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

0:00Support for today's episode comes from Square, the easy way for business owners to take payments, book appointments, manage staff, and keep everything running in your business without running yourself into the ground. In my neighborhood, there's a shop that sells incredible locally made food, fresh breads, prepared meals, sauces, jams, all from producers within an hour's drive. And they use Square. And as a customer, I love the seamless payment, quick checkout, and easy receipts. Square's intuitive software and hardware simplifies

0:32everything. You can sell anywhere in store, online, or mobile while managing inventory and tracking sales in real time. With Square, you get all the tools to run your business with none of the contracts or complexity. And why wait? Right now, you can get up to $200 off Square hardware at square.com slash go slash built. That's S-Q-U-A-R-E dot com slash G-O slash built. Run your business

1:03smarter with Square. Get started today. They say that every day your business is late to AI, you fall two days behind. But how do you keep up when the competition is only moving faster? With NetSuite Next. NetSuite Next is the next huge leap in how business gets done. Because AI is built into everything you do. It automatically provides custom insights throughout your day, while AI agents work alongside you to solve problems and handle routine work. And

1:36anytime you have a question about anything, ask, just like you're having a conversation with a colleague. If I needed to manage HR, commerce, inventory, CRM, financials, I would use NetSuite Next. Whether your company earns millions or even hundreds of millions, it's time for NetSuite Next, where your business meets AI. For the first time ever, you can try NetSuite Next for free. If your revenues are at least in the seven figures, go to netsuite.ai slash built. Built for every

2:08industry, ready for every boardroom, netsuite.ai slash built. Think about the last time you tried to launch a great new idea. You've got the passion, the vision, but then the moment you need to actually build a website, everything grinds to a halt in a bottleneck of technical requests and design issues. I've interviewed hundreds of founders on how I built this, and they all tell me the same thing. Momentum is everything. That's exactly why Framer is such a game changer.

2:41Framer is an enterprise-grade, no-code website builder for creators, teams, and businesses who want a professional site and care enough to get every single detail right. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com slash built for 30% off a Framer Pro annual plan. That's framer.com slash built for 30% off. Framer.com slash built. Rules and restrictions may apply.

3:24I'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've got to 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 phone into the receptionist and say, my keyboard, you know, quit working, 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. Welcome to How I Built This, a show about innovators, entrepreneurs,

4:04idealists, and the stories behind the movements they built. 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, Sweetwater.

4:31There 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. Not with a chatbot, not with a commissioned salesperson trying to close a deal, but with someone who actually understood instruments

5:02and 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. Every

5:34customer who calls Sweetwater is assigned a dedicated sales engineer. Every one of those salespeople goes through months of intensive training even before they ever answered the phone. And remarkably, Chuck 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. And the amazing thing about all of this is that Chuck never set out to build a retail empire. He just wanted to play

6:07music, 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. We traveled almost every state in the continental U.S. I think I missed a couple out on the West Coast. But back then, you had a booking agent, and they

6:38would 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 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 pay phone every so often and go, where am I going? And eventually, they would tell you. I remember one time I left 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 night at seven o'clock. Wow. And did you make, I mean, presumably you're making

7:12enough money to, like, stay on the road, but I can't imagine this was 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 said I made about 50 bucks a week. I probably made a little bit more than that, but it barely paid for gas and get into the next location. And that's why I ultimately quit, because I just, I was a decent musician, but I wasn't going to be good enough to be a truly professional musician. Got it. All right. So you're touring around. And from what I understand, I mean, you become like

7:46the de facto roadie, right? Like setting up instruments and speakers and making the audio system sound good. And I guess even inventing or like hacking audio gear for gigs. So, I mean, you were kind of 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 sound system with my right hand as I played my saxophone with my left hand. And so, we didn't usually have

8:17a 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 sax with your 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. 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.

8:49So, 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 as a result of that, you started to get experience with these recording booths because they would just say, oh, go use that booth over there and, you know, record your spot and bring us the 8-track cassette of it or whatever it was. Exactly. And also, a lot of those radio stations had multi-track recording studios with either 8 or 16-track recorder. So, you could record every instrument on its own channel and then mix it and make it sound

9:19good. So, you kind of, even though you love the sax, 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 chords. And but when you come back home to Fort Wayne, you realize that maybe you could make a business out of this, like have 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 $50 a week. But I didn't know what I wanted to do.

9:50I really didn't. But I knew I wasn't going to 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. All right. So, you're back in, you've got your VW bus. And I guess you come up with this idea of converting the VW bus into a recording studio or like the engineering booth of a recording studio. Tell me how you came up with this idea. Was it because there weren't any recording studios in Fort Wayne or you knew musicians who wanted to record their music? Like maybe all of that?

10:25You know, I don't really remember. It just sort of naturally happened. I mean, I do remember it 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 like paint a picture of this, it wasn't like they were recording in the VW bus. You had like the mixers 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?

10:57Yeah, 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 were 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 70s. Yeah, they're sitting there with a reel-to-reel. Okay, so you're recording. By the way, what would they do with those reel-to-reel recordings? Like why would they? Yeah, that's a great question. So I would take those reel-to-reel recordings and then go back to the living room of my 12x55 mobile home. And then I would edit all the songs in order,

11:28take the extra pauses out. And then we would turn them into LPs 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 do the recording for free. So you got church choirs and the schools and these were your clients. Like who else were you recording?

12:00Everyone 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 presidents of companies, CEOs of companies. I'd go into their boardroom or maybe the speech they were making. I remember one year I recorded a speech of the 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 the next year. So he gets all done with his speech and I figured out how to use a razor blade and tape and change all those

12:32references 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 look great. 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. And how did you finance all this equipment? Well, anywhere I could make a few dollars, I would make a few dollars and put them away. And even when I was on the road, I was able to sock it a few bucks away. And then with the

13:04recording, you know, in those days I was making $22 an hour if I charged 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, 79, it was the year you officially kind of founded this business. You called it CNB Audio, which would become Sweetwater Sound. But CNB, what does CNB stand for? It was Chuck and my first wife, Brenda. Okay. And, and like, I mean, you talk about recording CEOs and church choirs, or were you

13:35kind of looking to get into like bands and recording musicians who wanted to make records? Yeah. Now 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 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

14:06were looking to do. Absolutely. And that started in 1981. And how did you do that? 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 was interesting about it, where I 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 1981, 82, when you've got the studio, because

14:40you know, we're not talking about Sun Studios in Memphis in the 50s, right? I mean, Elvis and Johnny Cash hanging out there, you know, Fort Wayne wasn't like where tons and tons of bands were recording, right? I mean, I can't imagine it was, 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 mecca. In fact, all of my friends, all my professional friends would go to a recording studio in Fort Wayne. They just didn't understand it. Right.

15:11Why don't you go to Nashville? Why don't you go to LA? Go to New York? Right. 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 to late at night. It was a very good thing. So you've got this business going, you're running the studio, and I guess there's a real turning point, and it happens in 1984. 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

15:44instruments. And while you were there, you discovered something that would essentially, I think it's not an understatement to say, would actually change your life. Yeah, it did change my life. I had a friend that owned a local piano and organ store here in Fort Wayne, and he invited me to the Nahum 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. Again, he was just a friend, and I had bought some synthesizers through his store. So we'd become friends through that. And I went there, and I saw a prototype of

16:15a music instrument that just set me on fire, and frankly, set the world on fire for a while. And it was called a Kurzweil K250. Ray Kurzweil, who's a futurist, he's still alive today, still doing some really interesting stuff. But he'd figured out how to record a nine-foot grand piano and digitize it and put it in memory chips or ROM chips. And, you know, back in 1983 and 84, 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 50-voice choir. It had a 45-piece string section.

16:47But it was an expensive instrument. And so I saw a prototype, and I'm going, that is amazing. In my own studio, I have a small six-foot grand piano that'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 Kurzweil K250, I would have a nine-foot grand piano, always in tune, plus 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 just took

17:18the instrument to a whole other level. This was a very expensive machine at the time, $20,000, which is roughly $63,000, $65,000 today. So this is not no joke of an investment for a 28-year-old guy to buy. Yes, I had 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 Kurzweil K250. And that's what I did. But once you had this thing, it would generate a lot of income for you, because you, first of all,

17:52you 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

18:24there and do sessions, and they would pay me for the day for having it there. I'd take it up to Detroit, other studios like that. So you would play it in the studio? Yes. 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 were doing more production work, too. Absolutely. I love producing music. I mean, it's really cool because it's like people are, well, they're paying you more for more studio time. So that's one thing. But then I guess you start to, it had the ability

18:54to enable the user to make their own new sounds with it, like their own proprietary sounds. We could do that also. We did a lot of that. We would 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 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. Which is wild. I mean, today, of course, you know, you should record into your iPhone. But in 1984,

19:28that was really different. I mean, you're essentially going for, most people are still using reel-to-reel to record music at that time. 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 the sound of a saxophone in his music. And, you know, we record all kinds of things. I did a bagpipe. There weren't bagpipes

20:03built 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 character's album. Yeah. I mean, how did, so that, that sort of segues into my question, which is you're a guy in Fort Wayne and you're, you start to make your own sounds, right? Yep. Um, but how did you, you know, this is pre-internet. This is like the early fax machine

20:36days. Like, how did anybody find out that, Hey, there's this guy in Fort Wayne, Chuck Serwak, he's making samples on the Kurzweil and, uh, they're pretty great. Like how here you go, Stevie Wonder, like how would help me understand how anybody even knew what you were doing? Yeah. Great question. There were two ways. The first way is there were a couple manufacturer reps worked 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

21:07would see me as a customer, as an end user, and he'd come by and trade sounds with me and he'd take them to the other music stores. 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 Kurzweil K250. And anytime I would see that they had a K250, I would immediately either call them or write them and go, wow,

21:37you have a K250. I have one too. And I was open 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 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 Macintosh has 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

22:10figure out that there was a great way to do both. You were recording samples onto floppy discs and selling those to people. Yes. Basically. It sounds, I mean, it sounds like, was it all that? I mean, I, again, I don't want to minimize what you did, but it doesn't actually sound all that complex. You were just the only one doing it. You know, anybody could do it pretty easily, pretty quickly, but to do it to professional levels where all the notes sounded correct and it didn't sound munchkinized. And yeah, it was a real skill. It was a real art. And I developed a

22:42lot of software tools to make my music or my samples sound even better. All right. And were you, I mean, selling the floppy for how much were you selling it for? Well, initially I gave them away and I was getting so annoyed that it was getting in the way of winning my recording sessions. So then I started selling them for $5 a piece, which is really funny. I sent out a dot matrix newsletter. And on that newsletter, I had a list of all the sounds that I had and people would send me back the form with everything checked off. And, you know, I got two, three, $400 for all the discs.

23:12So I guess you become at a certain point around this time, a dealer for this machine, for the Kurzweil K250. And why was that a good use of your time? I mean, what made you think, I should just start selling these machines for Kurzweil? Actually, I wasn't that smart, but I mentioned the Kurzweil 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 I kept telling about my relationship with all my friends. By then I

23:42had about 300 friends around the country that had their own Kurzweils. 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 he talked me into it. He said, I'll set you up to be a parts dealer. That was in the fall. And by Christmas time, I had sent out a newsletter again to all my friends and going, hey, I've just become a Kurzweil dealer. 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 I'll get the parts to you and I'll help you get it installed.

24:14So through the month of December, I started getting check after check because the kind of people that had these machines 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 Kurzweil K250s. And I'll never forget, it was a couple of days before Christmas. My rep friend called me and said, hey, Chuck, I really need all those orders. It's got to be done by the end of the year. 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 I said, I don't know. It's

24:47a couple hundred thousand dollars worth. He said, are you serious? I said, yes. He says, we got to 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 Kurzweil parts. Wow. And this is 1985 to 86, I think. Exactly. Yeah. You know, I read something that I just, I thought was so interesting because 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

25:21about 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, you know, a spouse's name or a kid's name, they might call you six months later and you could say, how is, how is Bill Jr. doing? And they would probably be blown away that you remembered that. Absolutely. Yeah. 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.

25:55Yeah. And that became the genesis of Sweetwater Sound. All right. So, and I should mention by this point, you know, you were called Sweetwater Sound and, and, and that I've heard different kind of, you described different variations on the origins of the name. What, what is this name? I mean, where's it come from? 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, I knew I didn't want to be C and B audio anymore. So this is about the second or third year of our

26:28business. And I had two acres of land and I had a little creek in the backyard and I'm 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 Sweetwater. And so I put a little sign, it was about two foot wide and a foot high that said Sweetwater. 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, are you still doing the recording thing? Cause this, you've got a lot going on. You're making,

27:02you're sampling, you're putting on discs and you're recording people and you're selling equipment for the, the Kurzweil machines, the synthesizers. So I imagine that the recording studio part of your business has to kind of shrink a little. 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 around 85, 86, you become eventually the exclusive dealer in your area for Kurzweil.

27:35And so at what point did you sort of 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 in January and February, about March of that year, I got a call from a friend and he said, Hey Chuck, I want to buy another Kurzweil K250. I said, Whoa, you already have one. I just

28:08loaded yours completely up. You know, you probably have $30,000 in your machine. Why do you want another one? And he says to me, he says, Chuck, a Kurzweil, I only placed 12 notes at one time. And I hold my fingers up and I go, well, I got 10 fingers. What do you mean 12 notes? He says, no, no, no, no, no. He says, I do orchestrations with full orchestras. And when I have to hire an orchestra for a day or two, it's thousands of dollars. He said, if I had another Kurzweil, I could do 24 notes at one time. And so I called the rep and he says, Oh no, Chuck, I told you that to open a Kurzweil as a retailer, a new dealer, you have to buy 10. And I'm 10.

28:45Yep. Yep. You got to buy 10. And so eventually over the next couple of months, I sold those 10. And over time I sold a lot more, you know, back to your question by 1990, 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 they wanted to sign me up for the really basic, basic equipment. And I said, no, I want to be involved with selling eight tracks and 16 tracks because I've got higher end customers. I've got people that have been buying these 20 to $30,000

29:15synthesizers. 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. And 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. And so much to their, I don't know, disappointment or chagrins, 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. It took about two weeks

29:48and I've got orders for everything that I have coming in already pre-sold. 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, it was like seven o'clock at night. And he says, I'll have to turn the light on. And I said, yeah, I guess, you know, it's funny today because any manufacturer's 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

30:18at seven o'clock at night to order the biggest order that he'd ever sold.

30:22When 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, you're listening to How I Built This. We get support from U.S. Bank, a question I love asking founders. What's the one decision you almost didn't make, the one that changed everything?

30:57Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't. Say you're 18 months in, business is growing, you've got expenses coming from six directions, gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed

31:27in year one. You're not thinking about it. Why would you? You've got bigger problems. But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands on the table in rewards you never earned, money that could have gone back into the business. Path B, you pause and get the U.S. Bank Triple Cash Rewards Visa Business Card. Now you're earning 3% cash back on gas and EV

31:57charging, office supply stores, cell phone service, and restaurants. You pick up an extra $750 cash back as a bonus. And you've got a low APR in purchases and balance transfers for 12 months while you're scaling. Same business, same expenses, two completely different outcomes based on one small decision. Visit usbank.com slash business to learn more. The creditor and issuer of this card is U.S. Bank

32:27National Association, pursuant to a license from Visa USA Inc. Some restrictions apply. When it comes to your health and well-being, the right care can change everything. That's why Cleveland Clinic has been elevating world-class patient care for over a century. From the most specialized heart, neurology, and cancer treatments to the latest surgical innovations and beyond, Cleveland Clinic is here for every care in the world. Whether you're exploring advanced care

32:58or just looking after your health, all the info you need is waiting for you at clevelandclinic.org. Every day, shareholders meet to discuss important matters about the companies you invest in. Now, Vanguard is making it easy to have your voice heard in those decisions. Alexa, take me to Vanguard Investor Choice. Got it. Texting you a link where you can set your proxy voting preference for your Vanguard Index funds and be heard by the companies you invest in. Just say, Alexa, take me to Vanguard Investor Choice and make your voice heard. Vanguard Investors own shares of our index funds, which own shares of the companies they invest in.

33:31Available for Vanguard Index funds that participate in Investor Choice, Vanguard Marketing Corporation Distributor.

33:40Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1990, 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. Yeah, by 1990, we were selling quite a few different brands, probably 20 brands of equipment or so, and just helping people with their recording, whether it was synthesizers or recording equipment.

34:10We 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 recording equipment. And how were you financing inventory at that time, Chuck? Hand to mouth and sales from last month 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 would you go to trade shows? Did you start going to trade shows and say, I want to sell that? I want to sell that. I want to sell that. All the above, definitely they would ask. And if I heard it enough times, I would go, okay,

34:44that 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 tend to specialize on the higher end equipment for a long time. Tell me what a typical, I mean, were you working seven days a week? Was it, I mean, you've got customers ordering, you've got a pretty robust business, you've got to get the shipments

35:16out. Obviously it's not like today, which is the next day, everyone expects the next day, but still, what do you remember about your lifestyle at that time? Because I think you'd mentioned your first wife and maybe your marriage had split up by that point. Uh, no, she was around for about 20 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 and, 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

35:49selling 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, because I like, I like technology. Yeah. I mean, it's a reading about the story. It's like your growth is incremental. You go from like tiny 200 square foot mobile home to, you know, a little bigger place than 5,000 square feet. And then by 1991, you got 10,000 square foot place. So this is a robust business. I mean, you're just,

36:20was 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 5,000 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

36:50store in LA or New York or wherever it may be. And I never really competed on price. 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. Um, you know, we will 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 show you diagrams on how

37:21to set it up and that sort of thing. Yeah. I mean, now, you know, there's obviously like content marketing and all this stuff. You were essentially doing that before we called it that. You mentioned the internet in 1994, you got the domain for sweetwater.com, 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

37:53right product for the customer. And what's amazing to me is virtually all of your business was just, it was a mailing list you had, and you had this very nice, but simple kind of, uh, I guess, two, three page, not catalog, but document that you would send to people and you would have your sales reps calling people, but you didn't actually become a catalog, physical catalog business until like I read 1997. That's correct. You know, we started, as you said, with the dot matrix, a couple of three

38:26pages, and then eventually went to a real catalog, which was, I don't know, six to 700 pages most of the time. And by then we've gotten pretty professional. It wasn't full for 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. What you're saying is, oh, I want people to call in because then we can help them

38:58figure 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 I imagine by the time you launched the catalog in 1997, you've got a significant number of people manning the phones. Yeah, we probably had 20 people or so around that time, 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 20 to 30 minutes because we would start to develop a relationship, understand

39:31how 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 like every time I go into a restaurant or a shop and I walk out and I'm treated really well and it was a great experience. I know that business was managed well because the employee there, it's not their business, but if they treat

40:04it 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 out of a place and it just sucks. And I think to myself, it's not that employee's fault. This place is not managed well. How did you get these 20 people to learn how to forge those relationships with customers over the phone? 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

40:36it was just the right thing to do. But we started very humbly, you know, at first we met at a little 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 talk through things. We'd role play. We'd practice conversations, what we called the perfect conversation. And how do you handle situations like this? And we did that for a week after a week after a week. And 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.

41:08Would the sales rep have their own customers or could you just call in and get anybody on the phone? 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 started 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 said a word, I'm going to 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

41:42engineers because what they also have the technical know-how on how to help 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 13 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, but they're taught by 80 different teachers over those 13 weeks. And they're not allowed to talk to a customer until they're

42:14through 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 said, 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 started, you know, really formalizing it, but it was pretty formal early on. And did you, like, one of the things I find fascinating about, especially good sales reps is they often have a script, right? And so there's like, they will know what the five or six things the customer might say, and there's all kinds of ready responses. Were you guys able

42:50to 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. 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. I wanted the customer to understand it's the right product. And once we get through all of that, 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 a Yamaha this or a Gibson that, they would just quote a price.

43:23And to me, that's silly because I don't know how the customer is going to use it or what else they want to use it with. And so I was not going to 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 1990s, you guys, you hit about 12 million in sales. It's amazing, right? You've got a very good business and you get approached, I guess, by your attorney and an accountant. And they're saying, hey, you guys got a big business here in Fort Wayne. You might

43:54want to take some money off the table. 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 compelled by the thought of having some money. I'm thinking, well, maybe we've reached our limit. Maybe $12 million is the limit. You're in Fort Wayne, Indiana. How big can you get? That's right. So we entertained and they were good people out of Chicago, the William Blair Capital Company. They're still around today.

44:25They bought how much of the business? About 80% of it. In the late 90s. So you get a check, which I'm sure was nice. And you could feel like, okay, I've got some security here. But you stayed on running it. They didn't intervene. They didn't get involved. You just kept it? Not at all. Okay. Yeah. Once in a while, they'd have some comment, but basically 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. Okay. By 2000-ish, right? So you've got your own 20% of it. Um, you're, you're now able to buy stuff online, right? But I, I imagine most people are not

45:00ordering through the internet yet. 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. Yeah. Cause I remember the first, I'm sorry, I didn't buy it through Shoewater, but in like 1996, I bought my first, uh, portable recording machine, which was a Marantz PMD 222. It's the most expensive thing I had ever purchased in my life. I was like this $800 or something. It was so expensive. I was

45:30so nervous buying it. I think I bought it from B&H in New York through their catalog at the time. Uh, but yeah, I would not have, even in 1999, I was not ready to buy things online yet. Right. 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 kind of hard to trust them. And we'd already proven that we had a good, solid, basic grounding of ethics. And so customers are comfortable buying

46:05things early from us or buying things online early from us. Okay. Let's, let's go back to the Sweetwater university because I think this is really begins around 2001. And it's a, it's a training program where you have these people who are just gearheads, right? 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. But what we really looked for were people that had fire in their belly. Someone really interested in a company that was growing fast and would do the right thing

46:40for the customers. I'm curious, why did they need 13 weeks of training? There's a lot of subject material. And like I say, we taught it with 80 different teachers, 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 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. So they're like tech support too, in some ways. They are. So like, this was a valuable person. Like you, you're investing a lot of money and time in this

47:15person. Well, 13 weeks before they ever make a dollar for our company. And then we continue to invest in them. 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 training as new products come out, new technologies, that sort of thing. 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 who's just aggressive and just, just relentless and just closing the sale, closing, closing, closing. But you're bringing in people who were actually not coming from sales.

47:47These were people who were like music gear nerds. Absolutely. And we never wanted them to close, close hard, as you've described. 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 them and they really should buy a less expensive thing, but get all the other accessories to go with it. I've always believed everyone in our

48:21company, whether it's a sales engineer or the receptionist is either adding credibility or taking credibility away from our company. And I got to 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, 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

48:54point 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. 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. Yeah. 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

49:29leave, um, 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 going to 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 going to make 75 to 80, $85,000 in 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 now. Wow. And that'll, that'll keep you. Yeah. That's a lot of money. And Fort Wayne, Indiana. I remember when I was hiring young people years ago, I would tell them the deposit

50:04on 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. All right. So you've got, you're running the business. It sounds like you're happy. The business is growing, but your investors get scared. Dot-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. You guys weren't because you're not a dot-com company really, right? You were

50:39okay. 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 going to sell our 80% to a new owner. And you're aware of this, but what did you, what was going through your mind? It was a mutual decision. It was about four and a half years in, they started talking about it. And I raised my hand. I said, you know, I'd like to buy the business

51:09back. I love what we're doing. I want to buy it back. By the way, how much were you doing in sales by 2001? I don't know. In the 20 million range or something, maybe even more. I'm not sure. And they kind of 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, 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 about 18 different individuals in Fort Wayne and said, we want to buy the company back. Would you loan me 50? Would you loan me a hundred? One guy loaned me a million dollars. Let's, let's break this down for me. You want to buy

51:43the company back, which we will learn was a very, very smart decision, but 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? High interest loans, right? Yep. 12%. 12%. And can you tell us what, how much you had to raise? You know, I don't know that I remember, but six, seven, $8 million in that range. Right. But what I will tell you is I didn't have any money myself. Oh, you didn't? Even though you got cash from the sale?

52:16No, because during that period, my wife and I got divorced. Right. And I gave her all the money. I kept the business, which kind of 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 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 18 friends, 17 of them said yes. And they did it because they had known me for several decades now

52:47and had trusted me and knew I was going to stand behind everything. If you didn't have personal cash and you had to borrow it, that's a lot of stress. And that's a, that's like sleepless nights kind of money that you have to raise. It was, but I've always, my whole life, I've always said failure is not an option. But what I will tell you during the four and a half years that William Blair people had the company, the one thing they did put in place was some good structure. So we had to do monthly reporting and all that sort of stuff. And that allowed me to understand the totality of the

53:20business and where I thought it could really go. And so that probably gave me some confidence through the process. They imposed discipline on the, on the business. You know, and the other thing I would add, 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. 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 cashflow is good and you can

53:53actually repay these loans faster. But I guess within two years, two and a half years, you are now the owner, full owner again of this business. A hundred percent. Yes. And it must've felt pretty great. It felt awesome. Meantime, this company is continuing to grow and you guys, uh, introduced free shipping, I think early, like 2003. It's been a long time. Yes. Which is expensive. It was expensive, but it just became accepted. And, uh, we wanted to take that question out of

54:28it 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 catalog, right? We're in the 2000s now. It's not really going to become primary. I'm imagining today, 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 2005, 2006, when you're now the full owner, I imagine it's still catalog, mostly catalog. Yes, it is. And so how did you see, what do you remember about imagining what this could be,

55:04like where this is going? You know, by then we started to have enough credibility with our customers and our vendors. 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 going to low ball and hurt our other dealers. So it took a while to get their credibility. Eventually they started coming one by one and wanted to do business with our

55:37company. Because you weren't competing on price. You were selling customer service and support. Absolutely. But it was unheard of to most of those manufacturers or those reps that we were working with. 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 and I would include a free bank of sounds or something extra that really didn't cost us a lot

56:09but gave extra value to the customer. Even down to technical support and 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 warranty. I wanted 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 going to break on month 13 or 14 or 15, I don't like that. I would 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

56:44gives the customer much more confidence. Yeah. You mentioned it earlier. 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.

57:00Well, let me come back in just a moment. How Chuck's idea of service leads him to start buying other businesses in Fort 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. This message is a paid partnership with Apple Card. I've noticed that a lot of people we talk to on this show, founders, entrepreneurs, creatives, they spend a surprising amount of time thinking

57:34about systems, not because they love complexity, but because they're trying to reduce it. The best systems usually make life feel simpler, calmer, more manageable. Financial well-being works the same way because most people don't want to spend all day thinking about money. They just want to understand where things are going, feel in control, and remove some of the stress and guesswork from everyday life. That's part of what Apple Card is designed to do. You can apply for Apple Card right

58:05in the wallet app on your iPhone in minutes. Once you're approved, you can use Apple Card right away with Apple Pay without any friction. And here's the fun part. You spend and then you earn unlimited daily cash back on every purchase every day, not a month later. That's it. It really is that straightforward. And you earn 3% daily cash back on anything you buy from the Apple Store and at select merchants when using Apple Card with Apple Pay. One more thing people really seem to like is being

58:41able to track spending right from their iPhone. You can see purchases, search transactions easily, and get a clearer picture of where your money's going over time. It just makes things feel a little more transparent and manageable. Easily pin down spending with Apple Card. Apply in the wallet app on your iPhone today. Subject to credit approval, some transactions may not be displayed in maps. Merchant offers may change at any time. Apple Card issued by Goldman Sachs Bank USA. Salt Lake City

59:12branch. Terms and more at applecard.com. Even if you want to take care of your mental health, it can be hard knowing where to start. And when you start worrying about the costs and logistics, you might talk yourself out of finding the help you need. But fortunately, there's Rula. Rula makes it easy to access affordable, quality mental health care with sessions costing an average of $15 with insurance. They accept over 120 insurance plans nationwide and actually show you your cost up front so you're not guessing or worrying about some surprise bill later.

59:47Rula focuses on quality care. They vet their providers and monitor outcomes. And 93% of patients report feeling better and making real progress. With Rula, you can find a therapist for your specific needs in as little as five minutes and even book an appointment as soon as the next day. So instead of overthinking it, you can actually take the first step. If you're ready to stop talking yourself out of finding care and making progress, then head to Rula.com. That's R-U-L-A.com

1:00:20and take the first step. Welcome back to How I Built This. I'm Guy Raz. So it's the mid-2000s and Chuck decides to start getting involved in other businesses, things like aviation and cars. His goal is to grow more jobs for Fort Wayne, which he does. And meanwhile, he's expanding Sweetwater's reach and introducing new product lines, including actual musical instruments like guitars.

1:00:52You know, the most fascinating part to me, and I don't remember exactly the year, but 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 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

1:01:25online. And that's what the manufacturers would think. 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. Some are made by Mary on Monday and Bill on Friday. And if we would take every guitar, we'd do a 55-point check, as we called it, and make sure everything on the guitar is perfect. Then we would take really high-quality pictures and show those pictures online. We'd weigh the guitar. Different guitars weigh different. They have different moisture in the wood and that sort

1:01:56of thing. And then you can now see those online at 3 o'clock in the morning in your pajamas and decide you want this one because it weighs three ounces less than that one. You 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 1,000 guitars every day. Wow. I know this as somebody who's ordered so much stuff from Sweetwater over the years that you get a bag of candy. And I think a letter, I know it wasn't handwritten, but you have a letter in

1:02:27there. It did for a long time. Yeah. The candy is just our sweet little way of saying thank you. We've done it for, I don't know, four decades now or something. It's just, it's not very expensive. I mean, 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's too common. We're not going to be able to talk about them all, but it started with flying. You wanted to, I guess when you turned 50 in 2008, around then, you wanted to learn how to fly helicopters, which would lead you to getting into that business. Like I think you've got like 12,

1:03:0313 other businesses and they're all based in, they're all around sort of Fort Wayne area. Yeah. Most of them are around Fort Wayne. There's actually about 25 of them today. Wow. But helicopters, I was at an air show at a local airport and I saw a guy flying his personal helicopter. And I said, oh, Pete, that is so cool. And he said, well, you should do it. I said, nah, 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 and started working on my wife. And that Christmas, she got me an FAA log book and how to fly helicopters. And by August, I had my helicopter rating.

1:03:34And eventually you would start a helicopter charter business out of this. Okay. I want to just mention a couple of businesses you have. Amore, an Italian restaurant in Fort Wayne. You've got a live music venue there. Okay. Not surprising. You got a cafe there, aviation company, helicopter, charter flights, charter helicopter companies, a car dealership. You've got an optometry shop that sells glasses and does eye care. 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,

1:04:07Sweetwater that 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. I don't need any of it, but I love our community. And there were just lots of opportunities that became available. So as an example of the 25, 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

1:04:37of jobs and a lot of opportunity for our community. And you acquire these companies when they're going to go out of business or like, what's the story? Because you're not starting them, right? All the above. Some, you know, we're in distress modes. There's been others like sweet cars. We started from scratch, you know, 15 years later. What kind of cars you guys sell? All kinds of 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 about 50% of our sales are local and the other 50% go around the

1:05:09country. 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 them. And now we can sell those kinds of cars to Fort Wayne. What happened to the modest Midwesterner? Driving their Lamborghini in Fort 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 them, but it was fun to see. Yeah. Okay. So a lot of this is around Fort Wayne and bringing jobs to Fort Wayne. Outside of Sweetwater,

1:05:40I'm just curious, what's the name of the company that oversees this? It's not called Sweetwater. No, it's CEREC Enterprises. CEREC Enterprises. Okay. How many, roughly, how many employees do you think CEREC Enterprises oversees? Yeah, we have about 700 right now, 700. And it sounds like, I imagine you're a businessman, you want these to be sustainable, but that's not really, it's more about you grew up in Fort Wayne and you've got the money and you want to support Fort Wayne now. Yeah. I've been very blessed. My wife and I have been so, so blessed. And we just want to do everything we can to help our community.

1:06:12All right. So coming back to Sweetwater, during these years, right, e-commerce is taking off, right? Like Amazon and Walmart got huge, right? Online. 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 10% less.

1:06:42They 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 and the investment we make in our people to offer, they don't want to have people. I mean, it's hard to call Amazon and talk to them on the phone. We encourage people to talk on the phone. 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

1:07:16want. 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? It's a cheap purchase. Yeah, you're absolutely right. And we've had many big companies try and compete against us, and they've gotten in the business and out, whether it's Circuit City or Best Buy. Now, 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.

1:07:51Can'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 38% of the United States in one day. And FedEx and UPS 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 2019. By this point, you guys are selling about 35,000 products on your website,

1:08:23huge number, 70,000 customers a month. That year, you're going to do around a little over $800 million in sales. And you build an enormous warehouse distribution center, 580,000 square foot distribution center. I think it opens in February of 2020 in Fort Wayne to- Yes, it did. You know, for growth. And that's exciting. It's high tech. You've got 580,000 square feet. And then, bam, COVID. A week or two later, the world shuts down.

1:08:57You know what was amazing? We knew that warehouse was coming. Nobody knew COVID was coming. In fact, 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 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,

1:09:30no, no, mail order is good. We want mail order to stay in business. So they gave us permission to open. And my wife and myself and my daughter, who was 13 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 get more equipment. We were selling equipment for streaming church services. We were selling guitars for first time owners. And our business that year grew by 40%. You were quoted, I guess, in a retrospective

1:10:02article about COVID by an Indianapolis magazine. You said, I was somewhere between panicked and trying to inspire those around me. Yeah, I would tell you that six months combination of COVID and Black Lives Matter was the hardest year in my 47 years of being in business. And I was stressed and it immobilized me for six months. Immobilized you? Yeah, I just, and every day was tough. I just didn't know what tomorrow would bring. And it took me about six months to get through it. And by September, I met with the

1:10:35whole leadership team of our company. And I said, I'm choosing not to participate and we're moving forward. Not to participate in what? Just the whole world of where it was at that time. When the Black Lives Matter thing came out, you know, to me, it was just awful. 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 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. And you felt like it was divisive.

1:11:09It was very divisive. And, you know, as soon as you support a Black Lives Matter, then the police, I remember very clearly putting a very small, innocuous statement. And I got a call immediately from the police department. And I go, no, no, 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 to, you know, that time I had 40 years of being in business business. And I knew what my track record stood for and what I believed in. And I just wasn't going to get stuck in that anymore.

1:11:40Do you make political statements? Do you get involved in political issues? Or do you just kind of like to stay out of it? I try really hard to stay out of it. Yeah. And it's interesting because I think a lot of companies have re-evaluated this and have kind of gone back to this view, which is the role of a business is to be a good employer, to be good to its customers, to make great products, to offer good value, but not to run the country or run policy. Like that is not the role. I mean, you know, you look at the 60s and the Vietnam War, I don't think Pepsi or Coca-Cola had a position on that. You know,

1:12:14they personally may have, but they didn't, as a business, didn't come out saying anything about that. Well, I think the challenge or what was different is that we had the internet. The internet empowered so many people to have a voice. 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, 2020, it's an amazing, you broke a billion dollars, over a billion dollars in business that year. And since then it's been over a billion every year, which is a billion dollars,

1:12:49right? It's unbelievable. Unbelievable. So you, uh, you get through this year, 2020, clearly very stressful for you, but going through that year, because I was wondering, I was like, you know, uh, in 2021, he decided to sell a majority stake of Sweetwater to a private equity firm. Now, I mean, 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, this was

1:13:22a lot. I just, I think I need to step away. You know, it wasn't so much that, um, 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 50% of whatever your net worth is just when you both die for estate taxes. And over a certain amount. Yep. Yep. And so I realized it's a big problem. And so for two years, my financial advisor, my attorneys, all that brought in

1:13:52all kinds of experts and had us look at various strategies. And I learned terms like irrevocable trusts and all these sorts of things that we could move our company to. And I just felt weird. And so December of that year, I said, well, why don't we consider selling it 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? JP Morgan. Yep. So they, uh, they sent out a copy of this book to 32 companies. And I was really clear when I started working with JP Morgan, there were some principles that I would not give up on. I had no

1:14:26debt, 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, the 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 16 sent back 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, it'll be five years in August and they've done absolutely

1:15:00everything 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, Providence equity, uh, Providence, yep. A majority stake and you retain a minority stake. Right. And how did you guarantee 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

1:15:31for ever? 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 other companies they had done. The best thing I can tell you is they've done exactly what they said they would do. And what they really did is they sped up some of the stuff that I was going to do anyway. 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 Providence. It was a little bit stressful for the team, but it allowed us to go even faster. And

1:16:05that's, that's what they really brought to the table. So 2021, this happens, you come to terms and, and the company again has done, so you are, has done over a billion in sales. So, you know, that acquisition was, was certainly considerable. Uh, part of this is you, you decide that you're going to move on. You're going to step down as CEO. What did that mean for your day-to-day life? I mean, here you go, 2021, you're running this thing. And then what happens is like one day to the next. It's like, you're not, there's not like a million questions coming at you. You're not going

1:16:36to a bunch of meetings. Like just, I will tell you, I didn't believe it ever happened, but the money was so amazing. Not only the money for me, but the 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, I wasn't going to leave my office and it was hard. It was really hard. My staff helped move me out of my office. I couldn't have done it by myself, but I stepped up to chairman of the board. I'm still involved. Uh, I've got so many friends that

1:17:07are 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. So, I mean, again, like just emotionally was part of you, 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, 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,

1:17:40I talked to a lot of my friends, of course, retiring right now. And I go, that scares the crap out of me. I do not, uh, I'm 69. Oh, you're a young guy. Yeah. I feel like I'm 39. I guess I don't quite look at, but I really have lots of energy. 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 like 2,600 employees, roughly something like that. Yeah. Yeah. You've got a warehouse in Glendale, Arizona and, 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, the new $2 billion in business. Wow.

1:18:15Yeah. It's crazy. Amazing. I guess in the lobby or somewhere in the Sweetwater headquarters, you can still find, 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 Vanward, Ohio, but many, many years ago, uh, I got a version of it. It's kind of a facsimile of the original VW bus. Yes. And it's in there in the headquarters and you can go see it. And I guess your Boy Scout uniform's also in there. My Boy Scout uniforms, uh, hanging on the door and my first saxophones on the floor right in

1:18:47front 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 this trajectory of your life, right, everything happened just for, even for like the four years of going gigging around the country and starting this little recording studio to a multi-billion dollar business, man, in Fort Wayne, Indiana. Again, it's amazing. How much of this do you attribute to the work you put in and the hard work and the skills you brought to it? And how much do you think had to do with

1:19:19luck 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 the more you're given, the more you're, uh, expected, you know, it's, it's, it's just been amazing, but it's been a lot of work and 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,

1:19:53it's just been an amazing, amazing ride. That's Chuck Serac, 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, the saxophone. Yeah. He played Saturday night and I'm playing three times this week, three different bands. Where are you playing? I play in a nine piece R&B soul band. 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.

1:20:25We'll plug you. What's the, what's the next venue? Yeah. The next venue I play at the club room at the Clyde theater. The Clyde theater. When, when is this happening? Uh, we're there a couple of times a month, so you 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. 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 gairaz.com or on Substack. This episode was researched by

1:20:55Carla Estevez and produced by Casey Herman with music composed by Ramtina Rablui. It was edited by Andrea Bruce. Our engineer was An Lee Huang. Our production staff also includes Alex Chung, JC Howard, Chris Messini, Sam Paulson, John Isabella, Carrie Thompson, Neva Grant, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

1:21:19I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This. I'm Guy Raz, and you've been listening to How I Built This.