The Art Of Segmenting, For Entrepreneurs

When I was introduced to Fred Sachs as an entrepreneur and farmer who’d make for a good interview, I knew only that he was somewhere in Virginia.

Virginia is a big state. But it turned out he was in walking distance of my house. It seemed like a good sign. On a late afternoon a few weeks ago, I walked down to his house in Old Town Alexandria, where we sat in his garden and talked.

Sachs is an inveterate entrepreneur, someone whose story I hope to explore more. He loves the process of entrepreneurship, he says, in part because it combines innovation and creativity. When he interviewed with the consulting firm McKinsey back in 1972, they asked whether he was more innovative or creative.

“An entrepreneur can be one or the other, depending on the circumstances,” he said. “Sometimes you have to create a solution to a particular problem; and other situations you have to innovate in order to get around a particular a particular hurdle. And if you’re not going to deal with the problem, you’re going to be left behind. You have to continue to change.”

“The ticket for me is I’ve got to be both at different times.”

A former Marine, he was wounded in Vietnam and then went to college – Syracuse and Columbia University, where he got an MBA.

He was working for Time-Life books in Alexandria when he encountered the owner of a storied Northern Virginia hardware company, Smoot Lumber, founded in 1858. He took a pay cut, from $30,000 to $20,000, to work for the company.

Five years later, he bought it. He Later still, he founded a commercial door and hardware company, Precision Doors and Hardware, during the Washington, D.C. building boom of the late ‘80s.

He sold them both, the first in 1996 and the second in 2008, to a private equity firm, and decided to settle down. He estimates the combined companies had revenues of more than $100 million, though says it was just an estimate because he wasn’t privy to Smoot’s books at the time.

He planned to spend time on a small farm in Eastern Virginia he’d bought years ago.

But one thing led to another, and a couple of years later, he found himself building another company. Grapewood Farm produces organic flour from native Virginian wheat. Last year, it produced about three tons and sold it to 12 bakers for upwards of $1.65 a pound, depending on the variety.

“I think we could probably do twice as much business as we’re doing now, because it’s unique and people are interested in eating healthy foods and buying local.”

Meanwhile, he’s also investing in a Canadian company, AusculSciences, that is developing a hands-free stethoscope.

Then he pulled out a notebook. “I told my wife I really wanted to show you this piece of paper,” he said. “I’ve been carrying this piece of paper for probably 30 years.”

It really defines my “management musts.”

In Sachs’ way of thinking, the most fruitful approach is to have an idea of what you’re selling. But before you refine the product, you must find the market. “And once you find the market, then you figure, okay, how do I penetrate that market?” he said. “Like Starbucks. They found the market and figure out how to boost the market, put lipstick on it and sell a cup of coffee for $4.”

“Tiffany never went out of business, and the diamonds they sell, everybody else sells, too.”

Here’s what his scrawled notes said:

Management Must

Spend its time identifying, and exploiting unique segments rather than broad assaults on entire industries. Segment by: products, customers, customer services, location. Emphasize profits rather than sales growth.