Barney Cohen

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From the Back of a napkin to a billion in revenue

 

A constant theme throughout my life has been a love affair with business and music. I feel fortunate to have built a highly successful career around my two passions. For over 40 years I have been growing my own businesses and helping others grow theirs. I have learned that doing some basic things right can make a huge difference in the success of any business.

I would like to share my experiences through my own personal story. I hope you enjoy it.

In my early teens, my dad wisely encouraged me to find a job to occupy my free time. I started working at a record store in Kansas City at the age of 13. I spent my middle and high school years learning the ins and outs of running a record store. I developed a passion around selling music.

After high school, I went to Antioch College in Yellow Springs, Ohio with no real profession in mind. I finally settled on elementary education. Between studies, I worked again at a record store. After graduation, I moved to Woodland, California where I soon found out there were no teaching jobs. So after a few odd jobs and no real career opportunities on the horizon, I decided to open my first record store. It was 1974. The country was in the middle of a recession. I had very little money.

Convincing the bank to loan me $10,000 and relying on my previous record store knowledge, I was finally in business doing something I absolutely loved.

 
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Barney's Good Time Music

 

One of my first customers was an older gentleman with muddy boots who asked if I carried any Buck Owens on 8-track tape. Not only did I not have any 8-track tapes, I had never heard of Buck Owens. My new customer explained to me that if I expected to do well selling records in Woodland, I better get some tapes and I better get some country music, including Buck Owens. I ordered every Buck Owens title in my distributor’s catalog – in 8-track – and called my new friend when they arrived. He was so impressed that he took all the titles, plus more, handed me $1,000 in hundred dollar bills, and asked me to buy him five tapes each week until the money was gone.

About 15 years later, I met Buck Owens at a record industry event and told him the story.

I thanked him for teaching me so much about business, especially always putting the customer’s needs and wants first. Owens laughed and said it was one of the funniest things he had ever heard. He asked his manager to send me one of his trademark red, white, and blue guitars.

I was always experimenting and trying new things in my business, especially when faced with a problem. During a period of slow sales and tight cash, I decided to try selling used records. I had accumulated thousands of titles that I didn’t have time to listen to since I spent most of my time at the store. Even though the records were used, I guaranteed them, which no one was doing at the time. I started to purchase my customer’s used LPs for store credit which turned out to be a huge success and significantly increased my sales. Not only did I expand my product offerings, I dramatically increased cash flow and gained a whole new audience.

Since the University of California at Davis was a little more than 10 miles away, college students started making the trek to Woodland to buy used records. Selling used records was so successful I opened a second store in Davis. Immediately, I had 30,000 students from all over the world in my backyard. Even though competition was fierce, I was the only record store to offer used records. I worked hard to give my store a personality, and encouraged my customers to ask about music. It quickly became the cool place to go to learn about and buy all styles of music.

By 1977 I was well-known in the industry as the guy who used a computer to keep track of his inventory. My kid’s swim coach, who had degrees in both physics and computer science, helped me build a computer program to control inventory. Although the technology was cumbersome and entering the product information time-consuming by today’s standards, I was able to keep track of a much wider selection of items than my competitors. I quickly got a reputation for having hard-to-find items that people wanted.

 

Valley Records Distributors

 

By the early 1980s, I had four record stores and was exploring additional ways to grow the business. One day, a man came into the store and asked me if I would replicate my store for him in another part of the state. I jumped on the opportunity. He agreed to purchase his inventory from me and my wholesale record business was born.

I sold my record stores, and on January 1, 1985, I opened Valley Record Distributors. I had six accounts and did $2 million in business that first year.

I personally called on all record stores within 100 miles of Woodland, and doubled my business each year over the next six years. Since I was selling the same thing as my competitors – prerecorded music – I needed to find an angle to be successful. Instead of trying to sell record stores only the top selling music, I also sold them those ‘hard to get’ titles that most distributors didn’t carry. I told record stores that even if you give an order to a competitor, give me the business that your primary wholesaler can’t fulfill.

As a retail store, customers paid me when they purchased the product. A major concern I had as a wholesaler was that my customers wanted credit. I knew if I wanted to avoid costly mistakes I better get some help. So I called my toughest credit manager and asked his advice about how to manage receivables. Not only did he answer all my questions, but he came to Woodland for a week and showed me step-by-step how to set up a system for collections. He coached me on managing the expectations of my accounts and even developed a script for my salespeople to use when authorizing credit. I learned a valuable lesson in how to collect bills. That experience also taught me that when you need help or advice, ask someone who really knows.

For the first six years of my wholesale business, I grew by increasing the number of titles I carried, improving my systems and equipment, and taking care of my record store accounts. I was doing about $120 million a year in business and looking for more avenues for growth. But I realized that if I wanted to truly manage the growth, I needed more business education. I enrolled in Harvard’s Executive MBA program which opened my eyes to different ways of looking at business problems. That experience made a huge difference in my ability to successfully take my business to the next level.

By the early 1990‘s most record stores in the United States had heard of me and the majority of them were customers. I continued to expand the business by marketing internationally and selling to non-traditional outlets, such as libraries and book stores. I was able to convince the CEO of Borders that music was a great fit for the expanded version of their stores. They added a complete record department when they opened their store in Dallas. It was a huge success. With my computerized systems, I was able to offer Borders a vendor-managed inventory. They decided to add music to all their stores going forward.

As I continued to grow, I decided to carry every record in print. I became one of the largest wholesalers of prerecorded music in the world. Since I was carrying every title in print, I compiled a database of all those titles. I was committed to keeping it current so now every record outlet in the world had an accurate list they could use to order. I met a professor at the University of California at Santa Cruz who ran an ‘intranet’ site at the university. He asked if he could add that list to his site and let university members order. To the best of my knowledge, I took the first order for music on the internet in 1989 before the World Wide Web existed. I remember wondering at the time if this was a ‘cute fad’ or would it turn into something bigger.

 
 

Going Public

 

 

During this time I was also very involved in our industry trade association, the National Association of Recording Merchandisers (NARM), serving as its national chairman. NARM expanded my network of business contacts and gave me an chance to look for opportunities that would allow me to continue to grow my business.

In 1992, during a visit to my son at Brown University, one of his friends speculated about the value of combining my music inventory with a ‘shopping cart’ on the Internet.  That was the beginning of CDNow, a pioneer in the selling of music online. When Amazon began selling music, I had the products, infrastructure, and experience to win their business. In the beginning, Amazon bought all its music from me. Our business again took advantage of a changing marketplace and we became the largest third-party fulfillment house of prerecorded music on the web, shipping thousands of packages daily to individual customers.

Valley Record Distributors

Valley's Growth over a 15 year period

By the mid-1990s, I changed the name of the company to Valley Media. We had approximately 3,000 employees in two locations and were shipping an average of 5,000 packages a day to businesses all over the world. We had sophisticated systems which assured accurate and timely delivery. The business was making over $900 million in yearly sales. But growth costs money and if we wanted to continue to expand, we needed more capital. The next logical step was to go public.

After spending a year working with JP Morgan and doing all the due diligence and presentations necessary to take a company public, we had our initial public offering in April of 1999.  Not only was the business I founded and built about to enter a new phase, I was embarking on another chapter in my life. But before I did anything else, I decided to take some time off.