Be Very Careful; Legacy Businesses

When you encounter a business that has been ‘in the family’ for generations, the ‘knee jerk’ response is to assume it is a solid investment.   Very often people will feel completely confident investing, buying, taking a position with such a ‘Legacy Business’.

In many cases this is a mistake of the first level.  This is a way to lose your money and be stuck with a non-profitable badly run enterprise you spend your days trying to dump.

Businesses have a kind of ‘life span’.   They are born, and like the baby there is much happiness and joy and expectation and investment, and everyone tries their best.   There is the childhood were no effort is too great and sacrifice is standard.

Then, there is the young adulthood with changes and a few glitches, then adulthood when the business is to be strong and vibrant.

In some cases, old age with all its draw backs follows quickly behind.

The persons who began the business cared, maybe their sons, their grandsons cared.  But soon enough the caring stops and all that matter is extracting and spending money.

The business models are often archaic, the customer base dwindles and the treatment is not prime.  This is because the attitude of the owners is contemptuous and the employees couldn’t care less.  The business often survives on its name alone, for that is what ‘sells’.

But the name becomes ‘mud’ when customers are unsatisfied and find better places to shop.   The Name means nothing when the products are shoddy, the warranties don’t exist, the staff is sour, and the owner treats them like potting soil.

A company which held great respect is now a tooth suck.

Often investors who don’t do the ‘ground zero’ investigation go by ‘hear say’.   They ‘know’ this is the ‘leader’ in (whatever) because that has been the hype.  But in truth, that business has been on a downward spiral only kept alive by rentals or sales of property or pointless investment by those who love it.