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How H&R Block Turned a $5,000 Loan Into a 24 Million-Customer Business

Henry Bloch, the co-founder of the tax preparation giant, says going after every last dollar shouldn't be your business's goal.
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Henry Bloch built his company from a two-man operation into the largest tax preparation company in the world, with 24 million customers a year. At the Small Business Administration's National Small Business Week event in Kansas City, Missouri on Tuesday, the 91-year-old co-founder of H&R Block recalled the evolution of his company and offered insight on what made his company succeed.

In a conversation with his son Tom, himself a former president and CEO of H&R Block, Bloch explained that for the first eight years it was a struggle to survive. But because he had been a C-student who had to study hard just to maintain those grades, he said, he was used to working all the time. "The reason I didn't give up was because I didn't think anyone would hire me," he said half-jokingly. "I figured I'd just keep at it."

Below, read about Bloch's journey from small-time to big business and his advice for entrepreneurs.

Be inspired.

After Bloch served in the Army Air Corps as a navigator on B-17 bombers for 31 missions during World War II, the Army sent him to Harvard Business School to study statistical control. There, he came across Professor Sumner Slichter's speech on how small business lacked resources. "He said that business is divided into three groups: big business, small business, and labor. Big business and labor are powerful, while small business is the backbone of the country yet has no one to turn to," Bloch said. "What he said was true and really affected me." After that, Bloch started United Business Company with his brother Leon, which offered 50 different services to small businesses, including temp work and office decorating, as well as bookkeeping and tax preparation.

Having little seed money can be an advantage.

To fund the business, Bloch reached out to a wealthy aunt and asked her for a $50,000 gift so he could hire all kinds of experts and open an office in downtown Kansas City. "She did the most wonderful thing that truly helped us: She said no," he said. "If she'd have said yes--since she could've afforded it--that business would've failed so bad. These small little companies couldn't have afforded our services and didn't need them or want this kind of help. It would've been a disaster." Instead, she gave him a $5,000 loan. Bloch says sometimes less capital can be more helpful to a business because it makes you focus on its most essential aspects.

Focus your vision.

After his older brother Leon left the company, Henry was alone doing all the work until his younger brother Richard decided to join. At that point, the company offered a laundry list of services, but bookkeeping and tax preparation (which he did for $5 for federal and state returns) were the only two that customers wanted. "It seemed like our biggest competitor was the wives of businessmen. They were the ones who kept the books," Bloch said.

Listen to your customers.

By 1954, the tax prep aspect of the company was so busy that Henry and Richard had to ignore their bookkeeping customers during tax season and work seven days a week. Henry thought tax preparation was too time-consuming and initially cut it from their business model. But one client, an ad salesman from The Kansas City Star, persuaded them to advertise tax services for the next year. The brothers decided to roll the dice one more time.

After the ads ran, it was apparent what customers wanted: "I was picking up books from a few clients and Dick was at the office. When I called to check in he said, 'Get back as quickly as you can, there's an office full of people,'" Bloch recalled. Later they opened an office in New York City, which they eventually sold as a franchise, and H&R Block was on its way to becoming a multimillion-dollar company.

Don't chase the buck.

Listening to your customers is one thing, but satisfying them is another. Bloch says their whole business model was always aimed at supporting small businesses. Once they found their niche in filing taxes for mom-and-pop shops for $5, they stuck to it and for 15 years never raised their prices. "We weren't trying to make the most amount of money. We were just trying to satisfy our customers," Bloch said. "We wanted to do a good job and would do anything to keep them. And each year, they'd all come back."

IMAGE: Courtesy Company
Last updated: May 13, 2014

WILL YAKOWICZ | Staff Writer | Reporter, Inc.com

Will Yakowicz is a staff writer for Inc. magazine. He has covered business, crime, and local politics for The Brooklyn Paper and was the editor of Park Slope Patch. He has also reported on the West Bank and Moscow for Tablet Magazine. He lives in Brooklyn, New York.




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