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After the original owner leaves ?

dennh

Stainless
Joined
Sep 8, 2002
Location
northeast
After reading thru the "It's that time again" thread I got to thinking about this question. I'm just an HSM, not a machinist, but I see the same pattern in my profession as in some of your shops.

After the original owner leaves, do most places eventually head in the wrong direction (multiple acquisitions, a-hole bosses, etc.) until you either leave or the place closes up?

How about other cases with a nice, positive outcome to enter Christmas with?
 
The owner sets the style of the shop. When he or she leaves the style will change.

The new style wil be set by the new owner or the new boss, whatever he or she is called.
 
Things usually change... For the worse...A few reasons I think this happens: Often the original owner was debt-free, so he/she did not have to pay a note, & still try to show a profit. New buyer usually has to be more frugal, to succeed... And, most often, the orinal owners had a real interest in the core business, sort of a "Labor of Love"... Many buyers have little, if any rea
 
In the late 80's I was involved on the selling end of a family, actually 2 families, mine and my dad's partner family, business. The next generation did not get along, at all. We sold out to a company 20 times our size. What you don't see of the management(mostly) or financial sides of the buyer, has the real possibility of biting you in the rear pocket. We got all our money, but the companies they bought afterwards didn't. The bank holding their paper forced them to sell out to one of the largest wholesalers in the country, six years after they bought us. Our buyers did not escape unscathyed, nor did their employees, and I have to admit that I enjoyed the discomfort for some of them. Many were cut loose from the consolidation and reorganization that ensued. Today the new owners are one of my best customers.
To say that our buyers were badly managed by their owners, would be an understatement.
I think it safe to say that many of today's managers, financial consultants, and lawyers have no business being in business. It seems they look to the short term, not the long term.
Harry
 
I have seen it go both ways.
I know of several situations where sons have taken over a business after their father dies. The biggest problem is they don't understand why their father seemed very thrifty and liked to put money in the bank rather than spending it.

They take the surplus cash and buy new toys totally unrelated to the business. It doesn't take more than a couple years to turn the cash flow upside down and they are in debt up to their eyeballs. Nothing will save the business.

I have also seen where the son followed in his fathers footsteps running the business. The big difference is the son may investigate newer technology and actually expand the business by upgrading machinery thus gaining new work.

SWMBO in a way wishes she had sold this business when her step-father died. One reason she hung on to it was for me. She loves dealing with our customers but is tired of dealing with the paperwork end of the business. She hates the business unfriendly climate in this city and state. So while business is still good it is time to sell and go.

It is time to close this chapter in life and start a new one.

Les
 
Les,

Just out of curiosity.

How do you feel about leaving the business? I mean, you obviously didn't start it, but like said, it becomes a labor of love.

Do you feel guilty about leaving your employees?

I'm not trying to be rude, as I completely understand that sometimes it's just time for a change, but as someone who sounds like they have strived to be an honest businessman, what are the emotional repurcussions of leaving the family business in someone elses hands?

-Jacob
 
I can relate a story to what you guys are saying only somewhat in reverse. I called on a local company and sold them material handling equipment over the years and attended their closing sale a few weeks ago for one of their divisions that was no longer profitable in the states and most production had already been moved overseas. However the owner was a real people person and had been a hands on manager also for many years and this Co. had been a cash cow to buy many other entities during that time. While at the sale many of his laid off employees seemed more concerned for the owners well being from the trauma of letting them down than they seemed for their own well being.The owner mentioned that other family members were not interested in continuing the rest of the business so he sold it all except the real estate holdings and got in excess of 1.2 BILLION dollars.I said to many of the employees that he will get over it much faster than they will.
 
We just had an aluminum extruder close its doors near Youngstown. The original owner and founder sold out a couple of decades ago but was interviewed recently when news of the plant closing surfaced. The management styles couldn't be more different. Whereas the original owner was a people person and was in it to build the business, the new owners were in it for the money and treated the employees like crap.

I remember a quote by a CEO of Bethlehem Steel who said that "we are not in the business ofmaking steel, we are in the business of making money". He couldn't be more wrong. My belief is that making money is the byproduct of making a good quality product. If you are not making decisions based upon what is best for the production and sale of your product then you are cutting your own throat because someday all those short term money oriented decisions will come back to bite you.
 
Jacob, I love doing this kind of work but I've had enough. Since we laid off the employees 2 years ago it has kept me swamped. The worker's comp rates increased three-fold due to our inept state.

Our former machinist obtained his own tax/business license and rents space from us for his machines. He quotes us work he can do on his mill and lathe. I don't have the time to sit and countersink 12,000 holes at a time for one job we do quite often. So he does them.

We treated our employees very well. We often prepared lunch for them. Just about anything they asked for they got. I think they really enjoyed working here. We considered them family. We didn't have problems like people not showing up for work and such.

Our big concern is the service and care our customers will receive from a new owner. Our customers are used to just placing the order knowing they will receive 100% correct parts delivered ontime.

It is also time to get the heck out of So Cal. It has been pretty hard on my folks since we lost my brother earlier this year. So moving to a place near them in Nevada will help. I'm taking some of the machinery with me so I'll have something to do. I've had several job offers if I want to work for somebody else.
We'll just have to see how things work out.

Les
 
Rick, IMHO, the attitude of the Bethlehem CEO summarizes the reason US Companies are failing... All they want to do is to present a good quarterly report... since they know they are only going to be there for a few years, anyhow...
 
One classic exception is the Martin Guitar Co., established 1833. Now in the hands of the sixth generation owner, the company still leads the industry in production of fine acoustic guitars, and remains essentially true to the vision of its founder.
 
having some business experience as an owner of more than a couple, and having worked for and been laid off by other take over or second owner businesses i find the following to be the problem.

1. as previously stated the original owner owed nothing or very little.

2. the original owner treated his business like one of his kids or as a body part. or msybe he was a body part of the business, the new owner doesnt generally come to the table with this attitude.

3. new owners usually underestimate the needed capital requirements after the aquisition, alot of times the original owner takes all the accounts receivables, bank accounts and ever blessed dime out of the business at the time of sale. Couple this with the new owner usually being strapped by putting down all he can to get the place, and has little to operate on until he can get cash flow up to a reasonable level.

4. the new owner thinks he is buying a cash machine, that will generate profits to him from day one, which is rarely the case.

5. the new owner doesn't have sufficient advise or bean counter ability to get a handle on the situation from day one.

6. the new company culture is hardly ever a copy of the old culture, the new guy comes in thinking he can do it his way from day one. This causes alot of problems, in that usually if he was to allow things to operate as they have been and learn how things are done, he will make money. Then after he gets fully aquainted with the system then he can make changes, one at a time to see the result.

7. another problem is what i call the big head syndrome, that is thinking by the new owner that the old guy didnt know what he was doing. never thinking that if the old guy didnt know what he was doing he wouldnt have been in business long enough to have a business to sell.

the bottom line is alot of good employees either get laid off, or quit on their own. If the new owner is lucky he can pull it off, if he is smart and doesnt make the aformentioned mistakes amoung others he is likely to succeed and keep happy and well qualified employees

bob g
 
Good and bad things happen with small companies when the owner sells out, but also with large companies through a succession of CEO's. I worked for a very large company for twenty-five years under three CEO's. For the one I hired under, the company was growing at a moderate rate by encouraging development of state-of-the-art technologies. The second expanded the company into new technologies and got the company to around 400 on the Fortune 500. The third CEO, with a hand picked Board of Directors, sold off technologies and product lines. (Today if there was a Fortune 700 list, I don't think the company would make it!) Of course under the last two regimes, as time went on, working conditions, morale, middle management, etc., became worse.
 
I worked for Brownells Inc. in the early 80's
http://www.brownells.com/

Bob Brownell started the place in the 40's, selling a few gun parts. Built it into one of the largest suppliers in the country.

Son Frank started working there after college, handled lots of the day to day ops until Bob passed, then became president. Has done a great job keeping the company on track.

Frank's son, Pete, started working there after college. Most likely will take over as Frank gets near retirement.

A pretty neat company, great products, great people, a pleasure to deal with.
 
Sorry - my turn to rant...

Had the experience of becoming the 6th data dink for a small company. After one day one of the two database guys left as obviously incompetent and was scared of someone who he couldn't bamboozle.

Three months later the IT Mgr departed - no replacement.

A year later down to two ITs, one network/Visual Basic expert and one database guy (me).

Company sold to a Big firm, get four different 'managers,' one after another, heading up the IT effort, the last one was a registered nurse! One day she asked me to generate a "report for the client" and when I asked her what kind of data, format, any summaries, etc., she said "That's your job. Your IT!" For the sake of the other peons I gave her 30 days notice so they could work up a position description, interview, hire, and I'd train on existing processes.

She gave me three work days to clear out and sent in one network guy for one afternoon's turnover on database theory, structure, and processes.

The Big company closed down that entire operation not too long after and took a major write-off that year.

Okay, thanks! Rant over.

Stan
 
Nice post, Mobile Bob, it actually drew many parallels to what can go on in a large company.

A department leader appeared after a couple month vacancy and laid low for about 4 months...barely visible. Things were humming.

A large meeting was held and he announced that he had been observing and was now going to take strong control of the department and start making much needed changes.

It literally wasn't 1 day after that our department sank into a funk for months...I mean anything you can think of just went right into the toilet. And it wasn't sabotage or disgruntled people...it was just like a dose of instant karma that slapped everybody with a string of bad luck.

A new leader came on board. He was a technical person by training and had edgy, radical ideas about how to solve some of the perennial problems we had faced for 20+ years. His bosses said absolutely not, do it the traditional way, and that fire which started right there burned & escalated over several more months until they "found him a new job" at another plant.

Interestingly, all of the ideas he proposed are in use today.
 
Stan, I've had to watch from the sidelines as similar things happened ... several times.

I like to be a slight bit positive and think that for every 3 - 5 competent people who leave their positions, a new, competent startup is formed ;)
 
3. new owners usually underestimate the needed capital requirements after the aquisition...
This is so true, Bob. One of the cardinal principles new owners fail to grasp is how much capital you can have tied up in accounts receivable. I'm talking mainly about the machine design/building business. The big customers often take 45-60 days (or more) to pay, meanwhile you need to pay your suppliers in thirty days to maintain your credit standing with them. Financing this cash-flow gap often takes new business owners by surprise. They think that growth is just a matter of finding work. Surprise: it also requires capital.

Paula
 








 
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