The men’s fashion boutique Drinkwater’s Cambridge in Porter Square is an artfully curated collection of garments that aren’t just made but engineered, says Gary Drinkwater, who co-founded the company with his wife in 2004. Sitting tall against a backdrop of leather shoes and pleaded pants he raises his hand in jest to pretend difficulty turning a deadbolt lock. Drinkwater describes his succession plan as when he is unable to turn the lock which open the store, it will be time to retire. Currently in his 60’s, Drinkwater says even if not as the owner, he wants to remain a creative force in the company.
Like many entrepreneurs who have spent their lives building up a brand, Mr. Drinkwater has everyday challenges that consume his time, but he wonders what will become of the company after his involvement. Among his clients is Harvard Business School Professor Lauren Cohen, who is also a nationally ranked powerlifter. Cohen prefers a custom made dress shirt suited to his unique body type. Drinkwater says Professor Cohen once visited the store and assigned him to come up with a succession plan. When the two revisited the conversation, Mr. Cohen graded Drinkwater’s plan a C+.
Rather than plan for a second generation of ownership, Drinkwater and other small business owners are opting to extend their tenure by skipping retirement and opting to work through their 70’s. For Gary Drinkwater, that means many more trips to Fall Hills MA where he manufactures coats and trousers that bear his name, an appointment he speaks fondly of. Other businesses throughout Boston have shuttered in recent years for lack of a succession plan. Louis, the store founded by Drinkwater’s mentor Murray Pearlstein, closed down in 2015 after three generations of ownership spanned 85 years. Pearlstein took over the business from his father in 1950 and his daughter, Debi Greenberg, took over in 2003 when Pearlstein was in his 70’s. Ten years later despite being profitable, Greenberg closed the business “to pursue other things” she said in an interview with Boston.com. For the large majority of Greater Boston’s 40,000 small businesses few of them will change hands to a second generation. For owners of small businesses with revenue less than $1 million across the country, liquidation is increasingly the most common exit strategy according to the Bureau of Labor Statistics.
Drinkwater, however, sees a different vision for his business. Looking out of his storefront on Massachusetts Ave, he points to harbingers that suggest the brand will have a future even beyond his leadership. A steady stream of traffic, local university students dressing better, while older professionals are sporting more casual attire in the workplace. As changing styles reflect in the traffic outside his window, Drinkwater adjusts the selection in the store as well. The product mix in recent years has changed from 70% men’s suits and 30% outdoors dress to a near 50/50 split. The store has also benefited from greater demand for American made apparel. Drinkwater says customers are astonished when they learn many of his products are made in the USA. That astonishment has led to “thriving” conditions according to Drinkwater, with his small business etching close to $1 million in annual revenue.
Kevin Mulvaney, professor at Babson College, argues that those sales are largely dependent on the owner’s ongoing participation. Mulvaney teaches the graduate course “Buying a Small Business.” He says businesses making less than $1 million a year are unlikely to sell because the company’s success is so closely linked to the owner. Mulvaney and his colleagues at Babson College have pioneered education on small business issues including mergers and acquisitions, however they focus on companies with 3 – 10 million in sales. Any less than that, the existing owner is essentially offering a job not a saleable company, said Mulvaney.
In the 10+ years Drinkwater’s Cambridge has been serving the community, other clothing retailers have come and gone. A customer post on the popular industry message board, StyleForum.net, calls Mr. Drinkwater’s store a “collector’s jewel”. Several other posts and resoundingly positive review on the customer review site, Yelp.com, suggest that Mr. Drinkwater has indeed built a brand that would be missed by a significant number of people. Drinkwater says he wants to find someone capable of bringing the brand forward. “Whether or not we grow to be a national brand, we absolutely can, but I’ll leave that for the next person to decide”. For now however, Mr. Drinkwater is dedicated to leading his company at least through the next ten years.
When owners retire, it’s a life or death decision for the business