For The Retailer’s January NAMM show issue, more so even than our other editions, we try to find a true industry luminary for our monthly “Five Minutes With” feature. It’s safe to say we succeeded this year by landing an interview with Kurt Listug, CEO and Co-Founder of Taylor Guitars, who’s spent a career helping to build one of the United States’ more iconic and widely respected guitar manufacturers. In this wide-ranging interview, Listug discusses everything from Taylor Guitars’ humble beginnings to its ascent to prominence in music circles. He also has specific advice for the reseller channel, to which Taylor is firmly committed and in whose success the company is deeply invested.
If you’re on-site in Anaheim, sit down to grab a bite and check out this interview. It’s one you’ll really enjoy.
The Music & Sound Retailer: Let’s start with your personal background. Trace your own history with music in general and with guitars specifically, touching on what initially captured your interest. Then, transition into describing how Taylor Guitars was born.
Kurt Listug: Well, I’ve loved music my whole life. There was always music in the household growing up. My folks originally met while singing in a church choir in Chicago. We had a piano, and I started teaching myself how to play the piano pretty young. I also got piano lessons all through grade school. My sister’s a singer. And then, when the Beatles happened, I got interested in guitar. Got a couple of guitars…never learned how to play very well.
I was also very interested in making things. In high school, I made some speaker cabinets and sold them. And then a friend of mine whom I knew from high school, when he was in college, he got a job at a guitar shop called American Dream. I pestered him to see if I could get a job there. They weren’t really jobs—it was more like a co-op. You’d get a bench, you’d do some work, the shop would get a percentage of your work to pay the rent and such, and you’d get the rest. Everyone was self-employed.
My friend was Bob Huff and, after a year or two, he was able to get me a bench there. I started working and learning how to do refinish work. That would have been in the summer of ’73. I finished my junior year in college…didn’t really know what I was going to do. At that time, Greg Deering was working there, building banjos and doing repair work. He went on to found Deering Banjos. And, a few weeks after I started, a young guy just out of high school named Bob Taylor got a bench there also. He’d been coming by and buying materials to build guitars. He started building guitars in high school. So, we all worked together.
After a year, Sam, the Owner of American Dream, decided he wanted to sell it. He kind of left it up to us to see who was interested in buying the shop from him, if any of us were. It ended up being Bob, me and a friend of ours, Steve Schemmer, who bought the shop from Sam. And we bought it on October 15, 1974. Just recently, we had our 40th anniversary. It’s amazing how young we were…and we really didn’t know much of anything. I mean, Bob had built a few guitars. I knew how to do a little bit of work, but I wasn’t really that talented as compared to somebody like Bob. But, I was interested in business.
When we were looking at buying the shop from Sam, I went down to the Small Business Administration and got all the different books they had. And I don’t know if they still have this, but there was something called SCORE: Service Corps of Retired Executives. They were retired businesspeople who would help you out and kind of counsel you. So, I met with some of those people and read everything I could. I put together a little business plan. SCORE had a program with attorneys where attorneys would give you a discounted rate on legal help, so we hired an attorney and drew up a general partnership agreement.
When we started, we had a general partnership agreement and we had a contract to buy Sam out. It’s just kind of my nature to do things that way. I approach things that way: learn all I can about it from a business perspective. Then, even after we started, a year or two down the road, we had the attorneys draft a buy-and-sell agreement, which is something you need in case a partner wants to leave, so you don’t have to dissolve the company. This ended up coming in handy down the road when we bought Steve out. We had a buy-and-sell agreement ready for that eventuality.
At the beginning, we had $10,000 altogether. $3,700 of that went to Sam to buy his equipment and to pay off some past-due bills. The $6,300 that was left was our working capital. We went through that pretty quickly and I think that, by the end of that year, two and a half months later, we were broke. [Laughs.] But, we thought, “Well, we decided to do this, so let’s figure it out.” And we did repair work at that time. We’d keep the doors open by doing repair work. We’d build instruments—electric guitars and acoustic guitars—for people. And we just started going down that path, eventually figuring out that we wanted to be a guitar company. We decided to name it Taylor, and I started going out and selling to stores. That’s how we started down the path that we’re still on.
The Retailer: Describe a bit about the early years of Taylor Guitars. Did things come relatively easily, or was it a struggle from the outset? How did the company evolve and develop in those early years?
Listug: I’d say the first 12 years, which is October 1974 until the fall of ’86, were about just trying to stay in business and overcoming the various obstacles that we ran into—and we ran into a lot of things! First of all, we didn’t know how to make guitars. [Laughs.] Minor problem! We knew how to make them one at a time, but we didn’t really know how to produce them. Once you start making more than a few, you start to run into the problems that can happen…things you haven’t learned yet. I mean, even to this day, with all the guitars we’ve made, there are things that happen in the factory. All of a sudden, things aren’t turning out right, and you’ve got to figure out what it is. Imagine all the way back then, when we hadn’t made many guitars and didn’t have much experience, the things we went through: when you’re trying to make guitars so you can sell them, and then get the cash to pay your bills. So many things can come up! For example: finish that doesn’t cure; finish that cracks; finish that traps moisture and turns kind of bluey purple; wood that cracks; wood joints that won’t stay together; necks that bend backward. In the early days, it was one thing after another. Plus, we weren’t jigged up at all to make a lot of guitars; everything was done by hand. We’d make them by hand, and they wouldn’t turn out for one reason or another.
When we originally started, we thought, “OK, we’ll make a batch of 10 guitars. That would be efficient. We’ll make 10 guitars and sell them, and it’ll take a month.” Well, actually, you do that several times…you ruin four of them, six turn out and it takes two months instead of one month. So, basically, you struggle and you get six guitars made at the end of every two months, and then you go and sell them. That left us only having income every two months. It was a tough lesson. And we had the best of intentions, but we didn’t know what we were doing during that period. There were times when we had bills that were two years past due that we couldn’t pay. You just keep the list up to date. And, unfortunately, the month goes by pretty quickly…rent comes around the beginning of every month, power bills and things you absolutely have to pay.
Even with the best of intentions to try to get ahead and pay some of those old bills, it was tough. But, I want to add that we did eventually pay every debt we ever had. Every penny, we paid. Even bills where people wrote off what was owed, we went back and paid them. And finally, by the fall of ’86, things improved. Bob learned from Augie LoPrinzi that you start a guitar every day and you finish a guitar every day. It’s better to finish a guitar every day than to have 20 or 30 half-done guitars. And, we eventually—through a lot of trials and tribulations—got sales up to a level where we had enough dealers selling our guitars that, when we got guitars done, we could ship them out and then get the cash in. In the first 12 years, we’d gotten to where we had a handful of employees, we were making 22 guitars per week and we had enough sales to sustain ourselves. At that point, we had a stable cash flow, and Bob and I could pay ourselves a few hundred bucks every week. That took 12 years. That was the first big phase of the company, I’d say.
The Retailer: Continuing on from that point, how has Taylor Guitars changed over the years? Has it pivoted over time? Or, has it been a matter of refining the original founding vision?
Listug: Well, let me take you through a couple of the next phases. The next phase, I’d say, went from ’86 to ’93. We eventually moved out of our small shop in Lemon Grove CA because we had enough orders. We moved just north to Santee CA, and we increased production a lot. I hired my first salesman and turned sales over to him. We grew from about $400,000 to about $3 million during that period. Acoustic guitars started to get popular again. There was “MTV Unplugged” and you would hear acoustic guitars on soundtracks, in movies and on TV. We had laid enough of a foundation that we started to capitalize on that.
Then, in ’93, we moved into our first building over here in El Cajon CA. We started getting help with branding and doing good advertising. We got into a period where we were growing 50 percent a year. Then, the next thing we ran into was learning to manage people because, as you get bigger, you’re not hiring friends anymore: you’re inviting strangers into the company and you have to learn how to manage people, how to hire people, how to discipline people, how to reward people and how to penalize people. And then we added another building here in El Cajon.
And as we make more guitars, Bob doesn’t just keep making guitars as we’ve been making them. His strategy has been that you have to rethink how the guitar is made—how it’s designed and how we make it—in order to make more guitars and better guitars. Case in point, in 1999, Bob invented something he’d had in his mind for a long time: what we call the New Technology or “NT” neck joint. It’s a way of attaching the neck to the body to where it’s very easily adjusted for the player.
In 2003, we came out with our own pickup, called the Expression System, to solve both sound quality and installation problems with the traditional piezo pickup that goes under the saddle. And, during the 2000s, we plateaued around $50 million a year. Then, the last several years, we’ve broken out. It’s really through bringing in more experienced management. We’ve been able to break through and, for 2014, we’ll have done over $100 million for the year. During the last 10 years, we’ve grown from $55 million to probably about $105 million for 2014.
The Retailer: What are the most important tasks you tackle day to day? What continues to keep you inspired and motivated? What’s the best part of your job?
Listug: I really like the people I work with. I like the fact that we’re in the guitar business—out of all the different businesses I could be in—because it has to do with music. I think the better the job we do of designing and making new instruments, and leading the way with designing and producing new instruments that inspire people to play, I think we will continue to have leverage and impact on the music that’s being created. You know, making coffee tables or home entertainment centers doesn’t have the same aesthetic vibe to it that making musical instruments does. I enjoy the people, and I enjoy the challenges. We work on a lot of fun stuff here, whether it’s marketing, sales, business or visiting customers. I’m doing a lot of travel these days, working on growing sales in different parts of the world.
The Retailer: When you look at Taylor Guitars as it currently exists, what would you say you’re the proudest of? What makes the company stand apart not only from direct competitors, but also from all companies in the music and fretted-instrument space? What’s the “secret sauce” at Taylor Guitars?
Listug: We make our own instruments; we don’t make a version of anybody else’s instruments. So, our instruments really have their own identity. I’m really proud of that, and I think that’s one reason we’ve been as successful as we have been. I think we’re very honest. We set the bar really high, in terms of doing quality business, treating our people well, being honest and ethical in all our dealings, etc. I’ll give you a quick example: obviously, our sales are to resellers, whether they’re distributors or music stores. But our focus these days is really on not only the quality of our instruments and our own sales to the resellers, but also how well our products are performing for those resellers.
We’re very focused on each model and how well it’s performing at the retail level. We want our dealers to be successful selling our guitars. That includes a lot of things: the right guitar, at the right price, with the right features so that it’s competitive. The marketing has to be right; our sales training has to be right: the whole package. The better we are at the whole package, the more successful the dealers will be. And the more successful the dealers are, the more successful we’ll be, because they’ll buy more products. Our approach to doing quality business is probably what I’m most proud of, and it’s what I think really distinguishes the company.
The Retailer: Being a company that specializes in acoustic guitars, Taylor Guitars I’m sure is frequently confronted with issues of sustainability: what woods to use, how those woods are harvested and where they’re procured. Tell us a bit about Taylor Guitars’ philosophy relative to sustainable procurement of the wood you use.
Listug: Simply said, we have to look forward. We’re using wood, other industries are using wood and you have to look toward sustainability: not only for ourselves, but also for the health of the forests and the people of the forest communities we work with. Bob in particular has been really focused, for years, on the sustainability of products. He’s been telling me for a long time—before I even believed it—about the next wood that’s going to be endangered in a couple of decades.
The work we’re doing in Cameroon, Africa…it’s unbelievable how hard this work is: to sustainably harvest and process ebony logs into musical instrument fingerboards and instrument bridges. It’s amazing to see the obstacles we’re up against, because we’re a good citizen and responsible in our efforts, so we can provide for a new forest economy. We’re making sure we’re doing it in an honest, ethical, sustainable way. It’s not enough just for us, because there are other individuals there, from other parts of the world, whose moral code is such that they don’t think there’s anything wrong with bribing people or doing things illegally. A certain portion of the world runs on doing things that way. We don’t.
It’s like I mentioned earlier: once you’ve hired all your friends and the people you know, you’re inviting strangers into the company. The more we extend our responsible reach into areas like sustainable woods, the more we’re going to run into other factions in the world who view it differently, and who may operate in ways we don’t consider ethical or sustainable for natural resources.
So, we’re running smack dab against that in Africa, which makes it hard. But we’re not backing off. It’s worthwhile, challenging work, and somebody has to do it.
The Retailer: Is there anything the dealer channel could do that would be helpful to Taylor Guitars as a company? Do you have any suggestions for the dealer channel that would help retailers, in addition to helping the company itself?
Listug: I would say the biggest thing I see is that you have to be able to say “No” to a lot more things than you say “Yes” to. You can’t be everything to everybody. Some of the most successful stores I see have the narrowest focus, and they’re very specialized in what they do. They have to be disciplined and say “No” to a lot of things. There might be a lot of lines they could carry in an attempt to try to be everything to everybody, but they have decided what their focus and their market niche is going to be.
I read a really good book years ago called Marketing Warfare. The analogies the author made between marketing and warfare, I think, were really applicable. Because he said you have to be focused and to concentrate your resources. For example: if you have an army and you’re trying to take another territory, you aren’t going to spread your troops along every front and waste them. You have to concentrate them to be able to deliver the heavy blow to the place that the enemy is weakest, and to take them by surprise in order to make headway.
But, you see, if you compare that to being in business, there are a lot of stores that have a little bit of everything. I think they really waste their capital, trying to have a little bit of everything rather than focusing on companies they really want to partner with, and that they can represent well. And if that’s Taylor, great. If it’s not Taylor, that’s fine, too. I feel people need to be more focused. If they want to focus on another brand or another segment of the industry, that’s fine. Just focus and get a better return for your efforts.
Don’t scatter your money and your efforts trying to do too many things.
The Retailer: What is your sense of the relative strength—or weakness—of the broad music products market and the fretted-instrument sub-segment of it? Are you feeling optimistic about our industry? Do you see challenges ahead that we, as an industry, must try to overcome?
Listug: Not speaking for Bob or the company, but just expressing my own personal feeling: I think there’s a lack of leadership in terms of instrument design. I think the industry could be doing a much better job right now crafting more instruments that will create future business. I think this is partly a result of the lifecycle of companies: people create instruments and they create a company because they’re an inventor. Then, they move on: they die, they sell the company and/or the company changes hands several times. You end up with finance, sales and marketing people owning and running companies. And I don’t think the instrument creators get enough of a seat at the table.And so, companies end up making more and more and more versions of something that was invented ages ago. It’s offered at different price points, in different finishes, in different colors.
I think that new instruments need to be created. There needs to be new blood in the form of new instruments being created to move the industry forward. And that’s what we’re trying to do at Taylor.
The Retailer: What does the future hold for Taylor Guitars? What can company-watchers expect over the next six months? One year? Five years?
Listug: We’re going to continue growing. A few years ago, after [Master Builder] Andy Powers joined the company, we started overhauling our line. And we’re introducing another newly redesigned series this month: the new 600 Series. At the Frankfurt show, we’ll be introducing another newly redesigned series. After that, we’ve designed other instruments that are in a little bit of a different market space than what we’re currently offering, any of which will require an awful lot of sales, marketing and artist relations work. The products will be logical extensions for Taylor.
Beyond that, we’ll continue working on sustainability and sourcing wood. We’re working on a project now in Hawaii on sourcing Hawaiian koa and the possibility of growing other tropical hardwoods there. I think you’ll continue to see us take more and more leadership across the spectrum in our industry. I expect we’ll have a lot more aggressive growth outside the U.S., as well. We’re a market leader here in the U.S. and in other parts of the world, but we’re going to be focused on growing faster internationally. I’m personally going to be doing a lot of the travel to these markets to observe them and see what’s needed to grow them faster.
Plus, we’ll be opening our new facility across the border in Tecate, Mexico this year. We have the building; it’s being built out right now. It’s a new facility for the part of our line made there. And then we’re looking toward, later in this decade, a new facility near where we are here in East County in San Diego.