Those who run a business understand the hard work and dedication that goes into devising and implementing strategies to streamline operations and improve their bottom line. The more effective these strategies are, the more successful a business will become. While businesses have a level of control over how they operate, sometimes an unplanned or unforeseen event can rock a business to its core. These events, referred to as black swan events, can be detrimental to even the best run businesses.
In this episode of Brothers, Battles & Bounty, the Gfesser brothers discuss some black swan events that impacted Trendler and how they made it through these events. You can watch the complete episode here:
What is a Black Swan Event?
Andreas starts the episode by defining a black swan event as “a significant, major event that occurs to the operation unexpected, out of nowhere, but has a magnanimous, huge impact on the future viability of even the enterprise getting through it.” These unplanned or unforeseen events are so significant that not only can they negatively impact the operations of the business, but even cause the business to go under.
It is common for businesses to go through challenges, whether they are expected or not, but most challenges can be overcome with a swift and effective response. Black swan events are potentially devastating for a business because they are completely unexpected, and their effects can deeply impact a business.
Black Swan Events with Trendler
Homeland Security I-9 Audit
When Andreas asks his brothers which black swan events Trendler has experienced that stand out, Martin immediately brought up an incident in 2014 when they were given an I-9 audit. An I-9 form is a form that verifies the identity and employment authorization of the individual to work in the United States. It is standard for employers to complete an I-9 form on all employees they hire, regardless of their citizenship status.
In April 2014, Trendler got a letter from Homeland Security requesting a copy of the I-9 for every Trendler employee for an I-9 audit. Trendler complied and provided Homeland Security with all of the documents that they asked for, including the I-9 forms. A couple weeks later, Homeland Security returned to Trendler and informed the Gfesser brothers that about half of their employees had to be terminated for not having the proper documentation. Homeland Security gave them 10 days to terminate these employees.
In one of the meetings with Homeland Security, they asked if the employees they are letting go would be deported, but the answer was that they just couldn’t work for Trendler. The Gfesser brothers never learned exactly why these employees couldn’t work for Trendler or how they came to be audited in the first place. Many of the employees they had to let go had worked for Trendler for more than a decade and were understandably upset and worried about their future. Anton points out that they lost 350 years of combined experience when they had to let these employees go.
Homeland Security never found a violation on the part of Trendler and the employees that were let go could legally be hired elsewhere after going through the I-9 process. However, this incident resulted in a major hit to Trendler as half of the workforce was lost in just 10 days. Trendler was able to hire and train enough new employees to avoid going out of business and implemented I-9 verification to prevent such incidents in the future.
Civil War in Yugoslavia
The Yugoslav Wars were a series of wars beginning in 1991 in which the six republics that once made up the country of Yugoslavia fought to declare independence after decades of ethnic tension. Before the conflicts began, Yugoslavia had a huge furniture market in part because of an abundance of European Beachwood which was great for furniture. Factories and distribution centers began opening in the U.S. that would import European Beachwood parts and assemble the furniture. Trendler provided the rings and swivels for the chairs and barstools being assembled at these factories which at the time accounted for 38% of the business.
When the war broke out, the factories and distribution centers in the U.S. could no longer import furniture parts from Yugoslavia and instead began importing from Canada, Taiwan, and China. Once they started importing from China, they also imported the parts that were once supplied by Trendler. This resulted in Trendler losing 38% of our business almost overnight. While trying to figure out how to react to losing this much of the business, Stefan and Anton decided to visit the factories in Croatia, a part of what was Yugoslavia. Anton and Stefan recall seeing the effects of the war, including tanks on the side of the roads, destroyed buildings, and blown out bridges that required them to take ferries across the rivers.
Unfortunately, they were not able to resolve the issue by visiting Croatia. At the time the war broke out, Trendler was experiencing 30-40 percent growth and the business lost due to the war caused Trendler to break even for several years in the 1990s without getting ahead. The Gfesser brothers tried following the market from Yugoslavia to Canada and then to Taiwan and China. This made them realize that they cannot depend so heavily on making swivels and rings for furniture made by others which is a major reason why Trendler began making completed chair and barstool products.
The Effects of Black Swan Events
The two situations described above, the Homeland Security audit and civil wars in Yugoslavia, are true black swan events in that they came out of nowhere and greatly impacted the business. However, the Gfesser brothers made it through each event and kept the business going. They briefly describe a third black swan event in which a competitor that made barstool frames for years began offering free swivels to customers who bought their frames in a direct attack against Trendler. Trendler responded by making their own barstool frames which is now a major part of the business.
This prompted Stefan to say that in Trendler’s experience, “Swan events are really the raw materials for breakthroughs.” After every black swan event, they made changes to the business that allowed them to come back stronger. In discussing what it is about Trendler that helped them survive these black swan events, Anton immediately credited the resilience of their father who came to the U.S. with a sixth-grade education and unable to speak English. Tony Gfesser took a lot of risks and never let anything stand in the way of what he was trying to accomplish. The brothers agree that their father inspired them to be fighters when faced with difficult situations. When their backs were against the wall after these black swan events, they fought back by taking risks and making changes to the business that ultimately paid off.
Make sure to check out Trendler’s YouTube channel for more episodes of the Brothers Battles & Bounty podcast and you can listen to the complete episode about black swan events here: