The Wall Street Journal recently published an article on the life of entrepreneur Clarene Law.  Clarene was a mother and a hotel bookkeeper in Wyoming’s Jackson Hole valley in the 1960s.  Which led to a problem – who would take care of the kids?  This question led her down the path of starting a family business.  After hearing the Antler Motel was for sale, she borrowed money from her parents and put a down payment on the $125,000 asking price.  Problem solved – Clarene switched hats from hotel bookkeeper to motel owner and innkeeper, and her family could live at the motel.

Fast forward some years later and what started as a little-known town blossomed into a luxurious year-round hiking and skiing destination for visitors all over the country.  While right place, right time played a part, it does not tell the whole story of how Clarene Law became one of the best-known entrepreneurs in Jackson Hole.  Clarene expanded her reputation further as she served n the Wyoming House of Representatives for 14 years.  Inspired by her story and the family business she built, we highlight three themes that can help build your family business: growth, diversification, and family business leverage.

Growth

Steady, natural growth is a long-term commitment.  Clarene realized early on there was no get-rich-quick formula – how could there be when rooms cost less than $10 a night?  She understood that growth could be individually affected through her own efforts.  Her energy was infectious, and her personal interactions with customers made them feel special.  This feeling grew into loyalty, creating 30+ year relationships with customers as well as hotel employees.  Clarene’s daughter, Teresa, shared why they kept coming back, “because mom’s here…just to be with her.”  In 1973 Clarene married Creed Law, and while finding the right business partner doesn’t normally start with “I do,” Mr. Law helped Clarene take a step forward in growth.  Mr. Law was a great builder, and together, they expanded the family business to include several more properties with a total of 477 rooms, now known as the Elk Country Inn.

Growth in your family business may seem distant and slow-paced, but consistent, day-to-day efforts play a huge part in long-term growth.  Clarene presents an example of someone who steadily influenced growth through her personality, decision making, and reliable hard work.

Diversification

We have written on asset diversification in the past, but Clarene’s story teaches us a good lesson on how the degree of diversification matters.  Diversification is simply investing in multiple assets as a means of reducing risk.  Warren Buffett states, “Diversification may preserve wealth, but concentration builds wealth.”  As far as concentration goes, Clarene doubled down on hospitality, buying several inns around the area to add to the growing family business.  Later, Clarene began to transition from building wealth to preserving it.  She diversified into non-hospitality investments with a couple of farms and a dude ranch.  Unfortunately, her other investments reportedly did not work out.  Regardless of why the investments failed to deliver, we question whether Clarene’s approach to diversification was radical enough.  Investing in multiple assets yields diversification benefits only if the assets behave differently; if the correlation between the assets is high, the diversification benefits will be negligible.  We suspect that the correlation between Jackson Hole motels and other real estate investments in the same area was too high to generate significant diversification benefits.

Diversification is simply investing in multiple assets as a means of reducing risk

This illustration is an important reminder for family businesses that diversification is important, but how you diversify your assets matters just as much.  Understanding the degree of correlation among assets in the family business portfolio is essential to achieving real diversification.

Leverage the Benefit of Being a Family Business

Had it not been for family, Clarene might never have purchased the Antler Motel.  Our colleague Atticus Frank reminded readers in a post earlier this year to distinguish a family business from a business family.  Clarene involved her family in the business early on and gradually began passing the management of the business to her children as they grew older.  Until earlier this year, she still came to work and was the first person customers would see.  Clarene told The Jackson Hole News, “Whatever success I have, I owe to my family – my hardworking children, my husband, and a very loyal staff.”  Loyalty, hard work, and focus on the best service are common hallmarks of successful family businesses.

Conclusion

Clarene knew when to have the talk with her children so that when the day came, they would be ready to continue the business in her honor.  Her concentration on steady, long-term growth allowed the business to develop naturally as a family business.  While her diversification efforts may have fallen short of the ideal, her legacy of success is a valuable example to other enterprising families.