Nonplussed, adversaries sued Mrs. B., alleging violation of various contracts and fair trade laws. Mrs. B. turned that to her advantage by garnering positive publicity over the suits. She also got the cases thrown out by proving that she fairly, legally, and profitably sold carpeting at steep market discounts. According to legend, after making her case in court, she sold the judge $1,400 worth of carpeting.
Mrs. B.’s children joined her in operating the business. Her son, Louis (“Louie”), became president. Like his mother, he had a knack for buying wholesale appliances and furniture at low prices. Buffett wrote: “Louie says he had the best teacher, and Mrs. B. says she had the best student. They’re both right.”5
Mrs. B. and son Louie were joined in the family business by Louie’s sons, all of whom devoted their working lives to it, just as their grandmother and father had. The entire family made it a point to gather each July 4 for a celebration where everyone sang “God Bless America”—exuberantly led by Mrs. B. in tribute to her immigrant past.
By 1983, Nebraska Furniture Mart operated out of a huge store—two hundred thousand square feet—and generated annual sales exceeding $100 million. A peerless operation nationally, the store did more volume than all of its Omaha-based competitors together.
Buffett, an Omaha native, was awestruck by the Blumkins’ story and had always been interested in acquiring the business, but Mrs. B. consistently demurred. In 1983, the time was ripe, however, as Mrs. B. was nearing ninety and wanted to make a permanent home for her family’s business, while continuing to manage it. Buffett impressed on Blumkin that Berkshire offered not only cash but autonomy and permanence. Berkshire bought 90 percent of Nebraska Furniture Mart, and family members kept the rest. The cash price was $60 million. Shortly after closing, as part of Berkshire’s annual audit, its outside accountants appraised the company’s value, based on an up-to-date inventory, at $85 million.6
By the late 1980s, the Blumkin grandchildren had climbed up the ranks, and Mrs. B. had become alienated. They encouraged Mrs. B. to retire in 1989 at age ninety-six, but she felt insulted. In response, she opened a rival store across the street—Mrs. B.’s Clearance and Factory Outlet—that gave the Nebraska Furniture Mart a run for its money. The family beseeched her to come back. In 1992, Berkshire helped smooth over the family dispute by buying Mrs. B.’s Clearance and Factory Outlet and merging it with Nebraska Furniture Mart. The family proceeded to open additional stores—in Kansas, Iowa, and Texas—using the business principles Mrs. B. had laid down decades earlier. The Blumkins still run the company today.
Mrs. B.’s skills—including drive and tenacity—were good for business. But not all such skills are good for the families of businesspeople. Such a mismatch between professional and personal traits can occur in anyone, but it is a common problem among family business operators. It is particularly difficult when a founder’s persistence prevents him or her from retiring on terms that provide a satisfactory transition to succeeding generations. This was the Blumkin family’s problem, and it was not easy to resolve.
With a reservoir of mutual support the family had developed since immigrating and with Berkshire’s influence, the Blumkins were able to work out their problems. Berkshire’s principle of operational autonomy played an important role in this. Both sides in the family feud saw Berkshire as unbiased, and both welcomed Berkshire’s acquisition of Mrs. B.’s second business and its merger with Nebraska Furniture Mart. Berkshire benefits from the family values that bless the Blumkins; reciprocally, the Blumkins benefit from the supportive and resourceful Berkshire culture.
As the Blumkin story indicates, one downside of the family business is difficulty in deciding how to move forward at turning points, when a founder refuses to retire, a business reaches a certain scale, senior family members face concerns about estate tax obligations, or younger family members develop new career interests. Berkshire’s culture, along with its capital resources, offers solutions to the recurring challenges that vex family businesses, from succession struggles to coping with the emotional conflict that occurs when selling.
Selling the family business poses difficult decisions about managing the resulting wealth and handling the future. Family members can disagree, and individuals can be torn between staying involved to preserve a legacy versus the desire for liberation from heavy responsibilities. Berkshire’s culture of permanence offers an attractive outcome. For families who wish to continue to be involved in managing the family business, Berkshire likewise provides a solution. So valuable is Berkshire’s culture—especially the values of permanence and autonomy—that business sellers undeniably treat it as a valuable part of what they receive on the sale. It is its culture that enables Berkshire to acquire companies at lower prices than rival bidders.