Jake Jabs founded American Furniture Warehouse in 1975. Headquartered in Englewood, Colorado, the company now operates 13 stores and employs around 2,000 people. Jabs serves as president and CEO.
My first job
During the Korean War, I did a couple of years of active duty. When I got out of the service, I went back to Bozeman, Montana, where I had graduated from Montana State University. I had worked my way through college teaching guitar and playing music, so I figured I’d pick up where I left off.
This was in the mid-1950s, and everyone wanted to play the guitar. Folk music was huge. I started teaching, and I had a little studio. I was actually selling TVs during the day and teaching guitar at night.
After a while of this, a music store in the middle of Bozeman came up for sale. This was 1955, and there was a recession going on. I negotiated with one of the partners and gave him $1,500 in cash for a half interest. It was the first big move in my career.
Businesses take money
My partner didn’t want to run the kind of music store I wanted to run, so I had to get rid of him. He didn’t like Elvis Presley or country music, and that was the stuff our business was built on. Kids would come in looking for Elvis, and he would say, “We don’t sell Elvis Presley records.”
That wasn’t going to work for the business, and I had to make a deal with him to buy out his share for $3,000. I didn’t have $3,000 at the time, so I had to go down to the bank. I didn’t realize the problem that presented.
I could tell the bank didn’t want to lend me the money. I didn’t take enough business in college and when he asked me for a financial statement, I didn’t know what that was. So I’m sitting in front of the banker making one out right there. He’s asking, “What’s your receivables? What’s your payables?” and questions like that. I didn’t have the right answers for him, and it didn’t look good.
This is one of the reasons I support business schools like the Jake Jabs Center for Entrepreneurship. I think everyone should have some basic business knowledge.
Fortunately, I had something else to offer. I told the banker I had 30 head of cattle on the ranch at home. The story there was that when each of the boys in my family graduated from high school, we got a heifer calf. That was our start in life. Eight years after I got my calf, the banker took my 30 head of cattle as collateral on that $3,000 loan.
It all comes down to money. You’ve got to have inventory, equipment, delivery vehicles, and credit to make the moves you need to make. That was the first time I learned that lesson.
Overcoming early challenges
Starting with nothing and trying to grow a business and have inventory, that’s the biggest challenge.
There were five music stores in business in Bozeman at that time. Mine was the finest. I taught steel guitar, Spanish guitar, and banjo. I had an accordion teacher and a piano teacher, and we also sold band instruments. Over the next five years, I grew that business and, eventually, I was the only music store left in Bozeman.
I had the best store. I was buying all the latest records. When TVs came into Bozeman, I started selling them.
One of the things I teach young people is to live within your means. It was during this period I learned to pay in cash for stuff, not to expand too quickly, and to keep my credit good. I’m against bankruptcies. I think they are a cop-out. Everybody loses in those situations, so I always try to stay liquid. At American Furniture Warehouse today, we pay in cash for everything. It’s not a challenge now, but it was back then.
A life-changing opportunity
Around that time, a guy came through Bozeman selling furniture, and he was looking for a dealer. I didn’t know furniture; I was born and raised on a farm.
But he gave me a pitch and some pricing, and I said, “It sounds pretty good.” I bought a truckload of furniture from him, and I put it upstairs on the empty floor of my music store. It was a hobby, so I started selling it cheap.
I’m an entrepreneur, and entrepreneurs take risks. That was a big risk. The investment was huge for me at the time. Fortunately, I learned a lesson pretty quick: Not everybody needs a guitar, but everybody needs furniture.
Today, of course, my furniture business is the largest dealer in Colorado and one of the biggest in the country. I’d say that the success of that music store put me in a position to make the big bet that got me here today.