A full 88 percent of the Fortune 500 companies that were around in 1955 are now gone. They either went bankrupt, merged, or still exist but are no longer in the top 500.
In case you need a refresher on some of these massive failures, here are just a few:
- General Motors (1908 - 2009)
- Blockbuster (1985 - 2010)
- Polaroid (1937 - 2001)
- Borders (1971 - 2011)
- Tower Records (1960 - 2004)
- Kodak (1889-2012)
- Toys R Us (1948 - 2017)
The fact is, big businesses have been going down right and left. And some new, small, Millennial-owned business owners are running scared as a result. If it can happen to Toys R Us, can it happen to you?
The short answer is, "Yes, but ..." And that "but" has a lot to do with how new entrepreneurs can find wisdom in what has happened to big businesses. Avoid a similar fate by following some simple but critical tips:
1. Face your fears
Elon Musk pulled a prank on April Fool's Day that touched on what he calls his greatest fear: going bankrupt.
The lesson here is to envision your worst-case scenario ... and face it. What would happen if your company ran out of money? Musk chose to answer the question with humor, but his joke had more than a grain of truth in it: Tesla came close to bankruptcy in 2008.
He's not alone in this fear; a lot of business owners are terrified of suffering a similar fate. However, bankruptcy is not necessarily something to panic over. Chad Van Horn, business bankruptcy attorney for Van Horn Law Group, says bankruptcy is primarily a business tool. There are several different types of bankruptcies that address different situations. The most common is Chapter 11, also known as a "reorganization" bankruptcy, and it's used primarily to stave off creditors and reorganize debt.
"When your business is deeply in debt, chapter 11 bankruptcy can give you breathing room and help with immediate cash flow problems," says Van Horn. "With collection activity stopped, some debts eliminated and others restructured, small business owners are often able to recover and get their business back to profitability."
In other words, filing for chapter 11 doesn't necessarily mean you've failed past the point of no return. Some businesses can recover--and do. "The key is to create a realistic plan that not only works in the short-term, but also allows for revenue growth in the long-term," says Van Horn.
2. Stay on top of trends and be prepared to pivot
All companies, but retailers in particular, must stay on top of changes in the market. Retailers like Toys R Us failed to keep up with the internet revolution, and ended up failing as a result. While the giant toy company did offer online shopping in the end, they never made the kind of monumental pivot seen in companies like Walmart.
Walmart pivoted successfully by investing in creating a smooth online shopping experience, and partnering with other brands to offer tons of stock without people ever needing to leave their site. That massive investment in ecommerce paid off, and kept the chain out of ruin. Other savvy moves included closing low-volume stores and exploring new concepts like online grocery orders for pickup and small neighborhood stores. Concepts that failed were quickly eliminated.
A lot of Millennial-owned businesses have no problem with ecommerce (that's often their primary or sole platform). However, it's critical to watch for trends in host providers like Etsy, Instagram, Facebook, and more.
For example, Julie Wilder ran a small business selling astrological calendars called Spiral Spectrum, originally hosted on Etsy. However, Etsy recently killed their entire wholesale segment with very little notice. If Wilder had stuck solely with an Etsy storefront, she wouldn't have been able to open up a whole new channel for revenue.
Instead of doing that, though, Wilder recognized her inherent vulnerability in being hosted solely on Etsy, and built a separate site of her own. A lot of Millennial-owned businesses can take a page out of that playbook. Use host sites to build your audience, but make sure you're building your own thing ASAP.
3. Get personal
One thing small companies generally deliver much better than big corporations is customer service. Lack of personal service is a common complaint when it comes to big business, and stellar customer service is a great way to build loyalty.
For example, when James Rhee took over as CEO of plus-sized retailer Ashley Stewart, the brand was in bankruptcy--and in trouble. His philosophy that helped the company make a turnaround was simple, powerful, and personal: Be kind.
Essentially, he instilled a company culture that addressed a sorely-overlooked need in the plus-sized industry: larger-sized women were unaccustomed to the simple respect accorded to other shoppers. Thoughtful and personal customer service turned the brand around.
The global nature of today's market means competition is at an unprecedented high. You're not just competing with the store down the block; you're competing with individual crafters selling everything from jewelry to baby blankets on Etsy or Shopify, and manufacturers in China selling merchandise direct to the public.
Fortunately, that same globalization means you have access to more information than ever, as well as mentors and collaborators. Take advantage of the smart strategies, business tools, and relationships that foster growth; it will lead to even more sustainable success.