Thursday, March 31, 2011

Business 101

When I saw that Harry and David were in bankruptcy I figured it was just a sign of the times, that there wasn't quite enough gravy to go around to keep a higher end mail order food company in business. However, I thought the timing was a bit off and that if market forces were a factor that the place would have been in bankruptcy protection much sooner. After reading the article my suspicions were confirmed and the company's poor experience reflects one that happens all too often:

  1. A well off accounting goon fancies that he can run a business.

  2. He sets his sites on a fairly successful business.

  3. He goes to his bank buddies who are looking for a place to park a portion of it's vast ocean of cheap cash that it's been given by the Feds. The goon sells them on the idea that by 'streamlining synergies' and what not that they can run the business much better than the provincial idiots currently managing it.

  4. The pitch justifies an outsized buyout offer to the current company's owners and the accounting goon and the bank have dreams of being in gold plated heaven when their brilliant efficiencies are brought to bear on this business that was formally run by clueless putzes.

  5. The bank gives the goon the cash, with various financial 'experts', lawyers, sales realtors all getting a cut. The current owners retire to the Caribbean, the accounting goon gets his business toy with an outrageous salary and, more than likely, many people at the targeted business are fired.

  6. Low and behold, the accounting goon actually doesn't have clue about what's he's doing and the business struggles. Since he had no money of his own, the loan to purchase the business is on the businesses own books. Even more people are fired when the business inevitably goes bankrupt since it's veritably impossible for it to ever pay back a loan whose balance no doubt exceeds the worth of the business itself, especially when it's being run by a clueless dolt.

The occasionally odious Tom the Dancing Bug has a nice comic that sums the whole mess up:


Marty Plumbo said...

Any company that can stay in business for multiple generations selling mail-order pears at $5 apiece must have been doing something right. Any system that rewards unique success like that the way ours does gets the mediocre market it deserves.

John Craig said...

Your summation was perfect.