Editors note: This story has been changed since original publication.
HALL OF FAME LAUREATE Hans J. Sternberg
COMPANY: Starmount Life Insurance Co.
• Expanded the family-owned Goudchaux’s/Maison Blanche to 24 stores, making it the largest family-owned department store in America.
• Holds a patent for the carbonless postcard.
• Founded Starmount/Always Care, which now has 525,000 clients.
• Author of We Were Merchants, which tells the story of his family’s emigration from Nazi Germany and their success in Baton Rouge business.
Very few people leave an enduring business legacy in one community.
Hans J. Sternberg has done it twice.
Sternberg inherited Goudchaux’s—Baton Rouge’s most beloved department store—from his parents, taking it to incredible heights before selling during the recession of the late 1980s and early 1990s.
He then established Starmount Life Insurance Co., which has spread to 49 states and three times made Inc. magazine’s list of the 5,000 fastest-growing companies in the nation.
Add that he’s also a published author who tells the story of his family’s escape from 1930s Germany and their ownership of the nation’s largest family-owned department store in We Were Merchants.
“Hans is a very exceptional businessman—the kind we don’t see many of,” former U.S. Rep. Henson Moore says. “He took a company and a business that everyone knew, and it rose to heights like we had never seen before in Baton Rouge. It was like something you’d see in New York, Chicago, Houston and Dallas.
“It was a real point of pride here that we had one of the largest businesses of its kind, and it originated right here and was headquartered right here.”
The family business
To say Sternberg has business in his blood is an understatement. His ancestors started the family’s first retail store in Germany in 1739, long before the American Revolution.
Sternberg’s father, Erich, fled his home in Aurich, Germany, in 1936, just as Adolf Hitler accelerated his harassment of Jews. Erich’s wife, Lea, and their children—Josef, Hans and Insa—remained behind.
Erich Sternberg managed to escape with $24,000—the equivalent of $340,000 today—half of it being his wife’s dowry. He connected with relatives in New Orleans who manufactured clothing, and they helped him find a retailer to buy.
Given the choice between one in New Orleans and another in Baton Rouge, Erich chose the latter because he thought his money would go further in a smaller city; the population of East Baton Rouge Parish at the time was 38,000.
He bought Goudchaux’s for a little more than $100,000—the equivalent of $1.4 million today—using every penny of his own money and borrowing the rest.
Lea and the children arrived a year later, and the five of them, along with their grandfather, moved into a rental house at 1001 Main St., which had two bedrooms and one bath. Hans was 18 months old at the time.
The family spent more than four years there, until Erich and Lea spent $10,800 to build their first, and only, home in Baton Rouge. It had air-conditioning ducts, but no air conditioning.
The original Goudchaux’s was 10,000 square feet and sat on the outskirts of the city on Main Street. As Hans tells it, his father knew he had to grow to compete, but he wanted to keep everything under one roof. So he expanded that building nearly a dozen times, to a whopping 310,000 square feet, landing it in Ripley’s Believe It or Not in 1986 as the world’s longest department store.
Sternberg began working in the store on Saturdays at age 5 at Josef’s side, and he started waiting on customers as a teenager.
While attending Princeton University, from which he graduated in 1957, Hans was encouraged by his professors to pursue a career as an economics professor. At the time, however, a full professor at the Ivy League school made only $12,000, and Sternberg preferred interacting with people to research.
“I also didn’t see how I was going to be able to afford a family with that,” he says. “Not that I was anywhere close to having a family. But other than being in front of a classroom, there would have been a lot of research involved. And I like people a lot.”
So it was back to the family business. When his father died in 1965, Hans and the rest of the family took over, and Goudchaux’s really took off.
It was such a fixture in the community that an LSU football coach called to apologize the first time a game was moved from Saturday night to afternoon for television. The coach knew the switch might hurt the Sternbergs’ business. Then there was the ladies’ shoe sale at the Cortana Mall store that brought out the fire department. Officials blocked the doors, allowing customers to enter only as others came out.
Goudchaux’s was one of the few department stores at its era to offer interest-free credit cards; at one time, 640,000 people had accounts. Some customers were offered the “Gold Card” for a $30 fee, which was interest-free but offered benefits like discounts on alterations, free parking in downtown New Orleans, travel insurance, car rental and hotel discounts. In its first year, the program made more than $1 million. American Express later paid for the right to exclusively market the “Gold Card” name.
It was during the mid- to late 1970s that Goudchaux’s expanded to Cortana Mall, to Lafayette and, with the purchase of Maison Blanche—founded in 1897 by Isidore Newman, another German immigrant—to New Orleans. The family also quickly moved into Florida by purchasing two chains totaling 16 stores and growing the employee count to more than 8,000. Combined annual revenue was $480 million.
Then came a major recession in the late 1980s and early 1990s. Retail declined, and credit became tight. The prime rate during that period rose to 21%. Many of the nation’s largest department stores—Macy’s, Bloomingdale’s, Carter Hawley Hale, Carson Pirie Scott and others—went bankrupt. Even Saks Fifth Avenue and Marshall Field’s were in financial trouble.
Back home, four of Goudchaux’s six banks functionally disappeared, and the store itself was saddled with debt and declining profits. It was time to sell. The Sternbergs sold eight Florida stores to Dillard’s in 1991 and the remaining 16 stores in Louisiana and Florida to Mercantile Stores Inc. The eight Louisiana stores continued to operate under the Maison Blanche name until 1998, when Mercantile Stores was acquired by Dillard’s.
And so the days of Sternberg walking the hardwood floors of Goudchaux’s came to an end. So, too, did the nickels given for every “A” on a child’s report card, free same-day delivery and that impeccable Goudchaux’s service. The family bid farewell to many longtime, loyal employees, including a hosiery buyer who had been with the company for 60 years.
“It was a very difficult decision,” Sternberg says. “Once I was able to tell my mother, it became a lot easier.”
A new beginning
When Mercantile Stores bought Goudchaux’s/Maison Blanche, it wanted no part of the highly regulated life insurance that the Sternbergs had offered to their charge-account customers.
So Sternberg walked away with it, for free.
He renamed it Starmount, the literal translation of the German name Sternberg. Today, Starmount and its sister, AlwaysCare Benefits, underwrite and administer dental, vision, group life, critical illness, accident and disability insurance for employee benefit plans and also sell individual life and health insurance policies.
Although the company dealt strictly with life insurance at the time it began, supplemental health now constitutes more than 80% of its business. Starmount has 525,000 clients.
The company is now in its 28th year and is available in 49 states [most recently Wyoming, in 2010] and the District of Columbia, and Sternberg hopes to be admitted to a 49th state this year. The company has seen its revenue climb an average of 15% annually.
Last year, Starmount moved into a 24,000-square-foot headquarters on Goodwood Boulevard at Connells Park Lane, almost double the size of its previous building off Jefferson Highway just west of Baton Rouge Country Club. The company’s workforce has grown from three to 173 since its inception in 1983.
Sternberg’s wife Donna and two of his children, Erich and Deborah, take part in the family business. Another daughter, Julie, recently published her first children’s book, Like Pickle Juice on a Cookie; and son Marc is a deputy chancellor of New York’s public schools. Sternberg also has nine grandchildren.
Like Goudchaux’s/Maison Blanche, this company, too, is known for its emphasis on customer service. Digital boards that hang throughout the Goodwood Boulevard headquarters note the number of clients on hold, the length of time they’ve been waiting and the number of customer service representatives available. If the numbers move too slowly, Sternberg himself walks up and down the aisles, prompting his employees.
The cable guy
Over the course of his business career, Sternberg has been involved in a variety of ventures.
He invested in cellular telephone in the early 1980s, long before just about every person on the planet had one. He got into cable television, first in 1972 as a founding partner and director of Cablesystems of Hammond, then later as a founder of Cablesystems of Alabama. He also was an owner and director of several radio stations, including WQXY-FM and WLCS-AM in Baton Rouge and KQXY-FM in Beaumont, Texas.
Sternberg and Lamar Advertising executive Sean Reilly started Wireless One, a cable business they took public. He and partner Al Bankston started a now-defunct weekly newspaper in the late 1960s called the Baton Rouge Advertiser.
Still, Sternberg doesn’t regret for a moment that none of his children is following in the family’s centuries-old tradition of retail.
“That’s just a consequence of selling the store. At least two of my four children would have come into the business if not for that,” says Sternberg, whose favorite places to shop include Perkins Rowe and Towne Center at Cedar Lodge.
“Things change a lot, and one of the tenets of any business is the ability to adapt. Isn’t that what Darwin said? It’s not the strongest of the species or the smartest that survives; it’s the one who’s most able to adapt. I think that’s very true of business. The world turns, and you have to be able to turn with it. We’re a different industry now, and hopefully we’ll last another 200 years.”
What advice does this longtime entrepreneur have for people who aspire to start their own business? Have enough capital to go into business and enough knowledge to make it successful. Watch your debt-to-equity ratio and your cash flow, since the latter can be more important than profit and loss.
“You have to learn your industry better than anybody else and work harder and smarter,” Sternberg says. “Watch who is already out there and learn from them. Not everybody is going to be able to start a $50 billion company like Facebook, so keep your eye on the ball.”
It’s business sense like that that has made Sternberg one of the most respected businessmen in the Capital Region.
Moore says Sternberg’s successes—in retail and insurance—are something that local business leaders ought to study to determine whether they might be replicated in order to improve opportunities for entrepreneurs in south Louisiana.
After all, Moore turned to longtime friend Sternberg for business advice when his own family needed it.
“When my own son started his business in Nashville, I had him sit down and spend time with Hans to get advice,” Moore says. “I felt Hans was one of the brightest businessmen I knew.”
CORRECTION Starmount Life Insurance Company has 525,000 insured individuals. Incorrect information was provided by the source. Business Report regrets the error.