Music Store

[Jeroen]

My Father in law and I were talking last weekend about opening a music store...He owns 2 stores (Audio/Video/Tv etc and a juwelerstore. another section of his building is rented to another store, but will maybe be available within 1 or 2 years.

There aren't a lot of music stores in our area and only 1 nearby (8 miles) is carrieing crappy stuff (brands you've never heard of).

So my Question:

For guitars/basses/acoustics what brands do u need to have in a good store??

We'll do a lot of research on what people need/want and what the chances of sucses are here. I was thinking of Ibanez...Ovation...

Let me know.....

Jeroen

[Pr3Va1L]

Well, do you want to be succesfull or be a good store?

You gotta think that most of your clients are gonna be kids starting to play, or at least not professionnals

Anyways, what seems to be in stores around here (electric guitars):

- Gibson (mostly epiphone LPs)

- Jackson

- BC Rich

- Fender

- Ibanez

What I'd like to see in a store:

- Hamer

- Parker

- Godin

- Musicman (not OLP)

[tomteriffic]

Jeroen. I've never owned a retail shop, just managed one. That got me close enough to realize that, above all, you have to have tenacity, nerves of steel, and hopefully enough start-up capital to get you through two or three years. The rest is less important and will become obvious if you have the first two things I listed.

I know the other dealers will chime in, but that's just my 0.02 euros worth.

[Jeroen]

I'd like to carry for both parties...I know there are a lot of bands in our area.. I don't have to make a million $$ if I can continue my life like it is now...financial then I am happy....

Hamer's, Godin are things I would like to have too

Jeroen

[Luke]

It would appear that the industry is very mature. You cannot buy cheap enough to do high volume, mail order and Guitar Center have the bottom of the market. You can go upscale like Willcutt, but that is expensive inventory that turns slowly. Many manufacturers will not talk to you without a large intial order and a guarantee of future sales of a given volume. Companies like Peavey and Fender want you to carry their entire lines, so I hope you wanted to have a PA department.

Small stores that are still around seem to have cultivated a nitche. The one music business that seems to do well is high end basses. It seems like the dealers of Ken Smith, Pedulla and Fodera carry very little inventory, almost all sales are custom orders. Customers will be strictly price shopping, but even if you you only make 20%, it is guaranteed money because you collect a 50% deposit. There will always be a market for lessons, and it is the lifeline for many operations. If you attend a luthier school you could dabble in repairs as time permits.

Opening a music store at this time is buying yourself a 60 hour a week job. You will be forced to stay open at least until 8PM and you have to open on Saturday if not Sunday as well. If owning a music store is a life long dream, it maybe worth the time and risk. If you were willing to relocate I'd image you could find fifty small music retailers willing to hand you the keys if you take over the contracts, leases and other payments. In other words, you will not become rich anytime soon. It has to be a calling, like the Priesthood, because the money is no longer there to be had.

[BCR Greg]

You wanna make a million with a music store nowadays?

Start with TWO million and lose one.

The internet has killed most of the small shops, so think three times before doing it. I'm here from 9 in the morning to 12 midnite or even later every day. I HAVE to be here to do what it takes to be competetive.

Find another way, really, bud. Starting a store in the current climate is pissing up a rope.

[jerseydrew]

It would appear that the industry is very mature. You cannot buy cheap enough to do high volume, mail order and Guitar Center have the bottom of the market. You can go upscale like Willcutt, but that is expensive inventory that turns slowly. Many manufacturers will not talk to you without a large intial order and a guarantee of future sales of a given volume. Companies like Peavey and Fender want you to carry their entire lines, so I hope you wanted to have a PA department.

Small stores that are still around seem to have cultivated a nitche. The one music business that seems to do well is high end basses. It seems like the dealers of Ken Smith, Pedulla and Fodera carry very little inventory, almost all sales are custom orders. Customers will be strictly price shopping, but even if you you only make 20%, it is guaranteed money because you collect a 50% deposit. There will always be a market for lessons, and it is the lifeline for many operations. If you attend a luthier school you could dabble in repairs as time permits.

Opening a music store at this time is buying yourself a 60 hour a week job. You will be forced to stay open at least until 8PM and you have to open on Saturday if not Sunday as well. If owning a music store is a life long dream, it maybe worth the time and risk. If you were willing to relocate I'd image you could find fifty small music retailers willing to hand you the keys if you take over the contracts, leases and other payments. In other words, you will not become rich anytime soon. It has to be a calling, like the Priesthood, because the money is no longer there to be had.

Good post Luke

[anotherfreak2]

60 hrs a week, I wish!

It's like pissing up a rope that is threaded througn your P3NIS!

I love what I do, and it is worth the long hours, AND the hard work!

I have been lucky having a reputation as a teacher/performer and a schooled repair tech. I still have a lot of debt and have yet to make any money

This is what I do and I felt I could do it better than anyone around, that is the only reason to do it, If you think it would be fun, you might want to do a different kind of retail, where it is easier to be competitive.

I'm not trying to be negative and I don't know you from Adam, so I'm not saying anything about you, your experiance, or your work ethic, but I have never worked so hard in my life to get what seems like nowhere. Then I look around and I know this is MINE, and the friends and the people I've met are here for me now and I wouldn't change a thing!

It's the hardest job you'll ever hate/lovehate/lovehate/lovehate/lovehate/lovehate/lovehate/lovehate/lovehate/love

love

[Bruiser Brody]

Congrats to those that have taken the plunge and are working their ass off doing something they enjoy..even though the hours may add up, employee probs, dealer BS, etc etc. I say GO FOR IT!!!!! I would love to have my own business (not a music instrument shop) but I can't afford the triple digit buy-ins from major manufacturers...or the start-up money to do it right...or being in the red for years..or the gray hair...or the Mallox diet...or insurance BS..or the tax and legal issues..or the fact that my social life would be ruined. The type of business I would like to own would cost well over a million to get started..closer to two million. I think big...then go home. Maybe when I'm old I'll own a dive bar or a ultra sleaze strip club. That's the ticket. A girl can dream.

I do know what the future is all about though..........."plastics".

[JohnnyB]

One thing I've noticed with the smaller more independent shops is they tend to carry high quality stuff that's better made than the mass market stuff, but is about the same price. There are advantages and disadvantages to that. Brands they commonly carry are Sonor for drums, a lot of things from the Kaman group such as Ovation/Takamine/Jasmine, Gibralter drum hardware, maybe Hamer. They flesh out the selection with G&L, Godin, Seagull/Yorkville, Trayner, and maybe Washburn.

But BCRGreg carries many of those, has done it for some time, and still has the struggle of those long hours and the low-balling and Internet price competition. The downside is that many of these brands don't bring people in the way being a Fender/Gibson/Pearl/Tama dealer does, you work a lot harder convincing people to try brands that don't do high-profile endorsement deals, and sometimes the big stores pick up some of these brands after all. MF now carries Sonor, for example.

A successful store in my neighborhood is Guitarville. They are a single independent store and carry a funky mix of new gear such as G&L, Guild, Gretsch, Ovation, Tacoma, and Dean, but their lifeblood is used and vintage instruments. Being in the used/vintage market they are very vigilant watching for and snatching up ebay deals as well as marketing there. I remember walking in the store one time when they had just picked up a pre-Gibson Flatiron mandolin off eBay for about $100 that they'd have no trouble selling for $300 or more.

They also have the advantage that they've been in business for 48 years under the same family ownership.

I've also seen how the encroachment of Guitar Center in this area has killed or decimated independent stores. When I got into guitar 9 yrs ago, Seattle had something like 6 different authorized dealers. Now there are none. Some of the stores are still in business, but they've had to cut back inventory, selection, and number of stores to stay alive at all.

[FunkyE9th]

I teach at a music store on Saturdays. The store "makes" it's money from lessons and not sales of gear. They really cannot compete with big music chains as far as sales, but their attitude is the more people buy stuff from the big chains, the more people will take lessons. IMO, the store is just making enough to keep going.

The store doesn't carry much in terms of brand names other than Seagull and Godin. A lot of what they sell are consignment.

They have down-sized (square-footage) the store and are in process of having an owner change.

You're in a different country, so I really don't know how it is over there. But over here, I really don't know how a music store can compete unless they offer lessons.

The stores that I've seen that don't offer lessons and are able to stay in business are the ones carrying the boutique gear.

-FunkyE9th

[Luke]

They also have the advantage that they've been in business for 48 years under the same family ownership.

In other words, the building is long paid off. The children are either paying no rent or artifically low rent, covering the taxes and insurance only.

I'll give you 50:1 odds they have not increased their insured amount in the past decade and thus they are under insured by at least 50% to the true real estate value at this time. Very few people say to their agent "you know with all this real estate appreciation I think I should double my coverage (and monthly bill)".

If the parents are subsidizing the rent by $2,000 a month to keep the doors open it is not a viable business, it is romance gone bad.

[anotherfreak2]

It's only a romance gone bad when you quit!

[kurtsstuff]

Do not!!!..And I repeat....Do not open a music store unless you really want to hate life and go home everyday and kick your dog because people don't give a shit whether you live or die as long as they can buy your products for as little as humanly possible and when you board your windows up after filing for bankruptcy they'll just move along to the next "mom&pop" music store and run them into the ground but....I'm not bitter or anything....

[Luke]

It's only a romance gone bad when you quit!

Look at it from another point of view. Suppose you had a job that was paying you $60,000 a year. Would you look for a $30,000 a year job to replace it with? Of course not, you'd want to make more money at your next job.

When families keep a business open for memories sake in the face of economic reality they are doing themselves a disservice.

Suppose the parents absorb the lost rent to the cost of $24,000 a year. Not only are the parents losing the rental income, but they are also losing the interest income they could be making from having the $24,000. The value of the business is not increasing because any potential buyer will see the books and see the lack of realistic rent. The business property is not increasing in value at the same rate as its neighboring properties because most commercial real estate sales today are based on 10x annual rents plus $200,000. By having artifically low rents the parents devalue their property. Any bank lending money to a buyer will demand tax returns dating back 5 years from the parents to determine the rental income. The parents will have a hard time finding a customer who can come to the table with a 50% down payment, which is what they will need given the tax return information. So while the parents could never sell the property for its true value given their actions, the children will absorb the true value at inheritence time.

Let's say the property is worth $500,000 if the parents were collecting the $30,000/year rent the market should bare. If the parents sell, the fully depreciated property would be exposed to $75,000 in capital gains tax, putting their net at $425,000. By charging the children only $500/month rent the bank sees the property as having a value of $260,000, which means they would lend a maximum of $208,000 to a potential buyer. Therefore you need a buyer that has $292,000 cash, which would be a 58% down payment. Now suppose the parents die, the property would be valued based on the square footage for the area. The children would have a $500,000 charge against their inheritence amount, even though they could never realize that number even with a $500,000 sale price.

It is a lot more complicated than people think. A business is simply a job you own. The point of your employment should be economic gain first, enjoyment second. When you confuse the purpose of your work you make bad economic decisions that have long lasting consequences.

If you can make more money working less hours for someone else, it is not viable. The time away from your friends and family have an economic value. You have to make more money than the customer who has a simple 9-5 working for the town, who has no downside risk other than being terminated.

Many once successful businesses are kept on life support for so long that the family fortune is lost in the end. People simply refuse to see the reality that is right in front of them, the market has changed and while an idea may have been great 40 years ago, today it is no longer viable.

There are always exceptions, the people who bet the odds, acheive the American dream, etc. Just be sure you are willing to lose all of your savings, potentially go bankrupct, maybe lose your wife and kids as a result of being broke and a future of bad credit before you jump in.

[elduave]

Make sure there's nothing else you'd rather do in life. Be prepared to barely scrape by financially. Make sure there's nothing else you'd rather do in life. Have an investor (or a great big bank loan) as a safety net so that you can make it through for a few years. Make sure there's nothing else you'd rather do in life. Give as many music lessons as you possibly can. Make sure there's nothing else you'd rather do in life. Rent band instruments. Make sure there's nothing else you'd rather do in life. Even though failure is not an option, be prepared to close up shop after X number of years if it doesn't pan out. Make sure there's nothing else you'd rather do in life.

And make sure there's nothing else you'd rather do in life.

[cmatthes]

I have to disagree with all the doom and gloom. I think Anotherfreak has a realistic view and realizes it isn't all going to be a rose-strewn path - that's the way it is opening ANY business anywhere in the world. If you're a sole proprietor, expect that some days will kick your ass and that you will put in long, hard hours. Business is not kind - I review many businesses that I know will fail inside of 12 months. That being said, I also see many who start up their businesses not with the intention of a quick buck, but because they know their stuff and are motivated to work hard and make a go of things. Like he said, you LOVE it and you hate it. In the end, if you love it more, you're beating the hell out of 90% of the working stiffs out there!

Starting your own business is easy - anybody can do it. STAYING in business is tough, and only for the people who can stick it out because they have confidence in their abilities (or the abilities of their employees/staff/counsel). Unless you've got money to burn, don't jump blindly in to a business. If you want to insulate yourself somewhat, INVEST in a business instead. Either way, make sure you research the options and know your local market.

You can carry out a successful business if you promote it properly, work the angles/deals and keep your strategies flexible. Above all, don't screw your customers. They will make you or they will break you.

Jeroen, good luck in whatever you decide to do - remember that the Internet can be a big help for you and that many lines you would carry aren't all that available in stores where you live. That could be a good thing! Just remember, it can't be a "part time" thing if you truly want it to work out.

[belgian]

Jeroen, the only mom&pop shops that make some money over here, are the ones with a strong and skilled repair department. But it takes a long time to build that up.

The competition with German online stores on musical instruments is very strong and they have a VAT advantage (16% in Germany). However there are some opportunities in the brands they don't carry.

[Jeroen]

Thanks all for your posts!!!

First of all I said I don't wanna make a million a year

second I don't have 60.000 USD in a year....

We were having thougts on this for a couple of years, but I always thought you can't make a living out of it.

My father in law is very excited though...also cause there aren't any good stores in a large area here. For sure there aren't high end shops.

On the other site of the medal he owns the building so we don't have a very expensive building to rent. My wife is taking over the Juwelery store in a few years and we can make a living out of that.

I know that the internet market is big....I am one of those who buys all his gear in the USA....but why?? reason number 1 is the lack of great service here!! and second is the lack of great gear.

It's just a thought we are playing with right now.... but I can asure you that working in a music biz is more satisfying then what I do now...hehehe

If this is getting serious we'll do a lot of research on it before even start with it.

sorry for the spelling:) I wish I had paid more attention to it back in my school days

Jeroen

[Steve Haynie]

Since you live in Europe, the brands we in the USA suggest are irrelevant. You should look at what Europeans want, not Americans.

Service is the key to a small shop. Can you do guitar repair? Can you learn guitar repair? There are repairmen who pick up instruments and take them home to their own shop, but that is money that you should make for yourself. Your service is in the hands of others as well. You really need to do the work in house. If you start a business you will have to be good in the beginning, and great within a short time.

[Guest pirateflynn]

It's only a romance gone bad when you quit!

Look at it from another point of view. Suppose you had a job that was paying you $60,000 a year. Would you look for a $30,000 a year job to replace it with? Of course not, you'd want to make more money at your next job.

When families keep a business open for memories sake in the face of economic reality they are doing themselves a disservice.

Suppose the parents absorb the lost rent to the cost of $24,000 a year. Not only are the parents losing the rental income, but they are also losing the interest income they could be making from having the $24,000. The value of the business is not increasing because any potential buyer will see the books and see the lack of realistic rent. The business property is not increasing in value at the same rate as its neighboring properties because most commercial real estate sales today are based on 10x annual rents plus $200,000. By having artifically low rents the parents devalue their property. Any bank lending money to a buyer will demand tax returns dating back 5 years from the parents to determine the rental income. The parents will have a hard time finding a customer who can come to the table with a 50% down payment, which is what they will need given the tax return information. So while the parents could never sell the property for its true value given their actions, the children will absorb the true value at inheritence time.

Let's say the property is worth $500,000 if the parents were collecting the $30,000/year rent the market should bare. If the parents sell, the fully depreciated property would be exposed to $75,000 in capital gains tax, putting their net at $425,000. By charging the children only $500/month rent the bank sees the property as having a value of $260,000, which means they would lend a maximum of $208,000 to a potential buyer. Therefore you need a buyer that has $292,000 cash, which would be a 58% down payment. Now suppose the parents die, the property would be valued based on the square footage for the area. The children would have a $500,000 charge against their inheritence amount, even though they could never realize that number even with a $500,000 sale price.

It is a lot more complicated than people think. A business is simply a job you own. The point of your employment should be economic gain first, enjoyment second. When you confuse the purpose of your work you make bad economic decisions that have long lasting consequences.

If you can make more money working less hours for someone else, it is not viable. The time away from your friends and family have an economic value. You have to make more money than the customer who has a simple 9-5 working for the town, who has no downside risk other than being terminated.

Many once successful businesses are kept on life support for so long that the family fortune is lost in the end. People simply refuse to see the reality that is right in front of them, the market has changed and while an idea may have been great 40 years ago, today it is no longer viable.

There are always exceptions, the people who bet the odds, acheive the American dream, etc. Just be sure you are willing to lose all of your savings, potentially go bankrupct, maybe lose your wife and kids as a result of being broke and a future of bad credit before you jump in.

Well, this is not the GOOD news that everyone was expecting but it should be required reading for anybody wanting to open a business.

edited to add: I can't express strongly enough the importance of a well researched business plan. Look at the competition, make sure the community can support your endevors, find your unique angle and be the best at it. Advertising methods have changed drastically and continue to evolved. Once you make the leap, finding advertising that works for you will occupy a great deal of your time, but it is invaluable. Good luck!

[JohnnyB]

They also have the advantage that they've been in business for 48 years under the same family ownership.

In other words, the building is long paid off. The children are either paying no rent or artifically low rent, covering the taxes and insurance only.

I'll give you 50:1 odds they have not increased their insured amount in the past decade and thus they are under insured by at least 50% to the true real estate value at this time. Very few people say to their agent "you know with all this real estate appreciation I think I should double my coverage (and monthly bill)".

If the parents are subsidizing the rent by $2,000 a month to keep the doors open it is not a viable business, it is romance gone bad.

Ever the optimist, huh?

• In other words, the company has a half-century of continuity, doing the same business in the same location.
  
• In other words, customers know where they are, how to find them, and know what they carry.
  
• In other words, Val, the current owner and son of the founder, was born into this family business, and he knows his shit, both in taking on new franchises and just about anything you'd want to know about vintage guitars or amps. The store's been around since current vintage was brand new.
  
• In other words, this store has weathered any number of boom and bust cycles. The store incorporated within a couple years of the advent of rock 'n' roll, and has been proffering guitars through the folk and surf movements, the British invasion, psychedelic rock, folk-rock, disco, fusion, punk, new wave, techno, heavy metal, grunge, rap, hip-hop, u-name-it.
  
• In other words, the store has been around long enough to have everything in place--entry-level, pro-level, used, vintage, a full-time luthier, and a vigorous teaching program to cover all the bases.
  

Val is well into middle-age; his father died about 6 years ago. As for keeping insurance current, I personally know of enough incidents of vandalism, attempted shoplifting, and accidents there that I suspect they revisit their insurance policy pretty often. It is not a gaggle of spoiled kids coasting on Daddy's legacy. It's run by a son who grew up in the business who has consistently shown that he has plenty of business acumen of his own.

Your assumptions are presumptuous, invariably negative, and all wrong.

[Luke]

[*]In other words, the company has a half-century of continuity, doing the same business in the same location.

People put very little value on this anymore. Your parents were impressed by issues like these, today's kids do not seem to care about this.

[*]In other words, customers know where they are, how to find them, and know what they carry.

While this may aid in customer retention, it does very little to build new business. America is a transient society and playing guitar is youth oriented business, you have to keep replacing the lost customers with new ones.

[*]In other words, Val, the current owner and son of the founder, was born into this family business, and he knows his shit, both in taking on new franchises and just about anything you'd want to know about vintage guitars or amps. The store's been around since current vintage was brand new.

Is he making the same money his father made (inflation adjusted)? I doubt it.

[*]In other words, this store has weathered any number of boom and bust cycles. The store incorporated within a couple years of the advent of rock 'n' roll, and has been proffering guitars through the folk and surf movements, the British invasion, psychedelic rock, folk-rock, disco, fusion, punk, new wave, techno, heavy metal, grunge, rap, hip-hop, u-name-it.

The invasion of the big boxes is not a business cycle issue, it is a reality of modern life. You can find thousands of hardware or paint stores that survived business cycles to then be killed of by the big box.

[*]In other words, the store has been around long enough to have everything in place--entry-level, pro-level, used, vintage, a full-time luthier, and a vigorous teaching program to cover all the bases.

This is actually the only issue you raise that may have some factual basis to support a future. Being well rounded and exploiting the nitches the boxes are not interested in is the key to survival.

Val is well into middle-age; his father died about 6 years ago. As for keeping insurance current, I personally know of enough incidents of vandalism, attempted shoplifting, and accidents there that I suspect they revisit their insurance policy pretty often. It is not a gaggle of spoiled kids coasting on Daddy's legacy. It's run by a son who grew up in the business who has consistently shown that he has plenty of business acumen of his own.

You just said you simply "suspect" their insurance coverage, so that means you do not know and your speculation is no more valid than what I said.

Your assumptions are presumptuous, invariably negative, and all wrong.

You are yet to say one word about whether this Val guy is making any money, whether his income level (inflation adjusted) is on par with what his father made and if he pays fair market rent for the property. It could be Val's mother still owns the property and she does not charge him fair market rent, or if both parents are dead he may have inherited the propery. Either way, he has to account for a rent expense to determine if the business is viable.

Say he got the business, the inventory and property all for free via inheritence. The property could be sold for some amount, that amount could create interest income. The property could be rented to someone else, that would produce some form of income. If we take Val's net income and subtract out what either he loses in interest income, or what he under pays in rent, what would his net income become? Being able to survive a business cycle because you are debt free is different than running out the string indefinetely. The boxes are not going away, the rules have changed and for a business to viable long term the profit margin has overcome all of the aforementioned issues. To justify the hours, exposure to risk and aggravation you need to see a 50% margin, not 30% and another 7% due to nepotistic luck.

The simplest of questions is, whould Val's father have entered the business 48 years ago given today's business reality? I truly believe he had visions of success greater than that are acheivable today.

[BCR Greg]

Man, I wish I knew everything like Luke.

[cmatthes]

Luke:

Ease up, Rommel! Maybe Johnny B's friend gets some personal job satisfaction out of what he does that keeps him going. If it was as dismal as you paint it, maybe he should do something else. Just stop and think that maybe that's what this guy LOVES doing. Despite your points - some of which make sense academically (but your delivery...Jeez !) - not everybody is out to be the biggest and baddest in their niche (no "t").

There are plenty of people who live far more rewarding and fulfilling lives doing something they enjoy and getting by than by pursuing the big bucks. That's their right and more power to them. I think it's great.

Feel free to debate any points people make on this forum, but if your only input here is negative/critical and you want to come across as a know-it-all, you will not be taken seriously. Positive contribution is also welcomed!