Rocky Mountain News

Jake Jabs retired twice before opening the doors of American Furniture Warehouse in Denver 30 years ago. Now 74, the child of Russian immigrant farmers talked recently about his early years, his business philosophies and some practical lessons learned along the way.

Jabs on how he started out:

There were nine kids in the family, and we were playing in country bands when I was 5, 10 years old. When we went to college, dad gave us 50 bucks to register and then you were on your own.

Five of us boys ended up working our way through college playing music.

(After college and a stint in the service,) I started playing music again, toured with a Grand Ole Opry group and eventually went back to Bozeman (Mont.) and started teaching guitar. It was pretty lucrative - back in those days, everybody wanted to play guitar. Folk music was huge, so I did real well.

I ended up buying a half interest in a music store in downtown Bozeman for $1,500. A year later, I bought my partner out for $3,000. When I first started there were five music stores in Boze-man. Five years later, I was the only music store left.

In Bozeman, I had all the good franchises and sold all the good lines, which is one reason my store did well. So I went to open a store in Billings, and they wouldn't let me take my franchises with me. Somebody else already had them in Billings.

I went to the guy selling Fender, who I thought was a friend of mine. He said "Jake, you can't sell Fender guitars in Billings." I was doing 500 times the amount of business the guy in Billings was, but they just protected him.

Jabs on what came after he sold the music stores:

The guy who owned the Motorola distributorship in Billings called me - he had a brother-in-law in Great Falls (Mont.) who had an appliance store with some furniture in it. He was struggling, and he said, "Jake you were always a great promoter when you had your music stores. Come up and run a sale for us."

So I ran a sale for him, and it was very successful. So, right away the phone started ringing, people called and said, "Run a sale for me, run a sale for me."

Little by little, I was running sales and turned that into a big business.

Everyone who I was running these sales for was making some mistakes. In the back of my mind I said, "If I ever go back into the business, I'm not going to make that mistake, I'm not going to make that mistake, I'm not going to make that mistake."

In 1968, there was a store going out of business that I was running a sale for down on South Santa Fe Drive called the Mediterranean Shop.

I bought it and re-opened as Mediterranean Galleries.

And I bought the (Montana) factory in 1968 just to make Mediterranean furniture.

Jabs on starting his current business:

I had Mediterranean Galleries from 1968 to 1974. 'Til 1973 it was hot, then it started dying. I don't believe in bankruptcies - when things get tough I suck it in and do whatever I need to do, so I just sold my four stores and went back to Montana to run the factory.

There was a big recession in Colorado then, and a lot of furniture stores were going out of business. I had been traveling from Montana selling and thought I saw an opportunity. I bought the old American Furniture Co.

I took over the lease at $1 a square foot, which at that time seemed high enough but turned out to be a home run. Plus they had about a million and a half of assets on the books that I bought for $80,000.

We opened on June 9, 1975, as American Furniture Warehouse. I changed the name because at that time the warehouse concept was very popular.

It started out very slow. The first year we did $8 million, then $10 million, then $15 million. We kept growing until '84-'85. Those were tough years; every Colorado business was suffering. The only two years I lost money were '84 and '85.

The way we saved the business is we had nine stores then. I got on TV and I said, "Times are tough out there, and when things get tough, the tough get going. So I'm gonna close half of my furniture stores, and I'm going to sell my furniture at half price until my inventory reaches the proper level."

People started coming out of the woodwork. I owed the bank $1 million; they were starting to foreclose. I paid them off. I was slow paying creditors, which I hated. I always believe you have to have good credit, and I always had good credit except for those two years there where we just couldn't do it.

So I paid the creditors off, paid the bank off and started over. I closed five stores, ended up with four stores in Colorado. I basically saved the Colorado stores and got out of Montana, Wyoming and Idaho.

Of course, the recession got over in the late '80s and early '90s. That's when the business started taking off, and we started having those $20 million a year increases. This year we'll do like $350 million with nine stores.

Jabs on outlasting the competition:

One mistake is people get too greedy, they want to make big markups. See, nobody taught me that. I grew up on a farm. I didn't know you were supposed to make big markups. I thought you were supposed to sell stuff cheap. I didn't know any better.

Jabs on retirement:

Retirement is for other people. I'm not working any harder today than I did when I had my little music store. I worked 60 hours a week then; I'm working 60 hours a week now.

But I think you have to enjoy what you're doing. I loved the music business until I decided there was no future in it. I liked running sales till it became too much time away from the family.

I like what I'm doing. I still buy. I supervise all the buying. That's kind of the fun part, seeing what sells. I can't wait to come to work on Monday to see what sold over the weekend.

Jabs on doing business in a global economy:

I just bought a new car. I predicted two years ago that gas would be $2 a gallon - I was traveling in China and all of a sudden I'm seeing cars. Before, it was all bicycles.

I've driven Lincolns all my life. A year ago I went to the dealer, they told me, "We're coming out with an all-wheel-drive, 30 mpg, all the latest technology." I went back again two weeks ago. They still don't have the car and they're gonna call me when it gets in. Meanwhile, their lot is full of gas guzzlers and the imports are eating their lunch.

What I ended up buying is a Hyundai. I wanted to make an example to my employees.

Hyundai's a Korean car. It's a value, because Koreans make $8 an hour. Japanese cars are higher, and American-made cars are even higher.

I think the same principle applies to furniture, electronics. We bought a new house a year ago. We got Viking appliances in there, and we already have trouble with them. We're having trouble finding someone to service them, and they were expensive.

We could have bought (ones) made in China for a third and probably had somebody to service them.

The Chinese are making better furniture for less money.