This part of a series linked to how to make money in a theoretically impossible manner in retail: see also ( http://sinaas.blogspot.com/2018/05/brenninkmeijers-profiting-from-insight.html )
|Cash flowing at Home Depot checkouts|
"Bernie Marcus' revolutionary idea for a new chain of home-improvement stores sounded great ... In Bernie and Arthur's vision, the new stores' huge size, wide inventory, and low prices would produce $7 to $9 million in annual sales per store (Handy Dan stores averaged $3 million in sales per annum), at gross profit margins of 29 to 31 percent (the industry standard was 42 to 47 percent). Sheer sales volume would compensate for the lower profit margins.
And not just volume. The salespeople in the stores wouldn't only be there to operate cash registers. They would be highly trained in home repair and home improvement, ready to answer all questions and guide customers through any project, small or large." Langone continues: "I calculated that the initial stage would take a couple million dollars in venture capital... I needed a contrarian with a couple million dollars lying around.
Who else but Ross Perot?" (Langone had helped with Perot's EDS IPO).
|Ross Perot entrepreneur & candidate|
At the end of the meeting, Langone spoke to Perot: " "Look, Ross," I said. "We're all thinking about where we are. Bryan's clearly got reservations about the deal. Why don't we all think this over for a couple of weeks, and we'll come back and see where we are."
"Okay, " Ross said, "If you want to come back, come back."
We knew we wouldn't be coming back. As we waited for the elevator outside Perot's office, Arthur was despondent. "Oh, my God, what are going to do, what are we going to do?" he said. "We haven't got any money!"
"Arthur, here's what we are going to do," I said. "I'm going to go out and raise the two million bucks. You guys are going to get 45 percent instead of the 25; the investors are going to get 50, and I'll get 5."
Arthur looked amazed. "Hell, that's a much better deal than we would've had with Perot," he said.
"Yes, Arthur," I said. "In the retail business, when you can't sell something, you guys mark it down. In my business, when you can't sell something you mark it up."
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