The company that would become H&R Block, the world’s biggest tax preparation business, started with two brothers going door to door on Prospect Blvd. in Kansas City, Missouri. In 1947, Henry and Leon Bloch were asking residents if they were in need of any of 50 services, from bookkeeping to office decorating.
Ironically, the business wouldn’t have succeeded if they’d gotten the funding they wanted, 91-year-old Henry Bloch said at a panel in San Francisco today for National Small Business Week. Being denied a big loan forced them to become more efficient and hone in on the most important parts of the business.
After getting a graduate education at Harvard Business School through the Air Force, Bloch decided to move back to his hometown of Kansas City, inspired to start a company that would help small businesses.
Full of optimism, Bloch wrote to his wealthy aunt in New York City, boldly requesting $US50,000 to get a nice office in downtown Kansas City and fill it with experts. The aunt refused the initial request, but said she would loan him $US5,000 if his father co-signed it.
“She really made us what we were,” Bloch said at the panel, alongside his son Tom, former CEO of H&R Block. He said that his aunt’s wise denial of his wish forced him to struggle through financial hardship, adjust his ambitions to customer demand, and really figure out what his company was going to be. He’s convinced that he wouldn’t have become so successful if she let him grow his company before he was ready. “That business would have failed so bad,” he said.
His original partner, his older brother Leon, left to go to law school after only four months, and was soon replaced by his other brother, Richard. The two young men scraped by with their aunt’s $US5,000 loan and Bloch’s $US50 monthly GI Bill check. After seeing most of the 50 original services they offered go unused, they first narrowed down their business to five services and then narrowed it again to just bookkeeping, with some tax preparation on the side.
Word got around that the brothers who charged small business owners $US15 a month for bookkeeping were also good at doing taxes, and in 1954 the brothers started charging $US5 for that service.
The business took off, and Henry and Richard decided to shift their focus to this profitable venture. They renamed the company H&R Block using their initials and a phonetic spelling of their last name in 1955, and a year later decided to sell rights to a New York office to two accountants, starting a franchise “before ‘franchise’ was even a word,” as Tom said. The company quickly branched out across the U.S. and eventually to other countries.
Bloch’s aunt could have afforded giving him the $US50,000 back in 1947, but he likely would have spent it developing services customers didn’t actually want and growing beyond what he could realistically afford. Bloch figures such a company would have crumbled under its weight in a short time. He had the passion every successful entrepreneur needs to start a business, but he wasn’t quite ready to handle a big office with a large team of employees.
That initial lack of finances is what forced him to listen to customers, focus on what his company was good at, and develop a company that went on to become incredibly successful.
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