Scott_Trainz Showcase

I have been involved in model trains since I was about 8 years old when my dad brought home a whole bunch of trains and set them up in the basement. He had purchased them from his boss and inste...

I have been involved in model trains since I was about 8 years old when my dad brought home a whole bunch of trains and set them up in the basement. He had purchased them from his boss and instead of just a single circle of track and one train set; there were so many different types of Lionel trains and tracks! I thought this was great! But at that age I was more interested in running them into each other and into tin cans than just running them around the track.My dad wouldn't let me play with them until he had trained me to play with them properly. That was fun for a while, but after a few years, I lost interest in playing with them. Since my grandfather was retiring and decided to take up model railroading, my dad told him, "You can have all of Scott's trains. He doesn't play with them anymore anyway." Even though I wasn't playing with them, I really didn't like that! So I hid my favorite piece, the big, black ZW transformer. When my grandfather came to take the trains, they couldn't find it. Finally my dad asked me, "Where's the transformer? I don't see it," and I had to give that up, too.Now that I didn't have any trains, I decided that I wanted to get into HO Scale trains since those were the cheapest things for me to do at the time. I started buying HO trains and cobbled together a layout in my basement. I even built a little oil refinery. Things were moving along and when I was 13, I decided to take a course in servicing small appliances from the National Radio Institute. It was a correspondence course that required the completion of 20 workbooks. You would do the workbook and take the test at the end. They graded the test and sent you the next workbook. I made it through all the workbooks and finally, proudly, received this great big diploma when I was 15. About the time I received this diploma, my grandfather was planning to get married and move to Atlanta. He decided to give me all the trains back now that I was showing this renewed interest.Buoyed by my successful course completion and the return of my Lionel trains, I thought I would branch out. There was a man in Toledo by the given name of Harry Train who ran Train's Hospital for Trains, a Lionel Service Station. He was about eighty years old and could no longer get up and down the basement steps to his workshop, so he was selling his trains and train parts. He was selling the Lionel for $2,000 and American Flyer for $3,000. This was in 1975 and I was a junior in high school at the time. I didn't know anything about American Flyer, but I knew enough about Lionel and had just graduated from my big appliance servicing course. I talked my parents into co-signing a loan for $2,000 and we went to the bank and signed the paperwork. Now I needed to bring the train’s home. My father had a pickup truck, but I was only 15 and couldn't drive yet. Luckily a buddy of mine was 16 and had his driver's license. I remember we had to do a fireman's carry to bring Harry Train down to the basement. We hauled out all the stuff and loaded it into the back of the pickup. It only took one trip. From this point on, from the year I was a junior in high school until I was a senior in college, I occupied one-and-a-half bays of my dad's two-and-a-half car garage. The walls were lined with train-related equipment. Here is a look at my cobbled together basement layout and my repair shop / store in my parent's garage around 1978 when I was 18 or so.  

I ran classified ads to buy trains and went to train shows where I bought trains that were broken or needed parts and reconditioned them. A few years ago I ran across one of my old bookkeeping records from this time period. I bought ZW transformers for $25, reconditioned them, and sold them for $35. I thought I was on top of the world. I met my wife, Milinda, when I was a senior in high school. We dated all through college and somehow she put up with this craziness. I would call her every Wednesday night and see her on Sundays. If there was a train show someplace in Ohio or Michigan, she would go with me on Saturdays and sometimes Sundays.The College Years after high school, I studied electrical engineering at the University of Toledo, commuting fifteen miles daily to school from my parents' house in Maumee while maintaining my train business called S&G Electric Train and Appliance Service. I had a good friend who came over some nights and most Saturdays who helped me fix trains and one or two part-time kids, my "elves," about the age of 13 or 14, who cleaned trains. During the college years I built up the business by running classified ads in small newspapers during the fall, winter and summer months. We were closed in the summers where I worked as a Supervisor at CraftMaster where they packaged up the Lionel Power-Passers race car sets, and then I was a crop duster chemical mixer then next summer, and an engineering intern at general Mills the next. Also during that time I built up my personal collection of Lionel trains and bought the parts inventories of Luelf's hardware in Toledo and Model's Hobby in Detroit. My last year of college, I placed small classified ads in all of the newspapers within 30 miles of Toledo inviting folks to come down to S&G Electric Trains and Appliance Service to buy trains or get them repaired. I had more business that winter than ever before. It was terrible! One Saturday, someone who had come to buy a train and left because I was so busy that I couldn't get to him!I asked Milinda to marry me when I was a junior in college. I had this bright idea that we would get married and get an apartment in Toledo. Nights and weekends, I planned to fix trains in my parent's garage, like I had the last several years, but somehow the realization came to me that it wasn't going to work. She wasn't going to put up with that for too long. So I had to make a big decision: the new wife or the trains. I decided that I would go with the new wife-amazing! I made the right decision. Up until that point, I only interviewed with companies based in Toledo. I completely changed my strategy and only interviewed with companies that were not in Toledo. I knew if I stayed, there was no way I would not get sucked back into repairing and selling model trains, I just knew too many people in the Toledo area.The G.E. DaysThen one day at the University of Toledo I interviewed with General Electric. There was one line on the bottom of my resume that stated "Owned & operated small appliance and model train business for the past five years" caught the interviewer's attention. He said, "Tell me more about this business." So I explained how I had built it up. He then asked me if I was interested in management. I said yes, and that my goal was to be an engineer, play with robots, do engineering for a few years, and go into management. He went on to explain GE's manufacturing management program in which they gave you four different assignments within the company. It was a program that encompassed manufacturing, quality control, production control, and supervision to provide the opportunity to experience the different kind of jobs within a big company. They gave you four assignments. The first year is at one GE location and the second year is at another different GE location. I thought that sounded good. They accepted two hundred graduates from across the country to participate in this management training program. He pulled out a list with the different GE locations. One of the locations was Erie Pennsylvania where they manufactured locomotives. I thought "Wow!" I hadn't known that GE made locomotives because Lionel never marked their trains with GE. I knew that GM made them because the Santa Fe's and the 622s had little decals on them. I thought, "Man, that's where I want to work."General Electric offered me a position. They offered $20,000 dollars a year, but they couldn't tell me when or where I would start. It was my first assignment out of school. I accepted the job and decided to sell my train inventory, but I wanted to keep my personal collection and all the parts that I had bought from Harry Train and other hobby stores along the way. Postwar train parts are hard to find and if you have them you can fix trains and if you don't, you can't. I decided I would sell off the inventory I took to train shows, keep the parts, and when I retired I could get back into it. That April of my senior year, my dad accompanied me to York and I took my inventory and sold stuff like crazy. We went to a number of train shows where we sold most of it. A man in Ohio bought everything else that was left except for the parts which we moved down into the basement where they would ostensibly stay until I retired.I paid all the money back that my parents had lent me interest-free and I had $10,000 in the bank when it was all done. I married Milinda, my high school sweetheart, the weekend after I graduated from college. For our honeymoon, we spent a month touring the country in the black Chevy van that I had completely carpeted that we used to go to train shows. On our big trip we avoided interstates, and meandered around the country using only US and state routes. During our trip, I had to keep calling a woman in Schenectady to find out where GE was going to send me. We were at Old Faithful the day I learned that I was going to start at the locomotive plant on August 17. We were very excited. We moved into a townhouse in Erie, Pennsylvania. I worked at the locomotive plant and it was great! Six months passed and happy as we were, we both missed the trains that had been our mutual hobby for five years. We decided to convert our spare bedroom into a workshop. I retrieved the parts out of my parents' basement and hauled them back to Erie. Once again, I was buying and fixing trains, then selling them at train shows.Then GE moved us to Virginia Beach where they had their TV plant where I was the foreman that shut down the last two black and white television production lines in the US. We then moved to Cincinnati, and from Cincinnati we moved to Louisville, and from Louisville back to Cincinnati and from there we moved to Atlanta. We really like it down here and have stayed here ever since.The Train StoresWe were still going to train shows, but it was difficult to make much money that way. It seemed like we could make a living doing it, and I wanted to do more than just buy and sell at train shows. Then a new indoor flea market, on Jimmy Carter Blvd. and I-85, just down the street from my GE office was opening! They rented booths and were open from Thursday to Sunday. I talked Milinda into working at the booth for those four days, and so we had an inexpensive way to start a train store. We had the flea market booth for nine months and then it seems we were more half-pregnant with the business than ever before. There were days when Milinda would sit in that flea market all day and not sell anything, bless her heart. I worked with her there in the booth on Sundays after church. Saturdays, I stayed home and fixed trains, when we were not at train’s shows. That was tough. It was not really working. I decided we really needed to find a regular retail space. The flea market space I had was 100 square feet and with tons of stuff crammed into that tiny area. I had to pack all of the trains and gear and haul it back and forth to train shows. Since Lawrenceville was in the center of the county and there were a lot of new homes being built in that direction, that seemed like a good place to open up shop, even though all the other train stores were closer to the center of town. So, Milinda went looking for a store location on those days she was off and she found a reasonably priced, 2,000 square foot space in Lawrenceville. I leased the space and we moved our train operations up there. We decided to call our store The Train Works. Milinda would only work Thursdays through Sundays, so we were closed on Mondays, Tuesdays, and Wednesdays. Here are a couple shots of the early store.   Although we had the store, I continued working for General Electric. Somewhere down the line we hired extra help and were open 7 days a week. Then in 1990 or so, we bought the assets of The Train Connection that was located in Roswell from the bankruptcy trustee and we expanded the store to 2800 Sq. ft. In the middle of this, along came Mitch, our son, in 1991. Here is a couple pictures of Mitch at his first train show and the store 1991. You can tell it was 1991 from the Santa Fe 11711 set on the counter, I mean you can tell it was 1991 since that was when Mitch was born.  Then in 1992 we expanded into the half the basement, then later in 1993 we took the whole basement for a total of 5600 sq. ft. The train store was going all right, but it was a constant struggle to keep up with the cash flow and the growth. We expanded and worked out a deal to buy Southeastern Hobby Depot in Atlanta in 1994. We remodeled it and added a K-Line superstore in 1995. Here is a picture of that:Still cash flow was tough and making money was difficult, although our sales increased at a tremendous rate. We would have made the Inc. 500 list in 1995, but the magazine changed its rules in the one year I could have made the list by requiring first year revenues to be greater than $200K instead of $100K like it was every year before that. Our first year sales were $187K. But even with all that incredible growth, the income just wasn't there. The overhead was just too high, including the interest on all the money that I borrowed to enable all that growth. Six months after we bought Southeastern Hobby Depot, I was still working for GE. I decided that two stores with annual revenues over $1M was a bit much for a hobby business and still continue to work full-time at General Electric. I finally quit my job after 13 years. We continued to grow and I opened a third store in Roswell. Yet despite the growth, something was wrong. I was constantly struggling in cash-flow hell.The End of the Train StoresOne day, I received a phone call from a telemarketer who offered to send out a business consultant at no charge. I said, "Send him out!" The consultant came out and recommended their business turnaround guy. He would come in here, analyze everything we've got going on, and turn the business around to make this work. I signed up with them and the turnaround consultant spent a lot of time with us and analyzed how we could do a better job of running the business and to make it work. We were attacking the train market on all fronts; three retail stores, mail order with full page ads, 800 numbers, direct mail, train shows and starting in 1996 we even had lists of products displayed for sale on the Internet. Should I close two stores and just work out of one? Should we stop train shows, expand the Internet; get out of the Lionel pre-order business? I had everything going on and I thought I was going to hit this on every angle. Money was coming in and we were selling trains like crazy, but the infrastructure and cost to do all that just didn't leave anything left over. One of the first things he had me do was take inventory. I really hadn't done one previously. It took too much time, was too expensive, and the stuff should be here anyway. He didn't buy that. He said we have to take an inventory. We took an inventory and found that I had an enormous $350,000 inventory shortage. That was the point the consultant told me I couldn't recover from this. I was on credit hold with a number of companies and couldn't get any product. Things were a real mess.Looking back on my life, I realize I was spending almost twenty-four hours a day, seven days a week at the business. I would work all day and go to Waffle House for dinner. Then go back to the store and work all night. I'd get home around 12:00 am and see my son sleeping in bed and wake up my poor wife long enough to say good night. The next day, I would do it all over again. Every two weeks I was going to train shows hoping I could sell enough stuff at the show to keep the darn thing running. The consultant told me that if I could figure out how to make $50,000 a year for seven years, I would have a business that's worth nothing. After working for seven years, I would be back at the beginning. I realized that my life was a mess, way out of balance, and I had to throw in the towel. That was bad because the suppliers I was working with were counting on me; they had extended me huge lines of credit. I had talked several friends of mine into loaning me $100,000 each. Even my parents were invested in it for tens of thousands of dollars. I had a pretty big SBA loan and had to figure out how to liquidate the inventory to pay back the bank loan and as many people and vendors as possible. Since the bank had the first claim to the money, all the other investors were subordinate to them. Fortunately, the bank agreed to continue to pay me and one of the other guys that worked for me, which was a miracle because I still had the keys to all the stores. I could have tried to take the inventory and stash it somewhere and the bank would have been completely hung out to dry. But, of course, I wouldn't. I wanted to get as many people paid off as possible.We let everybody else go, papered up the windows of the other two stores, and put up a note that we were closed for inventory. We left the phones on voicemail and continued to fulfill mail order business while we tried to figure out how to sell what we had. We tried to figure out how to have an auction to sell everything, but we had trouble pulling that together. Then one day, I received a phone call from some people in Atlanta who were interested in buying the Brookhaven store. I set up an appointment to meet with them. It was time for me to do the sales pitch of my life. I was certainly honest about it because I felt that there was really an opportunity for it to really succeed, especially if you didn't have to deal with a debt of an extra $350K for merchandise that simply wasn't there like I did. If I didn't have to pay the interest on that, I would have probably been fine. They liked the idea. They didn't seem to like the jobs they had and appeared ready for a change. We arranged an auction to sell the entire inventory in one shot. We advertised in newspapers and trade magazines and sent out a notice to all the train stores in a four state area. On the auction day, we had the auction in The Train Works store up in Lawrenceville. The people interested in buying the store were there, five or six men who owned train stores in Atlanta were there, and a guy flew in from Canada. They all had lists broken down by manufacturer and cost of inventory. I remember the auctioneer said, "Who will start the bidding?" One guy says, "ten thousand dollars." The next guy, "Fifteen thousand!" Then the man from the bank said, "295,000!"-which of course, is what I owed the bank. The local guys were shocked. The folks interested in the store said, "$297,000." And that's what it sold for, which was a great deal for the buyers. The new owners kept me on the payroll as the store manager and I worked with those folks for about six months and through the first Christmas. After Christmas, out of the goodness of their heart, they gave me a two-week severance package.My New Start in the Corporate LifeLo and behold, one of the guys I had borrowed a bunch of money from worked at Digital Equipment Corporation and he knew of a situation there where one of the clients was a help desk and they needed some help in getting that working better. I had done a lot of help desk work at GE. He set up a telephone interview, and I convinced the hiring manager (Thanks Jesse) over the phone-to hire me. We negotiated a salary that was double what I had been paying myself at the train store.Amazingly, through this whole debacle, I was never without a paycheck. I had been a Christian for many years, and I see how God was truly working in my life. I thought God was with me when I was building the train business up and it was going great guns, but looking back on it, I was a terrible husband. I don't know how my wife put up with me. I was a terrible father because I was never around. I was always climbing the mountain, thinking that I'm almost at the top and when I reach the top, it will be smooth sailing and the money will start rolling in. The way I look at it is that God put this $350,000 chasm of missing inventory in front of me and said, "Scott, let me see you jump over that." Because anything else that was put in front of me, I'd find another rich friend to get me through it. But God carried me through that whole thing. I know that he brought the buyers to me that bought the train store, and helped my bank go along with my plan that I could sell the business for more money than the bank could while they continued to pay me and left me with keys to the store and that entire inventory. I know that God softened the heart of the investor friend of mine and he was the one that found me a job that paid me almost twice what I was making before!I started with Digital Equipment then with Compaq and then with Hewlett Packard. That ended the train hobby for a while. Immediately after that, I just didn't want to deal with trains anymore, but it didn't last very long. I also had a small train collection left. I had taken all the expensive stuff and put it into the business long ago. What I had left were some freight cars and Plasticville that were not consumed in the bankruptcy. I decided to sell some of that stuff on eBay because I was really broke.Then Came eBayWhile I was waiting for the website to be developed and after being in the business for so long, I knew what trains were worth and I began studying what trains sold for on eBay. Once again, I started going to train shows and buying items that I felt would do pretty well on eBay. Sometimes I would win and sometimes I would lose. I continued with that until now it has evolved into a full blown business where we buy collections and retail inventories from stores going out of business, and then selling them primarily on eBay.When I made my first sale on eBay, I didn't know all the rules. A guy emailed me and said he would buy an item I had listed for a particular price if I would end the auction now. I thought hey, that's cool. So I ended the auction and sold it to him. But unfortunately, I didn't end the auction right. I ended the auction without canceling the bids. The high bidder at the time was very upset and left me negative feedback. So for my very first eBay sale, I received negative feedback! I remember my second sale was a Girls Set that I bought at a retail store in Dallas, GA. I saw that set up on the shelf. It had been there for three or four years, and they were selling it for five hundred bucks. I remembered seeing it sell for seven hundred dollars on eBay. I went home, talked to my wife, and I took our house payment money-because I didn't have any other money-and I bought that set for five hundred dollars. I put it on eBay and just hoped it would work. It did. It was my second sale on eBay and it sold for seven hundred and fifty dollars to these nice folks in Texas. I talked with them about why my feedback rating was a negative one (-1) and explained what had happened and that I hadn't known the rules. They were understanding and the sale went through. I made $250 from my second sale on eBay. I now know the rules, and am careful to follow them. The business has expanded tremendously and I have learned a great deal from my first attempts at train stores. We are dedicated to good customer service and accurate descriptions. We expanded the operation again in my basement until we had 5 part-timers working there and took over the whole basement, the garage, the dining room, and every place else we could store stuff. Then we made the leap of faith to lease a 2500 sq. ft. Office/Warehouse space for 3 years, then after being there about six months, we expanded into 5000 sq. ft. Then we moved out of that after our lease expired and bought two buildings with 17,000 sq.ft and used 10,000 sq. ft. with tenants in the other 7,000. In April 2007 we took over one of the tenants spaces to have a 10,000 sq. ft. contiguous space with another 3,000 sq. ft. next door. As of December 2013, we have 23 full-time employees and sell tens of thousands of trains annually and keep growing. Thanks to all you great train people for your continued support!Then Came DASHFor several years, I was the biggest seller of model trains on eBay. While we still do a lot of business on eBay, in 2012 I started thinking that eBay's size, policies, and pricing were creating an opportunity for new ecommerce offerings which would be better for the customers and for the hobby as a whole. One day I got a cold call from Bill Jones, the founder of CollectorDASH. In a nutshell, he described many of the key features I'd been dreaming about for the model train hobby for years. The DASH platform was relatively new, but it was getting serious traction in another hobby community and DASH had been just named Georgia's top high-tech startup that year. I decided to partner with Bill on his vision of DASH for the model train hobby. While he was building out his auction capability, I ran my own auction site for a while, but when DASH was ready for us in May 2013, we jumped in with both feet.For the past six months, we've been really pleased with how the DASH platform has worked.  The team at DASH is very responsive and earnest about making this the best place on the Internet for model train collectors. While DASH is great for buying trains, the team at DASH tells me that nearly 10,000 users are managing more than 100,000 of their own trains in their collections on the site.  The news is fun and the social networking interactions are neat too. And I really do enjoy the DASH app on my iPhone. Basically, I'm excited about working with the DASH guys to keep making the hobby easier and grow to new people.ConclusionMy wife Milinda has been amazingly supportive through the years and is an unbelievably supportive and patient person and great wife. I don't know how she has put up with me all of these years, but we recently celebrated our 25th anniversary. That's the story from when I started at eight years old to where I am now. I still really enjoy trains and just thoroughly enjoy the business and bringing happy train memories to new generations. Thanks for reading and I hope you enjoy model trains as much as I do. I absolutely love it!

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Feb. 2014

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