In the UK there’s a family business that has been in existence for more than four hundred years. It is a relatively small building company that built their first house in 1591 and, as you can see from the picture, it is still standing today and looking better than ever.
Just like the house, the family business has survived the plague, the great fire of London, the English civil war, the Crimean war, two world wars and more than one hundred other wars and skirmishes that the British have been involved in since they began! On top of that unrest they have had to face countless economic crises but none perhaps much worse than today’s.
So you can imagine my surprise when the current CEO was recently asked on a radio program what his plan was to secure the long term financial success of the family business for the next generations to come. “Plan, well I think we haven’t got one really!” The radio interviewer pushed on further “What is the secret to your family’s success?” “It’s not all about the bottom line” the CEO replied, “Our name is above the door, it’s about quality, morals and respectability. It’s also about sticking some money away for a rainy day”.
I found myself agreeing with the young CEO and believed his business to be in good hands. I like to run my businesses in the way that I like my suppliers to run theirs: namely focusing on quality and service, ensuring they meet the needs of their customers at a fair and reasonable price. On top of that I want to be sure that my companies have sufficient assets to ride out difficult times. Often that involves daring to take decisions that some shareholders might not be happy with.
I have witnessed several occasions when investor shareholders have been upset by very modest levels of cash within a business, accusing the board of being too careful. But what about in times such as now when the banks are reluctant to lend and new ideas need funding quickly?
I am not sure if The Bayard Partnership will be around for as long as Durtnel’s, the building company I mentioned but I do know of one business that won’t.
A friend of mine recently told me of a company he knew that was making a fortune buying the lowest possible quality French wine and re-branding it for the Chinese market at a massive mark up. It was clear the intention was pure and simply short-term margin. I just wonder if it wouldn’t be a better plan to establish a long term partner relationship with the Chinese by ensuring that both supplier and consumer get a good deal and thereby continue trading for several generations.
I personally prefer moderate returns, rather than closing a few one off deals at unsustainable margins. After all, John Harvey & Sons have been running their business on a very similar basis since 1796 and they’re still doing OK!
Have a good week,