In 1950, Sam Walton was 32 years old and had spent the five or six years working for himself building a Ben Franklin retail store in Newport, Arkansas. His talent had already begun to show and his little business became the most successful five-and-dime in the state, generating $250,000 in annual sales and $30,000 to $40,000 in profit; adjusted for inflation, that is the same as $2,200,000 in sales and $353,000 to $441,000 in profit today.
Unfortunately, due to his inexperience, Walton had made enormous real estate mistakes at the outset that caught up with him. He had agreed to give the landlord 5% of sales, which he later learned was the highest anyone had ever seen in the variety store business. He also did not negotiate the right to renew the lease on the space. When the lease expired, the landlord knew there was nowhere else in town for Walton to relocate his store. The landlord refused to renew the lease – at any price – and instead offered to buy the store, fixtures and all, so he could give it to his son.
Walton had no choice. He sold his assets and walked away with $50,000. Adjusted for inflation, that is $441,000 today. All of the earning power Walton had built over 5 or 6 years disappeared overnight and he was left with only his savings. It was an enormous blow. He, his young wife Helen, and their children were forced to move from the town they loved, unable to make a living. Walton later said it was the low point of his life.
Yet, it was that seed capital out of which the entire $100+ billion Walton Enterprise fortune originated. As Bud Walton, Sam’s brother and co-investor, put it, “Our money was made by controlling expenses.” Equally as important, Sam didn’t let the disaster get him down. “I’ve never been one to dwell on reverses, and I didn’t do so then.”
If you spend less than you earn, that surplus capital represents the building blocks you can use to form whatever life you want. It all starts with saving money. You have to have capital. If you don’t have any, raise it from someone else who does (just be sure to follow all the securities regulations and that the terms are favorable to you and fair to them). If you are armed with a pile of capital, you can look around and find a way to serve society in a way that gives them the products and services they desire, and you the return you demand on your efforts and savings. Maybe you’ll end up selling sandwiches, perhaps you’ll be breeding horses, or you might even end up launching satellites; it comes down to your own skills, talents, and passions. It all starts with saving money.