Entrepreneurs really do matter as study shows 60% sales drop after founders die

The death of a founding entrepreneur wipes out on average 60 per cent of a firm's sales and cuts jobs by around 17 per cent, according to a new study. The research, by Sascha O. Becker at the University of Warwick and Hans K. Hvide at the University of Bergen, sheds light on exactly how much a founder-entrepreneur 'matters' in terms of influencing the performance of privately-owned businesses. The authors analysed firms' performance up to four years after the death of the founder-entrepreneur and found a long-lasting and significant negative impact. As well as the striking effect on sales (down 60 per cent on average after four years)companies where the entrepreneur dies have 20 per cent lower survival rates two years after the death, compared to similar firms where the entrepreneur remains alive. Becker, Deputy Director of the Centre for Competitive Advantage in the Global Economy (CAGE) in the Department of Economics at the University of Warwick said: "It seems founder-entrepreneurs are the 'glue' that helps to hold a business together. "We expected businesses that experienced the death of a founder-entrepreneur to have some kind of a dip in performance immediately after the death owing to the upheaval, but we anticipated there would be a bounce-back. "However the results were quite surprising.