Case studies teach business students entrepreneurship.
They are qualitative pinpoint analyses of companies.
Here is a magical example.
El Paso, Texas, nestles the border with Mexico. Highway 45 snakes from the south close to the Rio Grande. El Paso, Juarez Chihuahua and Las Cruces join hands across four bridges. The area population is nearly three million people.
The cities share vibrant trade and commerce, where Helen of Troy has its corporate headquarters.
The Rubin family settled in the dry heat of El Paso to escape the Chicago cold, where Momma Idelle suffered from asthma.
They opened a beauty supply store. Their oldest son, Gerald, ran a wig business in the back of the store.
In 1972, Gerald graduated from the University of Texas with a degree in science, but he turned his attentions to his real love, retail. He built a chain of 40 stores along the border and had 400 wig concessions in department stores across the US.
Gerald reinvented Helen of Troy, named by Rubin as “the most beautiful woman of antiquity,” after wig imports eroded profit margins. He expanded from retail into hair appliances, selling salons hair dryers and curling irons. His strategy was to manufacture under contract for celebrity companies that were building brand awareness in the crowded market.
In 1980, Rubin pitched to the Vidal Sassoon Company to put its brand on his products. Recalling the event to the El Paso Times, HELE was “the smallest company with the least amount of capital to vie for the license” and never sold its products in retail stores. He claims Sassoon liked HELE products, but being familiar with this environment, I can attest they liked Rubin. His passion, knowledge of products, industry data, consumer preferences and his personal veracity and integrity sealed the deal with Sassoon executives.
The HELE mission is to lead “in the consumer products market through new product innovation, superior product quality and competitive pricing.” The strategy is to sell relatively simple products, “but piggyback on the visibility of the brand recognition to drive sales, acquire shelf space and gain a degree of pricing power.” The gamble for HELE came when the deal required it pay Sassoon a $100,000 signing bonus and 10 percent of sales. HELE still has a license with Sassoon and with name brands Braun, Revlon, Hot Tools, Vicks, Brut, Honeywell and Pert.
HELE’s growth is through product development, acquisition and Rubin’s “RLC” leadership. It books nearly $2 billion in annual sales in housewares, health-care, home-environment and personal-care products.
RLC, coined by a Harvard Business School professor, is Rat- Like Cunning in the DNA of successful businesspeople. Associates describe Rubin as “a savvy businessman who knows what works and doesn’t work instinctively [emphasis added]...
He loves being in business. He loves the art of the deal.” He is a “dynamic leader with a lot of great ideas and lot of energy.”
Despite HELE’s size, Rubin is hands-on and accessible, still listening to his customers. This character description is a prerequisite I share with my university students and start-up entrepreneurs with whom I consult.
Rubin steadfastly continues two traditions his parents taught him and his brothers. Attached to the front entrance doorpost of the gleaming corporate office building of HELE is a mezuza that carries inside it the prescription for success.
Rubin and his companies also contribute significantly to charities.
HELE’s fortunes and stock price are subject to the vagaries of economic times. Products are exposed to fluctuations in prices for raw minerals, electrical components and chemicals.
Sales in beauty products declined in 2008 as much as 6% during that recession. Rubin responded by dropping low-margin goods to improve company margins, grow earnings and swell cash balances, while continuing to invest in new lines.
One analyst wrote, “I was very impressed how their SG&A costs came down so much. These guys know how to manage their business.” By the end of the first quarter in 2011, earnings grew 26.7%, driven by higher sales and robust gross-margin expansion.
HELE receives its share of criticism. Some analysts say the company relies too heavily on commodity-type products and grows too fast through acquisitions. Overseas manufacturing operations expose it to fluctuations in multi-government currency climates. Good company cash flow has never been used to pay dividends, while corporate executives benefit from overly generous salaries and stock options.
Rubin’s recent resignation as chairman, CEO and member of the board of directors comes abruptly with hammer-like finality to a stellar career. HELE will sever the positions of CEO and chairman, realizing a net savings in compensation in 2015 of about $30 million, or 9 cents per share. Rubin’s golden parachute charge-off in the 2014 fiscal year amounts to more than $16m., or 50 cents per share.
Rubin is the apotheosis of entrepreneurial success straddling the clashes of family business and corporate commix.
The brittle irony is that he leaves with quarterly earnings beating expectations and the stock price reaching a new high.
He is taking a short pause focusing on his substantial real-estate holdings, but as Mark Twain said, “No word was ever as effective as a rightly timed pause.”
Entrepreneurs, you can learn from Gerald Rubin, who personifies Shel Silverstein’s wisdom: “Listen to the mustn’ts, child. Listen to the don’ts. Listen to the shouldn’ts, the impossibles, the won’ts. Listen to the never haves, then listen close to me... Anything can happen, child. Anything can be.”