Furniture, appliance retailer was good enough for Warren Buffett
Clint Engel -- Furniture Today, April 2, 2009
R.C. Willey had too much debt, not enough income and an abundance of credit customers past due on their payments.
That's the predicament described in detail in Jeff Benedict's new book, "How to Build a Business Warren Buffett Would Buy: The R.C. Willey Story," coming to bookstores in May from publisher Shadow Mountain ($19.95 hardcover).
Somehow Child, now 77, righted the ship, chipped away at the debt until it was paid off, hired the IRS agent who was auditing the store and built a business that Berkshire Hathaway Chairman Warren Buffet described as a "jewel of an operation." Buffett purchased the retailer in 1995 in a stock deal valued at $175 million.
Benedict takes readers on a trip back to R.C. Willey's beginning in the 1930s, when Rufus Call Willey, known as RC, was selling refrigerators from the back of his pickup truck, and then from a cinderblock garage/store behind the family home in rural Syracuse.
But the story is mostly about the role of Child, who worked in his father-in-law's store nights and Saturdays while attending college. Child never dreamed of a career in retail. But on the day he graduated from college (with a teaching contract in hand), RC asked Child to do a favor and take care of the store while he headed to California "to rest and get rid of these ulcers."
RC's illness turned out to be cancer. He died in September 1954 without ever returning to the store, leaving behind a business on the verge of bankruptcy and heavily in debt, with past due invoices and taxes.
"He'd been living well beyond his means," Child said in an interview about the book, which he collaborated on with author Benedict. It was the type of financial pinch many in the industry face now. But Child said the company had a great reputation and loyal customer base "and that's what saved us."
The book tells how Child brought R.C. Willey back from the brink of bankruptcy and into a growth mode, eventually building annual sales to $259 million before the 1995 sale to Berkshire.
Under Child's leadership, R.C. Willey added furniture, a more profitable category than appliances and a natural extension of the business. It built warehouse operations to support store growth while a major competitor focused more on store growth alone and ultimately failed. It hired the right people, including Child's younger brother, Sheldon, who was a star salesmen and then president of sales. It shunned mortgages and only borrowed to finance its accounts receivable; and it offered its own financing to customers, creating a profitable credit business.
When Child considered selling R.C. Willey, he quickly realized he could only do a deal with Buffett. Other offers came in before Child approach Buffett, including interest from the now defunct Heilig-Meyers and Montgomery Ward, but "it didn't take me long to realize I wasn't very excited about the management of either company," Child said in an interview.
He laughed at the thought that if he had sold to one of them, he'd probably be working as a furniture sales rep today.
Later, when Buffett initially vetoed Child's idea to expand into Idaho and Nevada, Child figured out a way to change the Oracle of Omaha's mind, resulting in a business that is now bigger outside of Utah than it is inside the state.
Asked if retailers in trouble today would be able to dig out the same way he did and ultimately be successful, Child said, "I think so."
"If you apply proper principles, I think there are plenty of opportunities. Even in these though times the American dream is not dead," he said.
In the book's foreword, Buffett writes that "Bill Child represents the best of America. In matters of family, philanthropy, business or just plain citizenship, anyone who follows in his footsteps is heading true north."
Child, still chairman of R.C. Willey, is back from a two-year Mormon church mission in Washington D.C. and plans to resume a more active role in the business soon. Child, who hired Benedict to tell the story, said he will not take any profits from the book; a percentage of profits are expected to go to charities that Child hasn't yet named.
He'll be at the High Point Market this month to shop for furniture and sell a few books.