Inc. 5000 TMR Interview

Forward and Interview by Matt Hessler

Growth has always been a way of life here at The Music Room (TMR). From our humble one-car-garage beginnings in early 2011 to our present-day status as the largest and most trusted online retailer of pre-owned HiFi in the world, growth has been a way of life. Just in the past several years, I have witnessed TMR go from a team of six working in a 1200 sq. ft. warehouse to a team of 25 in 7000 sq. ft space (with another 10k sq ft. expansion planned for Spring of 2020).

I witnessed the development of a fully automated and scalable custom platform that took us from manually creating five to ten new product listings per day to 40 to 50 quality-assured used products per day. Underlying this phenomenal business trajectory is a foundational belief that growth is only good to the extent that it allows us to better serve our customers.

We took a moment to reflect on our journey that allowed us to grow at such a rapid pace without sacrificing the quality of our customer experience. It can be difficult to put our rapid gains in context without a yardstick to measure it by. We looked around the home audio industry, and could not identify other companies with similar rates of expansion. So, we started looking at other growing businesses outside of home audio to learn more about their challenges, struggles, and successes.

This exploration led us to the Inc. 5000 list. The annual list names 5,000 of the most successful privately-held companies in America. Companies are measured by their three-year growth, and we began to wonder if our small, boot-strapped, family business could make the list. We decided to take my mother’s advice — you’ll never know if you don’t try—and submitted our information for consideration. When the results came in that we landed squarely in the middle of the list for 2019, we knew our moms would be proud.

Being recognized on a prestigious list like Inc. 5000, is a reminder of the countless hours of dedication made by our amazing team, the trust we have built with our valued customers and the opportunities that lie ahead to serve our music-centric community that we appreciate so much. Thank you for this incredible journey, we would not be where we are today without you.

Interviewer MH:

I want to start by saying congratulations for your place on the Inc. 5000 fastest growing companies in America list. What a huge accomplishment. I would love to hear about how you went from humble beginnings to where you are today as a leader in the HiFi industry.

Let’s go back to the beginning. When did you start the business and what did your first year look like?

Josh Jackson:

I dabbled with audio gear for years before this ever became a real business. At first it was a hobby, then an obsession, until it finally became a “side hustle.” I taught myself the in’s and out’s of running a business along the way. If I had to point to the beginning of it all, it would be my very first job out of college. I was hired at Circuit City to sell cordless phones and widgets, but quickly gravitated to the home and audio department where I began to learn about HiFi gear.

Circuit City also taught me a great deal about selling. They did not have an installation department, so as sales people we would pick up side jobs, installing product for customers to earn extra money. After a job was complete, I usually left with a pile of used gear. That in combination with Circuit City’s open-box specials sparked an online business for me. From that point on, I started developing a sense of what audio gear was worth on the second-hand market.

MH: Melissa, was music and home audio something that you and Josh enjoyed together as a hobby?

Melissa Jackson:

From the beginning, music was a huge part of our relationship. Which I guess encouraged the obnoxious turnover of stereo equipment in the house that would drive most people crazy.

JJ:

There's a term in the audio community that you'll see often, WAF - Wife Acceptance Factor. You hear it all the time, “I'd love to have these speakers, but I don't think they're going to have the requisite, Wife Acceptance Factor.” I think I am pretty lucky because Melissa likes HiFi and is on the more lenient end of the WAF scale. In fact, one of the first romantic gestures I made in our dating relationship was to get her an entire Harman Kardon, Infinity stereo system through my connections at Circuit City for her college apartment.

MH: When did this hobby turn into a business for you both?

JJ:

Late 2010, early 2011 we were your classic victims of the Great Recession. I had a stable lucrative job for many years that suddenly was no longer stable or lucrative, and the job market was fiercely competitive at that time. We also had a young family with two babies and an expensive mortgage in Atlanta.

I stepped into what was supposed to be a dream job in Boulder, Colorado but one of the stipulations was that the work wouldn’t start for six months. Rather than waiting around in Atlanta and paying an expensive mortgage, we decided to give up our house, move across the country, and find a cheap place to rent in order to stretch our savings.

MJ:

While Josh was out of work for those six months, he began to sell the stereo equipment he had been stockpiling for years. Through this, we realized that there was some money to be made in selling audio equipment on eBay.

Over the years, Josh had purchased stereo equipment for the house, and he would actually make a little money when he went to sell it. Now that he was out of work for those six months he started selling lots of gear and we realized that there was some money to be made there. I encouraged him, and he really hit the gas turning over audio equipment on eBay.

JJ:

I always had an entrepreneurial bug so even with this being a hobby I started systematizing the process to make things more efficient and profitable. I had a little packing station in the garage and started coming up with systems to get to the very best Craigslist deals to turn a profit.

JJ:

I don't think we realized this at the time, but we were in a pretty tough place. I mean, neither of us come from well-heeled families. There was no safety net other than my parents’ basement, which was not a very attractive place to raise a family. We had limited capital, gone through job loss, and a foreclosure under our belts. Needless to say, our credit was shot. But there's something about moving out to Colorado, I think the mountains have a way of inspiring hope. I've always been an optimistic person, but I could really feel the potential around what we were doing. As I approached the start date of my new job, I realized more and more that I wasn't that passionate about it.

MJ:

It was more than not being passionate about it, he had been dreading it for months.

JJ:

A few weeks before the job was supposed to start, I had a talk with Melissa about how I was feeling. I basically said, “I know you just left your family and friends behind to chase this opportunity with me, but I’ve got another idea. Instead of taking this job, how about I continue working out of the garage and we empty the rest of our 401k into used stereo equipment?”

MJ:

This felt like our now-or-never moment. I knew Josh had always wanted to be an entrepreneur, so I said, “let’s do it.” I knew if it didn’t work out, he would be able to find another job.

JJ:

Melissa is an amazing and pretty unique partner. Not only did she tolerate years of me swapping out big, ugly stereo gear all over the house constantly but she didn’t hesitate in pursuing this dream. She jumped in and we did it together.

MH:

At what point did you bring on your first employee?

MJ:

The first person we hired came from Craigslist. We were in desperate need of an extra set of hands to fulfill orders.

JJ:

We were about six months in, and it was just a basic time proposition. I figured, I can TRY to do everything myself or I can find somebody to at least, pack and ship the boxes, and take the photographs so that I can spend more time, acquiring inventory and answering customer questions.

MH:

Bringing on an employee is a big transition, tell me about that.

JJ:

Yeah, I guess that really is when a business becomes a business. It’s no longer just about your livelihood when others depend on you. Each and every decision you make matters.

Our first employee rode his bike across town to our little garage “office” and he was really unbelievable. He came with a background in construction, and was a very hard worker. He was used to throwing around 80 pound bags of concrete, which was great because a lot of our gear is heavy! He was the perfect guy for the job at the time. He did everything from packing and photography to running errands and loading up gear. It was all very difficult work.

MH: So you had an employee working out of your garage?

MJ: At the time, our business seemed like a bit of a joke to almost everybody. The neighbours were making fun of us, and our family thought of Josh as some sort of “junk-man.” Our first employee worked with us in that tiny garage, and then we moved to a bigger house with a three-car garage, and then we eventually got a small office space down in North Denver. From there it has been a steady of progression of seeking more space and more help.

MH: When did you decide to continue to hire more employees?

JJ:

In the beginning, nearly every employee we hired was a result of Melissa telling me that I was working to much. And each new employee helped grow the business. We've always been really fortunate to come across the right people at the right time, and every person on the team has had an outstanding work ethic. We all appreciate the nature of working in a small family business. Of course there are good and bad times that come with growth but for the most part we are all aligned. It is so rare to have such a large number of long-term, stable, loyal, and dedicated employees. This business would not exist without them.

MH:

I think a lot of businesses fail when they hire the wrong person. No one has a crystal ball to hire perfectly but good people so often make all the difference.

Was it hard for you to give up control of some of those things that you had been doing day in and day out as you were growing the business?

JJ:

I am always trying to make every business process better—constantly trying to improve everything. No matter how well I might be doing something, I wake up every day thinking I can do better. That can be challenging when imposing expectations on other people who are not owners. I’m still learning how to be a good leader every day.

We take even small things like our packing and shipping very seriously. Doing it right and ensuring that delicate HiFi gear arrives in perfect condition is a huge part of earning the trust of our customers. So in every aspect of the business, I’ve tried to give up control while also hiring people that care about our customers as much as I do and want things to be done right.

MJ:

I think it helps that a lot of our employees are highly-skilled and passionate musicians. They understand the importance of nailing the details; whether that means product-testing or packing and shipping, or photography.

JJ:

I think the hardest thing to give up is letting someone else make decisions on acquisitions. Also, pricing items was hard to let go. This was a big release but also one that positively impacted our business. When we hired Rob (Baretich) and put our trust in him to drive purchasing and pricing, we went from a small operation to something that we could start scaling. I was finally able to focus on other parts of the business that I'd never been able to do before.

MH:

Melissa, during this moving, hiring and growing phase, what were all the ways you were in involved in pushing The Music Room to the next level?

MJ:

At first, I was about to say I didn’t help that much with some of the physical side of things but I was out there doing pick-ups and helping with packing and shipping. Josh and I made all the big decisions together. Whether it was moving to a bigger space or juggling cash flow or hiring new employees, we made those decisions collectively. Hiring when you are just starting out is hard. Bringing on more people means adding overhead, and we didn’t have extra money to work with during those early days. We always asked ourselves, “do we want to hire someone and scale up or does that increase our chance of failing?” We didn’t know if the business could really scale or if it would be a mom and pop operation forever. We made all these decisions together, and I think we must have balanced each other out really well to end up where we are today.

MH:

It sounds like you both have a pretty healthy attitude towards risk and were both curious about how big this could be.

MJ:

Our desire was not to build a giant company. For us, this has been a journey of organic growth and calculated risks. We had to be strategic to actually keep it from getting too big, too fast. We worked hard to avoid becoming a different animal.

JJ:

Melissa and I never really had the luxury of sitting around thinking about how big the business could be. It has always been about keeping up with the growth and solving problems that come up along the way. Like Melissa was saying, each of those hires that we made in the first few years, was a leap of faith. We assumed that if we invested in this person that it would allow us to keep up with the growth and hopefully stay sane and not work 100 hours per week.

JJ:

It’s hard to communicate with our current employees what it was like in those early days. There was so much time spent on the road. I would be in the passenger seat working on my laptop via WiFi hotspot, while she drove to some part of Colorado where we had an opportunity to get some gear from a private seller. It was the two of us doing a pick up in a van with a couple of toddlers in the back. There was a lot of brushing cheerios out of the seats to load HiFi gear, and there was a fair bit of crying.

We were pulling vintage HiFi gear out of people’s basements, covered in dust and cobwebs. It was hard work, long hours and took its toll on our bodies, minds, and marriage. It is a classic tale of blood, sweat and tears.

MH:

Let's fast forward to some of the successes. You are eight or nine years in — depending on how you measure the exact start date— you just made the Inc. 5000 list of the fastest-growing private companies in America. What does the business look like today? People might hear about the Inc. 5000 and not know what that means for a business of your size. How many employees do you have now and how big is the facility? What's the state of the business, nine years later?

MJ:

We currently have 21 employees and climbing. We have managed to completely outgrow the 5k sq. ft. warehouse we purchased and moved into just a year ago.

JJ:

Twenty one employees and three more about to start in the next few weeks. That number will likely be 30-35 by the end of next year. Of those, only one was hired prior to 2016. We’re still learning how to work together and hitting our stride. Today we have over 1,000 used products available on our website at any given time, and we've been able to create a fun and unique shopping experience online. The Inc. 5000 list is really not something that recognizes the risks taken throughout the journey, nor take into consideration all the things discussed during this interview. It's simply a measurement of growth over the past three years. For us, that growth looks like about 130% over the past three years. In my mind, that is a testament to the quality of our employees and their hard-work and innovative ideas.

I believe the HiFi industry attracts some really great people who are incredibly passionate. People contact us from all over the world to ask if we are hiring because they love music and the hobby of collecting and listening to HiFi gear.

So we've been lucky to have a big pool of top talent, and that's really what has helped evolve the business over the past three years to a place that we never really could have imagined getting to on our own.

MH:

What is unique about The Music Room?

JJ:

Ultimately, we want to see this industry survive and thrive in the age of Amazon. We strive to make sure this industry doesn’t get consolidated and soulless. Everybody in the audio Industry is going to need to figure out ways to work with used gear, we just happened to start from that angle. The amount of used gear on the market is always increasing but the number of potential customers for that gear isn't necessarily growing at the same rate. We are helping to make HiFi more accessible by offering high-quality, used gear that has been professionally tested, repaired if necessary and is guaranteed. This is something you won’t find on Craigslist or eBay.

We are working on ways to help dealers facilitate trade-in programs, and we are starting to offer our customers paths to upgrade with a handful of new in-box products. We have a killer line-up of some of the best brands in the industry, and we’re one of the only places that sell brand new products with full warranties without actually spending a dime. You can literally pay us with the gear collecting dust in your closet.

I’ve seen so many people start with a used system or budget bluetooth system, and that puts them on a path to wanting better sound. It can be an obsession for some people, but mostly it's a fun hobby that's centered around enjoying great music.

MJ:

I think we have helped people nurture a fun hobby. We have our weekly “Friday Five” newsletter that highlights some amazing HiFi gear each week. There's been at least two newsletters that I can think of specifically that outlined budget-minded systems for somebody like myself (non-hobbyist) to appreciate. Part of our mission is to educate our customers so that they can build the best system for their budget with the least amount of hassle. We want to use education to become your HiFi partner.

JJ:

One of the best things about 2-channel HiFi systems, is that some of the used gear might sound just as good or better than some of the very expensive, new “state-of-the-art” equipment. It is about building a system that YOU really like and it can be modern or vintage, really whatever suits your taste and budget. Used HiFi doesn’t get outdated like many other technologies.

Used HiFi delivers amazing sound in most cases and should be sold to the next generation of enthusiasts. However, consumers need to be able to buy with confidence in the quality. And that is where The Music Room can provide a unique value. People in the audiophile community are typically honest and forthcoming. They want that next person to buy a piece of gear and love it the way they did. We start by purchasing from the community, and then go the extra mile by fully testing each piece of gear so that we can stand behind everything we sell.

MJ:

Packing and shipping is also very important to delivering quality. We have spent nine years perfecting the packing and shipping of sensitive electronics around the world. This isn't the same experience as unwrapping your multi-thousand dollar amplifier that has arrived in box wrapped in old bath towels from an unknown seller on eBay. Have you ever seen the Fedex and UPS guys throw those boxes?

JJ:

We built this business the hard way and customers respect it. We don’t cut corners. When you buy from us, items are exactly as pictured and described, and they arrive to your door in exactly that condition. It’s not easy, especially when you are talking about a 120lb amplifier with a glass faceplate (McIntosh), but we treat the gear the way our customers would, or better. It’s not fast or easy but that is what has helped us to build relationships and respect. Quality and care is what keeps our customers coming back.

MH:

Congratulations again on the award, you certainly earned it. You have built a fantastic business with some very basic principles that are easy to talk about but hard to execute. Additionally, you have a great eye for value, have built trust and solid customer relationships by simply doing the right things.

I know there are a million little things that go into each of these big principles, and by doing them every day, over nine years, you have built one of the fastest-growing private businesses in the country.