Russ: This is the BusinessMakers show, heard here and seen online at thebusinessmakers.com. It's guest time on the show, and I'm very pleased to have with me the chairman of Berkshire Hathaway-owned Star Furniture, also the namesake of the Wolff Center for Entrepreneurship, and I might add the ranked number one entrepreneurship center at the University of Houston, Melvyn Wolff. Melvyn, welcome to the BusinessMakers show.

Melvyn: Thanks so much for having me, Russ.

Russ: You bet. Well, let's start with that University of Houston. My goodness, you must be awfully proud to have your name associated with such a winning organization out there.

Melvyn: I really am. The number one ranking in entrepreneurship is something we're very, very proud of. I wish I could take credit for it, but I'm happy to be associated with it.

Russ: Well, you definitely played a role, for those in our audience that don't know, in 2010, the Princeton Review, and Entrepreneur Magazine, ranked the Wolff Center of Entrepreneurship number one in the nation in the undergrad category. In 2009, they were number two, in 2008 they were number one, and in 2007 they were number two. Before that, they didn't show up, but my goodness, when the program showed up, which I think coincided to your contribution and naming of the organization, they just started winning.

Melvyn: Well, just by chance, the rating came shortly after we became involved, so -

Russ: Perfect timing.

Melvyn: - I'd like to say it happened because of our involvement, but actually we got involved before the ratings came down the pike.

Russ: And, Melvyn, as I've told you earlier, I've traveled all over the country looking at these entrepreneurship programs because I'm really impressed with almost all of them, but for this one, to get this recognition - number one - just takes my breath away because the people out there, Bill Sherrill, the founder, stayed with it all this time; a great businessman, an octogenarian, and he seems to me to do so much of advocating the basics of business, and teaching it very thoroughly out there.

Melvyn: Well, Bill Sherrill is my hero. He founded this program many years ago, shepherded it along, and has been responsible for the success of so many students that have benefited from it. He stays committed to it.

Russ: Absolutely. Now, back to your involvement. It seemed like it was perfect timing. Maybe you get some of that perfect timing from the fact that you're also a Berkshire Hathaway company, because Mr. Warren Buffett came to Houston, I think it was a little bit more than ten years ago, and bought Star Furniture. Was that a great experience, or what?

Melvyn: It was a great experience at the time. It was exciting, and it turned out to be probably the best thing that I've ever done business-wise, to be associated with Warren Buffett.

Russ: ________, so if you picked up the phone right now, over there on your desk, and called Warren Buffett, he'd take your call?

Melvyn: He answers his own phone. I've called in the past, and the first time I did that and he answered the phone, I said, "Warren, you answer your own phone?" and he said, "Well, I have a secretary but she's quite busy."

Russ: That's great.

Melvyn: He's got a great sense of humor.

Russ: Well, now I know enough about how he does this, is that when he buys one, he certainly wants to keep the operators involved, so how has that worked out? I mean, now it's not your company, it's his company, but you still show up, you still work, and does it feel okay?

Melvyn: It feels really good, and you'll find that he owns 70 companies, and most all of the 70 companies, the people that were running the company before he acquired it are still running the company. It's kind of a fraternity more than a business.

Russ: Wow. Do you actually know the other owners of some of the 70?

Melvyn: Yes. He has a breakfast and a brunch about two times a year that most of us attend and get acquainted with one another.

Russ: That sounds really cool. I'd love to see that some day, but how involved is he in running Star Furniture? I mean I've seen him in some commercials around here, but does he call you at the end of every month and say, "Okay, Melvyn, how'd you do this month?"

Melvyn: No, he's our cheerleader.

Russ: Wow.

Melvyn: If things are going really well, we get notes of congratulations and how well you're doing, and if things aren't going as well as we would like and we miss our goals a little bit, we just get encouragement that things will be better and you'll get it back on track. We enjoy working for him.

Russ: My goodness, that sounds almost too good to be true. All right. Well, I'm talking to Melvyn Wolff, now chairman of the board of Star Furniture, a Berkshire Hathaway company, and also the namesake of the University of Houston's Wolff Center for Entrepreneurship, and we'll be back with more with Melvyn after this. You're listening to the BusinessMakers show, heard here and seen online at thebusinessmakers.com.

[Commercial]

Russ: This is the BusinessMakers show, heard here and seen online at thebusinessmakers.com, and continuing on with Melvyn Wolff, chairman of the board of Star Furniture, a Berkshire Hathaway company, and also namesake of the nationally ranked number one University of Houston Wolff Center for Entrepreneurship. So, let's go back to Star Furniture. Tell me about it from the beginning. Were you a founder?

Melvyn: No. I've been asked that question many times, but the firm was founded in 1912, so it's 98 years old, and I prefer not to be asked that question after I've told people that.

Russ: All right, 1912. Okay, well who were the founders?

Melvyn: The founders were three men who pooled their resources to buy a horse and wagon. They entered the furniture business and wouldn't sell anything they couldn't sell for $1.00 down and $1.00 a week. It was a credit operation, and they worked hard and they did fairly well. At that time, when a salesman made a sale, it was up to him to collect the money. Since they were selling things for $1.00 down and $1.00 a week, if they sold a bedroom suit for $12.00, and that was about the price of a bedroom suit in 1912, it meant that one of those partners had to go out in the evening with the horse and wagon and collect the $1.00 until he had collected his $12.00, and hopefully sold something else to keep the account live.

Russ: What a story -

Melvyn: So, that was the meager beginnings of the company. My father was a Russian refugee that came to this country. We're not sure exactly when. We think it was around 1910, and by 1918, and that's a guess, he had saved enough money to buy an interest in the partnership, and he became the fourth member of the group, and they then opened a storefront on furniture row in downtown Houston, and that's where they began to grow.

Russ: Well, my goodness. So, your dad became one of the partners in 1918, and so then there were four owners, right?

Melvyn: Yes. The business just wasn't large enough to support four growing families, so one partner would buy out another, the company would take on a little more debt, and they would go on and try to grow from there, and they were fairly successful. And then, by 1962, there were only two partners left, and second-generation family members involved from both families, and then both senior partners died in a 13-day period in 1962 -

Russ: And one of those was your dad?

Melvyn: - and one of those was my father, _________. Business was doing, by that time, it had just passed the $1 million mark, so if you do the math, it took 50 years to get to $1 million, so we're in bad trouble if we don't do that every Saturday, or -

Russ: ________ these days, right?

Melvyn: - do a lot more than that every Saturday, so we've had some growth since then.

Russ: Okay, so that was 1962, and you're involved, so were you put in a position to lead the company at that time?

Melvyn: Yeah, I kind of tricked my partners into thinking I was best suited to be the president of the company, and I became president at that time and began to kind of reposition the company at that time.

Russ: What kind of repositioning did you do?

Melvyn: The other partners, who are fine people and we're still very close friends, had a little different idea about how the company ought to grow, and so forth, so I attracted my sister to join me in the company and we made arrangements to buy out the other company so we could - when I say we repositioned the company, we had six small stores and we closed them all to get the money to make the down payment to the family that was selling their interest. And then, we rented an abandoned warehouse from our major competitor and reopened the store, and it was a little larger store and we aimed at a little more affluent audience, and kind of repositioned the company in that manner.

Russ: Okay, so when you say you talked your sister into coming on, I assume she was still an owner but maybe not actively involved in management?

Melvyn: That's right. She wasn't active in the company at all. She was an interior designer, and I got her to leave her practice and come apply her interior design skills to our company.

Russ: Okay, so then, your strategy worked and the company kept growing and growing and growing.

Melvyn: Yes.

Russ: Cool. Okay. Well, let's then skip forward to this Warren Buffett chapter. What even motivated you to consider selling it?

Melvyn: Everything that we made in the company we put back into the company - we didn't take anything out - and, at the time, we were looking at estate taxes of some 55 percent, and we knew that when either my sister or I passed away, the company would have to be sold to satisfy those taxes, and we had really acquired a great group of people to take management positions and cast their lot with us in the business, and it wasn't fair for them to be exposed to the lack of opportunity if one of us passed away. So, we began looking at what our options were, and we examined all sorts of options, looking at perhaps going public, looking at doing an ESOP, doing a merger or an acquisition, or selling the company outright, and that led us, eventually, to the Warren Buffett story.

Russ: Wow. How did you actually get connected to him? I mean does he take all calls, even from prospects?

Melvyn: No, I guess it was a matter of dumb luck. We had engaged a New York firm to give us advice on which of these options would work best for us, and they worked very hard for about a year, and every option they exposed us to I turned down as not being in our best interest, and finally we had agreed to stop the process. They were spending their money to give us advice and I was turning it down, and the senior partner in that New York firm and I had dinner together, and I said, "We've exhausted our opportunities -

Russ: Reached the end of the road.

Melvyn: - we've reached the end of the road, it's time for us to stop," and he said, "Fine." And we were standing outside of the restaurant waiting for the valet to bring our cars up, and he said, "Melvyn, have we left any stone unturned?" and I said, "Well, yes, perhaps one," and he said, "What would that be?" and I said, "What about Warren Buffett?" and he laughed and said, "I think you might have had too much wine to drink. You're much too small to be of interest to him," and I said, "I know that," and he said, "Why did you suggest it?" It happened to be Salomon Brothers, and I said, "He's the largest stockholder of your company," and he said, "Yes," and I said, "He already owns two other furniture companies," and he said, "That's true." I said, "Our figures look pretty good. We know both of those other companies, and our figures look pretty good, and I think he might find some interest in that, and the other thing is the CEO he's put in charge of your company is a fellow Texan and a friend of mine, so you might just mention it somewhere down the line and see if there's any interest." And I thought it had gone to bed at that time, and a month passed and nothing happened, and I got a phone call one day, and my friend said, "Mr. Buffett would like to meet you. Is it possible for you to be in Omaha tomorrow?" and I said, "Yeah, I think I can do that," and he said, "Well, be here, and bring your wife." And so that's when I met Mr. Buffett, and that's how it happened.

Russ: Wow. So, I mean I've heard stories before, but when you met him, was there a lot of progress made in that very first meeting?

Melvyn: No. I didn't know at the time that that was the day before the annual meeting with 15,000 people at that time __________, now it's 30,000, but when I met him that time, we went through a receiving line, I shook hands with him; we had a wonderful conversation that lasted ten seconds, "I'm glad to know you, certainly glad that you're here," but he knew my name and knew why I was there, and I was very encouraged by that. But then I didn't hear anything for some period of time after that, until I got that call. The next call I got was from my friend that said, "Mr. Buffett would like to know if you'd share three years of financial information with him," and I said, "Yes," and that's how it happened.

Russ: Wow! And from what I've also heard, there's not a lot of negotiation, once he looks at it and makes an offer.

Melvyn: The next phone call I got was, "He has some questions about your financial statement," detailed questions that let me know he read every word of the statement. He asked questions about notes in the back of the financial statement. I answered those for him, and the next call I got said, "Mr. Buffett would like to buy your company, and here's the price," and I said, "Gee, I do want to sell my company and I do want to sell it to Mr. Buffett, but that's not the right price." My friend said, "You've got to decide if you want to sell the company, because he doesn't negotiate. That's the price," and I said, "Will he meet with me to discuss that?" So, he said, "I'll ask him," and I got a call back and he said, "He's gonna be vacationing next week in New York, but he would welcome you to come to New York and talk to him." So, I met him at his hotel room, he and his wife, and we negotiated for an hour and 20 minutes, and I sold the company at that time, an hour and 20 minutes, a company I'd spent my lifetime building.

Russ: Great story. Talking with Melvyn Wolff, chairman of the board of Berkshire Hathaway-owned Star Furniture, and namesake of the number one ranked entrepreneurship program in the country, the Wolff Center of Entrepreneurship at the University of Houston, and we'll be back with more with Melvyn after this. You're listening to the BusinessMakers show, heard here and seen online at thebusinessmakers.com.

[Commercial]

Russ: This is the BusinessMakers show, heard here and seen online at thebusinessmakers.com, and continuing on with Melvyn Wolff, chairman of the board of Berkshire Hathaway-owned Star Furniture, and also the namesake of the Wolff Center for Entrepreneurship at the University of Houston, the entrepreneurship program that was ranked number one amongst university undergrad programs, and wow, still, I can't say that enough. That's just incredible.

Melvyn: I'm pretty impressed with that title, too.

Russ: You should be, but before I let you go, let's imagine that a young, aspiring business person, a young, aspiring entrepreneur is listening to your story and totally intrigued and fascinated, what general advice would you give to him or her at this stage to prepare themselves for the future?

Melvyn: Well, the Wolff Center is all about learning, and I would say devote yourself to learning. Following your passion, but never stop finding new ways to learn more about where you're going.

Russ: All right. You gotta keep that learning going.

Melvyn: Absolutely. That's the secret.

Russ: All right. Melvyn, I really appreciate you sharing your story with me, and I would encourage you to keep doing what you do.

Melvyn: Thanks so much for having me.

Russ: You bet. That's Melvyn Wolff, the chairman of the board of Star Furniture, the Berkshire Hathaway Company, and the namesake of the University of Houston's Wolff Center for Entrepreneurship, and you've been listening to the BusinessMakers show, heard here and seen online at thebusinessmakers.com.