I’ve been quite nostalgic of late. I was clicking through the property details of what was the first and only home of my paternal grandparents. The house that became their home was built in 1931 and they moved in as a young married couple just before the world went to war for the second time. Their home was sold to another family when my grandmother passed away about 20 years ago. Sadly, my grandfather left this mortal coil a few years earlier.
Even though my grandparents lived in that home for just over 60 years, the house has changed hands 11 times since.
This walk up memory lane to what was their front door led back into a haven of boyhood wonders for me — the large garden my older brother and I could exhaust ourselves within, while the grown-ups talked about matters we neither understood nor cared about during our age of innocence.
It dawned on me as I closed down the webpage that just as a house changes hands, so does a business. Just as the owners of a home contribute to the rise or fall in the value of a building, so do the owners or managers of a business.
I Googled, “What is the average lifespan of a publicly traded business?” I was shocked to read that, according to McKinsey & Co, the average life span of a business listed on the Standard & Poor 500 in 1958 was just 61 years. They further predict that only 25% of the companies listed on today’s exchange will still exist by 2027.
What societal factors have occurred to reduce the average lifespan of a business for McKinsey to predict that 75% of today’s public businesses will soon change hands, go private or simply close down to be no more? Likewise, how can one family make four walls a home for 60 years and yet it’s been bought and sold 11 times since my parents closed that beautiful front door and gave the keys to strangers my grandparents never met?
I’m no philosopher — I’m just a recovering accountant who is a student of organizational development and leadership behavior, but I think it essentially boils down to the increasing restlessness of the human heart.
Just as homes change hands because the grass looks greener somewhere else, businesses change hands. Just as families outgrow homes, businesses have to adapt to the new needs. This sometimes means merging with another business to create a new home for the commerce that now needs to be cooked up in the kitchen.
The home may become too big when the children grow and go, and so, it’s best to sell. Likewise, when a business loses the talent it thought would be the next generation of leaders, it is often sold because the energy is no longer there to keep the forward momentum. Like us, it slows and then gradually stops. The doors are closed as soon as the price is agreed. It all becomes history — simply, memories of yesterday.
According to Castles Unlimited, the median age of a home in the U.S is 37 years, which means that most properties will need to be repaired at some point. Staying on our parallel path, according to the Small Business Administration, only about half of small businesses launched today will survive at least five years, with the average life span being just over eight years.
Houses that last more than the average 37 years do so because they’re well managed and maintained. Likewise, small businesses that survive more than eight years are well managed and maintained.
There seems to be an interesting corollary between those who live in one home for many decades and those who work in, or run businesses for countless sunrises and sunsets. I think the answer rests within the concepts of contentedness and contribution.
See, just as my grandparents made a home from a house, which continues to increase in value, great owners, leaders and employees create organizations built to last.
Paul Butler is a Santa Clarita resident and a client partner with Newleaf Training and Development of Valencia (newleaftd.com). For questions or comments, email Butler at [email protected].