Keeping score

April 24, 2021
 by Paul McGowan

Most businesses are profit-centric. Their decision-making process is based on how to best maximize profits.

That does not describe PS Audio.

PS Audio has always been more about affording all the engineering and production resources necessary to build state-of-the-art products that have enough profit in them to sustain and grow the organization so we can do it again.

This is a rather different business model than most.

Proft-focused companies make decisions based solely on how it will impact their bottom line. They succeed when the profit scorecard gets higher.

We, on the other hand, make decisions based on our primary goal, building great products and community so we can grow and do more of it.

We’d never make it on Wall Street.

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32 comments on “Keeping score”

  1. It all depends on what you, as a business, do with those profits.
    If you want to retain brilliant personnel like Skinas, Brunhaver & Myers well, you’re gonna have to pay them top dollar, otherwise they will move to companies who will pay them top dollar; that will eat up some profits.
    If you have ‘stock give-aways’ annually or bi-annually that will also minimize profits & if you buy expensive toys for the office that aren’t really necessary to run your business but look good & are fun to play with, that can also make your nett profit margin look minimal.
    If you don’t make a decent profit then you can’t pay for future product development, R&D, nor have the financial resources to build well designed recording studios.
    Of course company profits are calculated after company expenses, including wages, give-aways & toys for boys are paid out & R&D money is banked, however ‘creative accounting’ can minimize nett profits so that on paper your business can almost look like a charity. 😉
    Bottom line (pun intended) profits are necessary to keep your business running & growing.

    1. Thanks, Martin, but I would counter with a few facts. While we pay well we don’t pay “top dollar” or whatever that figure is that keeps people employed with golden handcuffs. People stay working at PS Audio out of passion and because it’s one of the few places in our industry where we encourage them to let their passion fly. Darren’s a great example. He was making more working for B and W and Classe at the time he came to us, but felt stifled. He wanted to make products his way and that reflected his values as an audiophile. They, on the other hand, wanted him to do it their way which did not include spending crazy amounts of time designing and redesigning by ear until it was right (in fact, quite the opposite).

      Most companies tell you how to do your job. We do what we can to build an environment where the job is building the best products in the world and being a welcomed member of the family. The rest works itself out.

      People generally don’t work for money as their primary goal. They work for the chance to follow their passion, to spend their days doing what they want rather than what’s required to get a pay check. If they are here just for the money they don’t get to work for us no matter how good they are.

      1. Ken Ishiwata was with Marantz for over 40 years & I’m pretty sure
        that he would not have stayed there for that long if he wasn’t
        a) allowed free reign with his passion & design &
        b) well paid…& I mean WELL paid by Marantz.

        Andrew Jones is passionate about loudspeaker design but moves around
        from loudspeaker company to loudspeaker company; I wonder why.
        Even though he’s very obviously passionate about audio, he doesn’t
        stay with the one loudspeaker company?
        Could it be that other loudspeaker manufacturers are offering him
        more reward (money) to do the same job, but at their company?

        As anyone in audio would know those two names.
        They were/are regarded as 2 top, world renown audio designers.

  2. Paul, my coworkers and I had lengthy conversations about the best place to work and always came to the conclusion that a business run like a family business where people belong and skills are sought after no matter who you are where your passion drives your daily working life has always attracted the brightest and smartest workers, salary is important but not to the expense of true close working relationships/collaborations. Keep the flame burning, we’re reaping the benefits of your efforts.

  3. Fat rat and ejab are correct. It’s still a profit-intended enterprise in a capitalist system that’s trying to succeed in support of whatever your values are. And companies with similar values succeed on Wall Street all the time. I know many. I took one of them public. Values are what you do with the profit. But it’s sanctimonious to think that, because you use your profits to pursue your values, that you’re somehow different or better than other (also successful) companies also pursuing profits and promoting their values.
    “We, on the other hand, make decisions based on our primary goal, building great products and community so we can grow and do more of it.”
    That is literally the definition of a profit-seeking company. How you use your profits is (almost) entirely up to you. That is another beauty of capitalism: it actually promotes cooperation as human values.

    1. ‘Capitalism is the worst economic system, except for all the others.’

      I don’t recall (“Done got old.” — Junior Kimbrough via Buddy Guy in my case) the source of this probably paraphrased para-quote, but it’s not wrong, not completely anyway. Economics is a mess; sometimes it works fairly well, other times horribly awful. Human civilizations, for lack of a better term, have muddled through somehow so far, don’t know for how much longer. New golden age or the next mass extinction event a-comin’?

      This is getting me too depressed. I need to listen to some music now.

  4. While I understand your sentiments…
    … I do remember the quote in one of your You Tube Videos – we total up ‘everything it costs to make a product’ and multiply it by five.

    You’re fortunate, and I know you realise it, to have enough customers who can afford your products at that margin. If it stays like that I’m sure all at PS Audio will be fine, even prosper – it was good to hear you pay everyone their above the minimum salary levels, maybe higher and higher for the good ones.

    I guess for most of us while we follow your passion we have to wait for a windfall to obtain your kit. I’d hoped it might be viable to obtain your new speakers, however, with the level of resources you’ve rightly thrown at them I now doubt it. In the U.K. at least your products are seen as for the very wealthy – paying the same £2000 as you charge $2000, plus at least another 20% for ‘dealer margins’?

    Long live PS Audio…
    … fine aims led by an audio fanatic for all the right reasons, now with such an amazing team behind him, from pre-recording to media and from input, amplification to eventually final stage – the speakers…

  5. I have a somewhat different viewpoint. When you are passionate, driven and proud about the products that represent your company name at a fair price (considering the industry) your bottom line will surely increase. That should be your reward in and of itself.

    It must be nice going home at the end of the day knowing that you bring the joy of music that enriches the soul to your customers. That was the case for me as I grew my business. I never gave a damn about increasing my bottom line, It happened all by itself because of my passion to help others. Believe me it shows.

  6. There is a story I grew up with in Bolivia, about and Aymara Indian artist who could carve exquisite wood busts. Once a month he would come down from the Altiplano, where we had a small farm, to the “Calle de Brujas” (Witch Street) market in La Paz where tourists frequented. The artist brought with him only four small, but beautifully and Intricately carved pieces to sell. He had no stall or table, he just spread his blanket on the sidewalk to display his wares and sit down.

    One day a wealthy American walked by and saw the Artist’s carving:

    American- “How much?”

    Artist- “2,000 Bolivianos each.”

    American- “That’s crazy, everybody else is selling their carvings for 500 Bolivianos each. Tell you what, I’ll pay you 2,000 for all four.”

    Artist- “8,000 Bolivianos for all four.”

    American- “ OK. I’ll give you 2,000 Bolivianos each. But I need more than four to sell. I need at least twenty every month.“

    Artist- “ I sell you four today. Come back in a month I will sell you for more.”

    American- “Are you stupid! Don’t you realize, or care how much money you could be making?“

    Artist- “I make enough to be happy and feed my family. Why do I need more?“

    I believe that PS Audio follows the Witch Street philosophy, and not the Wall Street philosophy of profitability. 😉

  7. Thanks so much for pointing this out Paul. It is important to understand that PS is a privately held company, which does not answer to any shareholders, etc. I have seen many companies which produce high end specialty products lose focus when they have gone public. Generally speaking, a publicly held company must answer to shareholders, and shareholders demand maximum profit as the first priority. Companies which care about their products first, often produce the best products in a given field of endeavor. Of course any business must pay attention to the financials to stay viable, and to provide adequate resources to their employees.
    I would suggest though, that those who say a company must pay “top dollar” in order to have the best the best people to develop products are in error. A high end audio company cannot afford to pay top dollar to anyone. The “best” engineers coming out of MIT, etc. are going to get more money from telecom, computing and med tech companies. The way audio companies get good people is when those people are willing to work for somewhat less than top dollar, in order to do something that they love. So, this no different than Paul’s view from the top: money is not everything, no one (OK, at least no one who has any knowledge of the reality of the high end audio business) goes into audio if their priority is to make the most money they possibly can-people go into audio because they are passionate about sound quality, and they go into it with the hope that they may be able to make enough money to live comfortably.

  8. I see two points of view here.
    Enough is enough and enough is never enough.
    I would have thought the latter more applicable to the world of audiophilia as, over time we continually strive improve our systems. As some of us approach our golden years (the polite way of saying we’re getting old) we now might be less striven and hopefully happy to sit back in contentment listening to our systems. However, participation here would indicate that the desire is not completely lost or possibly some degree of fomo.

    Irrelevant aside. Whenever I see the abbreviation fomo I can’t help thinking of OMO, a washing powder brand that used to be available in the U.K. It was popular in the swinging sixties and the story was that housewives, for whatever reason, would place a box in their front window to indicate ‘Old Man Out’. 😉

      1. I grew up with OMO as well but when it went biological and brought me out in a rash we stopped using it. Funny, we never did see ‘Uncle Jerry’ again after that.

        For clarification, the first sentence is true, but not the second.

  9. I worked for two major corporations in my 30+ year career. One was Exxon and the other IBM. Perhaps you have heard of them. 😉 Like so many people I wished I could have made enough money to go start my own small company and run it much like Paul runs his. If I had been able to do that I would have gained a great deal more control over what I would have done in my work life, however, I would have also given up a lot. Major corporations can take on herculean task that no one else can even think of doing. If you need a $100M supercomputer to better predict the weather, find new treatments for cancer or stop cyber espionage you do not go to PS Audio, VPI or Magico, but you do go to IBM. I was fortunate enough to have worked in some small way on three supercomputer projects during my time at IBM.

    On the other hand, I am waiting on Paul to start producing his music server some time real soon and hopefully for considerably less than $100M.

  10. When my journalism career focused on business, the expression “Profit is the cost of staying in business” stuck with me. This philosophy of constant investment in improvement appealed to me, even as I saw plenty of enterprises that seemingly ignored it. Then my wife started a home business to fill what she saw as an unfilled need – not to make a lot of money, but to provide a real service folks needed. Lo and behold, the money followed, the product got better, and she was off and running. So I’d say Paul has the right approach. Find a real need, or just a strong desire, and do your best to satisfy it. It’s very possible the profit will follow.

  11. I wish audio companies like a PS Audio were bigger and more powerful than say the likes of Big Pharma.

    If more people invested into their music listening experiences the world would be a better place, especially since I truly believe in the Shuman Resonance theory.
    Brain waves and sound pressure waves need to line up!

  12. Being listed on Wall Street can be a liability, as the company valuations rise and fall with the market tide and executive decisions focus more and more on share appreciation. I worked most of my life in a privately held company with a 401K profit sharing plan in which employees over the years accumulated more shares than management, but the holding company (wisely) maintained executive control. They resisted lucrative corporate buyout offers by the industry giants who gobbled up its competitors. Like PSAudio, my company valued quality, customer satisfaction, employee development and community service, because those things were the key to its profitability. The leadership understood that you cannot have profitability and growth for very long without a high bar in quality of products and services, and an engaged and happy employee team and customer base, in which employees and customers feel like part of a family. Unfortunately as companies grow through subsidiaries and geographic expansion, the “family” model becomes harder and harder to achieve. With growth and founder succession there becomes a danger of the family concept becoming mere lip service. Think Walmart, Southwest, Zappos, etc. Just like audio system sweet spots, there is a sweet spot in company size, beyond which it becomes more challenging to optimally focus resources and maintain high standards of quality and employee and customer satisfaction. May PSAudio stay in that sweet spot forever! 🙂

    1. Hi Genez,
      Well it’s probably a good idea for Biden to pull the last American troops out of Afghanistan then, since they will be needed elsewhere…possibly Taiwan.
      I’m sure that God is making his popcorn so that he can sit back & enjoy the entertaining combat just around the corner.

  13. …and that Paul is why I will always support your brand. Little or no B.S. in the marketing, because it’s about the music. Your products deliver the most sonic bang for the buck I’ve found in 42 years as an audiophile.
    Argue what you will combative seekers of Hi-Fi, this is still the best deal around.

  14. Outstanding.

    I will say this based on personal experience. I’ve never met a group that genuinely cares more about its customers or wanna-be customers than PS Audio.

    The kindness and generosity that I’ve experienced from PS Audio and even from its customers has been truly unprecedented in my 51-plus years on this earth. I owe a great deal to this group of folks, Paul in particular; a karmic debt I will never be able to repay.

    PS Audio is a one-of-a-kind outfit that lives its values every day. Thanks to all.

    Mike in Dayton

    1. Thanks, Mike, that means a lot. Our customers, our community, mean everything to us. We base our entire thought process around how best to serve our customers. It’s even part of my “speech” to new employees. I let them know that if you make a mistake in the favor of the customer there will never be any negative consequences. Make a mistake against the customer and that’s when the shit flies.

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