Business Owner/ Entrepreneur – Mentor, Tom Robinett
This Mentor has spent over forty years as the owner of an office supply business where he has successfully been able to compete against the big box stores. He did this by developing a strategy where he concentrated on commercial accounts, a part of the business where personal relationships are important. He also found ways to drive down his costs of doing business by building an efficient logistics system that eliminated his need to carry expensive inventory. In addition, he created a number of innovative products for niche markets that diversified his income base. This Mentor’s ideas about how to compete with the national chains and how to go about economically testing your business concepts should be of interest to anyone interesting in starting a new business or a current business owner facing competition from large, national companies that have entered their local market.
When I was in high school, I attended the YMCA Leader’s Club. I admired the director and the program he had developed for young people and wanted to pursue the same career. When I graduated from high school, I went to a college in Chicago that trained most of these YMCA instructors and got a Bachelor of Science in Physical Education. After I graduated from college, I took a job as the Physical Director of the YMCA in Midland, Texas. I worked there for three years. But after awhile I wanted to make more money than I could working at the YMCA. So I began to look around for other opportunities. My Dad was a printing broker and had just purchased an old, established forms company founded in 1907 called Burkhart’s. That company supplied pre printed forms like mortgages, deeds, notes and mineral leases so you didn’t need a lawyer to draw up the form. All you had to do was fill in the banks. Because their forms had been around for many years, the company had established itself as providing forms that met legal standards and consequently were well respected. My Dad was 65 and said he could use some help with running the business if I was looking for a change. So I went to work with him managing this forms company.
It may be hard for young people to understand, but at that time there were no copy machines. To make a duplicate of a letter or a form, carbon paper was put between two pieces of paper and the letter or form was put in a typewriter. The people who we were selling these forms to also needed office supplies like carbon paper, pens, plain paper, etc. So we began to carry these items and sell them along with the forms. As we began to sell more office supplies, we opened our first retail office supply store, then a second and then a third. The business grew and continued to do well until the big box office supply stores entered our market.
These big box stores carried a larger variety of office supplies than we did and sold out of large stores that attracted retail customers. After a few years we saw our retail sales drop to only 5% of total sales. Our response was to migrate from retail to commercial accounts and close all but one of our retail stores. We owned this building and an adjacent warehouse. This location became the center of our operations.
Commercial accounts for us were businesses that had someone who was a purchasing manager responsible for buying a company’s office supplies. These people did not walk into a store with a shopping cart. They bought in large enough quantities that they needed delivery to their location and expected good service to help with the problems that always occur with office supplies. For example, a box of pens labeled red could turn out to be green and needed to be exchanged. A chair they ordered could have a broken castor that needed to be replaced. This is where our sales people who call on the purchasing managers became an advantage for us over the big box stores. We had somebody the purchasing manager knew helping them solve their problems which established a personal relationship with our company. The big box stores generally are not able to build these kinds of relationships.
But having a strong, personal relationship has never meant that we did not have to be competitively priced. We always have to be able to match or beat our competition. We have been able to keep our prices competitive by building good logistics arrangements with office supply warehouses and manufactures so that we do not have to invest in large inventories ourselves. We provide our customers with an office supply catalog that has as much variety as the big box stores. Our orders are then either brought into our office by the salespeople or taken over the phone by customers calling in using our catalog or in some cases entered by the customer themselves on our website. All these orders are then sent to our suppliers the day we receive them. The suppliers pull the order, package them, put our labels on the packages and deliver them by 4 AM to our warehouse. Our people then come in and sort the packages by delivery route and put the packages on the delivery truck. So our customer gets their office supplies the next day after they place their order.
There is a misperception about big box stores that because they buy in quantity they are always the cheapest. You go into their stores and see these large stacks of merchandise and often lead items they advertise that are cheap. But all this inventory and the costs of maintaining all these large stores is expensive overhead that we do not occur. That is our competitive advantage and allows us to be able to offer competitive pricing.
Basic Principles of Entrepreneurship
We have created a number of new products related to the office supply business. After we conceived the ideas for these products, we then found an economical way to test the market before we made a large capital investment. I am going to talk about three items that we produce as examples. These include PDF forms, Federal and State labor forms and a global calendar.
While the forms business is still a good business, people want to be able to fill out these forms on their computer. In response, we now also sell PDFs of our forms to our customers. The PDF sells for more than one printed form but they can use it to print as many forms as they want. These PDFs are sold over the Internet and licensed to each customer. This allows us to stay in contact with the customer and let us build a customer list so we can let them know about additional forms and products we sell as well as any updates or other modifications we make to our forms. When we tested this concept, we found a price point that our customers will accept where we can make a reasonable profit and a method of marketing over the internet that also allow us the opportunity to do some cross selling.
All businesses in every state must post certain Federal and State regulations for employees like minimum wage and worker’s compensation rules. These are usually posted by time clocks, in lunchrooms or other areas employees gather. These regulations regularly change. For example, right now there are many States changing their minimum wage. We came up with the idea of taking all the State and Federal forms that a company is required to post and embossing them on one sheet of clear plastic. We tested this concept by sending out mailings to each state and developed some estimate of what we could sell before we began to build a basic inventory of these forms. Now we have an established base of business in every state and repeat business when the Federal and State regulations change.
While these first two businesses are profitable and provide a way to diversify our income stream, our Bank Calendar business is a strong, stand alone business. It is interesting how we got into this business. Several years ago we had customers who wanted to order what is commonly called a banker’s calendar where you can flip to the current day and then look out for an entire twelve months on that page and the adjacent page and see listed below each day of any month and how many days between the current date and any future date out to a year. Bankers commonly use these calendars when they make loans to set payment dates. While this can now be done on a computer, there still is a strong demand for these printed calendars all over the world.
It is an interesting story about how we got into this business. We had customers who wanted to order these calendars. The company that made them had a patient that went back to the turn of the century and an exclusive dealer network. They would not sell us the calendars we needed because we were not one of their authorized dealers. So we began to look at printing a calendar of our own. We designed our version of the calendar and found a printer who could handle the work. We also found out that rather than getting a copyright, the company in Chicago only had a patient and that patient had expired. But we expected litigation. So I asked a lawyer if he would handle the litigation for a percentage of the company. He agreed and we went ahead and did a mailing in April to all the banks in the US asking for orders for our new calendar for the following year. That would give us plenty of time to print and deliver them. We received many more orders than we anticipated. We also did get sued as we expected by the company in Chicago. But our attorney prevailed. In a few years we ended up selling the new calendar all over the world while the company in Chicago eventually went out of business.
Basic Business Principals
Here are the main lessons I learned from launching these and several other products as well as running the office supply business
- Start small. There are always going to be production problems you need to work out before you want to commit to large-scale production and distribution.
- Find inexpensive ways to do a test market before you invest a lot of money in production and basic inventory. It is easy to buy inventory but sometimes hard to sell it.
- Try to develop a variety of products to produce and sell so you can diversify your income stream.Try to have the production capability to produce products as you get orders rather than building a large inventory. Maintaining a large inventory of finished goods is more expensive that producing to fill orders.
- Understand that the markets are always changing. Only 25% of new businesses are still operating after 15 years. To survive you have to be able to respond to changes in your markets like the entrance of big box stores changed our office supply business.
- Always look for ways to improve your customer service and your products.
- No matter how technology changes business, building strong personal relationships with your employees, suppliers and customers will always be important.