Relying on a business value of the future to fund lifestyle in the future can be a bit like buying a lottery ticket. You may win but there are no guarantees
Relying on a business value of the future to fund lifestyle in the future can be a bit like buying a lottery ticket. You may win but there are no guarantees. Businesses used to last on average 40 years before they collapsed or were taken over; now the average lifespan appears to have dropped to a mere 14 years (Charles Handy). In the past 20 years a number of businesses that were considered ‘ goldmines’ such as pharmacies, newsagents, coffee shops, medical practitioners, taxi services and IT support to name but a few, have been devalued by globalisations, conglomerates and off-shoring. This is due to either low barriers to entry or capitalists having sufficient capital to start businesses on a large scale. In addition retailbusinesses that depend on shopping centres are at the mercy of landlords where leases may not be renewed, thereby making the business worthless. In addition internet shopping has had a major impact on retail sales.
There have been some notable public failures of businesses in the recent past including One-Tel, Ansett Airlines, Quintex and internationally Flooze.com, Swiss Air, Enron, PanAm to mention but a few. So what we should do is enjoy our business while they’re profitable and invest all the non-essentialcash in entities outside the business such as other investment companies or retirement funds and aspire to sell before the curve changes.
I had a retail business that traded very profitably and was worth more than $1,000,000 until a major competitor opened a store six times our size within 200 meters and put us out of business. The business was then worth nothing.
There was also a clientI worked withwhoin the dotcom boom was heading for an IPO whose business was worth $5,000,000 one day and zero the next day. The sad thing was he had planned his financial future on the $5,000,000.
In 2007 Harvey Norman decided to take on Office Works in the market place. This was after Jerry Harvey had declined to make an offer to purchase Office Works saying that he could take them on in the market place. In February 2009 Harvey Norman announced that it was closing its office stationary supply chain OFIS less than 12 months after its launch. The reported hit on profits was $7,000,000 – $8,000,000.