[Guitar Affair]

Now the more difficult issue, the SSN. I struggled for many, many months with this one when I was designing the business. One of my previous startup efforts was PromiseMark (sold to Experian), which invented the identity theft recovery service and insurance that is now common and offered by all kinds of insurance companies and banks.

Jim, seriously, in one sentence, you claim to be the inventor of identity theft recovery services as an industry, and in the very next sentence you begin to explain why I would have to give you all of my personal information AND my SS number AND $50 in cash just to do business with an online entity I never heard of and know nothing about other than seeing a nice website?

Your point is well taken. My experience in the identity theft industry makes me sensitive to the issue and made me try like hell to avoid being a credit lender. It makes me very sensitive to the fact that people hate giving this information out and they are legitimately wary of companies who ask for it. However, I don't control the playing field here, so once I couldn't figure out a model that would adequately protect me from loss, I had to decide to act as a credit lender, which means I have to run credit and background checks on customers. It was a difficult and painful decision because I fully realize that I am writing off a lot of potential customers because they won't want to give me that info. That is a dreadful feeling for an entrepreneur.

The $50 is another issue. Running the credit and background checks costs a lot of money and I was terrified that if there wasn't a fee, people might sign up, just in case they ever wanted a guitar. I can't wait until a rental is actually reserved because the various checks take time, so I would have to incur the cost of those checks up front, which would drain my cash. I settled on the fee to cover my costs, and as a mechanism to limit signups to only those people who were truly interested in taking advantage of the service. To date, the problem hasn't manifested itself and I've been crediting back that $50 to customers toward their first rental or purchase. I'll continue to do that as long as it doesn't turn into a problem. The interesting thing that you may have noted is that the membership also provides pretty significant discounts on products in the form of additional credits that members get when they buy from Guitar Affair and on some rentals. Even if I didn't credit the $50 back straight away, my intent was always that they members would get that money back through member credits. It may not be evident now, but should be more so once I get all of my accessories, effects, etc. loaded up on the site.

Ultimately, I'm not trying to build the next Musician's Friend here. I'm really trying to build a community of high-end guitar enthusiasts and provide the best service I can to them, and of course hopefully make a living doing something I'm truly passionate about. All of my decisions are made based upon how I can do the former without giving up the "making a living" part.

Again, I hope this helps. Feel free to ask additional questions. BTW, thanks for the kind comment on our web site.

Jim

[Guitar Affair]

Got LEFTYS?

Unforunately, no leftys yet, but that is next on my list. You can imagine how expensive this business is to start, so I had to start drawing lines and couldn't afford to do right and left handed guitars at the start.

Sorry.

Jim

[strumminsix]

Have you considered the alternative of allowing "renters" to put the value of the guitar in "escrow" to you until it is returned?

Yes, I'm sure this adds some complexity and cost. However it may be what some people prefer. Just an idea...

[Guitar Affair]

Have you considered the alternative of allowing "renters" to put the value of the guitar in "escrow" to you until it is returned?

Yes, I'm sure this adds some complexity and cost. However it may be what some people prefer. Just an idea...

And a good one. One of my customers mentioned it to me, not as a one-time alternative, but in his case, he rents quite frequently. He suggested that he would leave a bail in long term to cover all of his rentals.

The problem with a one-time deposit is that I would have to charge the customer significantly more for the rental because of the credit card fees. For a $2000 deposit on a Les Paul or PRS, the credit card processing fees and fees for Amex (which a lot of my business customers use) would be in the neighborhood of $130 or so. That could practically double the cost of a weekly rental. It still might be something that I offer for the customer, if they absolutely want to do it, or for international customers (who don't have an SSN or US credit background).

Thanks for thinking outside the box. This is probably an option that I will add in the near future.

Cheers,

Jim

[Tennessee Jedi]

Got LEFTYS?

Unforunately, no leftys yet, but that is next on my list. You can imagine how expensive this business is to start, so I had to start drawing lines and couldn't afford to do right and left handed guitars at the start.

Sorry.

Jim

If Tiger bites send him a righty strung up side down.

[Mick]

I am having trouble swallowing a lot of the foregoing. I own rental properties and run credit and background checks all the time. I think it works out to about $5 per person, and the checks usually take a day. It sounds like when I "reserve" a guitar, you don't send it out right away, so I don't see the problem with adding $5 to your prices and doing the checks the first time a customer forks over the cash to reserve a guitar, thereby eliminating the $50 fee to "join", and gaining a huge amount of credibility along the way.

Speaking of credibility, and ways to get around running background checks on every yahoo that you might want to do business with, how about signing some partnering agreements with retailers? Most folks interested in $5000 guitars probably have one or more guitar retailers with whom they do business on a regular basis, if for nothing more than buying picks and strings. This would give you more credibility since customers would have a bricks and mortar business to go scream at if they thought they were mistreated, as well as giving you an idea of who is really interested in spending money on guitars and gear and who is likely to just take the axe and run.

I'm sorry if I am coming across as an a-hole, as you say you have worked for months on this, and I admit to thinking about it for maybe 10 minutes but it's just hard to believe that there aren't pretty simple ways around these problems in this day and age. Strummin's idea sounds like it has merit too. Escrow.com more or less enables the cross-country purchase of used cars at dramatically lowered risk and for very affordable prices, maybe a partnership with them would be beneficial? If you are serious, that's great, but I think your business plan needs a little more time in the oven.

[Guitar Affair]

I am having trouble swallowing a lot of the foregoing. I own rental properties and run credit and background checks all the time. I think it works out to about $5 per person, and the checks usually take a day. It sounds like when I "reserve" a guitar, you don't send it out right away, so I don't see the problem with adding $5 to your prices and doing the checks the first time a customer forks over the cash to reserve a guitar, thereby eliminating the $50 fee to "join", and gaining a huge amount of credibility along the way.

Speaking of credibility, and ways to get around running background checks on every yahoo that you might want to do business with, how about signing some partnering agreements with retailers? Most folks interested in $5000 guitars probably have one or more guitar retailers with whom they do business on a regular basis, if for nothing more than buying picks and strings. This would give you more credibility since customers would have a bricks and mortar business to go scream at if they thought they were mistreated, as well as giving you an idea of who is really interested in spending money on guitars and gear and who is likely to just take the axe and run.

I'm sorry if I am coming across as an a-hole, as you say you have worked for months on this, and I admit to thinking about it for maybe 10 minutes but it's just hard to believe that there aren't pretty simple ways around these problems in this day and age. Strummin's idea sounds like it has merit too. Escrow.com more or less enables the cross-country purchase of used cars at dramatically lowered risk and for very affordable prices, maybe a partnership with them would be beneficial? If you are serious, that's great, but I think your business plan needs a little more time in the oven.

Mick,

Not coming across as an a-hole at all. Here are my quick responses. On the checks. I'm not sure what level of checks you are doing. I am running credit checks with multiple agencies, which average about the cost you cited. The bigger expenses for me are the full federal and state records checks. Those range between 20 and 35 bucks. If you have a good source, I sure would appreciate a pointer.

Not sure what you mean by partnering with retailers. There are very few retailers who will let their high end instruments go out for rent. Plus, that changes my business model completely and doesn't allow me to control the experience (delivery, setup, etc.). In that regard, I'm really acting as a salesperson for that retailer and that really wasn't what I set out to do.

On the escrow issue. As I said, it's something that I'm going to look into. But, there's a BIG, BIG difference between escrowing a car sale, where a couple of hundred bucks for a fee doesn't really effect the sales price significantly and tacking a fee on to a guitar rental fee that may only be $100. It's something I'll keep exploring but at some point, the hassle of going through it just to rent a guitar will lose me more customers than asking for an SSN to run the checks.

Cheers,

Jim

[Mick]

On the checks. I'm not sure what level of checks you are doing. I am running credit checks with multiple agencies, which average about the cost you cited. The bigger expenses for me are the full federal and state records checks. Those range between 20 and 35 bucks. If you have a good source, I sure would appreciate a pointer.

Credit checks can be bought per unit or as a subscriber. I used to buy units, but lately I have had little turnover and have been using a realtor for the few vacancies I have filled in the last year or two so I have been letting them do it and paying them their rate. I don't remember off the top of my head where I was getting them myself, but if you are really interested, I can check and get back to you, but if you are getting them for a few bucks a piece, I doubt it will be of any benefit to you. Let me know.

Background checks: I agree, this is a "spend what you want" area. I have run checks for open warrants, figuring that if a person had a high credit score and no active warrants, that was likely enough for me. Checking for open warrants depends on where you are and where you want to check. In some counties, the info is available on-line for free. You can also check for recent bankruptcies in some areas online for free, but again, a person with a 650+ credit score probably hasn't had a recent bankruptcy. If you really want to crawl up someone's butt, you can go all the way to hiring a private investigator to check them out, I am told this costs $200-$300, but I have never gone that far myself.

What follows may or may not be applicable since I can't read your mind, but if it was my business idea (and I think it is a good one btw), I would be thinking about what my risks are in concert with who my target market is and appropriate ways of keeping the two in balance. So I think: who is your target market? I would think that someone willing to pay $300 per week to rent a $5000 guitar is going to be a person of some means, correct? I mean, why would I want to rent the guitar in the first place? Probably because I am thinking about buying one, and I want to try it in my home for a week, playing through my amplifiers and with my gear and seeing how it performs, yes? Meaning I probably have $5000 to pay, or at least sufficient credit to cover $5000, right? Why do I need a background check at all? I need a credit check. The result of the credit check will tell you what credit is available to them. If you run the report and they have a high score and sufficient credit, you have them sign two charge slips, one for the rental and one for the balance of the value of the guitar. When they return the guitar, they get the second slip back and you never process the transaction, so no CC fees. If they do not return the guitar, they have bought it, and you process the second transaction. Of course, all this needs to be written into the "purchase agreement" they sign before you send them a guitar. If you have proper controls in place, like making the customer confirm all personal information on the credit report, only shipping the guitar to the address where the credit card bills go, etc. your chance of someone stealing a credit card, renting a guitar and absconding with it are essentially zero. In fact, if you can figure out a way for them to do that, I'd be interested to hear it because we probably need to beef up our credit card controls here at work. If you want to charge $15 for the credit check up front, with that amount applied to someone's first rental, that would be more palatable than a $50 up front "membership fee".

Not sure what you mean by partnering with retailers. There are very few retailers who will let their high end instruments go out for rent. Plus, that changes my business model completely and doesn't allow me to control the experience (delivery, setup, etc.). In that regard, I'm really acting as a salesperson for that retailer and that really wasn't what I set out to do.

Partnerships can take many forms. I wasn't thinking renting the retailers equipment, I meant that you still rent your equipment, but when a customer at "Guitar Assylum" can't decide on which guitar, GA can offer your services. They get a piece of the action for each rental they produce for you, you retain control of the rental experience, and you make sure to set up non-exclusive partnerships so that your services can be offered at all the big name stores. That's just an idea for structure, and it may suck, but the possibilities are essentially boundless.

On the escrow issue. As I said, it's something that I'm going to look into. But, there's a BIG, BIG difference between escrowing a car sale, where a couple of hundred bucks for a fee doesn't really effect the sales price significantly and tacking a fee on to a guitar rental fee that may only be $100. It's something I'll keep exploring but at some point, the hassle of going through it just to rent a guitar will lose me more customers than asking for an SSN to run the checks.

You may be right. Again, just an idea. The cost of escrow does decrease with smaller amounts though, so I wouldn't write it off as too expensive without checking into it.

In all seriousness, I responded to you the way I did because when I read the initial posts and the website, I was completely convinced that this was either a scam or a goof. At the moment, I am trying to give you the benefit of the doubt, but I have had my chain yanked enough on-line that I am still not convinced that it is not someone yanking my/our chains. That said, if it was my business, that would be a big priority area, namely, how do I get potential customers to take me seriously?

[Guitar Affair]

Mick,

Thanks for taking the time to explain your views. You definitely have some thoughts that are worthwhile for me to consider and I will do that. You nailed my target customer base pretty well. The only other point that I would make there is that in addition to people considering certain boutique guitars for purchase, a large part of my customer base consists of business travelers who are guitar enthusiasts and want a nice guitar to play on a business trip rather than spend the evenings the lobby bar.

You're definitely thinking outside the box on the guitar store partnership (you don't happen to live in the Washington DC area do you). I may try pitching that to a local store and see if it works. The obstacle that I see is that because I'm selling guitars, and normally for much less than a local store can sell them, they may be hesitant to refer a potential customer to me. Even if I private labeled the experience under the store name, I fear they may have an issue, but I'll pitch it to a couple of local stores to check and speak with some folks at NAMM next month.

Thanks again for the time that it took to write those ideas down. I really appreciate it. And thanks for your kind words about the business idea.

Cheers,

Jim

[Mick]

The only other point that I would make there is that in addition to people considering certain boutique guitars for purchase, a large part of my customer base consists of business travelers who are guitar enthusiasts and want a nice guitar to play on a business trip rather than spend the evenings the lobby bar.

OK, that is a problem. My only thought on that is to buy insurance on the guitars, or at least try to. I would think that an insurance company would have some good ideas of how to keep people from stealing the guitars, especially if they have to pay for them when they disappear.

[Guitar Affair]

The only other point that I would make there is that in addition to people considering certain boutique guitars for purchase, a large part of my customer base consists of business travelers who are guitar enthusiasts and want a nice guitar to play on a business trip rather than spend the evenings the lobby bar.

OK, that is a problem. My only thought on that is to buy insurance on the guitars, or at least try to. I would think that an insurance company would have some good ideas of how to keep people from stealing the guitars, especially if they have to pay for them when they disappear.

You're right Mick. That is the logical backstop and I'm still working with some insurance companies. Ironic as it is, insurance companies hate risk. They like to know exactly what their loss rates will be, like the do with cars. Since there is no loss rate history on a business like this, they are currently looking at me like I have 3 eyes. It just takes time.

Thanks again for all of the time you've spent with me helping to make my business better.

Jim

[strumminsix]

(I'm seeing an RUKIND discount from Guitar Affair )

[Guitar Affair]

(I'm seeing an RUKIND discount from Guitar Affair )

Hey, you guys have been helpful. If you're interested in anything, just email me first at [email protected].

I'm actually considering a number of programs that would allow people to earn credits toward free "affairs", including having people help me to write guitar and gear descriptions. I still have about 50 guitars to get up on the site and dozens and dozens of accessories.

BTW, speaking of free guitars, Guitar Jam Daily is giving away a free $2900 Collings Model 360. I played one at NAMM - Sweet guitar. You can find details at www.guitarjamdaily.com.

[strumminsix]

Very cool of you, Jim! I have to be careful.

I've got this disease called GAS.

It's main symptom: TRY=BUY