I’ve written about Amro music in the past, so when Pat Averwater, CEO, told me that his brother Chip wrote a book titled, Retail Truths, The unconventional wisdom of retailing, I was intrigued.
I’m not familiar with any other music instrument retail owners writing business books about retailing. If you’re out there, please let me know.
It’s important to keep in mind that music instrument retailing, when done right, is a business which follows many of the same principles as any other successful retail business. However, for me, it’s fun reading these principles knowing that an MI dealer wrote it.
We all know folks who have opened up a music retail store, just to get into NAMM, or get a discount on their favorite pedal. What Chip discusses are real-life retailing principles of success learned over 4 generations of music retailing.
No doubt if I learned the principles in Chip’s book when I owned a school music business in the 1970s, I would still be in that business. But then again, I wouldn’t be talking to music instrument retailers from a financial succession planning perspective. (more about my personal transformation in a future article).
Chip shares 427 lessons he learned from the trenches. Quite a bit of learning going on here. The hardest part of this post was to narrow down the top three principles which especially resonated with me.
# 305 Firing- A business is the sum of the performance of its people.
A well-run retail store is never created passively; in every case someone is relentless in pursuing high standards— and that includes, specifically and especially, shedding employees whose work doesn’t meet the standards.
I’ve always had a problem firing employees. I tend to see the best in people and my personal MO was too wait too long hoping my staff member would eventually discover that the job was simply not the right fit. This approach invariable wasn’t a good solution for the business nor the employee.
#337 Cash Flow- Profit isn’t cash flow and is often it’s opposite.
One of the great disappointments of retailing is that making a profit doesn’t mean having cash in the bank. Profits require sales, and sales require investments in inventory, leasehold improvements, and equipment. The problem is compounded further when sales go to accounts receivable.
I was running a successful music teaching program. At our height we were teaching 1,000 kids a week at private schools. Then I made the mistake of stocking very expensive digital keyboards, and midi computer systems. Having to discount away my profits just to get the merchandise out of the door, I discovered the difference between cash and profit the hard way.
#359 Multiple Stores- Two stores don’t make twice as much
My real wake- up call happened when we expanded to our second location. My wife and I originally purchased a building in Brooklyn NY to operate our music school program. It was highly profitable. Then I had the bright idea to open a second retail location in Manhattan. That was the beginning of the end.
Opening more stores is just in the DNA of retailers. It’s irresistibly logical that a successful store— a proven and profitable retail concept— could be easily replicated. The same products, methods, and operating systems should yield similar results in another location, only with enhanced economies of scale. It makes so much apparent sense that the question “How many stores do you have?” is almost equivalent to “How successful is your company?” or even “How profitable is your company?” Ironically they often have the opposite meaning. Second and third stores are rarely as profitable as the original, and often they’re losers.
There you have it. Words worth learning. If you want to learn more, pick up Chip’s book.