What can you learn when a business closes?

By
Real Estate Broker/Owner with Cornerstone Business Group Inc 0225086119

Today, I received the sad news that a local business is closing this week. I told my wife last week that I didn't see them lasting much longer. This business had been a thriving business since the 1960s. I can remember going to it as a kid and buying candy and sodas. What went wrong?

I hesitate to sound like an armchair quarterback, but I think there are some lessons that can be learned from their failure.

One, if something is working, leave it alone. Or at least, make truly minor adjustments over time, but don't cut off something that is working. This business has changed hands a number of times in five decades. Most changes kept the business like it was before. The last one, decided they had a better idea.

The business had been a local landmark store with minimal groceries. In recent years they added wine and craft beer. It also added food about 3-5 years ago, and it was excellent. The addition of food drew more customers in and the craft beer selection also added to the clientele, with the craft beer craze. The penny candies were still there. You could stop for a local paper, a sandwich, a loaf of bread, milk, and a new craft beer on the way home. Early last year, the food side of the store closed. That was a bad omen. 

The business changed hands again mid-year 2018. This time, changes started taking place that may have signaled big changes were coming. The newspapers disappeared first. That wasn't a big change, but a lot of people stopped by there on the way home to grab a paper. Unfortunately, they weren't profitable, so they had to go. The store was rearranged from its 4-5 decade traffic flow, to a new more open pattern, and ironically, it was awkward. The food made it back, and that was a good thing, but more changes were coming.

The owner decided to have live music on certain nights, and that was fine. The wine tastings and beer samplings seemed to be less and less until them disappeared completely. With the music nights, came fewer drop in customers who didn't want to be incorporated in the music scene. Fewer customers meant less beer and wine sales and soon there were fewer and fewer groceries available.

One thing about craft beer is that it is expensive. With fewer customers, fewer $12 beers were sold, and soon fewer beers were available. The wine selection started to decline, and finally, the wine rack was empty. The craft beer selection declined as well. It had previously been the biggest and best in town. 

The Second lesson that can be learned here is that when you see negative things happening, make quick adjustments. Just because you think you have a great idea, doesn't make it a great idea. This establishment had been a landmark in that area for a half dozen decades. People knew what to expect when they walked in the door. Suddenly, they didn't know what to expect day to day. 

It was easy to see the quick decline in the business, but for some reason the owner didn't seem to see it. It can be easy to be so married to an idea that you become blinded to the harm it is doing to your bottom line. That's how businesses end up hundreds of thousands of dollars in debt. They can't realistically assess their own business to see what is working and what is not. 

I took an axe to my marketing plans beginning in May of 2018. There were so many things not working that I hadn't addressed. When I finally took a serious look, it was time to start getting rid of the money wasters that never produced anything, and that was the majority. I eliminated five sources of marketing from my marketing expenses. It was freeing. They hadn't produced anything near the bloated promises made by the sales people who sold them to us. I loved every minutes of whacking those dead marketing trees down.

The reality is, if you can't objectively look at your business, your decisions and your results, you will have a hard time being in business over the long period. A major recession like 2008 could easily take you down if you don't have a business model that works in both good and bad times. Be honest with yourself. What is working? What is not?

I'm sad to see this business go. I went in their frequently for years, but as each new owner came along and made changes from the charm and magnetic draw this location had, I noticed that I was only dropping in once every couple of months. Multiply that by the 3 or 4 thousand residents that surround the business, and before you notice, the doors are closed. And if most people are like me, they will say, "I saw that coming."

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Ginger Harper 02/27/2019 09:04 AM
  2. Peter Mohylsky 02/28/2019 04:00 AM
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Rainer
99,443
Brian DeYoung
Howard Hanna Real Estate Services - Ithaca, NY
Brian DeYoung

yes, it is interesting that customers can sometimes see what owners cannot.

Feb 27, 2019 06:54 PM #21
Rainer
92,988
Lynne Ruffin
Lynne RUFFIN - Norfolk, VA
Web Styles

Wow!  I must say that this is a very thought provoking post.  In 2008 I was doing well in real estate and have never recovered to the level I once enjoyed.  I learned a lot about how my flow over the past decade has pretty much paralleled a business lost and the new marketing and work initiatives I plan to put in place should not be handled with procrastination.  Thank you for sharing. 

Feb 27, 2019 07:14 PM #22
Rainer
12,137
Richard Haworth
Coldwell Banker Residential Brokerage - Goodyear, AZ
Phoenix West Valley Residential Specialist

The first rule when you inherit a successful pair of "shoes" (business) is "don't change anything".  If you do make minor changes, monitor the business stats.  If they go up, make the change perminant.  If the stats go down, get that changed off the lines in a hurry.  That way you will build a growing successful business.  This problem is not exclusive to small businesses.  Witness the recent rescue of Sears through Bankruptcy Court.  The guy who bought it several years ago, evidently did it with the stated intention of selling off all the Sears real estate holdings.  Completely nuts.

Feb 27, 2019 07:21 PM #23
Rainmaker
1,778,626
Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Sad to see a long-time store close. We're seeing that in many of our San Francisco neighborhoods. On-line shopping has certainly changed the way we live, high rents is another blow, and sometimes change like you describe play a hand.

You've given us great food for thought as how this might apply to our businesses. 

Feb 27, 2019 08:27 PM #24
Rainmaker
2,763,878
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Learn to interview the owners and pick there brain about what actually happened in the specific scenario

Feb 27, 2019 09:18 PM #25
Rainmaker
2,763,878
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

It always feels like a piece of you guys when a long-standing thing then changes in anyway

Feb 27, 2019 09:20 PM #26
Rainmaker
3,205,322
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Mike, looks like many of us looked at 2018 and eliminated the money drains and some did not get replaced, others were replaced... I still believe do not fix that works philosophy will keep the status quo, all you need to do is tweak some of the things that work to make it better, Endre

Feb 28, 2019 12:08 AM #28
Rainer
477,739
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

There are many reasons why successful businesses go out of business and it appears this business went out of business five times, five new business owners, right?

Some businesses can adapt to market and demographic changes and/or adopt new products and services yet, it must be profitable and when it isn't, the consequences are severe, aren't they?

Every business owner should have an exit plan in their business plan, however, most IMO don't and when the end comes unexpectedly, the chances of a favorable exit unfortunately is slim to none.

Feb 28, 2019 12:13 AM #29
Rainmaker
583,776
Peter Mohylsky
PrimeSouth Properties - Santa Rosa Beach, FL
Let me help you find your path to the beach.

Controlling your expenses is an important part of running any business.  Thanks.

Feb 28, 2019 03:59 AM #30
Rainer
50,645
Ken Jones, Realtor
Realty ONE Group Central - Freehold, NJ
Adult Community Specialist

Mike Cooper, GRI Great observations.

Unfortunately, most people who buy an existing business for the purpose of changing it tend to do more damage than good (as in your example).

That said, having advised other business owners to be nimble, I've found that few are willing to listen; it seems they'd rather be right than successful.

Thanks for a good post!

Feb 28, 2019 04:38 AM #31
Rainer
10,893
Bill Meloy
Palm Beach Gardens, FL
Private Money Specialist

Excellent post.

The only constant is change. Yet it sounds from this situation that the changes that were made to attract more customers actually had the opposite effect by alienating their existing customer base.

 

You need to change and evolve but don't change so much you lose your true self in the process.

 

In business and in life.

 

 

 

Feb 28, 2019 04:50 AM #32
Rainmaker
671,982
Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

It is sad. It's not just the mom and pops that are hurting, it's retail in general. The big box stores are seeing their demise right along with them.

If I knew how to solve the problems for the owners old and new (there must have been a reason the others saw a need to sell) I'd be a highly sought after consultant. Your point is true- we need to be able to test market and scrutinize every last element of our businesses in order to stay relevant.

Feb 28, 2019 06:27 AM #33
Rainer
303,102
AndreaBFerreira CRS - SRS - CLHMS
Keyes Co. - Davie, FL
Miami Dade, Broward and Palm Beach County in FL

The wake up call can come form different directions. I'm glad you got the message and change, some don't realized that until is late. Congrats on your reaction.. success ..

Feb 28, 2019 08:48 AM #34
Rainmaker
522,119
Lisa Friedman
Great American Dream Realty - Essex, VT
30 Years of Real Estate Experience!

I just read in the paper yesterday that my favorite (and only) local peanut butter company closed after seven years. It was quite disheartening.

They had the best peanut butter with organic healthy ingredients including peanuts, almonds, pumpkin seeds, cranberries, raisins, etc. Basically trail mix inside peanut butter.

I would literally buy 8-10 jars at a time to stock up. Sad to see them go.

Feb 28, 2019 10:58 AM #35
Rainmaker
375,678
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

What a sad story.   I wonder if anyone gave that business owner helpful advice that they ignored...  The only good that came of it was that you could compare it to when you re-evaluated your own business practises and eliminated what wasn't working.     But why eliminate or change what IS working?  

Feb 28, 2019 12:57 PM #36
Rainer
17,644
David Smith
Brokers Guild Classic - Lakewood, CO
Residential and Commercial Broker

Quite the operation they had going there by the end, local high-end convenience store -meets restaurant-meets bar- meets liquor store- meets grocery store.  Crazy, sounds kind of fun, but yeah, a lot going on there.  Sounds like trying to be too much to everyone finally took them down.  A lot of good food for thought in here, thanks!

Feb 28, 2019 02:00 PM #37
Rainmaker
1,139,215
Joyce Marsh
Regal | Christie's International Real Estate - Orlando, FL
Regional Manager Regal Christie's Int'l Realty

This story reminds me of a similar situation in our area.  Many years ago there was a very popular night spot.  Everyone loved to go there for happy hour and the place was thriving for years.  One of the things that young singles really liked about it was that the place was small enough to be crowded and people were stuffed in there and close enough to talk to each other.  Well here come some new owners.  They decided that the crowded conditions weren't conducive to business so they did a major remodel and enlarged the interior so big that there was no longer any interaction and people stopped talking to each other, and eventually stopped going altogether.  The business closed.  People like familiarity and don't like change. New business owners would be wise to keep things as they are until they have had ample time to really access the situation.

Feb 28, 2019 03:12 PM #38
Rainer
218,705
Greg Mona
Faira Homes Corp - Scottsdale, AZ
Real Estate in the 21st Century!

Nice post, Mike Cooper, GRI. The old saying "if it ain't broke, don't fix it" has been around forever for a reason. Taking stock and recognizing what works and what doesn't applies almost universally when it comes to business and life in general. Sometimes no change can be just as detrimental, so finding that correct balance, and reevaluating often are key to future success.

 

Feb 28, 2019 03:26 PM #39
Rainmaker
464,830
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Great post.  Like you, I re-evaluated my business in 2017 and 2018.  I agree, it was freeing ... of my time as well as my money.  Smiling

Mar 02, 2019 07:38 AM #40
Rainer
520,967
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

Things change, people chnage, the tastes changes. A business should be able to recognize and react appropriately to the adjust their approach to the changes

Mar 02, 2019 01:11 PM #41
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