Small Business

Learning from the Great Depression


Here is a sampler of companies that shunned debt, diversified, and innovated during hard times and are still here today

At 179 years old, Yuengling remains the country's oldest beer maker. Dick Yuengling, the fifth-generation CEO, says the family kept the business afloat by diversifying into dairy farming, Broadway shows, and dance halls during the Great Depression instead of shutting down or selling out.

Founded in 1833, Martin Guitars is the oldest surviving guitar maker in the world. Sixth-generation CEO Chris Martin credits his company's resiliency during the 1930s to its pricing and founding principle of remaining fair and equitable while maintaining its strong relationships with dealers—some of which stretch back generations. "Our billing has always been routine," he says. "No shenanigans. We don't offer discounts to high-volume retailers."

A.E. Schmidt, the oldest family-owned billiard manufacturer in America, was established in 1850. During the Great Depression, the company kept its credit lines open to customers, many of whom had bought on installment plans financed by the company. According to Kurt Schmidt, the company's fifth-generation CEO, his grandfather told customers: "If you can stick it out through these tough times, we will allow you to pay just the monthly interest on your debt to us; when business picks up, as it will, you can make payments on principle."

Remembering Bread Lines

What does it take to survive severe economic turbulence? With the federal government working to unveil a slew of economic proposals to stave off a recession and return liquidity to the credit markets—and confidence to investors and consumers, many small businesses are looking for answers that will help keep them solvent.

Some say the current fear and alarm eerily echoes the chaos and financial disaster that erupted some 80 years ago during the Great Depression. Newscasts talk of gloom and doom, listing grim statistics while displaying images of 1930s bread lines. The recent failure of established financial institutions such as Bear Stearns and Lehman Brothers and the foreclosure of scores of homes have left many asking, are we on the verge of a second Depression?

Back then, there were numerous small businesses deploying a number of tactics in order to stay afloat. Some retrenched, some diversified, some simply hung on by a thread. Many of those that did survive continue operating to this day with great success.

If the past is prologue, than who better to turn to for some business advice than those firms that weathered the worst economic crisis in American history—to date. With that in mind, BusinessWeek looked at nine companies that predated the Depression (often by several decades), lived through it, and remain in operation today. They are furniture stores, paper companies, and craftsmen. How did they survive? What did they do?

Some eschewed debt, others laid off significant numbers of employees, others diversified their operations, while others came up with a series of innovations that would allow them to keep their core businesses intact. While each operated under a different set of business philosophies, all of them found that the lessons gleaned from the Depression remain a significant legacy to the way they do business today.

Flip through this slide show to hear from each of the nine companies.

Perman is a staff writer for BusinessWeek.com in New York.

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