In this week’s Amazing Business Stories we would be spotlighting the life of a very peculiar man and one of the greatest entrepreneurs of the 20th century. The man also happens to be one of my favorite, his name; Sam Walton.
Sam Walton was an American entrepreneur and the founder of Walmart; the largest retailer in the world. His net worth as of 1992 when he died was US$23billion.
Sam was born in Kingfisher, Oklahoma on March 29, 1918. He was the first son of Thomas Walton, a banker, and his wife Nancy. Growing up during the great depression, Sam engaged in a lot of chores to assist the family financially, from Cow milking to delivering newspapers. Upon his graduation from High school, he was voted ‘Most Versatile boy’. Thereafter he went to college where he backed a Bachelor’s degree in Economics. During his years in college, he also worked different odd jobs, including waiting tables.
Walton got his first taste of retailing in 1940 when he took a job at J.C Penny as a Management trainee just three days after graduating from college. He worked with the company for 18 months before leaving to serve in the military in 1942.
In 1945, after being released from the military, Walton decided to start his own variety store. With $5,000 that he saved during his time in the military and a $20,000 loan from his father-in-law, Walton bought his first Ben Franklin variety store at the age of 27. Through hard work and the policy of pricing products well below what other retailers charged, Walton soon tripled his business, and his sales volume went from $80,000 to $225,000. This astronomical rise drew the attention of the landlord, P.K Holmes, whose family had a history in retailing, and who intended to acquire the business for his son. P.K Holmes refused to renew the lease on the store thereby forcing Walton out.
Walton soon found another store in the tiny community of Bentonville, and this time he insisted on a 99-year lease. As of the time, he began Walton’s Five and Dime in 1950, there were two other variety stores in town, but neither of them offered the consistently low prices that Walton did. As a result, the new store quickly achieved the same success as the previous one. This prompted him to look for other opportunities to expand and by 1960 he was the proud owner of 15 Ben Franklin’s stores.
But Walton had a strange idea; which was to build large stores that would offer discounts on everything being sold, and these stores would be placed in small towns rather than the big city as was the usual practice then (he wanted to bring the price down even lesser than he did before). He planned to make up for the difference in price through a higher volume of sales. He approached Ben Franklin’s directors with the idea but they bluntly refused it, so he decided to strike out on his own.
By 1962 Walton opened the first Walmart store in Rogers, Arkansas. Due to the wealth of experience, he had gathered and the thrill that a big-city discount store had come to rural America, local customers flocked to the store and sales soared. This early success provided funds for further expansion and by 1969 there were 18 Walmart stores throughout Arkansas and Missouri. By 1976 Walmart became a public company with a share value of $176 million. By the early 1990s Walmart’s stock worth had jumped to $45 billion.
At the time of his death, there were 1,960 Walmart stores (including Sam’s club and Supercenters) that employed 380,000 people, with an annual sale of nearly $50 billion.
5 Lessons from Sam Walton
Diligence and hard work:
Diligence and hard work are two ingredients that are most definitely found in every successful entrepreneur; Sam had them in abundance. It is also the first commandment in Sam Walton’s 10 commandments. Sam was known to start his day as early as 4:30 am and he expected results from those beneath him.
This is more like a two-edged sword, as family and friends could be the reason why that business of yours would crash months after liftoff (e.g requesting for goods or services on credit). The family could also be the reason why that business would succeed, by offering much-needed funds, timely advice, and encouragement. Repeatedly Sam’s father-in-law came to his rescue by offering him huge loans. Also, he was able to own those 15 Ben Franklin stores because his brother, James, worked tirelessly alongside him. Family is important, they sometimes can be a pain in the butt but their significance outweighs their drawback.
Learn From Mistakes:
Mistakes are life’s ways of making you wiser, if you don’t learn from your mistakes or failures then you are doomed. Failures will always come in business, disappointment will always come, they should never deter you; rather they should make you wiser. Twice Sam found himself in difficult situations, first with the landlord who refused to renew his lease and again with the Ben Franklin directors who were not ready for his revolutionary idea. Sam showed that he had learned from his mistake when he negotiated a 99-year lease on the next store after P.K Holmes kicked him out. Also, he was not deterred or discouraged by the Directors’ rejection.
Employ the Blue Ocean Strategy:
The Blue Ocean strategy is a systematic approach of making the competition irrelevant. Rather than engaging in meaningless competitions and squabbles, invent a way of making your product or service different from what is offered in the market. That way you would have created an uncontested market space ripe for your astronomical growth. Sam employed this strategy. Although retailing or discount stores were not particularly new, he changed the approach when he decided to build big stores that discounted EVERYTHING, not just specialty items as was the practice then, and also chose to place them in small towns. This was not the practice those days and that was why the directors at Ben Franklin kicked against it.
The lesson here is; think about a way to make your product or service a little different, if not a little better, than what is in the market. You must have a competitive advantage if you are to survive. The business world is crowded, how can you be different?
Treat your employees/partners kindly:
This point was so important to Walton that it formed the core of commandment’s 2,3,4,5 and 7. One strategy that also helped Walton’s success was encouraging his store managers to own part of the business. This helped motivate them to work even harder since they also had a stake in the business. As a young budding entrepreneur, you may not be able to ask your employees to buy into your business, but one thing you can do is to treat them fairly and kindly. In a lot of cases, they will determine how far you will end up going.