Companies do not live forever

Like people, companies can age and expire. But in business, says Jesse van Sas, Secretary General of FIDI, it doesn’t always have to be that way

he recent failure of two important FIDI Affiliates – established family businesses – is a wake-up call for our industry. Nobody is immune from failure, whether triggered by COVID-19 or any other economic condition.

One of these companies was familiar to me, as I had worked there for 14 years in the early days of my career in the moving industry. Back then, I was in awe of the strong reputation this company had in our industry. How fellow agents in other parts of the world would refer to my employer as an industry tycoon, a force to be reckoned with in the Belgian, and even European, market. How this business was supported by the founding family, who were very much present in its day-to-day management, always around to push their staff to do better, to forge alliances through their impressive network, to contribute passionately to the success of the business and its reputation, no matter what. It was already a 100-year-old company, and with all that history and family drive, we would have believed that this company would last forever.

Many companies in our industry successfully withstand the ageing process…by constantly and consistently rethinking the purpose of the business

It did not, much to the surprise and shock of many. Though COVID-19 was probably the final trigger, the company’s demise must have set in a lot earlier. The solid foundations it was once built on, turned out to have been weakened and incapable of supporting the business any longer.

The longevity of companies is not a given. Much like all of us, they are subject to ageing, too. They can become vulnerable, inward looking, and live on their historic successes. Their structure becomes more complex and less flexible, which threatens their innovation and growth rate. This ageing process eventually undermines their performance, in revenue and profits, and before you know it, a business once revered for its longevity is gone. Optimisation of a formerly successful business model can only be practised for so long.

But it does not have to be this way. The demise of older companies is not inevitable. Many companies in our industry successfully withstand the ageing process by a timely passing on of the baton to younger generations; by allowing fresh blood to join the ranks of management; by not living on historical successes or the merits of their sheer existence, but by constantly and consistently rethinking the purpose of the business; and keeping a focus on profitability.

I vividly remember that, during one of the first months with my old employer, the owner asked me to nurture one business relationship with an embassy. Even when I showed him that this one particular business relationship had been loss-making for more than three years, he insisted on pursuing the arrangement, for the prestige of serving this diplomatic customer.

Though prestige may have bought them recognition in the market and perhaps some spin-off business in the old days, such an approach is characteristic of some older businesses. A feverish focus on top-line revenue is typical but can be detrimental to the business. It is the bottom line that counts. 

Related articles