Lesson #34
If You Don't Like the Competition . . . Buy Them If You Can
Competition sucks. I know that doesn't sound politically correct or congenial, but the fact is that either you're gunning for them or they're gunning for you. And like it or not, your competition will probably find some way to exploit your weaknesses if you don't pay attention to them.
We faced a series of hurdles shortly after we survived the milestone first year of OfficeMax during the summer and fall of 1989. Competition was heating up, and we feared that the other operators would begin to move into our markets. It was time to start seriously developing Plan B and ask ourselves: What would we do to preserve the equity value and our precious cash if things went south? My primary task was to ensure that we had enough money, so we raised another round of capital later that year. We more than doubled the price to $200 a share and secured additional investors.
While we were completing this $5 million private placement—our third in just over a year—I received a call from the then-chief financial officer (CFO) of now long-gone Montgomery Ward, which was run by Bernie Brennan at the time. Montgomery Ward had invested $20 million into another office supply superstore chain, Office World, which had seven stores in the metro Chicago area. They had lost $13 million on the initiative and were still sitting on $7 million.
At this point, OfficeMax was operating about 15 stores in four states. We had been receiving a lot ...
