Hello, my name is Kirk Lawton and I run the Save-A-Lot grocery store in Statesville, NC.
Thank you for taking the time out of your day to talk to me about your trials and successes as an entrepreneur.
No problem.
Please tell me a little about your background.
I went to Statesville High School, and I graduated from UNC-Greensboro, and I moved to San Francisco after graduation and got a job in an investment bank. I worked in the margin department there where I did a lot of back office jobs. Then I moved to what they called the front office where I worked with the venture capital group and corporate services desk, and I did that for twelve years. Then I moved back here seeking a business and decided to go with Save-A-Lot Grocery Store, and that’s what we went with.
Great. Did you feel like a lot of the experiences that you gained helped you with your business ideas, as well as to become an entrepreneur?
Yes, I do. There are a lot of specifics, but yes, definitely the experiences certainly helped.
How long had you been thinking of owning your own business? Because I grew up with you and I remember the first time that I observed that you really had a lot of interest in creating opportunities to make money, and opportunities to offer products and services, was at the V-Point community center where we had a punk rock show. There, you and Joe Hartline were selling hot dogs and sodas out of a kitchen that wasn’t being used. We were all focused on the music, and you and Joe were operating a commissary. Then later, you had a business where you were selling very rare and expensive vinyl concert bootlegs that had been dubbed to cassette tapes and offered them at a really good price for people. So, those were the first two instances where I ever remember you creating your own business. I was curious when did you have this idea that you would be creating a business in our community.
Probably about four or five years before I left my job in San Francisco. Then, to get that business up and running, and to evaluate what was happening at the time, that took about two years from inception of this particular idea, Save-A-Lot Grocery store. From the grocery store actually opening that probably took two years, maybe two and a half years.
If I can back up a tiny bit, you had been thinking in general about opening a business for several years, and then you started thinking specifically about opening a Save-A-Lot?
Yes, exactly. We had gone through a couple of business ideas. I think three of them were fairly serious that we looked at. I had partners, and we came upon this one. So we went with this, and from two years inception to opening, that’s how long it took.
That’s pretty fast if you think about it, though it probably felt pretty slow at the time.
Yes, fairly fast with a lot of things going on right there at that time point. If I could do it again there are definitely some things I would have corrected, but all in all, we just kind of pushed the ball forward. That’s kind of a cliché saying but that’s basically it; if something goes wrong you just keep going forward and get it done.
How did you go about finding capital to start this enterprise, because I would think that this would be a pretty big undertaking?
It was a big undertaking. Capital is extremely important. Access to capital is extremely important for any business in my experience. It is always going to cost more than the contractor says, than the rep says; it always cost more. Access to capital is huge. I mean, I would not say that it is the number one thing in my business, but it is extremely important. And when you go to look at a possible partner for your business, or you are looking at it to fund yourself, or with a loan from a relative, or something of this nature, you really need to take a hard look at how much this will cost, and adjust for overruns, because they are going to happen in my experience. My capital was my partner’s and mine; we funded this business. I did receive an incentive from Save-A-Lot Grocery Store Corporation to open a business, which essentially bought the equipment in the business.
How did you present this idea to a partner? Did you present it as a piece of paper with a really well thought out business plan? Did you present is as an idea in general? Did you both work on the business plan? I guess what I am asking is how much input did the partner have, and did you have to show that you had a lot of your own personal equity in this start-up to be able to get the partner to sign on with you?
You had a lot going on there. The partner has a lot of experience in the retail business, not particularly in a grocery store, so that’s what he brought to the table. We presented this business, we looked at this business as simply a spreadsheet, cash flow analysis, and month over month – it was very simplistic. Save-A-Lot Corporation provided this research, and I can’t really speak to that, because of Nielson ratings and things of this nature, which I am very familiar with. I also had access to Nielson ratings independently of Save-A-Lot when I was doing my research. I don’t know how much that really played into the success of my business, but it did give you a guideline to say here are the projected sales of this business. We went with past experience at that particular location, we knew the operators of that location, we knew the faults those operators had, and we knew the successes and failures of those operators, and so we factored that into the business plan as well. We had three locations we looked at before we decided on this one. That’s kind of it in a nutshell, but I don’t think I answered all of your questions.
You gave some really good insights there. What you are saying is that because you picked a location that previously had grocery stores, you were able to compile several sets of data and actually figure out what you were going to be pulling in as far as customers. You had a very good educated guess.
Yes.
That’s really good to hear.
You do make it sound much more analytical than it was. You know, we had a rough guideline of what we thought this would do. And then, in this particular business price point is very critical: Save-A-Lot is a discount grocer. We knew the price points of the business based on the competition in that area.
I guess the other thing I was asking was if you were able to also take this data and get your partner to sign on with you? And, what did your partner expect from you? Did your partner expect you to have a lot of equity to put into the business? Or did you have to trade it out to where you’d put the sweat equity into the business? As a new entrepreneur who doesn’t have access to lots of capital but has a good idea, and is willing to do the work, how do you get this opportunity?
You kind of boiled it down there. I own 40% of this business. We capitalized the company at $100,000, and we put in that. I had access to capital, and it was a big venture. The capital that I had personal access to was freed up so that I could go spend on construction, permits, and things of this nature. You could have opened a smaller business, possibly, in who knows in whatever field, but we choose this and that required more capital and more partners. We opened this business with three partners and I had 40%; it was 40-40-20. The other 40% owner bought out the 20% shareholder six months into the operation of the business. Then we took out a loan from another individual. Capital, I can not stress again how important access to capital is, which in this environment right now is very difficult to get that from the bank. Certainly with a grocery store you cannot borrow money from banks for groceries. Access to capital, I cannot stress enough that that is extremely important in your venture.
I think in all ventures. The number one thing we currently discuss in our cohort is how do you get access to capital. We all know that banks aren’t lending in this environment. We also know that banks have to be very guarded with their money. They are usually generating 15% returns, and they just can’t afford to lose; that’s not a big margin. So the big questions that we discuss amongst ourselves is that if you have a great idea, how do you gain access to capital?
Not really in my experience, but certainly in my past experience in working with venture capital groups that support a variety of businesses. That money is out there. Your ideas have to be viable. You have to get to someone – there’s a lot of pizzazz in some of those pitches that people are giving to venture capitalists; but most of those pitches are rooted in high growth opportunities, and that can be in a variety of businesses, especially in this environment. It could be a vegetable stand or semiconductor company, so I think that capital is available on all levels. I think you need to have a viable business plan with a good pitch that you can the guy excited about. So that he’s not only excited about investing money in a possibly great investment, but that he takes pride, has an emotional connection, is having fun, and that he sought out this type of opportunity for his somewhat dead cash. There are people out there with money; as far as getting that money, keep them interested. Have a viable business plan with good numbers, high sales and growth.
That’s really encouraging to hear that you have a belief that this problem can be overcome with good plans and numbers.
Certainly, everyone’s looking for a good opportunity, and I think that happens on all levels; from your uncle that has $10,000 laying around to someone in New York City that in charge of some fund. You need to seek money from people that believe in you and believe in your plan, and think the opportunity is good. Get them excited about it.
That’s excellent! You had mentioned earlier, and you stressed it a couple of times; access to capital and always plan for overruns. As you just recently started your business, and you just dealt with this not that long ago, I was curious if you would give a percentage of what one should plan for in overruns? When we are talking numbers I get the feeling we are all bumping them up a bit, based on our gut feel. But I wondered if you had some hard data from your experience.
All the general contractors tell you to expect 15-20%. As far as construction I would say that is fairly accurate. As far as unexpected business expenses you just get cramped at the end of the month. At the end of the month in the grocery store business, business slows down – you still have to pay your salaries, the light bill’s still due on the 15th of the month, the rent, and your cost of delivered goods. That starts to get cramped at the end of the month. That’s why it’s important to have some kind of reservoir of funds to push you through that to where you can build your reputation in the community, and get your business up and running.
I wondered if you could give us any ideas about what you felt were important skills to acquire, to gain a mastery of, or to find in someone that can help you with, in order to successfully become an entrepreneur?
Well, the skills you need to acquire, first and foremost I think, is in dealing with people; develop your HR duties that are going to be essential at your business. You also need to prioritize – I mean these are just personal goals of mine. HR is a very essential part of that job, especially if you are in retail; not only with your employees, but also with your customers, to keep the business humming along. Everyone wants to take pride in their job, and that’s important to instill that in people. As far as aligning yourself with other people, we certainly did that at first when we were looking at other businesses, and meeting with other entrepreneurs and hearing their ideas; they wanted to push their ideas forward, and I wanted to push mine forward. We had access to capital, we had capital ourselves, and the options ranged from hamburger stands to renting out high velocity water pumps. There were a few ideas on the table; some of them were not as capital intensive as the one that I jumped into. But just bouncing ideas of those guys and hearing what they said when you said, “Hey, I’m going to do this”. It was fairly valuable information, and it was all kind of casual. That was very valuable information. I don’t know of one group and individual that one should reach out to, apart from someone that they see as successful. I think success is the determination of that. Approach a successful person in that business, because generally they are pretty willing to give out information. I mentioned a hamburger stand; we reached out to an operator of ten Bojangles and six Burger King’s, and he was very candid, apart from trying to sell me a part of his business, which was a fledging Burger King in Dobson, NC. He was invaluable to talk to, and he was pretty successful individual. Being that we were looking at that industry, he kind of scared me off of it, actually.
Because he gave you gave good information?
I think he gave me candid information that may have made me a little gun shy. We were talking about a lot of money, and we were talking about something that was going to go on for years. It was one of the first opportunities that came down the pipe, the hamburger stand, and I was gun shy. Talking to other people in that business made me reevaluate my business ideas. I have found that most people that you talk to are pretty discouraging, so you need to separate the wheat from the chaff there.
Are you a franchise or licensee?
Licensee.
When you were looking to start a business, what made you decide to go with a name brand as opposed to striking out on your own?
There’s that name brand identity, and there’s success in other markets. It’s a proven model. You’re not jumping out on your own, and someone’s got your back, so to speak.
Would it cost you more to be a licensee rather than starting your own grocery store?
You may have been able to open a grocery store cheaper than the Save-A-Lot model, however, they provided an incentive to our business to open it. Apart from the incentive, you may have been able to get something cheaper, but the name brand recognition and the support that they give me in the back office – it’s kind of two different models. There’s a lot of support.
Also the success rate from franchise and licensee is much higher, because as you mentioned, the name brand recognition is something that people understand. If you opened Kirk’s Grocery, you’d have build that name and recognition.
Yes, but that might be something that someone wants to go with and it could be a different model that trumps Save-A-Lot, or Aldi, or Food Lion, or the other players in the market. But the back office support, price book, accounting, advertising, and guarantee of the product, if you struck out on your own you are at a loss for these services that are provided as a first year incentive program.
Thank you. In closing, could you think of anything that you would like to add?
I really appreciate it. I hope that your cohort can glean some good information from this. It’s probably not the business they are going into, but I think some of the information could be applied to other fields. I just hope everyone can keep plowing through and push the ball forward. That’s what you’ve got to do.
Thank you very much. It’s been a pleasure talking with you.
You got it.
