Sweetwater: Chuck Surack. How a Customer Service Strategy Built a Billion Dollar Online Pro Audio and Music Company.

0:09 I've always believed everyone in our company, whether it's a sales engineer or the receptionist, is either adding credibility. taking credibility away from our company and I gotta have people always adding credibility. We empower everyone in our company to make the right decision, to do the right stuff. If someone would come to our store or or phone in to the receptionist and say, my keyboard you know, quit working or they're empowered to replace it. Every employee that ever I hired, I would tell them, You'll never get chastised for doing the wrong thing. You'll get chastised for not doing the right thing quick enough.

0:44 Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. I'm Guy Raz and on the show today. How Chuck Surak went from mixing music in the back of his mom's VW van to building the billion dollar music and audio equipment giant.

1:08 Sweet water. There are a lot of ways to build a retail business. You can compete on price, you can compete on selection, you can promise faster shipping, bigger discounts, or endless convenience. But Chuck Surak took a completely different approach. He believed that before anyone bought a guitar or a microphone or a keyboard or a recording interface, They should have a conversation.

1:39 Not with a chatbot, not with a commissioned salesperson trying to close a deal, but with someone who actually understood instruments and recording gear. Someone who played in bands, or spent time in recording studios, who understood signal chains and synthesizers. and could help a customer figure out not just what they wanted, but what they actually needed. That philosophy became the foundation of Sweetwater. It's a company that's managed to become the largest online retailer of musical instruments and professional audio equipment in the United States. Despite competition from retail giants like Amazon and Walmart.

2:17 Every customer who calls Sweetwater is assigned a dedicated sales engineer. Every one of those salespeople goes through months of intensive training even before they ever answer the phone. And remarkably, Shock never tried to win by being the cheapest. He truly believed that extraordinary service Not offering discounts would be the key to building lasting relationships. And over time? It was.

2:44 And the amazing thing about all this is that Chuck never set out to build a retail empire. He just wanted to play music. Specifically, the saxophone. He grew up in Fort Wayne, Indiana, where he still lives and where Sweetwater is still headquartered. After he graduated high school in the mid-1970s, Chuck turned down college, climbed into his mom's old VW van, and spent the next several years playing saxophone with a cover band in bars and clubs. Across America.

3:14 We traveled almost every state in the continental US. I think I missed a couple out on the West Coast, but uh Back then you had a booking agent and they would book you for a week or two weeks in a particular club. And then they'd give you a clue where you're going next week, or sometimes they wouldn't know and they'd just tell you on on Saturday night, get in your bus on Sunday morning and start driving north or start driving south. And you'd call, this is before cell phones, you'd stop at a payphone every so often and go, Where am I going?

3:40 And eventually they would tell you. I remember one time I left uh Charlotte, North Carolina. And he told me to drive north. And next thing you know, I'm in Sudbury, Canada. And just barely in time for a gig that started on Monday at seven o'clock.

3:53 Wow. And did you make I mean, presumably you're making enough money to like stay on the road, but I can't imagine this was a a lucrative Lifestyle. No, most of the places you played you got free room and board. Quite often you'd stay in the hotel or maybe they had an apartment they rented. You got free food. And you know, I laughed. I I said I made about fifty bucks a week. I probably made a little bit more than that, but it barely paid for gas and getting to the next location. And that's why I ultimately quit because I just

4:21 I was a a decent musician, but I wasn't gonna be good enough to be a truly professional musician. Got it. All right. So you're touring around and And from what I understand, I mean, you become like the de facto roadie, right? Like Setting up instruments and and speakers and making the audio system sound good.

4:37 Um and I guess even inventing or like hacking audio gear for gigs. Um, so y me you were kinda like the sound engineer. Yeah, absolutely. And so a couple of things I would tell you. Back then equipment was very expensive, hard to get, much different than today. Heavy really heavy. Heavy, big heavy speakers, all that sort of stuff. But I would run the the sound system with my right hand as I played my saxophone with my left hand. And so we didn't usually have a sound man out front. I would just run it from the side. You'd have a mixer. A mixer, right. And you would run it and you'd play the sacks with your right left hand. Exactly. And then the other thing that was interesting, when we were on the road Back then, there weren't a lot of standalone recording studios. Most of the recording happened in radio stations.

5:18 And so we would quite often on Monday morning go to the local radio station and record you know, this week we're playing at the holiday inn or wherever we were playing and so I got really used to using recording equipment. And through the years on the road I would gather more and more of that equipment myself. So it's interesting, you guys would have to record little spots on local stations to promote your live shows at these bars or clubs. And and as a result of that you were starting to experience with these recording booths because you would they would just say, Oh go use that booth over there and you know record your spot and bring us the eight track cassette of it or whatever it was. Exactly. And also a lot of those radio stations had multi-track recording studios with either eight or sixteen track recorders, so you could record every instrument on its own channel.

6:02 and then mix it and make it sound good. So you kind of, even though you you love the sex, it sounds like you're really kind of developing this passion For the technical side of you know, of setting up a stage and running the the the chords and But when you come back home to Fort Wayne

6:20 Uh, you realize that maybe you could Make a business out of this, like have a a recording studio? You know, I came back to Fort Wayne, I was really tired of living out of the suitcase and making the quote unquote fifty dollars a week. Um, but I didn't know what I wanted to do. I really didn't. But I knew I wasn't gonna go go to college. I also knew that I had a lot of this equipment and so it was a simple way to make money and just start helping my friends. And so that's really what drove me at first.

6:46 Alright, so you're back in you've got your VW bus, and you I guess you come up with this idea of converting the VW bus into a recording studio or like the the engineering booth of a recording studio. Tell me how how you Because there weren't any recording studios in Fort Wayne or or you knew musicians who wanted to record their music like maybe all of that? You know I don't really remember. It just sort of naturally happened. Uh I mean I do remember

7:14 wasn't very long after I had the VW bus doing recordings, I started going to all the high schools. And middle schools and saying let me record your Christmas concert or your spring concert. And then I just got so so darn busy. Recording everybody. And just to m like paint a picture of this, it wasn't like they were recording in the VW bus. You had like the mixers.

7:34 and the sort of reel to reel in there, but you would run the cables from the bus into the Auditorium where they were recording? Yeah, that's exactly right. I would record their live performance. But I would sit in the bus with my headphones on. And monitor it and make sure all the levels are coming in correctly and mix it together and all that. Like an FBI listening booth. I never thought of it that way, but it's kind of. Yeah, like in the movies you see in the seventies, yeah, they're sitting in there with the real's real.

7:58 Okay. So you're you're recording by the way, what would they do with those real to real recordings? Like why would yeah Yeah, it's a great question. So I would take those real to real recordings and then go back to the living room of my twelve by fifty five mobile home, and then I would edit all the songs in order, take the extra pauses out, and and then we would turn them into L Ps or records. And then they would sell those records. So it was a fundraiser for the school. And it was also an interesting way for me to tell the band director or the choir director, look, it won't cost you a thing. Just let me record them and then I'll make my money by selling those records or we'll split the profits of selling those records to your parents. Oh wow. So you would that's a great idea. So you would just d do the recording for free. You see, you got church choirs and and the schools and These were your clients? Like who who else were you recording?

8:44 Everyone we've talked about, but it would be choirs and bands and I would record them in their auditoriums or their cafeteria. I did many, many uh presidents of companies, CEOs of companies, I've go into their boardroom or the maybe the speech they were making. I remember one year I did a I recorded a speech of the uh CEO of General Motors. He was down in Defiance, Ohio. And all the way through his speech he kept referencing the current year and he meant to reference to next year.

9:11 So he gets all done with his speech and I figured out how to use a razor blade and tape and change all those references that he made. And I was a hero for them and for many, many years I got lots of their recording business because I made him great. Yeah. Um, and by the way, this equipment at the time was not cheap. I mean a reel to reel was it it was a four track recorder or I started on a four-track and then I did most of my recording in the VW bus with an eight-track recorder.

9:36 And h how did you finance all this equipment? Well, anywhere I could make a few dollars, I would make a few dollars and put'em away. And even Even when I was on the road I was able to sock a few bucks away. And then with the recording, you know In those days I was making twenty two dollars an hour if I charge for recording, which wasn't very much, but it was enough that every dollar I made would go right back into the equipment. Okay, so I guess That year, seventy nine, was the year you officially kind of founded this business, you called this CNB Audio, which would be When she become sweetwater sound, but C and B what does C N B stand for? It was Chuck and my first wife, Brenda.

10:12 Okay. And and like I mean you talk about it it recording CEOs and church choirs or were you kind of looking to get into like bands and recording musicians who wanted to make records. Yeah no I wanted to do musicians making records, but in the early days I paid the bills by doing all the recording we've talked about. But my goal ultimately was to do music for musicians that wanted to record real albums. Yeah. But I needed a location to do that. And and for the first couple of years I didn't have a location. All I had was that mobile home. So it was wherever they were recording, but you really wanted to have a space build it out and people could come there, rent it, record it, you could engineer it. That's what you were looking to do.

10:51 Absolutely. And that started in nineteen eighty one. And how did you do that? Where where'd you find the space? Well I found a small house on the west side of Fort Wayne and I built basically a two-car garage, but that garage really was a recording studio. It looked like a garage from outside, but what's was interesting about it, where I built this or built this studio, the house was already there. But it wasn't zoned. legally it was zoned for residential. I had to be careful, and I didn't want to raise the ire of the local zoning officials. So let's talk about Fort Wayne at the time in nineteen eighty one, eighty two, when you've got the studio, because

11:24 You know, it's we're not talking about Sun Studios in Memphis in the in the fifties, right? I mean Elvis and Johnny Cash hanging out there. You know, for Wayne wasn't like where tons and tons of bands were recording, right? I mean, I can't imagine it was or or am I wrong? You know, every city across this country has musicians and bands that want to record. But you're absolutely correct. It wasn't a recording mecha, in fact.

11:49 all of my friends, all my professional friends would go a recording studio in Fort Wayne. They just didn't understand it. Right. Why don't you go to Nashville? Why don't you go to LA, go to New York? Right. Um, but I knew that it was possible to be successful there. I didn't know what level I was going to do, but I knew I could be successful. And we had lots and lots of bands coming in. In fact I was So busy. We would run from early in the morning till late at night. It was a very good thing. So you've got this business going.

12:16 There's a real turning point. It happens in nineteen eighty four. And I want you to tell me about this because From what I understand, you were invited to a trade show in Chicago, a trade show of musical instruments, and While you were there you discover something that would

12:32 Essentially I I think it's not an understatement to say would actually change your life. Yeah, it did change my life. Uh I had a friend that owned a local piano and organ store here in Fort Wayne. And he invited me to the Naham show and he said, Well that means the National Association of Music Merchants, and they have their dealer show once a year up in Chicago. I said, Yeah, I'll go with you. He can he was just a friend and I had bought some synthesizers. through his store. So we become friends to that.

12:57 And I went there and I saw a prototype of a music instrument. that just set me on fire and frankly set the world on fire for a while. And it was called a Curzwile K two fifty. Ray Kurzwell, who's a futurist, he's still alive today, still doing some really interesting stuff. But he had figured out how to record a nine foot grand piano and digitize it. And put it in in memory chips or ROM chips.

13:19 And you know, back in nineteen eighty three and eighty four, this was unheard of. But not only did it have a recording of a nine foot Steinway piano, it had an upright bass, it had a fifty voice choir, it had a forty five piece string section. But it was an expensive instrument. And so I saw prototype, and I'm going, that is amazing. In my own studio, I have a small six-foot grand piano. It's always in a state of being out of tune because that's what pianos do. They're always getting worse. And I thought if I could buy this Kurfil K two fifty. I would have a nine foot grand piano always in tune, plus

13:51 39 other sounds that came with it initially. And so I bought one early on, and then I started reverse engineering how it worked. And I designed my own sounds for it, designed my own software for it, and uh just took the instrument to a whole nother level. This was a very expensive machine at the time,$20,000, which is roughly$63,$65,000 today. So this is not no joke of an investment for a 28-year-old guy to buy. Yes, I had a a small Yamaha grand piano and I decided I could sell that piano. and put some more money with it and I could squeak my way barely into a cursive K250. And that's what I did. But once you had this thing, it would generate

14:32 A lot of income for you because you First of all, you were probably the only one in Fort Wayne who had this thing, I would imagine. I was the only one in the Midwest at the time that had one. And so at the end of every one of my recording sessions, I would tell my customers, would you like to hear your music with a 50 voice choir or a 45 piece string section or upright bass? And so I would get a couple more hours of recording time and they would get a better sounding project. I also would throw it in the back of my VW bus and take it down to other recording studios. So one of the real famous studios is down in Anderson, Indiana, where the Gaithers used to record, and I would take it down there and do sessions.

15:09 And they would pay me for the day for having it there, or I'd take it up to Detroit and other studios like that. So you would play it. In the studio. Either I would play it or maybe they'd have another keyboard player that would play it. And so you were not just engineering in the studio, it sounds like you st you were doing more production work too.

15:25 Absolutely. I love producing music. I mean it's really cool because it's it's like people are well they're paying you more for more studio time. So that's one thing. But but then I guess You start to

15:37 It had the ability to enable the user to make their their own new sounds with it. Like their own proprietary sounds. We could do that also. We did a lot of that. We would

15:49 record the strangest instruments or not even instruments, the strangest sounds and turn it into an instrument. It could be a door squeak. It could be rock sitting together. And next thing you know, you you put it across the keyboard and it can sound like a music instrument. So you could record into the like there was a memory chip inside of the synthesizer you could record onto? Yes, that's correct.

16:08 Which is quiet. I mean today, of course, you know, just record your iPhone, but in nineteen eighty four That was really different. I mean m you're essentially going from most people were still using real to real. to record music at that time. And and these would be sounds like yeah, give me an example of like a sound you would create. Like what would you how would you do it? Well, being a musician myself, quite often I would just record myself or other musician friends into the instrument. So as an example, I did lots and lots of recordings of my saxophone. Right. So a guitar player or keyboard player that didn't play saxophone could now get

16:41 And uh you know, we record all kinds of things. I did uh bagpipes. There weren't bagpipes built into the machine, so I recorded a bagpipe player. I remember one time I brought in a trombone player, a trumpet player, and I played saxophone. And we made a brass section sound. There was not a section of brass in there. That sound ended up being used by Stevie Wonder on his characters album.

17:04 Yeah, I mean how did so that that sort of segues into my question, which is your guy in Fort Wayne And you're You start to make your own sounds, right? Yep. Um But how did you

17:16 You know, this is pre internet, this is like still early fax machine days. Like, how did anybody find out that hey, there's this guy in Fort Wayne, Chuck Sirac, he's making Samples on the Kurzweil and uh they're pretty great. Like ha Here you go, Steve, you wonder like how would Help me understand how anybody even knew what you were doing.

17:37 Yeah, great question. There were two ways. The first way is there were a couple manufacturer reps work for Kurzweil and they would travel around the country to other music stores and happened to be one from southern Indiana who called on all the stores in the Midwest, and he would see me as a customer as an end user. And he'd come by and trade sounds with me and he'd take him to the other music store, so that's one way. But the real way I really made it happen is there was a magazine back in those days called Mix Magazine. Mix magazine covered recording studios around the country and they would list their equipment. You know, they have a an MCI tape recorder, they have a uh an Atari console and they have a Kurzwell K two fifty. And any time I would see that they had a K two fifty, I would immediately either call them or write them and go, Wow, you have a K two fifty? I have one too. And I was hoping to trade sounds with them. Generally I found out most of the players were just players. They weren't technical. They weren't into the musical side or the

18:31 making sounds for it. And they'd go, Well I don't have any sounds but I sure would like yours. And it was kind of funny in the early days they were on a floppy disc that was a three and a half inch, kind of a semi-rigid disc that the Macintoshes used. And I'm running recording sessions, but I'm copying discs on the side. I'm kind of multitasking, and I'm frustrated that people want my discs, but I'm really busy trying to do a recording session. And it took me a while to figure out that there was a a great way to do the both. You were recording samples onto the floppy discs and selling those to people, basically. It sounds I mean sounds like Was it all that

19:05 I mean I again I don't want to minimize what you did, but it doesn't actually sound all that complex what you were doing. It just like you were just the only one doing it. Anybody could do it pretty easily, pretty quickly. But to do it to professional levels where all the notes come. sounded correct and it didn't sound munchkinized and Yeah, yeah, it was a real skill, it was a real art. And I developed a lot of software tools to make my music or my sample sound even better. Alright, and and were you I mean

19:32 Selling the the floppy for how much were you selling it for? Well, initially I gave them away and I was getting so annoy that it was getting in the way of winning my recording sessions, so then I started selling them for five dollars apiece. Which is really funny, I sent out a dot matrix newsletter. And uh on that newsletter I had a list of all the sounds that I had and and people would send me back the form with everything checked off. And um, you know, I got two, three, four hundred dollars for for all the discs. So I guess you become at a certain point around this time a dealer for this machine for the Kurzweil.

20:02 K two fifty. And why was that? a good use of your time. I mean I mean What made you think I should just start selling these machines for Kurzweil? Actually, I wasn't that smart.

20:14 But I mentioned the Kurzville rep kept coming by and getting my sounds, and he would take them to the other dealers up in Chicago and Detroit and Minneapolis and And uh I kept telling about my relationship with all my friends. By then I had about three hundred friends around the country that had their own Kurzweiles. And he kept saying, Why don't you become a dealer? Why don't you become a dealer? And I said, Oh no, I'm too busy running my recording studio. And eventually uh he talked me into it. He said, I'll set you up to be a parts dealer. That was in the fall and and by Christmas time I had sent out a newsletter again to all my friends and going, Hey, I've just become a Kurzwell dealer, and if you want sound block A or B or C or D, and each one of them had a bunch of different new sounds in it, I am a dealer for all that. So send me your check and and I'll get the parts to you and I'll t help you get it installed. So through the month of December I start getting check after check because the kind of people that had these machines

21:04 usually were pretty successful or they were universities and they didn't have a great relationship with their local store. And so I was a little bit the lifesaver for people that had Cursel K two fifties. And I'll never forget it was a couple days before Christmas Uh, my my rep friend called me and said, Hey Chuck, I really need all those orders. It's gotta be done by the end of the year. You know, how are you doing? I said, I don't know, I'm really busy, I'm recording Christmas albums, I've got a pile of checks here, I haven't really figured it all out. But Um I said, I don't know, it's a couple hundred thousand dollars worth. He said, Are you serious? I said, Yes. He says, Well you gotta get paid. I said, No, I have checks from everybody already. So he got in his car and drove up to Fort Wayne and we counted all the checks and ordered all the parts, and I did several hundred thousand dollars of Kurzwell parts. This is a nineteen eighty five to eighty six, I think. Exactly. Yeah.

21:49 You know, I read something that just I thought was so interesting'cause I guess back when you become a dealer, you also become the customer service guy because I'm assuming they would call you up and ask for Support or help. But you really started to focus on learning as much as you could about the people you would sell stuff to. Tell me about what you would do. Well you're absolutely right. And you know, I always have tried to keep track of spouses' names and children's names and their interests, but but having a relationship with them over time you figure all that stuff out. And you would by knowing s uh you know, a spouse's name or a kid's name, they might call you six months later and you can say, How's uh how is Bill Jr. doing it. And they would probably be blown away that you remembered that.

22:31 Absolutely. I mean it's the whole music business from my point of view is all about relationships. It's not a transaction. It's really a relationship for life. Yeah. And that became the genesis of sweetwater sound. Alright, so and and I should mention by this point, you know, you were called sweet water sound and and and the I've heard different kind of you describe different variations on the origins of the name. What what is this name and where's it come from?

22:57 So when I was out in the country, a lot of farmers had little wooden signs by their property. They'd sell Bill's acreage or Steve's farm or whatever it was. And when I moved into Fort Wayne, uh I knew I didn't want to be C and B audio anymore. So this is about the second or third year of our business. And I had two acres of land and I had a little creek in the backyard. And I've literally just put a bunch of names on a piece of paper. And I'm thinking about this little creek in our backyard. I go, water, that's kind of sweet. And it became sweet water. And so I put a little sign it was about two foot wide and a foot high that said sweet water. Didn't say what it was or anything, but that helped me get past the zoning officials, and yet my musician customers could find me. Yeah. Okay, so you are now growing as a dealer for Kurzweil, but meantime

23:42 Are you still rec doing the recording thing?'Cause this you got a lot going on. You're making your sampling, you're putting on discs and you're Recording people and you're selling equipment for the the Kurzweil machines, synthesizers. So I imagine that the recording studio part of your business It has to kinda shrink a little.

24:00 You know, by then I brought on my first employee. And so we could keep doing the studio thing and he would do some of the sessions. I would do some of the sessions. And it just grew from there. But no, I don't I don't believe in shrinking. You're you're always Going forward or backwards? Okay, so

24:14 Around eighty five, eighty six you become a eventually the exclusive dealer in your area for Kurzweil. And so At what point Did you Sort of

24:24 begin to become a person who wasn't a recording engineer, but a person selling studio equipment musical instruments. Like how How long did that take, that transition? Yeah. So I told you that I became a parts dealer in December and started sending all those parts out to my friends.

24:42 in January and February, about uh March of that year, I got a call from a friend and he said, Hey Chuck, I want to buy another Cursew K two fifty. I said, whoa, you already have one. I just loaded yours completely up. You know, you probably have thirty thousand dollars in your machine. Why do you want another one? And he says to me, he says, Chuck a Kurzwell only plays twelve notes at one time. And I hold my fingers up. And I go, Well, I got ten fingers. What do you mean, twelve notes? He says, No, no, no, no. He says, I do orchestrations with full orchestras. And I have to hire an orchestra for a day or two. It's thousands of dollars. He said, If I had another cursewall, I could do twenty four notes at one time.

25:17 And so I called the rep. And he says, Oh no, Chuck, I told you that to open a Kurzval As a re as a retailer, new dealer, you have to buy ten. And and um ten. Yep, yep, you gotta buy ten. And so eventually over the next couple of months I sold those ten and over time I sold a lot more.

25:36 You know, back to your question. By nineteen ninety I do remember one time with the TASCAM recording equipment, probably the most popular brand of recording equipment. The national sales manager came to see me with his rep and uh they wanted to sign me up for the really basic, basic equipment. And I said, No, I I want to be involved with selling eight tracks and sixteen tracks because I've got higher end customers. I've got people that have been buying these twenty to thirty thousand dollar synthesizers. And we went round and round and the sales manager said, Well I've never opened up anybody. for those higher franchises until you've been established for a while and all that. I said, Well that's really what I need to do, or I don't want to do it, because I want to sell the better stuff to my better customers.

26:13 And so much to their uh I don't know, disappointment or chagrin, they went ahead and signed me up. I ordered all the stuff and then I wrote a newsletter to my 350 customers at the time and said, I'm getting all this recording equipment. If you need a four track or eight track recorder or a mixing console, whatever, I have it. Took about two weeks. And I've got orders for everything that I have coming in already pre-sold.

26:36 Wow. And I'll never forget this. I called the rep and he was about an hour south of us here in Fort Wayne. And I said, Brian, guess what? I've sold all the stuff. I need to place another order. And he says to me. Now?

26:49 It was like seven o'clock at night, and he says, I'll have to turn the light on. I said, yeah, I guess. You know, and it's funny today because any manufacturer rep today would be thrilled to have any business that would beg for it, but he was kind of upset that I was making him turn his light on at seven o'clock at night to order the biggest order that he'd ever sold. When we come back in just a moment, how Chuck's decision to sell recording equipment and to intensely train his sales staff turns into millions of dollars in sales fast. Stay with us, I'm Guy Raz, and you're listening to How I Built This.

27:36 Welcome back to How I Built This. I'm Guy Roz. So it's nineteen ninety, just four years after Chuck bought that first Kurzweil. And Sweetwater's made about$6 million in sales. But Chuck's product list is getting bigger. He's operating out of a tight garage and he's barely keeping up with demand.

27:55 Yeah, by 1990 we were selling quite a few different brands, probably 20 brands of equipment or so, and uh just helping people with their recording, whether it was uh synthesizers or recording equipment, we really weren't into the rest of the technology yet. We didn't sell guitars, we didn't sell drums. It was just stuff I understood and I knew, synthesizers and and recording equipment. And how were you financing at that time, Chuck? Uh hand to mouth in sales from last month and the year and the month before? And then in terms of what you were actually carrying, your inventory, it would just grow organically because people would Ask you if you had it or

28:30 Or would you go to trade shows? Did you start going to trade shows and say, I wanna sell that, I wanna sell that, I wanna sell that. All the above. Definitely they would ask and if I heard it enough times, I would go, Okay, that might be worth looking at. But I also was very careful back in those days what we wanted to carry. I only want I was a little bit arrogant about it. I only wanted to carry the really good stuff. And so there were brands of equipment that I just didn't want to sell to my customers. If I didn't believe in it, if I didn't want to use it myself, I wouldn't sell it. So we we tend to specialize on the higher end equipment for a long time.

28:59 Tell me what a typical I mean Were you Working Seven days a week was it I mean, you've got uh customers ordering, you've got a pretty robust business. You've gotta get the the shipments out. Obviously it's not like today, which is the next day everyone expects next day, but still

29:16 What do you remember about your lifestyle at that time?'Cause I think y you mentioned your first wife d and maybe your marriage had Split up by that point. Uh no, she was around for about twenty years. Um but you know, I would say that was probably uh a sacrifice uh by being so engaged in the business and she had other interests

29:34 Yeah, you know, that we separated. Thankfully there were no children involved at the time. But no, it was it was definitely a seven day a week and it was early in the morning to very late at night. Uh I loved what I did, though. I mean I never considered it work. And whether I was selling to a customer or programming our next database updates, I did that for a long time. You know, all the systems that figured out the UPS shipping in those days and salesman's commission, I wrote all the code for that. Uh'cause I like I like Technology. Yeah, I mean it's reading about the story, it's like your growth is incremental. You go from like tiny two hundred square foot mobile home to, you know, a little bigger place and then five thousand square feet and then by nineteen ninety one you got ten thousand square foot place.

30:13 So this is a robust business. I mean you're just was there not a lot of competition where were there not a lot of businesses doing this kind of work or What explained You know, really just the growth of this thing at that time. Well, you know, there were about five thousand other music stores across the country, so there was lots of competition. Every town has two, three, four music stores. I don't mean this at all arrogantly, but what we really worked hard on is having relationships with our customers. What I heard all the time was I can't believe you can service me better out of Fort Wayne, Indiana than I can get out of my local store in LA or New York or wherever it may be. And I never really competed on price.

30:52 I always wanted to be a fair value, but I didn't try and undercut the local dealer. We just wanted to know the products better. We wanted to make better recommendations. We had this incredible service. You know, we'll fix anything we sell. By that time the internet is starting to happen, so we had all kinds of online educational tools. Our goal was to always add more value. And so if we sold a keyboard, we would include an extra bank of sounds. If we sold speakers, we would uh show you diagrams on how to set it up and and that sort of thing. Yeah, I mean now, you know, there's o obviously like content marketing and all this stuff. You were essentially doing that before we called it that. You mentioned the Internet in nineteen ninety four, you Got the domain. for sweetwater.com

31:32 But the website was not an e commerce website. It was a An education website, right? That's all it was for several years. It was strictly education. There was no way to even place an order online. The technology was there, we just didn't implement it because I really wanted to talk to the customer first. I want to make sure it's the right product for the customer. And what's amazing to me is

31:51 Virtu all of your business was just it was A mailing list you had and you had this Very nice but simple. kind of um I guess two, three page Not catalog, but document that you would send to people.

32:06 And you'd have your sales reps calling people, but you didn't actually become a catalog. Physical catalog business. Until like Uh read nineteen ninety seven.

32:17 That's correct. You know, we started, as you said, with the dot matrix uh couple, three pages and then eventually went to a real catalog, which was I don't know, six to seven hundred pages most of the time. And by then we've gotten pretty professional. It wasn't full four color. Um a lot of times so it didn't even have prices. Again, we wanted the customer to call us. There was no order form. You know, as an example, when we started selling keyboards, You know, it's not just buying a keyboard. You probably need a stand for it. You might need a sustain pedal for it. You might need cables to hook it into other things. All that stuff does take some expertise to explain it to the customer.

32:50 What you're saying is oh, I want people to call in because then we can help them figure out what equipment they need to buy with other equipment and how to connect them. Absolutely. That's a lot of time, right, on the phone with somebody, so

33:04 I imagine by the time you launched the catalog in nineteen ninety seven, You've got A significant number of people manning the phones. Yeah, we've probably had twenty people or so around that time.

33:15 But our whole deal was that one on one relationship. And so we know the first call or two with the customer would be a very long call. Our average talk time was twenty to thirty minutes. Because we would start to develop a relationship, understand how they're going to use it, what they're going to use it with, and that caused the customers to be very loyal and very sticky. You think about the other places they would call and the other store would just quote a price and we would spend time engaging with the customer. And at the end of the day, the customer would go, You know, I just felt more comfortable at Sweetwater. Yeah. I mean it's really cool because it's it's like Every time I go into a restaurant or a shop and I walk out and I and I'm treated really well and it was a great experience. I know that business was managed well because

33:56 the employee there, it's not their business, but if they treat it that way, you know that their boss is a good boss, that they're doing a really good job teaching that person how to do it. But oftentimes you walk a place and It just sucks. And you and and I think to myself, it's not that employee's fault. This place is not. Managed well. How did you get These twenty people

34:17 To learn how to forge those relationships with customers over the phone. Uh, we spent a lot of time training, but you're absolutely right. Customer service is just so critical. More critical today than it's ever been. But in those days I knew how important it was and it was just the right thing to do, but Uh we started very humbly, you know. At first we met at a little uh breakfast place. You would meet them yourself. Oh yeah, absolutely. And I would meet with the whole team every Tuesday morning and every Thursday morning and we'd spend an hour, hour and a half, sometimes two hours, and we would walk through things, we'd role play, we'd practice conversations, what we call the perfect conversation. And how do you handle situations like this? And we did that for week after week after week. And uh it was just really important. I wouldn't let anybody get on the phone talking to a customer until I felt they could do a reasonably good job at it.

35:04 Would the sales rep? Have their own customers. Or could you just call in and get anybody on the phone? Um you know, I had so many customers from my early days that I couldn't handle them anymore, and I was also starting to run the rest of the business. And so I start handing my customers off and then they got more referrals and and they all came to all the sales engineers came to us with a background of being somewhere, so they had their own friends and their own relationships. Got it and you you you said a word, I'm gonna just double click on that, sales engineers. These are this is a term you guys use. They're not trained engineers, but you call them sales engineers because what they also have the technical know how on how to help

35:43 People solve their problems? Yeah, unlike myself, most of them come to us with a four year music technology degree. And then we put them through what we call Sweetwater University. And Sweetwater University is thirteen weeks of eight hours a day where they're learning All kinds of stuff, you know, they're learning products specifically, they're learning technologies. Um, but they're taught by eighty different teachers over those thirteen weeks, and they're not allowed to talk to a customer.

36:09 until they're through that whole process. That wouldn't be formalized, I think, for another Several more years, right? A couple more years. But even even in our early days, I say we started at the restaurant and then we at our location we had a place called the Blue Diamond Lounge and we had training in there several days a week. And I'm not sure exactly when we start you know, really formalizing it, but it was pretty formal all early on. And did you like one of the things I th I find fascinating about especially good sales reps is they often have a script, right? And so there's like they will know what

36:39 the five or six things the customer might say and there's All kinds of ready responses. Were you guys able to develop those kinds of techniques as well? You know, we didn't really do that so specifically because every conversation was different. But what we did do is what we called the perfect conversation.

36:56 And that really meant that we weren't going to negotiate the price. Until the selling was done. I wanted the customer to understand where the right place to buy it. And when the customer to understand it's the right product. And once we get through all of that.

37:09 then eventually we'll talk about a selling thing. But for me to quote a price, which is what all my competitors did, you'd call around and go, I want to Yamaha this or a Gibson that, they would just quote a price. And to me that's silly because I don't know how the customer's going to use it or what else they want to use it with. And so I was not gonna quote a price until the selling was done. We're the right place and it's the right items for them. Okay. By the late nineteen nineties. You guys

37:35 You hit about twelve million in sales. It's amazing, right? You've got a very good business. And you get uh approached, I guess, by your attorney and an accountant and they're saying, Hey You guys got a big business here in Fort Wayne.

37:49 You might wanna take some money off the table. Wha what tell me the story. Yeah, that's exactly what happened. And Every dollar that we made went right back into the company and growing it and more inventory and the next salespeople we'd hire and all that. And so I really didn't have any money. And I was

38:05 Compelled by the thought of having some money. I'm thinking, well maybe we've reached our limit. Maybe twelve million dollars is the limit. For Wayne, Indiana, how big can you get? That's right. So we entertained uh And uh they were good people out of Chicago, the William Blair Capital Company.

38:20 Uh they're still around today and so how much of the business? About eighty percent of it. in in the late nineties. So you get A check, which I'm sure is nice and you could feel like okay, I've got some security here. But you stayed on running. If they didn't they didn't intervene, they didn't get involved, you just kept it Yeah, once in a while they'd have some comment, but basically they they let me run it. I mean it was a good business when they bought it and they let me just keep running it like it was.

38:44 Okay. by two thousand ish, right? So you've got your own twenty percent of it. Um you're s you're now able to buy stuff online, right? But I I imagine Most people are not

38:56 ordering through the internet. Yeah. They're not clicking. They're still calling you Or faxing you orders. That's absolutely correct. It took several years later. Really the success of Amazon is what got people comfortable buying online. Yeah.'Cause I remember the first I'm sorry I didn't buy it through Sheetwater, but in like nineteen ninety six About my first uh

39:16 Portable recording machine, which is a Marantz PMD two hundred two two. It's the most expensive thing I had ever purchased in my life. I was like, this is eight hundred dollars or something. It was so expensive. I was so nervous buying it. I I think I bought it from B and H in New York through their catalog at the time. Uh but yeah, I would not have even in nineteen ninety nine I was not ready to buy things online yet. Right.

39:39 But you could. You made that that was available. Yep. And the advantage we had in those early days is we had great relationships with our customers, so they trusted us. And trust is a big thing in our industry. I don't mean this to sound as negative, but a lot of music stores, it's kinda hard to trust them. And we'd already proven that we had a good solid

39:57 Basic. uh grounding of ethics, and so customers are comfortable buying things early from us, or buying things online early from us. Okay. Let's let's d go back to the Sweetwater University because I think this is really begins around two thousand one. And it's a it it's a

40:14 Training program. Where you have these people who are just gearheads, right? They're they love This stuff. Yeah, most of the people that we hired had music technology degrees or maybe they'd been on the road as a musician for a long time.

40:28 But what we really looked for were people that had fire in their belly. Someone was really interested in in a company that was growing fast and would do the right thing for the customers. I'm I'm curious, why did they need thirteen weeks of training? There's a lot of subject material. And like I say, we taught it with eighty different teachers, uh a couple hundred classes. We taught every technology, but then also a lot of specific brands and products and that sort of thing. So you would teach them how to work and and and operate virtually everything you sold. Absolutely. If you can't operate it, don't know how it works, I don't know how you could sell it.

41:01 So they're like tech support too in some ways. They are. So like This is a valuable person. Like you you're investing a lot of money and time in this person. Well thirteen weeks before they ever make a dollar for our company. And then we continue to invest in'em. I mean, Sweetwater University was just getting you off the ground. You would still as a sales engineer meet two times a week, every Tuesday morning and every Thursday morning for continual uh training as new products come out, new technologies, that sort of thing.

41:29 I mean there's a there's a sort of a you know kind of a stereotype of a good sales rep, right, who's somebody's just aggressive and just aggr just relentless and just closing the sale, closing, closing, closing. But you're bringing in people who were actually not coming from sales. These were people who were Like music gear nerds. Absolutely. And we never wanted them to close close hard as you've described.

41:52 We wanted them to present the right options to the customer. and jointly with the customer figure out if that's the right thing for them. I've always preached that I never wanted to sell customer more than they really needed. There were many times a customer would call in for a very expensive thing. And I would find out that That was too much for'em. And they really should buy a less expensive thing, but get all the other accessories to go with it.

42:15 I've always believed everyone in our company, whether it's a sales engineer or the receptionist. is either adding credibility. or taking credibility away from our company. And I gotta have people always adding credibility. We empower everyone in our company to make the right decision, to do the right stuff. If someone would come to our store or or phone into the receptionist and say, My keyboard

42:35 You know, quit working or they're empowered to replace it. I mean, we might ask a question or two, but they're empowered to replace it. They're never to ask a manager. They never would use the excuse, well, I have to get management approval. No, if you want to replace it, you replace it. And you know, the worst case from our point of view, we'll get it back, we'll fix whatever's wrong with it, we'll turn around and sell it as a demo or a used instrument. Uh so it's not a lot of skin off our back, but it's the right thing to do for the customer. So you it sounds like you discourage like cover your ass type of of Employees.

43:03 Yeah, we we would never Uh I've told every employee that ever I hired, I would tell them, You'll never get chastised for doing the wrong thing. You'll get chastised for not doing the right thing quick enough. So how would you retain people because the amount of money you're investing in an employee is so high that like you really don't want people to leave. We don't want people to leave, uh but they want to stay. Uh there aren't many opportunities like this. You know, you could go work at one of our competitors, but it's just gonna be a more traditional music store. I guess you could go back on the road as a musician, but to have a professional job like this, where frankly in your first year you're probably gonna make seventy-five to eighty, eighty five thousand dollars and your second or third year you're well into six figures. You know, we have people that are making nearly a half a million dollars. Wow. And that'll be that'll keep you. Yeah, that's a lot of money. In Fort Wayne Indiana.

43:56 I remember when I was hiring young people years ago, I would tell them the deposit on your house out in LA or some other big cities would buy your whole house in Fort Wayne Indiana. Amazing. Anyone listening to that who is like starting their life. Fort Wayne, Indiana. Alright, so you've got you're running the business, it sounds like you're happy, the business is growing, but your investors Get scared.com bubble bursts and anyone who remembers that time. It's a bloodbath, right? It's like venture funding just dries up because all a lot of venture firms are just getting killed.

44:30 Um, you guys weren't because you're not a dot com company really, right? You were okay. You the the bubble didn't really affect your business that much at the time, or did it? No, not at all. So we grew through that period just fine. But the way those capital firms work, after about five years, they want to flip the company and move on to something else. Okay, so five years they decide we're gonna sell or eighty percent to a new owner. And you're aware of this. But what did you What was going through your mind?

44:58 It was a mutual decision. It was about four and a half years in, they start talking about it. And I raised my hand and I said, You know, I'd like to buy the business back. I love what we're doing. I wanna buy it back. By the way, how much were you doing in sales by two thousand one? Uh I don't know, uh in the twenty million range or something. Maybe even more, I'm not sure.

45:15 And they kinda laughed and scoffed at me because they figured out that I didn't have that much money to buy it back. And I said, No, no, I think I can pull it off and They said prove it. And so my best friend who's an attorney and I went to uh about eighteen different individuals in Fort Wayne and said, We want to buy the company back. Would you loan me fifty, would you loan me a hundred? Uh one guy loaned me a million dollars. Let's let's break this down for me. the company back which

45:41 we will learn was a Very, very smart decision. but uh you didn't have the cash to do it. So you had to borrow money from And borrow. You weren't asking for investors, you were asking for loans. Right.

45:53 High interest loans, right? Yep, twelve percent. twelve percent. And can you tell us what how much you had to raise? Uh yeah, I don't know that I remember, but Six, seven, eight million dollars in that range. Right. But what I will tell you is I didn't have any money. Oh you didn't? Even though you got cash from the sale?

46:11 No because during that period my wife and I got divorced. Right. And I gave her all the money. I kept the business. Which Kinda funny at the time I tried to keep her as a partner in the business and my attorney said, No way, I will not let you do that. Give her all your cash and you just keep the business. which was, you know, a really smart, wise move. But I literally had no money. I did have the inventory. And so I was able to pledge the inventory and borrow money from we went to eighteen friends, seventeen of them said yes.

46:40 And they did it because they had known me for several decades now and had trusted me and knew I was gonna stand behind everything. If you didn't have personal cash. And you to borrow it. That's a lot of stress. And that's a that's like

46:54 Sleepless nights kind of money. that you have to raise. It was, but I've always my whole life I've always said failure's not an option. But what I will tell you, during the four and a half years the William Blair people had the company, the one thing they did put in place was some good structure.

47:10 So we had to do monthly reporting and all that sort of stuff, and that allowed me to understand the the totality of the business and where I thought it could really go. And so that probably gave me some confidence through the process. They impose discipline on the on the business. I've been able to grow this whole thing and I didn't go to college. I didn't have any business degree, didn't have, you know, a lot of that stuff. I taught myself almost everything I've done and that four years was a great education where they taught me how to professionalize the business.

47:40 Okay, so you've got now you've taken over the business back. You've got some debt. But turns out the business is growing and the cash flow is good and you can actually repay these loans. faster but I guess

47:54 Within two єers Two and a half years, yes. You are now the owner, full owner again of this business. Hundred percent. Yes. And it must have felt pretty great. It felt awesome.

48:06 Mean time this company is continue to grow and you guys uh introduce free shipping I think early, like two thousand three. It's been a long time, yes. Which is expensive. It was expensive, but it just became accepted.

48:21 And uh We want to take that question out of it for a customer. We'll just ship it to you for free. It's fine. Okay, so let's talk about the growth of this business. I mean, it is now you've got a catalogue Right. We're in the two thousands now.

48:35 It's not really going to become Primar I'm imagining today the overwhelming majority of your sales are Online. Yes, they are. I mean we have a great local store, but most of it's online, yes. But in two thousand five, two thousand six, when you now have the full owner.

48:50 I imagine is still Catalog. Mostly catalogue. Yes, it is. And so how did you see

48:56 What do you remember about Imagine what this could be, like where this is going. You know, by then we started to have enough credibility with our customers and our vendors.

49:07 I I should back up. Our vendors in the early days They didn't understand when I was operating out of my house. They'd never heard of such a thing before and many of them wouldn't do business with us. And I remember going to trade shows and begging them to do business. I tried to explain to them how we were different and no, no, you're just a mail order, you're just a catalog, you're just gonna lowball and hurt our other dealers. So it took a while to get their credibility. uh eventually they start coming one by one and and wanted to do business with our company. Because you weren't competing on price. You were selling

49:37 Customer service and support. Absolutely. It was unheard of to most of those manufacturers or those reps that we were working with. They they didn't understand that people would pay more or pay the same price if they got a better value or got great customer service. Yeah. And I would say that We had to be in the ballpark with the price. We couldn't charge dramatically more. But if I could charge the same price as your local store

50:00 And I would include a free bank of sounds or uh something extra that really didn't cost us a lot, but gave it extra value to the customer, even down to uh technical support and and a warranty. We offered a two year warranty on everything we've done. We've done that for a long, long time. Most of the manufacturers offer a one year warranty. Most of the local stores at best honor that one year warrant. I want to do a two year warranty most instruments will break in the beginning an infantile failure. And if they do, they're covered under the factory warranty. And if they are gonna break on month thirteen or fourteen or fifteen. I don't like that. I'd I wouldn't not have wanted to sell that to the customer. So I will cover that next second year and it's really been a relatively small amount of things we've had to cover, but it gives the customer much more confidence. Yeah. You mentioned it earlier, e anywhere you go today, Especially if you're used to great customer service, most places you go, you're disappointed. And so it can be a huge differentiator and it does not cost that much, but it's the right thing to do.

50:56 Well we come back in just a moment. Now Chuck's idea of service leads him to start buying other businesses into Wayne, all while growing Sweetwater into the billion dollar company. It is today. Stay with us, I'm Guy Raz, and you're listening to how I built this. Welcome back to How I Built This. I'm Guy Roz. So it's the mid 2000s, and Chuck decides to start getting involved in other businesses.

51:33 Things like aviation and cars. His goal is to grow more jobs for Fort Wayne, which he does. In meanwhile, he's expanding Sweetwater's reach and introducing new product lines. including actual musical instruments. Like guitars. You know, the most fascinating part to me, and I I don't remember exactly the year, but

51:53 We were selling lots of technology, recording equipment and all that, and I kept having customers ask about buying guitars from us. I had a lot of musicians that worked for me that played guitar, and so we finally took on a guitar called Godan. uh out of Canada and it's a guitar that had technology built into it. It could talk to computers and other things. And we thought we'd start with this high end guitar first. And I kept hearing from customers, why don't you sell Gibson? Why don't you sell Fender and all that. And then I'd also hear from my friends, well you can't sell guitars online. And that's what the manufacturers would think.

52:25 But we did it by the same kind of stuff we've talked about. We brought every guitar in and we did our own quality control on it. Which you go, Well, why do you need to do that? You would think they're all made perfect. Well, they're not. They're you know, some are made by Mary on Monday and Bill on Friday. And if we would take every guitar, we'd do a fifty five point check as we called it, and make sure everything on that guitar is perfect. Then we would take really high quality pictures and show those pictures online. We'd weigh the guitar, different guitar is way different. They have different moisture in the wood and that sort of thing. And then you can now see those online three o'clock in the morning in your pajamas and decide you want this one because it weigh three ounces less than that one. We place your order the next morning we'll call you and say, thank you for the order. And oh by the way, don't you want an extra set of strings? Do you need an amplifier? All those sort of things. But we went from no guitars to selling over a thousand guitars every day.

53:13 Wow. Um, I know this as somebody who's ordered so much stuff from Sweetwater over the years that you get a bag of candy And s and I I think a letter, like you you uh w no it wasn't handwritten, but you have a letter in there. Did for a long time. Yeah, candy's just our sweet little way of saying thank you. We've done it for

53:30 I don't know, four decades now or something. It's just it's not it's not uh very expensive. And it's just a nice way to say thank you. Okay, let's talk about Fort Wayne because You've gotten into a lot of other businesses. It started with

53:45 Flying. You you wanted to I guess when you turned fifty in two thousand eight. around then you want to learn how to fly. Helicopters. Which would lead you to getting into that

53:57 Business. Like I think if it like twelve, thirteen other businesses. And they're all based in they're all around sort of the Fort Wayne area. Yeah, most of'em are around Fort Wayne. There's actually about twenty five of them today. But helicopters. I was at a air show at a local airport and I saw a guy flying his personal helicopter.

54:14 And I said, Oh, Pete, that is so cool. And he said, Well, you should do it. I said, No, I'm 50. I'm too old. And he said, No, no, no. I have a friend in his sixties that got his helicopter rating. So I went home, started working on my wife, and that Christmas she got me an FA log book and how to fly helicopters. And by August I had my helicopter rating. And eventually you would start a helicopter charter business. Okay, I wanna just mention a couple of businesses you have.

54:38 A more an Italian restaurant in Fort Wayne. You've got a live music venue there, okay, not surprising. aviation company, helicopter charter flights, charter helicopter companies a a car dealership. You've got an optometry. shop and uh that sells uh glasses and does I care

54:59 Tell me about this, because these are a lot of businesses that it doesn't seem like you really need to do them. I mean sweetwater event will get there eventually became enormous, but even as you were sort of acquiring these businesses, were you doing it Just to diversify your business portfolio, tell me. What all of this is about. Well, you're absolutely right. Don't need any of it.

55:20 Uh but I love our community and there were just lots of opportunities that became available. So as an example of the twenty five, six businesses we have now, every one of them has a general manager running it, and then he or she has a whole staff of people working for them. And so it's created a lot of jobs and a lot of opportunity for our community. And and you acquire these companies when they're gonna go out of business, or like what's the story?'Cause you're not starting them, right? All the above. Some, you know, were in distress modes. Uh, there's been others like sweet cars where I started from scratch, you know, fifteen years later we felt. All kinds of uh

55:53 Uh one and two three year old higher end cars, so Lamborghinis, Ferraris, Porsches, Mercedes, all that sort of stuff. Get a lot of people buying Lamborghinis in Fort Wayne? We do, believe it or not, and uh about fifty percent of our sales are local and the other fifty percent go around the country. But these were brands that were not sold in Fort Wayne at a new dealership, and we just found a way to bring these one or two year old cars that have a little bit of depreciation taken out of'em, and now we can sell those kind of cars to Fort Wayne. What happened to the modest midwesterner? Driving their Lamborghini? In Four Wayne? There's quite a few I went to a car show this weekend. I bet there were eight or nine Lamborghinis. I think we sold most of'em, but it was fun to see. Yeah. Um okay, so so

56:32 A lot of this is around Fort Wayne and and bringing jobs to Fort Wayne. Outside of sweetwater, I'm just curious, how many W and what's the name of the company that oversees this? It's not called Sweetwater. Sarek Enterprises. Surec Enterprises, okay. How many roughly how many employees do you think Surec Enterprises oversees? Yeah, we have about seven hundred right now. Seven hundred. And and it it sounds like a I imagine you're a businessman, you want to you want these to be sustainable, but that's not really

56:57 It's more about you grew up in Fort Wayne and you've got the money and you wanna support Fort Wayne now. Yeah, I've been very blessed. My wife and I have been so, so blessed and And we we just want to do everything we can to help our community. All right, so coming back to to sweetwater, um During these years, right, e commerce is taking off, right? Like Amazon and and Walmart

57:16 got huge, right, online. Um and and I should say sweetwater does sell on Amazon, right? Like like other third party sellers. But Amazon has gone after a lot of other competitors in big markets, like Toys R Us, right? But not sweetwater. Why do you think that is? I mean I mean Amazon could just decide to undercut you by You know, by selling the same things you do, but for like Ten percent less.

57:39 I could. And I'll tell you the reason we're on Amazon. is access to customers. But that being said, Amazon has decided that there are other markets that are much easier to get into and to be an expert at. You know, I've mentioned it multiple times, but the expertise that we have

57:55 And the investment we make in our people. to offer they they don't want to have people. I mean you can't it's hard to call Amazon and talk to'em on the phone. We encourage people to talk on the phone. We we have those sales engineers and tech support people that really understand the products and I think people are comfortable buying little inexpensive things on Amazon or if you know exactly what you want. But when you have any question or anything like that, you'd be more much more comfortable buying that sort of technology from Sweetwater. It's interesting, yeah. And again, I mean I'm not you know, I buy tons of stuff on Amazon. I just bought a foam roller for my Thoracic spine, right? Cheap purchase. Yeah, you're absolutely right. And we've had many uh big companies try and compete against us, and they've gotten in the business and out, whether it's Circuit City or Best Buy or now

58:39 We're not naive. We have to compete against Amazon. So that's one of the reasons that two years ago we opened a warehouse in Arizona. We can now ship to Nevada or California in one day shipping. Can't quite do the four hours or whatever, or two hours now that Amazon's about to do. But most of our customers will wait one day to get the product. And the other thing about being in Indiana, we can reach thirty eight percent of the United States in one day. Yeah. And FedEx and UP S both have big warehouses or distribution centers, one in Indianapolis, one in Louisville, right down the road from us. So we can get to a big part of the country right away. And what we can't get, we'll get out of Arizona. Okay, let's get to two thousand nineteen. By this point You guys ha are selling about thirty five thousand products on your website.

59:20 Huge number of c seventy thousand customers a month. That year you're gonna do around A little over eight hundred million dollars. in sales. And you build a an enormous

59:32 warehouse distribution center, five hundred eighty thousand square foot Distribution center. No, I think it opens in February of twenty twenty in Fort Wayne to Yes it did. You know, for growth. And That's exciting. It's high tech, you've got uh five hundred eighty thousand square feet. And then

59:50 Bam. Covid. The world shuts down. You know what was amazing? We knew that warehouse was coming. Nobody knew Covid was coming. In fact

59:59 During the fall, we had ordered all kinds of inventory in anticipation of filling that warehouse up. We wanted it to be full. And fortunately all that stuff came in in January and February and early March, and now our warehouse is full. And then COVID happens and the world stops. Including myself and Guitar Center and and many of our other competitors were told they couldn't ship anything. You couldn't have employees in your building or anything. It didn't take very long and our governor said, no, no, mail order is good. We want mail order to stay in business. So they gave us permission to open. And uh my wife and myself and my daughter, who was thirteen at the time, and the local police chief and a whole bunch of others came in and we started packing boxes because I was desperate to take care of our customers because they were still buying equipment. And they were at home wanting to to get more equipment. Uh we were selling equipment for streaming church services. We were selling guitars for first time owners, and our business that year grew by 40%.

1:00:56 You were quoted I guess a retrospective article about Covid by an Indianapolis magazine. They s you said I was somewhere between panicked. And trying to inspire those around me.

1:01:08 Yeah, I would tell you that uh six months a combination of COVID And Black Lives Matter. uh was the hardest year in my forty seven years of being in business. And I was stressed and uh It immobilized me for six months. Uh mobilized you.

1:01:23 Yeah, I I just and every day it was tough. I I just didn't know what tomorrow would bring. And it took me about six months to get through it. And f by September I met with the whole leadership team of our company and I said, I'm choosing not to participate and we're moving forward. Not to participate in in what? Just the whole Um

1:01:42 the whole world of where it was at that time. When the Black Lives Matter thing came out, you know, I To me it was just Awful. I I've been a big supporter of every person. I don't care what the color of your skin is. And I think the Black Lives Matter group the people behind that were not necessarily

1:01:58 Good and strong. I believed in the movement, I believed in all bunch of stuff, but not the kind of rhetoric that was being thrown about. You felt like it was divisive. It was very divisive. I remember very clearly. putting a very small innocuous statement in and I got a call immediately from the police department and I go no I bought you guys all lunch last week. So I love the blue lives as much as I love the black lives as I do the yellow lives and the white lives and so on and so forth. So but I just chose to not uh You know, that time I had forty years of of being in business and I knew what my track record stood for and what I believed in and I just wasn't gonna get stuck in that anymore.

1:02:37 Do you make political statements, do you get involved in in political issues, or do you just kinda like to stay out of it? I try really hard to stay out of it. Yeah. I mean, it's interesting because I think a lot of companies have reevaluated this and have said have have kind of gone back to this the role of a business is to be a good employer, to be good to its customers, to make great products

1:02:58 But not too. run the country or run policy. Like that is not the role. You know, you look at the sixties in the Vietnam War, I don't think

1:03:08 Pepsi or Coca-Cola had a position on that. You know, they personally may have, but they didn't this business didn't come out. Well, I think the the challenge or the what was different. is that we had the internet. The internet empowered so many people to have a voice

1:03:23 So they drove it, encouraged a lot of it. You know, and again, that's the positive and the negative of it from that point of view. So It makes sense to me that this next chapter, which is I imagine you get through that year, twenty twenty. It's an amazing broke a billion dollars, over a billion dollars in business that year

1:03:41 And since then it's been over a billion every year, which is a billion dollars, right? It's unbelievable. Unbelievable. So you uh You get through this year. twenty twenty. Clearly very stressful for you.

1:03:54 But Going to that year. Because I was wondering, I was like you know In twenty twenty one. He decided to sell a majority steak.

1:04:04 Now, me you're doing over a billion dollars in sales. Amazing. opportunity to sell, but I have to imagine now knowing what I know From the previous year. Maybe you were like

1:04:18 This was a lot. I just I think I need to step away. You know, it wasn't so much that. Um

1:04:25 I had previously tried to figure out what's life after Chuck and what's what's the long term plan? And we have this problem in our country with estate taxes and you have to pay about fifty percent of whatever your net worth is to just when you both die for estate taxes and over a certain amount. Yep. Yep. And so so I realized it's a big problem. And so for two years, my financial advisor, my attorneys, all that brought in all kinds of experts and and had us look at various strategies and I learned terms like irrevocable trusts and all these sort of things that we could uh move our company too, and I just felt weird. And so December of that year I said, Well, why don't we consider selling it?

1:05:04 and decided to go through the process. So they went away and we worked on what we call a book. They you're talking about the bankers. Yeah. JP Morgan. Right. J Morgan. So they uh they sent out a copy of this book to thirty two companies and I was really clear when I started working with JP Morgan, there were some principles that I would not give up on it. I had no debt, didn't need to sell it, I was in a great position. But going forward, they had to continue to support our community, whoever bought the company, they had to support our sales management. process the team, um, you know, couldn't dismantle it. They had to they had to really keep the company kind of the way I'd been running it. And that was just a prerequisite or we weren't going forward. So sixteen cent back.

1:05:43 Incredible offers. I mean blew my mind life changing incredible offers. And we narrowed it down to two. Um, and I just really liked the one that ultimately won and uh be five years in August and they've done absolutely everything they said they would do. And it's just been a great relationship. My wife and I still own a big piece of it. We just don't own the majority anymore. And that course has freed us up to do lots of other things. Yeah, I mean this uh providance equity uh acquires uh a majority stake and and and you retain a minority stake.

1:06:14 Right. And how did you that they are going to do the things that you really need them to do, or that you you have a certain view about your employees, the business, the community. How do you bake that into a guarantee for ever?

1:06:29 Well, I don't know if I can do it forever, but But when I did interview them and I interviewed them as hard as they interviewed us, and we talked to references of of other companies they had done. The best thing I can tell you is they've done exactly what they said they've Would do. What they really did is they sped up some of the stuff that I was going to do anyway.

1:06:48 You know, I'd have done things in sequential order, very monitored and measured, taking on selling band instruments as an example, or opening the warehouse on the West Coast, or they did it all at once. It was a little bit stressful for the team, but it allowed us to go even faster. And that's that's what they really brought to the table. So twenty twenty one this happens, you come to terms w and and the company again has done uh CR has done over a billion in sales. So You know, that acquisition was was

1:07:14 certainly considerable uh part of this is you you decide that you're gonna move on. You're gonna step down as CEO. What did that mean for your day to day life. I mean here you go, twenty twenty one to running this thing. And then what ha is it like one day to the next?

1:07:29 It's like you're not There's not like a million questions coming at you, you're not going to bunch of meetings, like it's just ever happened. The money was so amazing. Not only the money for me, but the m money for all my team, you know, all my top people had a really nice payday. Yeah. But I stayed in my office until the day I saw the money in my checking account, or in my savings account, actually. Uh wasn't gonna leave my office. And it was hard. It was really hard. My staff helped move me out of my office, so I couldn't have done it by myself. But I stepped up to chairman of the board. I'm still involved. Uh

1:08:03 I've got so many friends that are there, lifetime friends that are there, and uh and it's my baby, but I've now sent my baby off to college and and doing really well. Yeah. So I mean, again, like just emotionally. Was part of you

1:08:16 You know, there's still the emotional thing of like I'm not coming in every day anymore. I'm not, um Sometimes people get sort of say to me, I didn't feel as needed right away. You know.

1:08:28 I miss it. That's what I would say. I miss my friends. I miss going there every day. Um But I am fulfilled with other things that we're doing. And uh I'm glad I have that. You know, I talk to a lot of my friends, of course, retiring right now, and I go, that scares the crap out of me. Uh I'm sixty nine. I feel like I'm thirty nine. I I guess I don't quite look it, but I really have lots of energy. I I'm up early and I'm going late and I sleep, you know, very few hours per night and so I love what I do. And today I think sweetwater's got well like twenty six hundred employees, roughly, something like that. Yeah. Yeah.

1:09:00 You've got a warehouse in Glendale, Arizona, and uh but most of the employees are in Fort Wayne. Yeah, it's pretty amazing. I left, we were doing a billion five in business. This year they'll do two billion dollars in business. Wow. Yeah, it's amazing. I Guess in the lobby or somewhere in the Sweetwater headquarters you can still find

1:09:19 Well, maybe it's not the original, but there's a replica of that VW bus that this all started out of, right? Yeah, my rusty old VW bus went to a junkyard over in Van Wert, Ohio, but many, many years ago Uh. got a version of it. It's kind of a facsimile of the original VW bus. And it's in there in the headquarters and you can go see and and I guess your

1:09:37 Boy Scout uniforms also in there. My boy Scout uniforms uh hanging on the door, and my first saxophones on the floor right in front of it, and just a little bit of the story of Sweetwater and the foundings. Yeah, it's pretty amazing. Um Chuck, when you When you think about

1:09:52 This. Y a trajectory of your life, right? Everything happened. Just f even for like the four years of going gigging around the country and

1:10:03 Multi billion dollar business, man. In Fort Wayne, Indiana. Again, it's amazing. How much of of this do you attribute to the work you put in and the r hard work and the skill you brought to it and how much do you think had to do with

1:10:16 Luck and fortune. Yeah, I'm not a big believer in luck. But it was hard work. Uh I think it was the grace of God and and the more you're given, the more you're Uh expected. You know, it it's

1:10:28 It's just been amazing, but it's been a lot of work, a lot of support from others around me, whether that's customers or friends. I don't take credit for it all. There's no way that one human being can do everything that that I've been able to accomplish. I get credit, but I don't I don't I don't believe in that. Yeah. I reflect all the time, you know, I started with nothing, no business theory, no background, a rusty VW bus. Uh I mean it's just been an amazing, amazing ride.

1:10:53 That's Chuck Sarag. founder of Sweetwater. And by the way, even with everything he's got going on these days, Chuck still makes time to gig as a musician. on the instrument that kind of launched his career.

1:11:07 The saxophone. Yeah, he played Saturday night and I'm playing three times this week. Three different bands. What are you playing? I play in a nine piece RB soul band and I play in a little three piece jazz trio. And I play in an 18 piece big band and there's just various clubs and places we play around here. We'll plug you. What's the what's the next venue? Yeah, the next venue I play at the club room at the Clive Theater. The Clyde Theater, when what is happening? Uh we're there a couple times a month, so I can look at the calendar and find it. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show.

1:11:42 And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at guyroz.com or on Substack. This episode was researched by Carla Esteves and produced by Casey Herman, with music composed by Ramtina Rui. It was edited by Andrea Bruce. Our engineer was An Li Huang. Our production staff also includes Alex Chung, JC Howard, Chris Massini, Sam Paulson, John Isabella, Carrie Thomson, Neva Grant, and Elaine Coates. I'm Guy Roz and you've been listening to how I built this.

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