Bill Child is a retired eighty year old entrepreneur who took a struggling 600 square feet appliance store in the State of Utah to a point where iconic Warren Buffett bought the business from him in the mid-nineties. I sat down with Child while visiting the USA recently.
Today he is the Chairman of R.C. Willey, a successful American home furnishings and appliance retailer. The business is led by his nephews. He tries to fulfill the duties of chairman while involved in a condominium project on the island of Kauai and enjoying his other passions of family and golf.
As a youngster Child’s father worked three jobs, with a small farm on the side. They never had a lot of money. Child learned the value of hard work, frugality and also realised he wanted to do something different, not depend on the price of a product, unpredictable weather and other outside factors.
In the 1950’s Child worked part time for his father-in-law RC in their small local furniture store. He had to take over the struggling business in 1954 when RC unexpectedly passed away. The estate recorded assets of $25k, including the business accounts receivable, eight acres of land and a house. Liabilities were $37k. In those days it was a lot of money, especially when one considers Child’s house cost him $6K. The bank suggested they close doors. Child could not accept this option as his mother-in-law was dependent on the income, he just did not want to fail and he saw some positive in their good reputation. He decided to put his head down and do his best, and at first the goal was to survive and get out of debt. There was no vision to become the greatest in the state.
But they did become the greatest in the State of Utah. Buffett once commented to Child: “Bill, you moved from being just an insignificant player in the field of home furnishing, electronics and appliances to being the number one in Utah. How did you do it? What happened to these other companies?” Child then wrote a paper attempting to give an answer, and Buffett forwarded a copy to top business leaders like Bill Gates, Tom Murphy and about twenty others.
Child and the business believe in eight simple principles to live by within their business environment, which no doubt contributed towards their success:
1. Treat every customer the way you want to be treated;
2. Little things make all the difference;
3. Be honest;
4. Do the right thing;
5. Don’t follow the herd;
6. Hire the right personnel;
7. Treat employees like family;
8. Build a business to keep, not to sell.
In the mid-nineties several factors led to a desire to sell the business, and not just to anyone, but to Warren Buffett, primary shareholder, chairman and CEO of Berkshire Hathaway. They succeeded in convincing him. In so many cases a so called dream acquisition rarely turns out to be what the acquirer or acquired expected. Life after the fact becomes a let-down. Not in the case of R.C. Willey and Berkshire Hathaway.
About Buffett Child says: “Our relationship with Warren has absolutely been first class, perfect. He leaves you alone. He is a wonderful guy; his integrity is unquestionable; he is very bright of course; he is very focused. As a businessman I learned a few things from him. I think my business IQ has increased by 10 points over the fifteen years I have associated with him.”
According to Child the only thing Buffett gave him any trouble on was moving the business out of state. After becoming the largest furniture store in Utah, Child wanted to know if their model and approach could work outside the state. The challenge was that they also believed in not trading on Sundays. The opinion all round, including that of Buffett, was that R.C. Willey would fail outside Utah should they continue the practice of not opening on Sunday. Child remarks about this practice: “Our contention was that you could get better employees if you don’t force them to work on Sunday. There is a little bit of a cost saving because you cut your overheads down from seven to six days, which helps a little bit.”
After taking a helicopter flight with Buffett over Vegas and a town called Henderson, which at the time had been the fastest growing town in the USA for ten years running, Child asked Buffett what he thought about opening a store there. He had also done his homework by asking for the opinions of other experts in the field. They believed R.C. Willey was good, but not good enough to succeed without abandoning their Sunday policy. Buffett could not be convinced and turned down proposals for building in both Las Vegas and Boise, Idaho.
Child came up with a plan in the shower that would get the ball rolling on opening up stores outside of Utah. So he proposed a deal that Buffett could not refuse. It was to personally buy land in Boise, Idaho and build and set up a store. If it wasn’t successful in six months Child would close it down and take his losses. Buffett agreed, telling Child “If we can’t do thirty million, we’ll close it. If we can do it, I’ll rent it from you and pay your 4% of gross sales.” But if it was really successful, Child said he would sell it back to Buffett for the price of what it cost him, without charging interest. Buffett agreed. A few weeks later Buffett called Child to mention that there was no upside for Child. His response was: “There is an upside. If we are successful you will let us go to Vegas, won’t you?” Buffett seemed to agree. Thereafter he showed personal interest by often calling Child to find out how the project was progressing. He even started calling it the Buffett store.
Well, the store was successful, beyond expectation and Buffett wanted to buy it back, with interest. Child did not want to relent as the agreement was without interest. And so there was a standoff between two leaders that are ruled by their sense of integrity. Buffett said to Child: “Bill, we have never had an argument, but we are going to have it over this one”. They came to an agreement that some felt did not make sense for Child from a business point of view. But, to Child it felt like the right thing to do, which is how he chose to live his magnificent life.
Child is a simple businessman and a leader who believes “if a leader has principles his followers will admire and respect him and know when you tell them something, you are telling the truth”.
R.C. Willey did eventually move into Las Vegas successfully. The world needs more courageous leaders like Child whose lives are governed by simple, universal principles that will always withstand the test of time.
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