The melancholy aphorism from “shirtsleeves to shirtsleeves in three generations” describes how too many family businesses transition from start up to tear down by the time the founder’s grandchildren are ready to move into the corner office.
According to data cited by The Harvard Business Review, 70% of US family-owned businesses fail or are sold before the second generation can take charge. Only 10% remain active businesses for the third generation to lead.
The Reading Eagle, Berks County’s hometown paper, defied these odds through five generations. Beginning January 28, 1868, the same family published this stalwart newspaper until it was taken over by MediaNews Group on July 1.
Of course, the family adapted to the marketplace over the years. On January 28, 1868, the newspaper was named the Reading Daily Eagle. At some point the word “Daily” was removed, as was the period placed at the end of its name. The paper cost 3 cents a copy.
More changes followed.
The Reading Eagle was initially distributed six days a week in the afternoon. A Sunday edition was added later. In 1940, ownership added to its business portfolio by purchasing the Reading Times, which was a morning paper. In 2002 the Reading Times was discontinued and the Reading Eagle was transitioned to a morning paper.
In 1946, the Reading Eagle Company expanded its footprint by diversifying beyond the newspaper industry into radio by purchasing station WEEU
Author and Shillington, Pennsylvania native, John Updike interned at the Reading Eagle for several summers. He served as a copy boy and occasional feature writer during summers he attended Harvard University, before leaving Berks County for fame and fortune in New York City and then Massachusetts.
It is perhaps fitting Mr. Updike told tales of everyday human beings who at times succeeded, and at other times failed before trying again. This would also describe your typical Reading Eagle reader.
What lessons can we learn from the eventual failure of this durable family business?
Nothing lasts forever. As the King James Bible eloquently states, “To everything there is a season…” By accepting this unavoidable reality, we gain a valuable dose of humility. There is no shame in being humble. It is what motivates us to rise earlier, work harder and think more creatively.
You can’t outbox a gorilla. The Reading Eagle, like so many newspapers before it, was ravaged by the tornado otherwise known as the Internet. This disruptive technology sucked advertising dollars out of display and classified advertising sections. When you can’t outbox your opponent, you must find other paths leading to victory.
Vacant retail storefronts. The Internet has also disrupted the retail space. Fewer retailers meant fewer dollars going to the Reading Eagle advertising Back to School, Memorial Day, Presidents Day and holiday season sales.
The cost of new technology. The company recently invested in an upgrade to its printing press and distribution center. This upgrade left a king sized debt hangover.
To look at the eventual demise of the Reading Eagle as a failure is to ignore far more than a century of success. Peter Barbey and his family have been delivering the news in a timely manner to Berks County residents for 150 years. Yet, it can still be a constructive exercise for family businesses operating here in the Lehigh Valley to take a moment to consider this ending to take away lessons.
- Beware of a disruptive technology like the Internet when it first appears on the horizon. The sooner you take corrective actions, the more likely you will be able to withstand it.
- Think deeply before investing heavily in capital improvements. Determine if the return will exceed your investment. If not, consider other alternatives before risking the long-term health of your family business.
- Remain open at all times to all options. As a Mergers & Acquisitions specialist, I know a well-timed merger or acquisition can preserve your family’s assets.
- Always know where you are going to land. Retired Hall of Fame basketball player Walt “Clyde” Frazier, when working in the announcer’s booth, was asked by his colleague if he ever recklessly jumped for the basket when taking a shot. He replied, “I never jumped up without knowing where I was going to come down.” By keeping a current copy of your exit strategy in the top drawer of your desk, you will always know where you are going to come down.
Michael Lamm is Managing Partner at Corporate Advisory Solutions (www.corpadvisorysolutions.com), a boutique merchant bank headquartered in Philadelphia and serving Lehigh Valley businesses. Michael can be reached at [email protected] or 202-904-7192.