Nathan Gwilliam Blog :: Social Media, Social Entrepreneurship, Faith

I just finished reading a Jeff Benedict’s book “How to Build a Business Warren Buffett Would Buy: The R. C. Willey Story.” If you don’t live in Utah, Nevada or Idaho, R.C. Willey is a chain of home furnishing super stores that dominates the markets it serves in those states.  

R.C. Willey is famous for not being open on Sundays.  When Warren Buffett, the world’s greatest investor, purchased R.C. Willey, this home furnishing chain only had stores in Utah.  After the purchase Bill Child, the CEO who remained with the company, wanted R.C. Willey to open a store in Idaho.  Up to that point, the only R.C. Willey stores were located in Utah.  Warren Buffett refused, believing that the closed-on-Sundays policy would make expansion outside Utah unsuccessful.  Bill Child believed in the Idaho expansion so fervently that he offered to front all the cost for the land and the new store personally.  If the store was not successful, it could be shut down and R.C. Willey would not lose any money.  If the store was successful, R.C. Willey could purchase the store from Bill Child at a price not much higher than what Bill had invested.  Warren accepted, the store in Idaho was built, and it was so successful during the “soft” launch that by the grand opening, Warren Buffet jokingly took credit for the Idaho expansion idea.  R.C. Willey has since expanded to Nevada with similar success.

One of the recurring themes of this book that stood out most were the defining moments in the history of R.C. Willey, and Bill Child’s leadership and decision-making during those moments.  R.C. Willey had many situations where the future of the company hinged on a single decision.  Many people look back at success that could have been and say “what-if.”  Bill Child lead the company through many defining moments that could have made or broken R.C. Willey, and traded “what-ifs” for a world-class success.  Here are a few examples:

(1) R.C. Willey was started by a man named R.C. Willey, who was Bill Child’s father-in-law.  Bill Child had gone to college intending to be a teacher.  Shortly after Bill finished college, he received an teaching job offer, and intended to pursue that career.  Before Bill he accepted, R.C. Willey believed he had ulcers and asked Bill Child to watch the store for a few weeks while R.C. took a vacation with his wife.  R.C. returned early from his trip, discovered he had cancer, and passed away soon thereafter.  Bill discovered quickly that the accountant had not been paying the bills and that the store had a huge amount of debt.  Bill and R.C.’s widow met with the company’s banker who recommended the company fold because of the huge debt load and the passing of R.C..  Bill Child refused to quit, gave notice he would not accept the teaching job, and spent the rest of his career building the R.C. Willey business.  If R.C. had made the easy decision to teach and walk away from the huge debt, his business career would have been over before it started.

(2) When Bill Child took over R.C. Willey, the store sold only home appliances.  Bill decided to expand the product line to include home furnishings, and feels if they had not made this decision they would have stayed a single store, and would have been forced to close when “big box” stores entered the market.

(3) In the early days of Bill Child’s success with a single store, a large percentage of his sales came from military personnel who worked on a nearby base.  Bill anticipated government cutbacks on military spending.  Instead of cutting costs and contracting to weather the storm, R.C. decided to expand to a second store in the Salt Lake City metro area.  When the military cutbacks happened, R.C. Willey had diversified and was even stronger than before.

(4) Bill Child invested in television advertising when other home furnishing companies did not see the value in this type of advertising.  Because of this decision, he was able to cut a “remnant” advertising deal to purchase a large amount of unsold advertising space before “remnant” advertising deals became popular.  As a result R.C. Willey received a phenomenal amount of advertising that the company never could have purchased, and experienced growth they could not have otherwise achieved.

(5) When the credit markets made it hard for R.C. Willey customers to receiving financing from traditional sources, Bill Child decided the company would offer financing directly to the customers.  The company’s financing arm became one of the key elements of R.C. Willey success.

When faced with adversity, many business leaders retract.  Bill Child knew how and when to keep moving forward instead of stepping back when times got tough.  In the end, R.C. Willey was rewarded with a $170 million acquisition by Warren Buffett, the brightest investor of our day.

In closing, here are few Bill Child quotes I enjoyed:

“Be motivated by excellence, not money.  You need to be better than all of your competitors.  If you are, the profits will come.”

” Offer customers true value on quality products.  A low price on a cheap piece of furniture is not value.”

Posted on May 6th, 2009 by Nathan Gwilliam
Filed under: Book Reviews, Business Management, Leadership, Mergers & Acquisitions