Welcome to the Eventual Millionaire podcast. I’m Jaime Tardy and today we have Brad Schy on the show. Brad owns a company called Musical Chairs. It’s a ticket service company that he grew from $100 to over $7 million. It’s a crazy story. I’m really excited to have him on today, especially because he didn’t start out as an entrepreneur. Thank you so much for coming on today, Brad.
BRAD SCHY: You’re welcome.
JAIME TARDY: So can you tell me first, I know in your bio that you didn’t start out as an entrepreneur. So how did you start out?
BS: I started out as, well before my company opened, I started out as an attorney. I guess I always was a bit of an entrepreneur. I did my undergraduate at UCLA and one thing I did was I went into what’s called Westwood Village, it’s where a lot of the students go for fun and food and so on and so forth. I went to a bunch of restaurants and I said, “Hey give a discount and I’m going to put it in a book and sell this book.” So I had back in college, all the way back then, I had a book called The Westwood Express, Don’t Go to the Village Without Out; kind of a takeoff on AMEX.
It was like $10.00 and it gave you discounts at restaurants and hair salons and so on so forth. That was my first trip. But basically I went on to become an attorney and I essentially didn’t like it all that much and so I started my ticket business full time. It did start, was also in college, I had some extra tickets for an event, well actually the very first thing was my best friend and I, when Magic Johnson was a rookie, and I have always been a sports fan and a concert fan, Magic Johnson was a rookie, so we bought extra tickets and we went out to the parking lot before the game and we would try and sell the tickets.
We weren’t really trying to make money to save, we just wanted to pay for our tickets. Didn’t have a lot of money so we wanted to make money to pay for our tickets to go to the games. We got to go to quite a few and Magic led the Lakers to the world championship that year. So it was really, really cool.
JT: Did it work? Like you never had a time where you bought a bunch of tickets and then couldn’t actually sell them, right? it pretty much worked every time?
BS: There’s plenty of times that’s happened. I’ll tell my story but then we can go more into more specifics like tickets not selling but basically what happened was then I had some extra concert tickets and it was for Eddie Murphy and I put an ad in the newspaper. I think I was probably a senior in college or something along those lines. I put an ad in and I sold them. I had never done it for profit. I had always just been the guy that went out and got tickets because I liked to go to events. But I put it in the newspaper and I sold them for like a $20 profit or something.
I said maybe to pay for my habit I’ll buy extra tickets for events that I want to go to and sell them to try and basically subsidize my habit of going to sporting events and concerts. So that’s how it all really started. So then I took about nine months off and I was a bartender at the Hard Rock Caf? which I did for about five or six years, just supporting myself and building up capital plus it was a great job. It was a lot of fun. It was the first Hard Rock in the United States so it was really a fun job.
I ended up going to law school and through someone in law school I met a girl at what’s called the Greek Theater, it’s one of the theaters out here in Los Angeles and she said, “Brad, buy a season of,” she knew what I was doing, I had been now doing this on the side, just a little penny Annie business really, and she said, “Brad, buy a season of Greek tickets this year because Neil Diamond is going to play seven nights” and this was, I want to say it was 1986. Neil Diamond was very big in 1986. Still pretty big now, he’s an amazing performer. He’s still very, very popular. In fact, he is going to play the Greek Theater this summer.
JT: Oh really? Are you going to buy a lot of tickets?
BS: It’s a lot more difficult to buy them now. It’s really, really difficult actually. But anyway, at that time, I capitalized it with my credit card and I bought season seats and how season seats worked was you paid one price and you took the risk, if there was one show or two shows or if there was 100 shows, you didn’t pay any more money. You put the money down and you got whatever happened. Of course, I knew Neil Diamond was going to play seven nights so that was the information that was valuable.
And it turned out that he played 14 nights actually and Whitney Houston did her first tour and played 3 nights. The Eurythmics I think were on their first tour did 2 nights and then your smattering of other stuff, so it was a real profitable endeavor. And that was kind of the start, that was 1986, it was the start of any kind of business per se.
JT: So do you remember way back when and how much that was? Like what did you have to put on your credit card and then what do you think you got out of it?
BS: I kind of remember it being about $3,600, which was a lot.
JT: Wow, in 1986, yeah.
BS: It was a lot of money but I knew Neil Diamond was playing 7 nights and I probably did some sort of calculation, not that I knew that much but I figured if he played 7 nights and I could sell them for $300 a ticket or so, that was $600 times 7 so that’s $4,200. that would pretty much more than get back your money. The fact he played more nights probably made the value of the tickets less but over the 14 nights it was well worth it, because you weren’t paying any more money incrementally.
JT: Yeah, do you remember how much you got? Was it a windfall you being in college going like “woo hoo I made a ton of money!”
BS: I was in law school at this point. Yeah, it was definitely good. I want to say I three or four times my money invested. You’re not doing that these days let’s put it that way. It just turned out to be really, really good. Then I passed the bar and I worked at a talent agency and I thought I wanted to be an agent and I decided no I don’t want to be an agent so I went into what they called business affairs which is like an in-house attorney for the talent agency. I did that for about three years. Worked with really, really cool people and I still was doing tickets but I kept it very low key because it could look like a conflict because the agency booked bands too.
It was one of the big Hollywood agencies so they not only booked tours for bands but they represented television stars and movie stars and directors and that stuff. But my joke always was I was so far down the pecking order that I wouldn’t use any tickets that got down to my level. Anyway, so I did that for three years and in 1990 I really wanted to go, it was when everything was happening in Europe, I didn’t hate my job I just didn’t love it. I wasn’t really passionate about it and so I decided to leave. I asked if I could have an indefinite leave of absence but they said no so I said okay I’m going to leave. I left on good terms and I went off to Europe and I went and saw, I loved Pink Floyd.
I saw Roger Waters to The Wall concert at the Wall in Berlin on my birthday and I saw the Rolling Stones play in Prague and it was really an amazing experience. I traveled with a backpack for a little over three months around Europe. I came back and I said, “God what am I going to do with my life now? Do I really want to be an attorney?” I think I did a couple of interviews but I really wasn’t passionate about it so I said, “Let’s start a full time business.”
My thinking was I didn’t really even make a business plan or anything like you should do but I said, “I don’t have a lot of expenses.” I had a rent controlled apartment in Santa Monica so that wasn’t very expensive. I owned a Honda Prelude and I didn’t owe anything on it; it was free and clear and I had to take my girlfriend to dinner a couple times a week and really those were probably my expenses. They were pretty low so one of the lessons would be don’t burden yourself a lot in expenses if you ever decide to start your own business. It made it a lot easier, there was always pressure, but obviously less pressure.
I started in the second bedroom of my apartment. So again, didn’t need a lot of capital to start the business. I started just telling everybody I know and came up with the name Musical Chairs, which people thought was clever and we had these great business cards, I don’t know if I have one in my pocket but I’ll try and show you on the thing. I probably have one some place. So it’s unique. we try and do everything as fun because we get to sell fun. Here’s one of the business cards. It’s a mirror and I don’t know if you can read it carefully but it says, “You look even better in good seats.” So we try to do everything with a little bit of panache, a little bit of fun attached to it.
JT: That’s really cool.
BS: We’ll have people that keep them in their wallets for years and will go weren’t you the guy with the card?
JT: It’s a mirror. People can actually use it unlike most business cards, right?
BS: They do. People do different things than what people would elicit and either legal or illicit. So anyway, that was the start in 1990 and then it kind of grew and I hired somebody still in the apartment and then I hired a second person still in the apartment and the business was growing just from me telling people and putting little ads in the newspaper.
JT: Let’s talk about that for a minute because back then, 1990, we didn’t really have much internet ? we did but it wasn’t that great.
BS: Yes, it was almost nothing.
JT: You were just sort of putting ads in the newspaper and telling people and that was it and you were able to hire two employees after that? That’s crazy.
BS: Yes, I mean they didn’t work full time but there was one and then there was another one, named Paul. I still love Paul. He’s great, every once in awhile I talk to him. Derek was my second one and Derek ended up being with me for about five or six years until he went off and got his MBA. I still stay in touch with Derek. He was a Bruin too so we always like Bruins, if possible. We like Trojans too. I’m not prejudice on that regard but Bruins are great.
JT: I’m from Maine.
BS: Gotcha. So that’s our big rival ? UCLA v. USC. Those were my first two employees and Derek stayed with me I would say five/six years and then he went off and got his MBA and worked for a bunch of big companies. I never had as much fun as when he worked with us but obviously he made a lot more money.
JT: So tell me about your mindset back then. Like you were just hey I’m going to start my own business, that’s it?
BS: Yep. My mindset was very casual. It was along the lines of if this doesn’t work I could always go back to being an attorney, but it was working and I wasn’t really that goal oriented which is probably a negative. Maybe I would have served me better to be more but I was kind of along the lines of I’m comfortable. I never was really, not to say I didn’t want to live a comfortable and I lived a nice and very comfortable life, but I wasn’t really like wildly motivated by money.
When I was living in my apartment in Santa Monica, I lived near the beach, it was your basic little apartment in Santa Monica, it was great. I was completely happy. It was just a great place to live and had good friends and business seemed to be going pretty well. I mean we were starting to save some money, growing our capital and it was good. Things were good.
It was better than going into the office. I dressed in shorts and a causal shirt. I didn’t have to wear a tie anymore. I didn’t have to take orders from anybody. That was big. I liked that. Although my bosses, in fact, to this day, one of my bosses I’m still friends with him and his wife and his wife is good friends with my wife now.
BS: So that’s really cool. He became a partner at the biggest talent agency in Hollywood. He does very, very well.
JT: But you’re happy where you are.
BS: Though I probably was not likely to get to that point but it has all been good. I can’t complain.
JT: Nice. So give us some advice, especially as you have been going through and growing your business, especially from 1990 when there was no internet. There must have been so many changes. Tell us about some advice that you might have going through all that.
BS: Hey Steve, did you hear that question? That just happened to come up this morning.
JT: Oh really?
BS: The changes. Yes, because we have a wonderful new employee from UCLA and we were talking about, Steve was explaining to him, he has been in tickets longer than I have, and he was explaining to him some of the changes in the industry. I mean there’s nothing similar. I mean literally there’s almost nothing similar. The good majority of our sales now come through the internet so you’re not on the phone all day long. You can see maybe it has rang once or twice since we’ve been together. Sometimes it rings more.
I mean there will be times and all of a sudden all eight lines will go but most of it is internet now. So that’s one huge difference. You buy your tickets and sell them over the internet. You used to buy your tickets either in person or on the telephone and you would sell them on the telephone. Now everything almost is internet. I mean you still do transactions, that’s not to say that you don’t talk on the phone but it’s substantially less. Substantially.
I mean we use to hire people to go stand in line. That has gone way to the wayside. When I actually started, what I had, you know those little eggshell pads that you have in a hospital bed, they are like eggshell bottoms. I used to actually go out myself, I’d sleep overnight at the record store and buy the tickets. I did that a lot of times. (Steve ? you would sleep on one of those? I could sleep in the car.) No because someone would steal your space. Most people were pretty cool but if someone was a jerk you could say if you parked your car right in front they could say well you weren’t here. Anyway, it created a hassle so I would just park myself right so if I was first, or if I was second, I was second, but if I was first I would be first and it would be clear no one could take my spot.
JT: So you’re not doing that anymore? Come on, you don’t want to go and lay on the ground all night long?
BS: Not particularly!
JT: So what do they do now? If you don’t have to stand in line, how do you guys deal with that now?
BS: Well most of the buying now is through the internet as well like Ticketmaster has online. I do a lot of kind of Armitrons. I try and compare markets. That’s why I have a lot of screens because I’ll try and compare prices and I’ll do my best to find deals on tickets that are already out there. That would have never been possible before. It would have but it would have taken umpteen more time. I mean things were done by the telephone.
Not until there was something called the Ticket Trader that came out, I want to say in the mid ?90s, and it was the first exchange of tickets where they were actually on a ticket on a computer screen. It was done by modem so it would update over the telephone.
JT: So what did you do? When you started to know that the internet was starting to get big, when did you decide like that was the way to go? I need a website. Was it early on or late?
BS: That’s a good question. I would say not early enough frankly. I was slow I think to change. I would say still to this day I have never been at the forefront of it, which is not good. I think we’re better now. We actually have an employee that one of her responsibilities, she’s young and so she knows it all is Twitter and Facebook. She twitters, Facebook, works on my blog, all those things that I would try and do but they ended up being done like once a month or once every two months. Fortunately, my wife kept up on Facebook. We have a good personal page. Our business Facebook page is okay so we’re improving it.
JT: Okay. How do you get your sales now? How do people find your website if it’s not social media and all that fun stuff?
BS: There’s a couple, I mean we have gotten sales due to social media. So we do get some but it’s not the primary. We’re trying to build that better. In fact, we just spent a huge investment on our website and part of it is to get more people to just find us on their searches and we’re investigating different SEO things. We are working on that as we speak. They get us in a couple of different ways. One is, first off, we have a huge client base now. We have about 15,000 or so people – 15,000-20,000 people in our database.
A lot of that is just really from me from networking, from ads. We’ve been advertising for years. We’ve given really good service, real personalized service so we get a lot of word of mouth and we’re really fortunate with our clients being very generous on their referrals. You build up a client base over years and plus we’ve done I think a pretty good job at keeping records, especially with Lakers, we probably, I bet in the whole ticket brokerage, we have the best list of owners of Lakers tickets as anyone would.
So we have relationships with a lot of them. They’re constantly selling us their tickets and obviously Lakers is a big, but way less part of our business. We said if we don’t change, this isn’t going to be good if the Lakers don’t do well. So we diversified a lot away from that.
JT: You said a little bit about ads. How did you get into that and if you could tell me like how do you test ads, whether they work, whether they don’t work, how do you know?
BS: It’s so much more sophisticated now with the internet and honestly I’m not that good at it. I have actually hired a coach, I call him my coach, part time CEO, because he is really, really good with stuff like internet. That’s part of his background but he is like a coach, CEO, friend and psychiatrist or psychologist. He actually, he and my wife are working a lot on that. When it was in its infancy the ads were really inexpensive. You could do private party ads and just say, “Hey I’ve got four tickets for Guns N Roses” or “four tickets for the Rolling Stones” or whatever and you would talk to people and if they liked what you had and they wanted to buy your tickets, they would buy tickets.
The ads were cheap so it didn’t make a big, it was like you’re investing some huge amount. We started doing Yellow Pages ads. To this day, and I did not honestly do what you should do as an entrepreneur, really test them really well. They would give us things that shows how many calls you got and I would kind of be with the phone guy and he was always the hardcore salesman and go “Well great, I got 200 calls off the Yellow Pages but none of them were buyers, what’s the difference?” Some were buyers. It wasn’t like they weren’t. To this day, we still get people that call off of old Yellow Page ads. That’s what’s really funny.
JT: Who uses the Yellow Pages anymore? Nobody.
BS: That’s why it’s amazing. But we will get calls. We absolutely know that they’ll say we saw you through the Yellow Pages. I haven’t advertised in there for 12 years. Anyway, so we got away from that when we saw that that wasn’t working. We started doing some pay per click. We said, God, we’re getting a number of sales but the sales, the profits from the sales, which for the most part, our business has a small profit margin. It’s only, people see these outrageous prices but we have to pay equally outrageous to get the tickets most of the time so the margin is not that large. So you have to do a lot of sales if your margin is not that large.
JT: So you have to do a lot of volume. How many employees do you have right now?
BS: We’ve got, I think it’s somewhere around six.
JT: I was going to say I saw three, I think three different ones behind you already.
BS: We have six employees and Ameet is the part time. He’s like the part-time coach/CEO. Then we have two and a half employees in India who help with pricing. We’ve tried to teach them how to price because pricing is really, since it has become less of a relationship business and you’re selling tickets on the internet, then price is real important. One of the ways we sell, you had asked a lot about how it is sold, there’s a lot of people that are really good with what’s called search engine optimization. So our tickets go on their sites and they end up selling our tickets.
Stub Hub, for instance, obviously they’re the biggest in our industry at this point, they are our biggest client. They sell more tickets for us than any other entity and there’s actually certain brokers, their business plan is to have no retail clients. That’s not what ours is. But they literally just went Stub Hub and there’s another one called Tickets Now that’s owned by Ticketmaster to just sell all their tickets. So they have literally over less than 1 percent of their sales are to their own clients.
JT: See I had no idea. I thought Stub Hub was like your competition and I was going how do you compete with them because they’re huge? But they sell your tickets for you.
BS: What’s funny is that a lot of people think that they’re our competition and they are in a sense because we’ve seen orders from them come in from, I know that name, they have bought tickets from us before. So we laugh because they end up paying more from Stub Hub than they would if they had just come to us but that’s okay too, whatever. Once people usually we tell them the difference and they give us a trial.
We just got a guy the other day that used to buy his tickets from Stub Hub and he ended up calling me and I took care of him on a couple different things. He was like I’m never going to Stub Hub again. The service is more personalized. You’re never going to get personal service on Stub Hub.
JT: Well why doesn’t Stub Hub just go buy the tickets themselves and cut out, because you’re kind of like the middle man in that situation, right?
BS: Because their business model is they don’t want to take inventory. That’s a whole different skill set to buy tickets. Every sale that they do, they make I think it’s 20, doesn’t work out perfectly, but it’s about 26 percent. Doesn’t look like that but what they do is if I put a ticket on for $100, with brokers there is a different system, but we basically if we put a ticket on for $100, they list it for $100 and they take like $5 from us so it goes on at $895 but if you put it on, they actually keep it at the price you have but they take $15 from you. We’re called the large seller.
But then the guy that buys the tickets ends up buying it at $110 because he’s also paying a buyer premium of 10 percent. So their real margin is actually a little bit more than what it looks. It’s more than just 25 percent. They’re charging 15 percent to one and 10 percent to the other. So it’s a model that works for them obviously really, really well and they don’t want to be involved in taking inventory. Again, that’s a whole different, let somebody else take the risk. I mean we take a lot of risk. Our inventory now is over $500,000. We’re at risk for all of that.
JT: How do you deal with that? I mean risk is a hard thing in general but how do you deal with knowing that you have that much inventory and if you can’t sell it, especially if the economy is down and people aren’t going to events as much as they used to?
BS: Here’s the bottom line. There’s rarely tickets that we can’t sell. It happens, I can guarantee you there are stacks of tickets but in the scheme of things, it’s a very small problem. It’s not really a big deal. What does happen is we won’t get our money back. Let’s say I bought a ticket for $200, let’s say I bought a Lakers ticket for $200, say I pay this guy over $325 a ticket, I might only sell it for $200 or $225. So I can’t make that up on volume. It’s the losing money on trades.
I’m just reading a book about Goldman Sachs right now and a long time ago, not just this book, but talking about traders and that’s exactly what we are. A ticket is a commodity. The price goes up and down based on supply and demand and we’re trying to gauge that all the time. If we do a good job, we’re not going to win every trade. Nobody could; if we could, you could interview me for the billionaires club. But I try to win more than I lose and I try to get out of the ones, one of the lines in this book and I just happened to read it this morning was: “Every trader losers sometimes, nobody can be perfect but really good traders know when to get out and if they’ve got a trade when to capitalize and make it a better trade.” I’d say that that’s what I have been pretty good at in my years of being essentially a trader of tickets.
JT: So was that something you learned or do you feel like you’ve always sort of been good at that since you were younger?
BS: I think I learned it actually. I think I had a little bit of a knack for it but I think it’s really something that I learned over the years. For instance, a lot of ticket brokers they’ll, let’s say the ticket cost them $100 and you called them up and say, “Hey I’ll give you $90 for this ticket or something.” They say, “Well I paid $100.” I kind of scratch my head and go I don’t really care if you paid $100. You don’t tell me you paid $100 if you’re charging me $200. It has got to be relevant both ways. I don’t even look at what we paid. All I care about is what is the best I can do? Once I put out the money it’s irrelevant what I paid.
If the market says I’ll only pay $90 and I believe the next day the market will only bear $80 then you know what, I’m better to sell it for $90 today than get $80 tomorrow. That has been a philosophy I think that generally has worked pretty well for us. So we tend to usually price, it’s not sometimes I don’t feel that I find some deals but we tend to price toward the bottom of a market and it’s just human nature to be a little bit greedy and people tend to price too much, especially individuals.
I mean it’s amazing. You can go onto a Craigslist or an eBay and see all the tickets that don’t sell. Well obviously that means they priced it too much. No one is even bidding on them. The market is not bearing what they want but they don’t too seem to fix it.
JT: They want their money. Give me my money!
BS: Especially if they’re losing money. So we’re just dispassionate about what we’ve spent for a ticket.
JT: So is it an everyday fluctuation? Is it one day it really makes a difference? I mean it sounded just like the stock market.
BS: It really is and most people don’t understand that, but essentially it is. One day, no not necessarily but it’s usually over, a lot of times one of the things we recommend to our clients, you’re my friend I’d say to you, “You know what, most ticket brokers don’t buy their tickets until the day before the event.”
BS: Yes, absolutely, because you’ll get a better deal. Now if you’re the guy that’s really, look if you’re a billionaire or you’re worth $100 million it just might not matter all that much. If you’re trying to get more value, that’s generally the way to get more value. But if you were to analyze it, roughly 80 percent of the time ticket prices go down, maybe 5 to 10 they stay the same and 10 percent go up and sometimes they go up insanely. So there are times where and if you wait too long, sometimes what happens is the prices fall, fall, fall and they hit that sort of bottom.
That happened with the Lakers. The Lakers played Miami so that was our big game last Sunday and they actually fell quite a bit and I had seen this pattern. They fall so much and then the bottom starts getting usurped. There are no more tickets there and then like the day of the game, I had someone call me about 11:00. There was like almost no tickets left, I mean there was literally just a handful and they were way more expensive than we had sold.
JT: That’s what I’m afraid of ? of waiting. I don’t want to wait too long because then those last ones are just going to either be a lot of money or there won’t be any and therefore I don’t even get it.
BS: The any part is rare, not being any is rare, it’s just the prices go up. So we usually advise our clients, when we do that, I’ll say let’s talk a week before the event. Let’s take a look and see how it looks and then we can make a decision. We can make a strategic decision at that point. Then we can go hey let’s talk three days or two days before. Say let’s maybe pull the trigger. Sometimes you might not hit, just like stocks, we just refinanced our house, maybe you’re not going to hit the very bottom of a market but you know you’ve gotten a better deal and it’s also something about getting the tickets a day or two before and not waiting for the very last minute. There’s some value in that.
JT: So you actually talk to your customers too and like tell them the best time to buy?
BS: Yes, absolutely. My wife gets angry at me sometimes because it probably and absolutely sometimes blows sales because people will maybe either end up being given tickets or they decide they don’t want to go or they could go someplace else. Then they don’t get back to me and they buy them on Stub Hub. They find a good deal on Stub Hub, who knows. There’s a number of things but I kind of feel in the long run that it’s actually beneficial because then people trust you. I’m not just trying to sell you tickets this minute that you called me.
JT: And get off the phone. Just give me your credit card number and we can get off the phone.
BS: Now the internet is actually great press because we don’t do those interactions and I don’t feel the same what’s called fiduciary duty. So if it’s just some stranger, especially if they’re not even going to our website, I don’t really care what they pay. They’re not even interacting with me directly until I’m the one that ends up sending them the tickets but they’re not going to our website. They’re not taking any of our advice so the internet has been good for us in that situation as opposed to, if you called me and now I know you, I’d say you know what, let’s hold off, Jaime, there’s plenty of those tickets. Or I might say you know what let’s pull the trigger now, there’s just not that many, there’s not a lot of inventory. Maybe we should just grab these.
JT: That’s awesome. As you’ve been talking, it seems like things have been somewhat easy the way that you’ve been saying things. You’re like oh it just sort of took off. I don’t really lose money on tickets because they all sell. What are some of the hard things, the challenges that you face?
BS: First off, there’s plenty of tickets, as I said, it is rare that they don’t sell but there are plenty of tickets that sell below what we paid for them. I mean that’s not uncommon at all. I’ll bet 20 percent of our inventory, maybe 10, 10 to 20 percent sells below what we pay and some get thrown out. One of my big endeavors was I bought Eagle tickets in 2000. They raised the face values to an incredible amount of money, way more probably five times more than anyone had ever charged for tickets and I mean don’t mean roughly, literally.
Some guy called me up from, he had thought he was going to put these group packages together and it was a complete failure so he just decided let me get out of these tickets. Someone gave him my number and I ended up buying them for half of face value which was still like $500 a ticket because a lot of these were $1,000. I said okay well I’m buying them for $500 I ended up averaging and there was a lot of tickets, 200/300 tickets, we lost about $150,000 on that because they only averaged selling them for about $350 a ticket. That was a nightmare.
So it was a good listen. Who cares what the printed price is and the public should know that too. The printed price is the most irrelevant thing on a ticket. They should just get rid of it because it really doesn’t reflect market value for the most part very well. Either it’s priced too low or too high. In this case, it was way too high for market demand. Actually I think I averaged $250. I averaged a little more than half of what I paid per ticket and there were a lot of tickets. I also got one of my clients to invest so he wasn’t all that crazy about it. Now if the internet had been around, we probably would have done better but it was in its infancy.
Anyway, so that was one thing. The most painful thing is we do, just like any other trader, we do the opposite which is called shorting tickets. Let’s say you said hey Brad I want to go to the Superbowl in 2013, the next Superbowl in New Orleans and you want to get a price and you’re willing to commit to buying the tickets. So you’ll say I’ll take two tickets and I tell you it’s $2,000 a ticket and you say okay I want two. I don’t necessarily already have it arranged at what I am going to pay to buy the tickets. I have to go out and get them and that’s called shorting, just like it would be in stocks. Same principle – you’re selling something that you don’t own and you’re promising delivery later on when the tickets come out and hopefully you’re going to pay less than you sold them for ? hopefully.
JT: Exactly, you’re sort of like okay good.
BS: The BCS game, not this year but the year before, I kind of took my eyes off the ball. December is our busiest month. We were really, really, really busy and I took my eyes off the market and meanwhile the market price kept going up and up and up and fortunately I caught it not too late but we ended up losing up to I think over $3,000 for each ticket that we had sold. Not every single ticket. I think on that event we lost a couple hundred thousand dollars. It was unbelievable.
The ticket prices rose to like, at the height, it was $5,000 to get into the stadium. It ended up at the end coming down to $2,000 to get in, meaning the worst, sort of you like hear it on the news, Dow Jones Industrial average, it’s kind of a bell weather for the market. Ours is the get in price. So that’s two tickets together, just into the stadium. It’s essentially just two tickets in the place. It ended up going down the day of the game to about $2,000 but we had to deliver the tickets earlier and so it was painful but you take that as part of most of the time you win and that time you lost.
JT: So how do you deal with that?
BS: There were some that were undercapitalized and they went out of business, bankrupt, I mean literally bankrupt.
JT: How do you deal with it personally too when you make a trade, I mean it’s you making the decision to go ahead and think that this is a good idea and then realizing like oh that was really a bad idea. Is it something that you take personally or do you just go it’s business? How do you really feel when that happens?
BS: Well it never feels good. I mean if you lose on two tickets $6,000 that’s a lot of money. So that never feels good but you can look at it the other way and say at least we, I kind of do it more on the, probably would be better business to just give them their money back. Obviously they’re not now but they need to get a couple of tickets and they are way more than what they paid but I’ve never worried like the legal end. It’s more just on a business, on a karma basis, sort of thing. This has always been my thing. You’re doing the right thing.
You promised something and you’re delivering and while there’s been a number of brokers, especially in that situation, that did not deliver their tickets, Stub Hub actually got everything done and they stepped up supposedly. Supposedly they bagged on some orders because they had people that didn’t come through for them. Now you could talk to Stub Hub with regard to us, every ticket, every order got filled. That’s a business purpose too because you don’t want to screw with Stub Hub if they are selling a lot of tickets for you.
But there were people through these other sites as I explained to you, I mean they never would have, if I would have given them their money back and probably would never have heard from them again. But it wasn’t the right thing to do so I think part of our business success has been that we’ve done the right thing, we do the right thing and that goes to the essence of what we’ve been about for 22 years. Yeah, we’re lucky we can afford it. If it was a $2 million catastrophe or something maybe that would be the case but I cut it off so that’s not too likely. It wouldn’t happen. I wouldn’t have that many orders that I could lose that much.
Of course the thing with shorting tickets is you never know if it goes against you, theoretically your losses are infinite. If I pay $300 for a ticket, the most I could lose is $300. If I sell somebody a ticket for a $1,000, in theory, it could go to $100,000. Who knows what, there’s no limit to what it could cost you.
JT: So do you guys do a lot of that then or do you try and stay away from that so much?
BS: So we work a lot like a hedge fund. We try and balance it actually, for big events, it’s not for everyday events, but especially for bigger events or we’ll sell stuff before it goes on sale so we’re forecasting what we think we’ll have to pay for it. Sometimes we lose money. Over time, I think we have more than made up for that. Trust me. Again, as I told you before earlier on, one of the first things I said was 80 percent of the time ticket prices go down. So they’re ordering early and I have to fill them three months or six months later, it’s very likely that I am going to be able to make more money on them.
But if you take the opposite situation and let’s say you sold tickets for the Superbowl back in 2002 after 9/11, you know, so those tickets you sold early on for $2,000 or maybe back then it was $1,500 or whatever for the get in seats and then you ended up paying way less than you expected because of all the catastrophe that happened. But it works both ways. Of course you never have a gain like those losses I mentioned to you but over time, you have a lot more smaller gains.
JT: Yes, wins.
BS: So that’s a real strategy. Essentially it’s the same thing that you heard in the financial markets with what went on with mortgaged back securities and the insurance. It’s very similar to that. Again, you don’t want to wipe out your whole company but it should be part, I believe it’s a good part of the strategy of the business.
JT: I think it’s funny because the name of your company is Musical Chairs and you’re talking about running it like a hedge fund. I think that’s a really cool thing. I never knew that tickets were like that. Awesome.
BS: Most people don’t even figure that out. There’s also ways to hedge tickets. For instance, I mean you use a bookmaker obviously so there’s online gambling it’s easy enough to do, but say the Lakers are playing in the conference finals and if they make the finals I forecast a profit of $100,000. So let’s say the odds are even on the semifinals. They’re usually not, of course. Let’s just say they are. I could say well I’ll put up $10,000 on the other team and if the other team wins well at least I get $10,000 back.
If the Lakers win, okay I lose $10,000 so I’m going to make $100,000 minus the $10,000 so I make $90,000. So that’s a hedging strategy, same as in brokerage. A lot of brokers do that. I mean we’re not the only ones that do that based on profits that are potential that would be lost if teams that you owned a lot of tickets for didn’t make it. There’s a lot of things the general public doesn’t see.
JT: No, not at all. It’s kind of really interesting. Well that’s really cool. So what are some of like the books, you mentioned one of the books that you’ve read, what are some of the books or resources that you’ve used in your journey to grow your business?
BS: Well definitely a resource is you found us through Entrepreneurs Organization, EO. I was a member of YEO for a long time. So that’s been a fabulous help. I’ve gone to a lot of universities so I’ve learned a lot through that and networking through that. They have just been an amazing resource. My old firm has always been a great resource as well. I have a coach/CEO and even before him I had another coach. That’s how I met the one I have now. It’s just better for where I’m at. He’s an amazing resource. He has helped really change our company in the last year to make it a better business.
I read incessantly. I’m a voracious reader. I read a lot of stuff about Wall Street to try and pick up things that are similar to our business. I have had a few mentors as well so that’s really, really great and I read a lot of the business books and try to integrate it into my company. Plus I take courses. I took a course at UCLA on executive management and I took a course that was through Entrepreneurs Organization called Birthing of the Giants. We actually have our reunion coming up in about six months. So I try to learn stuff that I can incorporate into my business and make it better.
I am not that good honestly in incorporating it. It’s something that I haven’t done as well as I wished I had. Overall, I’m fortunate. I’ve done a pretty good job.
JT: Nice. So what’s like one pivotal book, for the people that are listening right now, what’s one book recommendation that you’d have for someone who is an aspiring millionaire?
BS: I’d say if you’re an aspiring entrepreneur, that you should read Michael Gerber The E-Myth. I would absolutely recommend that. Now I wish I had again implemented everything that he said. Another one that is great who I am friends with the author is Verne Harnish. It’s called The Rockefeller Habits. He was the professor at Birthing of the Giants. He is a fabulous coach for entrepreneurs so I would definitely recommend that book as well.
JT: Nice. Awesome. As we are just starting to wrap up, I always ask for the last question is what’s one action that you think listeners should take this week to help move them forward towards their goal of a million?
BS: Wow, one action, one action item. I think they should actually write it down. I think there’s a difference between writing down goals and having them in your head. So I would actually write it and put it on your computer screen and put it in your wallet and put it in your bathroom because what you believe make that a part of your beliefs. I have learned, that’s not my own wisdom certainly, but if you can’t make your belief something, it will be really hard to get to. I know at one point in time, I never could have imagined the sales that, we expect our sales this year probably around $10 million. I couldn’t, in my wildest dreams, imagine that.
So if you don’t write it down and you don’t make your beliefs in accordance, you’re kind of working against yourself. Or let’s say I was losing weight. I believe myself as 180 pounds. I see myself as 180 pounds so on and so forth because without that belief, once you get the belief down and you write it down, you’re way more likely to obtain it and there’s all sorts of documentation on that.
JT: Awesome. It’s good to hear it from the trenches though. We know we can read books with it but it makes a big difference hearing it from someone who has used it and can really say, “This works. Do it, really. Read it but now do it too.” That’s awesome, thank you.
BS: I have run a couple of marathons and just said, “Look, I can do this.” It seems pretty daunting at first but if you don’t believe you can, I never could run a marathon, then even if you start training for it, I don’t believe I could do it but I am going to start training for it, well that’s probably not going to work.
JT: Yes, it’s not going to last. Definitely.
BS: So that’s a real concrete example.
JT: Awesome. Thank you so much. Where is the best place, if somebody listening actually wanted to get tickets, what would we need to do to go through you because you’re awesome?
BS: Thank you. They can always call us. Our number is easy ? (310) 207-7070. We’re on the internet at MusicalChairsTickets.com. You do have to put tickets at the end because there is a musical chairs that got the site first that’s a furniture company. Those are the two best ways. One great thing is you can always talk to the owner.
JT: Nice. And what we’ll do is we’ll link everything up.
BS: By the way, I am not the CEO. I’m not the President. I’m the Ticket Maestro.
JT: That’s makes serious sense!
BS: Again, we’re into a very casual atmosphere.
JT: That’s really cool. I love how approachable you are and stuff like that. Especially, I love what you said about karma. I think that’s awesome. So anyone that’s listening right now, you should definitely, if you need tickets, make sure you go to MusicalChairsTickets.com and I’ll link that up to everything. Thank you so much for coming on today, Brad. I really appreciate it.
BS: You’re welcome, Jaime. That was a lot of fun. Thank you.
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