Sam Walton told Kent Sutherland that "a customer's not a customer until he's a repeat customer," and what creates a repeat customer is consistency.
Sutherland saw insurance as a means of creating a consistent business from which he could create repeat customers--and repeat opportunities. It gave him access to a cross section of Little Rock's--and, by extension, Arkansas's--business community.
Today, Sutherland keeps what he calls "a mental file" of his insurance clients, which means that "when I sell somebody insurance, I ask them what they do." Translation: "I've helped you. Someday maybe you can help me." Sutherland buys steel for his mini-storage buildings directly from the mill because he insures its owner. Traveling around Arkansas for Becton Dickinson, Sutherland set foot in numerous pharmacies statewide. He has subsequently sold insurance to about 5% of them. Local pharmacists will make good land scouts and advance men as Sutherland tries to roll out his mini-storage business to other parts of the state. "They might know people on the planning commission," he says. "They can say, 'I know this guy. He's not a newcomer on the block."
For Sutherland, part of doing business amounts to spinning a web of relationships, with each deal, no matter how small, strengthening the bonds that support his mini empire. A policeman lives directly behind Sutherland's car wash--with another policeman directly behind him. "I insure a lot of the cops in Sherwood," boasts Sutherland. "Man, they watch it [the car wash] close for me." Would-be vandals know that Sutherland's car wash is one place to avoid. When he sought a zoning change on the land for his mini storage, Sutherland approached various neighbors, many of whom were also insurance clients. "I told them, 'Now, you're not gonna fight me on this, are you?"
Heading back toward Little Rock after lunch, Sutherland is running prospective Greers Ferry mini-storage numbers in his head. The entire project would amount to six buildings, with 44 units each. He'll build one at a time, making sure they fill up before moving ahead with the next. The six buildings would generate $79,000 in annual revenues, while overhead costs would total a paltry 13% of sales. That's what he finds so enticing about mini storage. "Return on investment is very important to me," he notes.
Sutherland figures the whole project would cost $80,000, thus allowing him to recoup his initial investment in little more than a year. "I've got a friend with a bulldozer. He doesn't live far from here. I'll fence it, buy the steel direct from the mill. My price for steel hasn't risen in three years. All I've got to do is put up an 8-by-16-foot sign, and I'll go in at a price that's guaranteed to be the cheapest."
Sam Walton often counseled Sutherland, "Don't reinvent the wheel." Choose a business you understand and can get behind. There is often good money in unglamorous businesses--provided you're a smart and disciplined operator. The market won't bail you out; you are the one who must add the value.
Just as Sam Walton figured out the formula on discount stores and then rolled them out with a vengeance, Sutherland hopes to do the same with mini-storage lockers. His goal is to have 1,000 buildings in 10 years, up from his current 100. Walton also drove into Sutherland's head the power of positive thinking. Says Milas Hale of Sutherland, "He looks for the best in every situation. He doesn't think there's anything you can't do."
The road between Little Rock and Greers Ferry seems littered with mini-storage lockers. Doesn't Sutherland worry about a glut and fierce competition?
No way. The demographics are too right--and Sutherland can recite them. People can't afford big houses with attics anymore. The average-size house being built these days is just 1,250 square feet, and, even in a state like Arkansas, that can cost $80,000 to $100,000. Meanwhile, baby boomers are inheriting a lot of things from their parents and are loath to throw them away.
Is he worried, then, that he won't get the land?
No. The seller will be back. "I'll tell her, 'Call me when he gets his price right.' He'll probably counteroffer $21,000. I wouldn't pay more than $22,000. I know he hasn't gotten any offers on it. When people want to sell something, they'll do almost anything to get rid of it." (After more digging in subsequent weeks, Sutherland learned that the owners actually paid only $19,000 for the land, and he decided that would be his top offer.)
Well, what about the competitor who has already built the fancy storage units in Greers Ferry?
"I'll guarantee you those are financed. I've made some calls. I've looked into the individual. I could cut him $100 a year [in rent per locker] and hurt him bad."
Grassroots market research was a Sam Walton trademark. Sam rode with his truck drivers, asking, "What can I do to make your job easier?" He buttonholed customers and queried vendors. Sutherland recalls how Walton was once driving his pickup in a parade in Bentonville. Passing one of his stores, he grew so intent on counting the cars in the parking lot that he ran into the back of the truck ahead of him.
