Thursday, August 30, 2007

Life and death in the world of small business

It’s Thursday noon, and the reporters are gone. For the moment. It’s time to go to the office, and check on my world of machines.

When I opened today's Springfield Republican, I read that the Mercedes-Benz dealer in my city shut yesterday. According to the news, they’d been having financial problems for a while, but their abrupt closure was a shock.

Twenty years ago, I decided to start buying old Mercedes cars and fixing them up. I drove to the local Mercedes dealer and introduced myself to the owner, and talked about my plans. Surprisingly, he took me under his wing, and he was full of ideas. From a slow start, my business grew and prospered. So did his.

My company moved from my back yard to a rented space in an old industrial part of the city. A thousand bucks a month, and I parked my customer cars among blocks of stone owned by my ugly-tempered contractor landlord.

Meanwhile, Lew’s Mercedes dealership moved from an old industrial building to a sparkling new showroom on Riverdale Road, home to all the other big car dealers. He was in the big time, and I was one step farther from the street. Both of us were proud of what we'd done.

And for a long time, both of us prospered. About ten years ago, our businesses began to change. I moved from a rented facility to my own building, a much nicer shop in a nicer part of town. My friend Lew got sick, and retired. His daughter took over and the place expanded. My place expanded too, but not the way she did. Her dad had three new Mercedes in stock; now she had thirty. I shuddered every time I looked at the lot, thinking of the finance charges she was paying on that inventory.

She drove a glittering black S500 sedan to work, while I drove castoffs from my customers.

It was a fine looking place she had, but the cost to keep it open . . . all those people . . . the cars . . . the fancy facilities . . . There was a time when I dreamed of have a new car dealer franchise, but times had changed. I was glad I wasn’t a Mercedes dealer then.

“I’ll be it costs her $20,000 a month, just to stay open in that place,” I said to Bud, out in our shop. When the car selling climate changed around here, a few years back, I was relieved I hadn’t gone down that road, too. Since losing all my money in the early 90s, I bought cars to order. I never had a huge lot full like the other dealers.

As the car climate worsened my decision not to stock high end cars proved wise. One by one, the used car dealers who competed with me vanished. I began to hear rumors about the Mercedes dealer, and one day a banker told me she was looking for investors. Then, without warning, they closed.

It’s sad to see them go.

But I’ve been cautious, and sometimes I’ve moved a little slower. My place may not be glamorous like hers was, but “was” is the operative word today. Robison Service is still open. Still fixing Mercedes. Still authorized Bosch Car Service for Springfield.

I don’t think we’ll be closing anytime soon. If you call 413 785 1665 there are still people picking up the phone, and it’s going to stay that way. Looking at my business choices today, I sure am glad, because there’s no bank holding millions of dollars in debt over my head.

When times get slow debt is the #1 killer of small business. That, and a lack of capital and a lack of hard assets. The best insurance a small business can have is equity in real estate. Banks like that kind of equity best, and when hard times come, the guy with $500,000 equity in his buildings will be fine, but the fellow with $500,000 in inventory may find his loan called, and his company in bankruptcy.

Why, you ask? Because a $500,000 building is 500 grand, any time to anyone (within reason) while $500,000 in inventory may have essentially zero value if the company ceases to operate.

So be cautious and move slow.

http://www.robisonservice.com/

13 comments:

PLANET3RRY said...

Great business mind! A reputable product and you obviously have some car fixin' skills as well.

Long Live the small business owner!

John Elder Robison said...

Yes, planet3rry, no matter what people make of my writing, I can always fix cars.

I'm proud to say our company is one of the top-rated Bosch service agents in North America.

You can find Bosch here:
http://www.boschservice.com/Overview/

sex scenes at starbucks said...

Impressive. I'll have to direct my husband to your blog. He looked at buying a 4 wheel drive shop not too long ago, and you give some good advice.

Maprilynne said...

It's not just small businesses. We as Americans are practically taught to live on credit. I think you present a wise lesson that can be applied to personal finances as well. If you are drowning in debt/interest/etc. it's going to be hard to keep yourself afloat, much less a family or a small business. Starting with a small house/car/shop etc. and slowly building up only as you have to means to do so is such excellent advice for anyone in any situation.

Tena said...

Man, you're busy. I smile whenever you take a moment to visit my blog. How's that super-fast Bentley coming along?

John Elder Robison said...

Tena, that Bentley is in our warehouse, waiting for the woodword to be refinished so we can assemble the interior.

It's just Rolls Royce cars in that part of our service department this week.

Michelle O'Neil said...

Great post John.

How does Asperger's play into your sound business practice?

Logic vs. overly emotionally based decisions?

John Elder Robison said...

Michelle, I think my Aspergian tendency to make decisions that are based more upon logic than emotion is generally helpful in business.

The Muse said...

I have worked in the art business for nearly 20 years now; and I have met many very wealthy people. Ironically, I have found that the people who have the most money are by far the MOST conservative with their money. They are not flashy. They have learned to be shrewd in business and invest wisely.

Polly Kahl said...

Muse, what you say is so true. The tortoise wins the race in the end, not the hare. John, there goes your wonderful common sense again. Be nice if you could bottle that and sell it. You'd sure never have to work again.

Demon Hunter said...

Wow, you know you're business. That was a very interesting story. I love small businesses; they're the heart of America! :*)

Anonymous said...

I can't wait to read your book. How did the influence of Augustens Success(Chris) play in your decision to write?
Eddie P.
Wakefield, MA

Chumplet said...

The trend seems to be going in the opposite direction here in Ontario. The car dealership is king -- we have Subaru, Honda, Hyundai, Chrysler, Ford, Mercedes, Porsche, Volkswagen... at least a half dozen more dealerships, plus used car dealerships, just in Newmarket alone. Our dealership owners even have celebrity status with 'fishing shows' on the sports networks, hosting NHL players.

We have a ton of parts dealerships, too. Beemers, Hummers and the like cruise Davis Drive all the time. And Newmarket is a small town a half hour north of Toronto with a population of only 75,000.