Given the demographics of the people posting and commenting on Searchfunder, here’s a story that might pertain to some of you:
How culture kills gooses that lay golden eggs. Musk / Twitter? (I’m LOL) It’s a good lesson about how to quickly transform a wonderful company into a loser.
How can it happen? Especially for buyers and sellers of SMBs. Sell the company to the wrong buyer.
Here’s an actual case that I saw a while back.
A white-collar executive (Let’s call him “WC”) running a midsize white-collar company quit his job to buy a small company providing blue-collar services. And employing blue-collar workers. Their customers were blue-collar people, too.
The workers lived on the other side of the tracks.
The new owner’s wife was embarrassed to tell their country club friends about their new company.
The employees didn’t look like and talk like the owner. They thought the owner looked down upon them and their lifestyles. They especially didn’t like, twice every day, walking by WC’s Mercedes-Benz SL 450 Roadster.
The value of the Benz was several times the employees’ annual wages.
Employees drove beater pickup trucks and old cars.
Employee loyalty quickly evaporated. Their productivity declined.
It didn’t take long for customers to become uncomfortable with the new owner.
The owner had to resolve the problems. So WC broke the rules for successfully coping with employee problems. (Might have helped WC if he had spoken their language.)
And then one day all the employees quit. They opened an almost-identical business. Most of the customers migrated to the new company, because they liked how it used to be: The friendly employees, an appreciative owner.
The hapless new owner (aka buyer) threatened to sue. But WC didn’t. Because of what he discovered. The reality of trying to seek recourse from litigation. WC’s courage dissolved. (His rage stayed.)
His company was liquidated. He’s threatening BK.
Oh, and the rest of the story: The seller financed part of the buyer’s purchase. The seller (aka former owner) did not get paid. And there was no company to return to. He thought about suing WC. But didn’t.
But that’s not all. WC’s wife divorced him, taking beaucoup dinero.
There’s more###-###-#### but it’s Thanksgiving week.
Why did this happen? Cultural clash. Like many buyers and sellers, they don’t take seriously enough or make the necessary effort to realistically understand the culture of the company AND its various constituencies.