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Sam Walton’s 10 Rules for Building a Business

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I’m a big fan of Robert Heinlein – a science fiction author. In “Citizen of the Galaxy” he tells the story of a slave, bought by a beggar turned into a trader and finally re-discovered as the son of Galactic Enterprises. The beggar turns out to be a Colonel guardsman in a special ops unit, under cover to help eradicate the human slave traffic off world. Colonel Baslim was highly respected by all other guardsmen and even years after his death, higher ups in that service would ask, when they found themselves in a tough situation, “What would colonel Baslim do?” These folks had a mentor they admired and respected.

So if you are trying to build a business of some sort, why not get the best mentor you can, just as those guardsmen did?  How about Sam Walton, founder of Walmart?

Irregardless of your opinion of Walmart today, it is irrefutable that Sam Walton built a billion dollar enterprise from the ground up. He started with a Ben Franklin franchise in Newport, Arkansas. He and his brother made it profitable but lost the lease on the space and had to start over. That is when he bought a store in Bentonville, Arkansas and started his first self service store.

By 1990, Walmart was the world’s largest retailer, with 1528 stores and doing a billion in profit every year. Sam and his family (he made them all partners in Walton Enterprises early on) were noted by Forbes as the richest in America from 1982 – 1988. As of September 2012, the combined heirs to the Walton fortune were worth over 107 billion dollars, a lot of it still in Walmart stock.

Mr. Walton died in 1992, but left behind the story of his life, the story of Walmart, in his autobiography “Sam Walton, Made in America – My Story”. In it, he gives his own 10 rules for building business. He says:

“These rules are not intended to be the Ten Commandments of Business. They are some rules that worked for me. But I always prided myself on breaking everybody else’s rules, and I always favored the mavericks who challenged my rules.”

Sam Walton’s 10 rules for building a business.

Commit to your business.

You have to really believe that your business will succeed and just keep learning, growing and pushing to make it so.

Share your profits with ALL your associates.

Ownership gives people incentive. Incentive helps them become better business partners with you.  So don’t just offer stock to higher ups, let everyone participate.

Motivate your associates.

Sam encouraged competitions between departments and stores. He didn’t hesitate to have upper management exchange jobs/positions. He once lost a bet that stores wouldn’t make a certain sales figure one year and had to do a hula in a grass skirt on Wall Street in broad daylight.

Communicate everything you possibly can to your partners.

Sam believes that they folks on the front lines are the ones that make or break a business. You have to listen to them and speak directly with them. Walmart stores were one of the first to have dedicated satellite communications. On the day of his death, it was communicated simultaneously to all stores.

Show non-monetary appreciation to your associates.

Walmart used to have Saturday morning meetings in Bentonville (they may still). Part of those meetings included bringing folks in from stores around the country to tell about a particular promotion or event or process that worked especially well, giving recognition and encouraging others to duplicate the success at the same time.

Celebrate your successes.

Don’t get all uptight, loosen up and have some fun.

Listen to everyone.

Sam used to love going out to visit the Walmart (and competitor) stores. He talked to the customers and floor associates to get the down low when he did. In fact he loved it so much that when he found out he had bone cancer and would likely die, he took off flying his plane to visit as many stores as he could. He made a point of sitting in the break room the Walmart truck drivers used – having coffee with them and hearing their remarks about the various stores to which they delivered. The truck drivers were pretty darn independent and didn’t care what they said to the Walmart chief, so he knew he could get the straight scoop from them.

Exceed customer expectations.

He strove and drove all associates to get to that lowest price for the customer, whacking out the middlemen and overhead whenever and where ever possible.

Control expenses.

Make your operation as efficient as possible. For 25 years, Walmart had the lowest expense to sales ratio of any in the industry.

Swim upstream.

Do the unexpected. Don’t let other people’s expectations define your actions, do what is right for your business.

So there they were, Sam’s 10 rules for building business. I’m sure a lot of them sound familiar. The trick, he says, is to find ways to keep executing the rules, over and over again, under changing circumstances.

What do you think of Sam’s rules? What govern’s how you run your business?

Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

9 Comments

  1. I think his rules are great. Especially sharing the profits with all associates. Too many business owners are in it for themselves. If they would give up some of the profits and give them to those that helped along the way, they would see their businesses continue to grow because everyone has a stake in its success.

  2. I agree with Jon. I think Sam’s rules do a great job of running the business, and at the same time they are excellent methods to motivate and engage employees. As a bonus, they’re all pretty simple. In my opinion, a good rule is an effective one that isn’t complicated.

  3. So many companies nowadays ignore the ‘sharing your profits with associates’. They figure that the ‘associates’ are replaceable and should be happy with what you give them. But the managers and execs, they treat themselves like royalty, letting each other know in no uncertain terms that every bit of success was tied to their work, and enacting the bonus and pay increase policies to match this line of thinking. I don’t think Mr. Walton would think too much of the way a lot of companies act in this regard nowadays. The sad thing is that it’s not just your big Fortune 100 companies, even smaller companies are often falling trap to this.

  4. Well said, great article, Sam was a good and humble man. He created a lot of Millionaires in Arkansas, many of whom were simply customer service employees. Wish I could have met ole’ Sam.


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