Taking Control

For this small retailer, the development of the right computer system transformed every single aspect of the way the company did business.

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A CUSTOMER WALKS INTO A RETAIL musical instrument store with a guitar and an amplifier, let's say. He proposes to sell the guitar outright, and to trade in the amplifier on more expensive equipment, provided the store's willing to knock off 30% from list. He'll retire the present layaway with cash from the sale and start to pay for the new stuff by applying the trade-in plus a gift certificate as down payment. Most of the remainder will be financed via a commercial lender, with the balance bridged by a credit card if necessary. But hold on: the components aren't in stock. They have to be ordered and transferred from the inventory of another store. The customers asks to be phoned -- after six o'clock -- as soon as they arrive.

At conventional retail enterprises, sequences as convoluted as that take place mostly in the nightmares of clerks. But variations on the script play out in real life so frequently at Daddy's Junky Music Stores Inc., a chain of six outlets headquartered in Salem, N.H., that its sales manager uses the scenario as basic training for counter help. It is also used to make sure the fancy computer system Daddy's installed company-wide last summer can hack the job.

Projecting a mere $3 million in sales back in 1983 -- the year the search for an appropriate data-processing system began -- Daddy's was an unlikely candidate for the sophisticated setup it finally bought. Then again, its founder, president, and CEO Fred Bramante Jr. was an unlikely candidate to run a fast-growing business in the first place. An eighth-grade science teacher -- whose small son inadvertently coined the name Daddy's Junky Music Store in 1972 while commenting on Bramante's first makeshift outlet -- he sensed that buying as cheaply as possible and selling at maximum profit demanded more attention than retailers were accustomed to giving it. Bramante was willing to assume simply from his ability to open the doors that business had been OK the day before. As the business appeared to flourish, however, not knowing for sure began to drive him crazy.

A self-confessed worrier and seat-of-the-pants merchant, Bramante fretted that a portion of the receipts that salespeople traditionally pump through registers as income actually isn't. Between the gross and the net undoubtedly stood undocumented costs from inefficient inventory control, inept financial planning, unrewarding product mixes, stock shrinkage, and other unseen chimeras. For example, accessories such as straps and picks were falling through the cracks because they were so hard to track financially, even though they added up to a full 25% of sales. So was a lot of warranty repair money that, if only Bramante had had proper records, would have been refunded by vendors. He wanted a picture of where the dollar went -- sales trends, growth slopes, inventory turns, sales-incentive payoffs. He needed to see profit, to touch it, to be able to trust it. And -- if all went well -- to spend it.

To be sure, all had been going to well that last year Bramante, now 40, was putting the finishing touches on a guitar-shaped swimming pool next to the mansion he had just built on the coast. So why the fancy computer? Because, he confesses, he was running scared. At under $5 million, Daddy's profile was low enough; but at over $5 million -- which the chain would be shortly -- the operation would alert competitors' jealous attention. What I've done this far has been relatively simple, Bramante figured, so there are probably people out there who can do it as well. But now I want to accomplish things that will make them wonder, How in hell is this guy doing what we can't do?

"I'd love to be invincible," he admits, "but I don't believe anyone can get to that point. So I'll take getting as close as a business can." And tight financial reins would carry him most of the way. One tack was to hire more support staff -- 25 bookkeepers, he estimated, for starters. In bookkeepers, he estimated, for starters. In Bramante's fevered image of some pencil-driven work force, each keeper would be assigned a specialty: Number One, your job is guitar strings. On which strings do I get my best gross margin return on inventory? What quantities of strings, therefore, should I have in each store? The second person would do picks, the third power cords, and so on.

The record keeping would entail phone calls back and forth among the stores, and reviewing sales slips, and toting up inventory levels. "In most small to medium-size retail businesses, the guys who run them have to be good guessers," Bramante says, including himself among the more gifted of the seers. They operate from paper-strewn offices and out of warehouses piled to the ceiling with goods still in boxes. "If you ask for something, the owner says, 'Yeah, I've got one, it must be buried over there somewhere." To them, an operational support staff is out of the question: too expensive. It's more important to get that customer's dollar locked up in the cash register. "Those guys live for today; they don't want to make sacrifices in the area of sales. They're praying," Bramante observes, "and it scares me. What does lack of control ultimately cost? You can go for years without knowing, until one day somebody says, 'Sorry, it's too late now."

The better alternative, he knew in his untechnical heart, would be to harness the right computer. A powerful system not only would save on office space, but would wrest profitability from the whims of chance and put it where it belonged -- into the plans and strategies of his management team.

One problem: Daddy's did not have the right computer. The other: Daddy's didn't have a management team, either.

Taking first things first, in 1983 Bramante employed an ex-magazine publisher as marketing director, then called on a public accountant to head finances. "I may be the only music store in the country to hire a CPA to run the accounting department," the president rationalized, "but I'm not hiring for where I am, I'm hiring for where I'll be."

Like any red-blooded entrepreneur, Bramante hoped to be in nine figures within 10 years. But Daddy's new marketer, David Wright, now 35, discovered that orderly growth was not what Daddy's store managers were interested in talking about. Rather, they insisted on orderly orders: we never get the product we need, they complained. We're sent dozens of something else we can't get rid of, and we don't know where most of the stuff is, anyway.

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