Wednesday, 7 October 2009

Recession and the family business

The recession has been brutal for many businesses, but perhaps none more so than small family run businesses. In the land of entrepreneurship, the United States, about 90% of all businesses are actually family owned and run; mostly small businesses with less than 20 employees. The mom and pop store, the restaurant round the corner, the self employed consultant. They have been the massively affected as this article lays out.

This blog is not meant to be chronicler of the world’s woes, If the last couple of posts have left you thinking that way, its not meant to be for long. But its just that we, as the fortunate few who have jobs intact and can continue to take care of our families, perhaps ought to reflect more on what the less fortunate are going through.

What family businesses have faced is a sudden steep fall in demand, complete drying up of credit and no robustness to weather such a storm. Any well run company will find it difficult to handle this, as is very evident these days. But traditional family businesses are even more vulnerable - often difficult to change, don’t see the storm coming early enough and when the gale force winds are buffeting, don’t have the strength to keep standing. Like a mighty oak tree, they fall.

Its when they get into trouble that families discover that there is a double whammy. Closure of a family business is invariably concomitant with personal bankruptcy. For the fine print in any loan document has it that every personal asset of the borrower can be repossessed. This report captures this frightening phenomenon of double bankruptcies. Sure, the bloke should have read the fine print before he took on the loan. But honestly, who really does. Do we do it on the multitude of legal stuff we sign – if we did, we would never have a credit card for the blah blah in a credit card agreement is absolutely scandalous.

It’s a tough world out there. But when a family business, which has perhaps been in existence for two generations, falls, it’s a sad and poignant moment, Especially as the article says, for the family, its loyal customers and its even more loyal employees. I have to echo athivas’s comment on an earlier post – perhaps emotion has no place in the business world of today. Sadly , that seems to be true.

PS – If you were a tad surprised at this blog sporting a new look, its all thanks to the wonderful Srivats. Sri berated me for a blog that looked like a cross between an owl and a donkey. When I protested that it was because blogger is blocked where I live and I can’t change any layouts, he very kindly offered to do it for me. Where in the world can you find blogger friends like this. So he created a swank, funky look which I sheepishly argued wasn’t age appropriate for me. In exasperation Sri toned it down to the look that you see now. Thank you Sri – you are truly sensational.


Anonymous said...

Like a hurricane tears apart the thatched roof huts first, these people are unfortunately affected the most.

This article has several relations to your earlier articles, on how internet is intervening with business (the book shops are close to closure due to online buy). And twitter's revenue is not surprising now!

It moves me to think of the plight of the workers, where else will they go? In a period of recession??

Anonymous said...

The template looks neat!!

DA said...

First, thanks for bringing the harsh realities of today front and center to our consciousness... but now I am left with an empty feeling of what next...Is this an exercise to become more aware of how lucky we are and to stop complaining about little irritants? Is this a call to be more empathetic - but then in my fairly cocooned existence, I hardly come face to face with with laid off people or business people forced to close shop - well maybe MBAs frustrated by their job searches... Or as Sri commented in your earlier post, it this the time to introspect and become emotionally and maybe even financially resilient in case the storm hits us... Somehow I am left dissatisfied with all of this. What do you think? Not to put you on the spot but you got us thinking about these weightier issues...

DA said...

I liked the glitzy skyline you had going (briefly) on your website... was that age inappropriate? Very nice, Sri.

Deepa said...

It just makes you wonder, somebody's recklessness can result in such a mass destruction of unsuspecting people leading their simple lives.

About the new look...Now I know why Shobha was so persistent about 'Corporate Dressing'. (ref. her mails before client visits)! Looking at your blog, it does make sense now! It makes quite an impression!

Adesh Sidhu said...

Nice layout of the blog. Liked it in first look.

Family businesses are more vulnerable but these days lot of groups are coming up which vows to support local businesses which essentially are small businesses.

In one article I read small businesses are making their customers as partners. Will send you the link.

Sandhya Sriram said...

i am motivated by what athivas said about the hurricane. yes smaller straws uproot faster than mighty trees, but i also beleive that they settle and regenerate back faster. trees which overturn, can never renew the lost roots.

Having said this, i feel it has been a tough world for every one. whether it is a family business going bankrupt or a working individual who would have waited for years to materialize his US dream and landed there leaving near and dear behind and struck neither with a job to do nor with a face to return back home (i know of someone personally who ended his life and so feel how bad it is). Standing today, my country is sinking in floods and me sitting on the 8th floor of a high rise building in bangalore am reflecting on the the rise and fall of family businesses in US. Isn't it ironical?

But looking at it philosophically, life is imperfect and unpredicatable. it is the imperfection in life which still keeps the emotion and human element in the business world alive. It is this imperfection which makes individuals see life as a journey. and it is this imperfection which motivates the thousands and thousands of people fight the surging water with all their might. some of them did sink but many of them managed to live through.

I know i have like really blabbered too much on this. please forgive me for this. the later in the day it gets, the more bonkers i go.

Ramesh said...

@athivas - You analogy with the hurricane is so apt. And yes, Sri is a great guy, isn't he ?

@DA - Oh - this wasn't meant at all to indice guilt feelings. We shouldn't be apologetic with what we have or our relative good fortune. I just think that when it comes to us taking decisions which affect other people's lives in a big way, we have it in us to do so with sensitivity and care. All too often, I have seen people make decisions that are life changing for others, but with such callousness and recklessness.

But you raise a very thoughtful point. Its not enough to just raise an issue without a corresponding point of view or statement. Thanks for that.

OMG, you saw the true handiwork of Sri. It was quite cool and like a stupid idiot I went and remonstrated with him on sobriety. Silly me !

Ramesh said...

@Deepa - Yesh, the greed of few has indeed brought destruction to many. Even a die hard advocate of free enterprise like me has to agree with that.

Ah yes; Corporate Dressing. very true. I suppose this makeover is the equivalent of wearing a clean shirt. The tie hasn't come on though !!

@Adesh - Thanks. Very interesting concept of making customers partners. Would love to read the link.

@Sandhya - A very perceptive and thoughtful comment, as always. You are right. Imperfections will always exist, and perhaps makes life as we know it.

Yeah; very sad reading about the floods. After a drought, this is a real whammy. Sometimes I wonder, why nature sometimes gives so much misery to its children. Maybe the same imperfection you talked about.

Srivats said...

This post leaves me very sad and happy at the same time. I can somehow feel the sadness of this issues. I love the movie, you got mail and the way she breaks down while she had to close the family owned small book store with fond memmories.

The article you mentioned ends with a note from the guy who is not sure what to do next.Yeah where else they go ?

Plus the interent stores and gaint retailers takes over whats left of good will business and small shops where laughter, love and loyalty exists than the sheer will to make money. god save us!

I am bit shocked that you mentioned my name here, *hides* hehe oh come on what are friends for :)

p.s: thanks for the oosi vilambaram :)

Srivats said...

@ Da
//I liked the glitzy skyline you had going (briefly) on your website... was that age inappropriate? Very nice, Sri//

Thanks :) but i got to agree with ramesh, this one rhymes better with his style and personality :)

no age bar :)

Ramesh said...

@Sri - Yeah, the sadness of it all gets to me at times. I can't simply reconcile to the fact that you can lose your job or livelihood in the blinking of an eye.

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