There was a wonderful clothing store in a big Texas city that had been started in the city's downtown in the late 1800s by two brothers from Galveston. By the 1970s it had grown to at least four stores throughout the town and with others planned.
And one of those stores grew to sell multimillions of dollars annually, even out-performing the downtown mother store, because it had been built in an area where there was great growth of the homes and businesses of the rich and famous.
Although the brothers owned that store building, they leased the store's major parking lot from another family, but with the option to buy it if the lot were ever put on the market for sale.
The two brothers died, and the heir apparent was a son. He took the helm of the operation, and before long he was the hero of the tony. Handsome and rich, and probably with a publicist, his photo and his social doings were constantly in the news in Houston, New York and abroad.
He lavishly spent money on even higher courtier inventory, put two of the largest of the stores through enormous expense for redecorating, and did other things he thought would build an even better mousetrap. Perhaps he envisioned himself as the clone of Stanley Marcus of Neiman-Marcus.
The owners of the parking lot that the store had leased for many years, contacted the man and told him they were putting the lot on the market, and were giving him the option to buy it.
I remember that he came by our office, I suppose for real estate and business advice that he had no intention of following if it differed from his opinion. He said, "The family wants $XX per square foot for the lot. I don't think they'll get anyone to buy it for that. I offered them $YY."
We all chimed in saying almost as though we were the Four Freshmen singing a tune, "Have you lost your mind? If they get an offer for that lot that's for more than $YY, your store will drown. Not only will your customers have to search for a parking space, but the buyer will certainly put a new building in front of your store. You'll be out of business there in less time than a heart beat."
He stuck by his guns, and within a few months, the parking lot owners sold the property to someone else for, you guessed it, $XX per square foot. It wasn't long after that that the loss of the parking lot plus many other of his decisions sunk the entire business and it closed.
It had survived and thrived for nearly one hundred years. He broke its back in less than ten.
It is interesting how often that the enormous risks of beginning a business and being able to nurture it to success are totally outdone by the next generation of the family.
I know another business that was begun in the 1880s that the grandson was able to tank within a year of his taking the helm. The unfortunate part of that was that the prior generation depended on his success for their continued income.
And then there was a famous restaurant that had enjoyed enormous success for more than 90 years when the great grandchildren of the founder sent it into red ink. Their fathers, one in his 70s, had to quickly step back in as the operators to save the business from the possibility of financial ruin. It will surely eventually be sold, the better choice than giving the heirs a second chance.
You know of some examples of these kinds of business failure vignettes of your own. Businesses that had a powerful name among their clientele, but by the time the next generation got through with its own idea of management, even the company's name no longer had value. The line on the Balance Sheet that says "Good Will" was now followed with a zero.
Oddly the risk of leaving these businesses to the next generation to run was substantially greater than the risk each incurred when the businesses were started. In each case, the founders' better decision would have been to sell the business to a third party rather than to leave it in the hands of the future generation of their own family.
In argumentation and debate, the subject is always styled to say that there is a need for a change. The burden of proof is on those who favor the change. If they are unsuccessful, those favoring continuing the status quo win by default.
In business, once there is a successful formula in place, to decide whether or not to modify it, management must prove to itself that there is a need for a change.
I was home for the holidays one year, when my daddy came home for lunch. He barely said hello before he called his stock broker, Don Frye, at Rotan-Mosle. "Don, Sears has lost its mind. Sell my shares immediately."
It seems that a substantial part of Sears successful formula had been letting each store manager inventory his own store, and that there was a great profit sharing provision that allowed the managers and their teams to get rewarded based on their store's sales. Ernie Norton, the store manager in Galveston, had told Daddy that he had just learned that all of that was being modified.
Daddy said, just watch how the greed of corporate management will alter the company's future profit opportunities. That was forty years ago. How have things gone for Sears?
BILL CHERRY, REALTORS
DALLAS - PARK CITIES
Our 45th Year
214 503-8563
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mathematical and critical reasoning skills, has been hired by the prestigious Canadian financial firm FINCAP in Vancouver.
My friend, Pam Sitler, is the marketing director of the Lake Highlands branch of Dallas' Republic Title, the title company many Realtors and our clients favor.
The program, simply titled "Gershwin Favorites," features Broadway composer, Marvin Hamlisch ("A Chorus Line") as conductor. The feature soloist is Kevin Cole, who has devoted his professional career to the study and accurate interpretations of George Gershwin's compositions, especially "Rhapsody in Blue."
So what is the inference? They charge $99.50 to determine whether or not your problem is covered by the warranty, and they are afraid that if it isn't, you'll stiff them and not pay the charge for the diagnostics? The solution, therefore is to get payment in advance?
BILL CHERRY, REALTORS
