Did you know an estimated 500,000 businesses open and close each year? A variety of factors can contribute to a businesses’ bankruptcy, yet whether it’s due to an ever-changing market, declining sales, or some kind of internal cover-up, the results are always the same.
But even while some business are often (wrongfully) deemed “too big to fail,” bankruptcies do happen. With that said, let’s have a look at 10 once powerful companies that bit the bullet.
1. Blockbuster
Remember a time before Netflix when you actually had to leave the house in order to rent a movie? Blockbuster’s name was synonymous with movie rentals, membership cards, and, of course, late fees. But while the movie rental giant once had a stranglehold on the VHS and DVD market (they were actually sued in 2001 for having such a dominant stake in the field), their demise was quick and probably very painful. There were over 9,000 stores at the height of Blockbuster’s success, yet it took less than three years for every one to close.
2. General Motors
When General Motors filed for Chapter 11 bankruptcy in 2009, it was really no surprise. The long-time automotive giant had been witnessing floundering profits for years. The fourth-largest Chapter 11 filing in history (after Lehman Bros, Washington Mutual, and WorldCom—which we’ll get to later), GM’s bankruptcy is intertwined with various government bailouts.
3. Lehman Bros
Remember Lehman Bros? If not, let us refresh your memory. The powerhouse financial firm was the fourth-largest investment bank in the country and at one point employed over 20,000 workers. Founded in 1850, Lehman Bros first noticed steep financial declines in 2007, and in 2008 they filed for Chapter 11. What’s more, their filing was the biggest in history, with over $6 billion in assets and another $6 billion in debt. Yikes.
4. Washington Mutual
Up until 2008, Washington Mutual, Inc. was the nation’s largest holding company. So when the company filed for Chapter 11 in 2008, it was the second largest bankruptcy in U.S. history—just below Lehman Bros, who coincidentally also filed for Chapter 11 just 11 days prior. Rival firm JPMorgan Chase & Co. acquired Washington Mutual’s remaining operations not long after for a whopping $1.9 billion.
5. WorldCom
At one point WorldCom, Inc. was the nation’s second largest long-distance carrier, and when they filed for bankruptcy it was the largest in the U.S. (with over $104 billion in assets). Today, their bankruptcy tops in at number 3. The telecommunications company filed for bankruptcy in 2002, a mere month after allegations of accounting fraud surfaced.
6. Enron
Enron’s bankruptcy is one of the most controversial and talked about bankruptcies in American history. At one point Enron was leading the market in terms of innovation and commodities, yet their financial faux pas (read more here) led them down a dark and lonely path, and in 2001 the energy services company filed for Chapter 11 bankruptcy.
7. Sbarro
Been to the mall recently? Maybe you’ve noticed a few less pizza joints at the food court. That’s because Sbarro chains across the country are going AWOL.
One of the more recent bankruptcies on this list, Sbarro first filed for bankruptcy in 2011, and then again in early 2014. Apparently, closing over 40 percent of its locations wasn’t enough to save the pizza giant, as its remaining few stores are still facing uncertainty.
8. Borders Books
Running a book store is hard, but running a book store in the 21 century is nearly impossible. Though Borders Groups, Inc. once had 226 stores scattered across the country, the company filed for bankruptcy in 2011. A decade full of decreasing profits and an overall lack of change led this customer-loved bookstore to finally close its doors after 40 years of business.
What’s worse, Barnes & Noble acquired Borders’ rights in 2011—thereby redirecting anyone who visits Borders’ now defunct site to Barnes & Noble’s.
9. KB Toys
Once one of the biggest retail toy stores in the U.S., KB Toys’ notoriety was second only to Toys “R” Us. So when news of the 86-year-old toy store’s bankruptcy filing first surfaced, children across the country shed a collective tear. KB Toys once had over 1,300 stores (mostly located within shopping malls), and though their sales were reportedly declining, their bankruptcy was pretty unexpected.
10. Mars Music
One of the lesser-known companies on the list, Mars Music, Inc. had 49 music stores across 20 states. But while the fawning company’s revenues were optimistic, a failed attempt to further extend their reach failed, and in 2002, less than 20 years after the first store opened, the music chain filed for bankruptcy.
Squandering profits, allegations of theft, and just plain bad business sense led these 10 businesses down a path of financial ruin, but it doesn’t have to happen to you.
By taking note of your expenses, being honest with your debt, and working toward managing your money more effectively, you’ll be able to avoid the financial mistakes these 10 big businesses made.