I remember a time when most companys in the hobby, when they would deside to close shop, the company would be sold or a least the product would live on in someones elses line. Times have changed and it seems a lot of companys just disapear. Some companys that come to mind are Jordan and Shinohara, both just died.
I had thought Shinohara stuff got bought by Walthers.
But the problem of being unable to sell your business when you wish to retire is getting common.
I believe it’s down to demographics in part. In Canada the ridiculous burdens governments place on business operators are a significant factor. It is literally impossible to run a small business now without professional accounting assistance which is in effect a tax on business due to government offloading tax collection costs onto businesses, among other regulatory functions imposed such as health & safety and so on.
There are fewer people willing to start or acquire businesses. At the same time there are more potential sellers. The only other option is just close up shop at the end of your last lease term.
That change must have happened before 2010. Champion Decals closed, and no one wanted to pay the seller’s price.
Ed
When Ron from Rail Graphics closed up and retired, I contacted him about buying the business. He was very honest and said the business was not sustainable and needed all new equipment. He said needed supplies were getting very difficult to obtain, and expenses were soaring. Potential customer base was shrinking, and a huge price increase would be necessary.
-Kevin
Shinohara simply closed up. Walthers sourced their new track from a different vendor.
The business climate here in the US varies from state to state, but is still difficult in many cases as we continue to head down a road that has failed everywhere it has been tried…
Sheldon
There were several companies I considered buying, but it just never made good business sense.
Sheldon
Me too.
Thank goodness NWSL was kept alive!!! I support them, and hope everyone realizes what a hit that would be for our hobby if they dissappear. Dan
The owner of my local model shop said he would sell every item he had for 1 penny each. He cannot get a buyer.
Thankfully he is still trading as I am one of his regular customers.
David
For many of these small companies, their revenues would not support purchasing the company. Unless the new owner has cash and doesn’t need to get financing to complete the deal, the cost of operating it would exceed the income.
Most of the assets outside of goodwill and intellectual property would only be worth as much as the scrap dealer will pay.
The biggest issue is cash flow - If you have rent/lease/mortgage payment due, salary and other employee overhead, insurance on the business, contents, employees and any customer interactions, tooling fees, manufacturing costs, shipping costs, plus the numerous other expenses associated with being a business owner, you must be able to at minimum break even, and most people want to make a profit, as they need money to buy food, clothing, housing, etc… for themselves.
Small “niche” businesses (like all in our hobby are) turn only little (if any) profit for the owners. And that chases potential buyers away from them.
The ones who have a adequate cash flow do continue on, those that do not are the ones that disappear.
But that happens in all businesses, not just model (really toy) trains. Look at retailers like K-Mart, Sears, etc… They did not have a good enough cash flow to turn profit, and are now gone.
In my own experience, a retailer I w*rked for had a decent business, locally owned and operated, and decently profitable, until the building he leased was sold to a out of state conglomerate that owns many strip malls. The lease/rent price was trippled, as that was the new building owners “standard rental fee” in other areas. Every single privately owned business in that plaza is no longer there, and they all were forced to close up period, as no other buildings in the area were available.
The only ones left in that plaza are the chains TSC, CVS, Verizon Mobile, a state owned liqueur store, a chain grocery store, and the fast food guys.
New tennants are limited simply to a single different chain store, Family Dollar. All the other store fronts sit empty and unused, unable to turn enough profit to afford the higher lease/rental charge.
But one chain store, and 3 locally owned businesses all left, because the cost became to prohibitive to remain.
There also is the change in what people want. As eras keep on coming the percentage that model a certain era diminish even as the number of modeliers increases.
And the out-of-state owners are probably writing off losses the empty building incurs, so they are in no hurry to lower rents to attract tenants.
I have commented on this many times. All else aside, this is a major problem effecting this industry today. The demand for any one single product is ever lower, and made worse by unnecessary product duplication.
Sheldon
Back in the day, the tooling belonged to the company. Not so in China, where most of our trains are made today. The tool is the property of the parent company/factory. So like the tooling for the G scale line of Aristocraft, which was owned by Kader, is now showing up under the Bachmann line of trains as Kader is also the parent company/factory that makes Bachmann trains.
It’s not that simple. Much tooling does belong to the model train companies, not to the factories.
Sheldon
Certainly there is some old tooling which has proven surprisingly durable, including some items from Varney. But if you look at the advertising index in a Model Railroader magazine from 1965, 1970, 1980, or 1990, or at the product list of a Walthers catalog from those same years, you’ll see plenty of names which have indeed simply gone away and the tooling is not to be found.
Dave Nelson
This development is a definate sign of changes in this hobby. With many LHS closing, they might realize that e-commerce is a preferred route. That is probably becoming more challenging with C-19. How people adjust requires refocusing on addressing the multiple supply chain issues. All of these interdependent changes are interesting to watch and discuss.
I never understood this. In my town is a strip mall. The owner kept raising rents. Many successful businesses had to shut down because they could not afford the new rent. Over the years, many empty stores - is the write off really that good? Somehow that does not make sense to me.
It is a mater of value and writeoffs. For example, years ago in multifamily, a pride of ownership property was worth 12x grose rents. So I raise all my rents to a certain point to get x amount of $ when selling, in the meantime you get to write off any losses and with proper timing you can turn loses into profits depending on the tax codes. In comercial real estate many propertys are triple net, the tenant pays rent, taxes and maintance.