, acquisition opportunities multiplied after more than 30 years in business. As this business leader put it, virtually all the other companies that they competed with when they started, no longer exist.
Seventh, they are very familiar with the vagaries of the market. There will be ups and downs, cycles, and good days and bad days. They are risk-aware and can realize what can go wrong. Thus, have a contingency. While COVID was difficult to predict, it was not unforeseeable to think that there would be a downturn in the market. Based on that reality, keeping some amount of powder dry is a good thing. Many businesses fail due to reasons unrelated to the actual profitability of the business.
Eight, they know their Simon Sinek “why,” the vision behind the company. They built the why of the business, which was bigger than them (often a family component). For the businesses that last long, it is more than simply a money-making entity. In the cases of these client businesses, there was often a family component and a generational transition was planned. So, there is a “why” to the business, a commitment to a greater purpose—it was family legacy, community commitment and difference-making.
Ninth, they have a loyal team – many of these businesses have a core of long-term employees who are committed to the business. Just as the owner is committed, so too is the team. They enjoy the culture and the work and have a sense of devotion. They are proud of the track record of the company. In the cases of these client-companies, employees have other family members and friends that they have recommended. The company stands by them and they stand by the company.
Tenth, these businesses often have personally prudent leadership. Most of these leaders have a modest lifestyle, reward themselves only when the company is in a position to do so, and don’t look to extract all the money out of the company. They have their egg salad sandwich on a Styrofoam plate; why waste money eating out? The company is not fueling the lifestyle of the leader. The leader is often taking out a modest or appropriate salary—typically less than they would get if they were working for someone else. Thus, the company is well-positioned in the event of reversals—even 16 months of COVID uncertainty.
In short, the companies that successfully reflect the above ten lessons are rewarded with longevity, but it is also a good COVID repellant. These companies will bend, not break. They have the corporate grit to survive.