American Dream Achieved
IBA, as an approximately fifty-year old business brokerage firm serving the entrepreneurial community of the Pacific Northwest, has been uniquely positioned since before the American Bicentennial celebration of 1976 to witness and hear the stories of thousands of people who have lived the American dream through entrepreneurship creating beloved businesses by employees, customers, and communities while finding personal fulfillment and financial prosperity through execution of their ideas, hard work, perseverance, and ability. In an effort to share these stories heard throughout the years by our team of business brokers, who are commonly regarded as the “best listeners” in the M&A industry, IBA has retained highly regarded writer, Nesha Ruther, to tell their stories. It is our goal to share one story a month. It is our hope that you will find the stories as inspirational and motivational as they are to us and the buyers who bought the businesses in IBA facilitated transactions in Washington, Oregon, and Alaska.
The Story of Harry Caraco (Kitchen & Company)
By Nesha Ruther
Harry Caraco learned from a young age that to get where he wanted to be in life, he would have to work. Throughout high school the Seattle native worked for Nordstrom to save for college. “I worked weekends and summers and during vacations,” he says. When Harry began attending the University of Washington, he kept his job in order to pay for his schooling.
Harry’s time at Nordstrom gave him experience in retail that would serve his career in the years to come. “They hired a bunch of us kids to sell shoes. I watched how they operated and learned from the management team, the experience was invaluable,” Harry recalls.
After graduating, Harry entered the broadcast business, where he would work in sales and management for the next 20 years. He reached a point, however, where he realized he wanted to break out on his own. “I was looking for a career of my own. I wanted to have my own business,” he says.
When working in radio, many of Harry’s clients were retailers seeking airtime to advertise their businesses. Retail was instinctively appealing to Harry, and when he traveled for work, he would keep an eye out for businesses that serviced markets that did not yet have a strong presence in Seattle. “I was looking for a niche,” he says. “Something that I could hang my hat on. At the time, there were no kitchen stores in malls, and there were only a couple in downtown Seattle.”
Harry had picked up on a valuable insight. Not only were kitchen stores popular, but their lack of presence in malls was a lucrative opportunity that nobody in the area was capitalizing on. Seattle would go on to be the birthplace of the popular kitchen store chain Sur La Table, which at one point Harry was approached about buying. He did not, however, choosing to stick to his own stores.
Harry called his business Kitchen and Company and would own three throughout the Seattle area. Harry opened his first store in the Southcenter Mall, one of the largest malls in the area.
The store was a huge success, and Harry was able to make a profit within the first month of opening. He credits his success to a thorough understanding of his customer. “I was right in the middle of the Boeing workers area, so blue-collar people that did not have high incomes. There were department stores there including The Bon Marche (later Macy’s), Frederick and Nelson, and JC Penny’s which had kitchen departments.”
The department stores predominantly sold cookware sets, knives, and small appliances. Harry paid attention to what they were selling, but more importantly, what they weren’t. Always on the lookout for untapped opportunities, he focused on kitchen housewares. “They were sending me lots of customers every day because they didn’t carry the right stuff, the garlic presses, and other gadgets that everyday people wanted,” Harry says.
About 18 months after opening the Southcenter store, Harry opened a second store at the Northgate Mall, the oldest mall in the United States, and a few years later he opened his third store in the Alderwood Mall. With few other kitchen stores in the area and his main competition inadvertently sending him customers, Harry was in a prime spot to succeed.
Harry’s success also relied upon the fact that he prioritized obtaining merchandise at a reduced price, so he could sell it for less than his competitors while still making a profit. “My whole thing was margin, margin, margin,” he says.
Harry began buying off-priced goods and developed a strong relationship with vendors so that when they had sales or specials, he was the first one they called. “I focused on the buying and made great relationships with the vendors,” he says.
Harry’s stores were roughly 2,000 square feet. He made the most of it by creating what he called “cube space”, areas of the store where he packed merchandise from floor to ceiling. “I ran library ladders down the sides of the store to help staff get merchandise that was above their heads,” he says.
The spaces had no storeroom, so he stored merchandise underneath the shelves on the floor. Throughout the store were posts that held up a metal grid system beneath the ceiling. On the grid system, Harry installed hooks so that merchandise could be hung from above. “We merchandized the whole store,” he says. “I maximized the space in a way that I could get a lot of merchandise in. This made the customers feel comfortable and they could just come in and browse. When they would browse, they invariably found something.”
Harry also understood the value of giving the customer options. For example, “I would have eight or 10 garlic presses to choose from. Utensils of all kinds, whether they be melamine, rubber, or metal. I had merchandise that nobody else carried and that the department stores didn’t want to carry.”
Every business decision Harry made was strategic. He analyzed the competition, identified their weaknesses, and maximized the opportunity. “It wasn’t brain surgery,” he says, laughing. “It was just that I could react daily to something that would take the department stores six, eight weeks.”
Large department stores are often risk averse and won’t purchase a product until it’s proven to sell. Harry’s agility and intuition allowed him to get on the front end of the next big thing. For example, “There was a new company called SCANPAN. They’re a high-end European company that sells pots and pans, non-stick, good stuff. Well, the representative came to me and said, ‘We really want to break this product into the market and you’re the only one in town that has the kind of traffic we can do that with.’ I let him set up a table in the front of my store and do a demonstration for the pans in the month leading up to the holiday.”
Where a larger department store might not have given a new company with an emerging product the time of day, Harry did. It paid off. The display attracted customers who would stop by, and even if they did not buy SCANPAN, they would browse the store and purchase something else.
While strategy is a valuable skill, it cannot replace hard work. “The bottom line is pretty simple,” Harry says. “It was all based on hard work, no shortcuts.”
In addition to running his businesses, Harry served on the board of the Southcenter, Northgate, and Alderwood Malls.
An example of Harry’s agility can be seen in Calphalon Cookware. Calphalon is a hard anodized, aluminum surface, with non-stick options. Harry formed a relationship with them and became the largest independent Calphalon dealer in the country other than Williams-Sonoma. “What was my secret? It was pretty simple; I would buy a lot of their promotional products so that I could sell them on sale. For everything else, I would mark it at 20% off.”
One might wonder if it didn’t hurt Harry’s business to constantly sell items on sale, but because he so often bought merchandise in bulk, or purchased off-price goods, he was able to make a profit. “It’s all perception,” he says. “There was a major department store called Frederick & Nelson, they were a division of Marshall Fields out of Chicago. One day a rep came to me and said, ‘We’re buying all the gadgets from Frederick & Nelson, are you interested in buying them from us?’ I said, ‘Sure’ I was buying 150 boxes of gadgets at a time. I was selling them on sale at a huge savings for the customer.”
While Harry loved being able to have items on sale and get his customers great deals, he still had a business to maintain. “I always said that I had to make at least a 40% profit on anything that I sold. That included aprons, cookbooks, whatever. If there wasn’t a 40% margin, then I didn’t sell it.”
Like many small businesses, Kitchen and Company had a slow but steady stream of customers throughout the year. They more than made up for it, however, during the busiest time of year for shopping, the Holidays. Harry says, “We always had a line up at the cash register during the holiday season because of our service, selection, and price. We made 47% of our [total revenue] in those two months.”
With great success came significant obstacles. For Harry, the greatest challenges were people problems: customers and employees
When it came to the former, customers could often feel entitled and be difficult to negotiate with regarding returns. “We had a two-week return policy with a receipt,” Harry says. “At Christmas time it was 30 days with a receipt. If you missed the deadline or didn’t have the receipt, we would still take the merchandise back but only give store credit. A lot of people didn’t like that. They didn’t like that after two weeks they only got store credit. This is a very common approach today. If you go to The Apple Store, what do you think their return policy is? Two weeks only with no exchanges after two weeks no matter what”
“I was one of the first people that had a [two-week return policy],” Harry says. “I had to protect my brand and protect my company, but we still got a fair amount of flack. I always told people ‘I’m a small, independent retailer. I can’t do what some of those [larger stores] do. All I can do is give you good service, and good products at a fair price.’”
On the opposite side of the people problems, were employees. Harry hired two full-time employees (a manager and assistant) for each store and a staff of part-time employees. Each came with its own challenges. For full-time employees, Harry had to be able to trust them to keep things afloat when he was at another store. For part-time employees, securing those that were competent and committed even when working limited hours was difficult.
Harry also set the bar high for employee performance. “I wanted my customers to be waited on,” he says. His best employees were the full-time ones. “I was very fortunate to have people I could trust. Most of them were with me for years,” he says.
Harry’s attitude was one of high performance yielding high reward. “I gave really nice bonuses at Christmas time for a job well done,” he says. “I was always the last one to get paid, my employees and vendors always got paid first.”
For Harry himself, his daily responsibilities involved being in at least two of the stores every day. Harry worked five days a week and seven during the holidays. “I started my day at the second of the three stores, the one that was in the middle location-wise from the other two. I had a basement warehouse there and a lot of our merchandise came there. I would go there in the mornings and offload merchandise that was being transferred to the other two stores. I didn’t have any warehouse employees, so I would also do all the deliveries. I’d check the merchandise and then split it up if it had to go to other stores. I would also meet with my [brand] reps and conduct business because I was also the buyer.”
As a small business owner, it is necessary to wear many hats and juggle varying responsibilities. “I had a lot of responsibility. I would approve all the new orders, buy new merchandise, and of course, I did the bookkeeping, I signed the checks, and I ensured that all vendors and employees got paid on time.”
While Harry loved running his own business, the constant work and endless responsibility can wear a person down. “I had decided early on that I was going to charge hard for many, many years, and try to make enough money to retire sometime between age 55 and 60, that was my game plan,” he says.
Harry was in his 50s and had run Kitchen and Company for over 16 years. It was the mid-90s, and the nature of retail was changing significantly. “The internet, Amazon, and online shopping were taking off and my computer system was antiquated,” Harry says. “I’m saying to myself, ‘do you want to spend $50 to $75,000 to put a new computer system in, and deal with all the headaches that go with it?’ My answer to all those questions was no.”
Harry, always aware of moments of opportunity, began looking for a broker. “After over 15 years, it was time to move on,” he says. A friend of Harry’s who owned a retail chain and used IBA to sell his business recommended Gregory Kovsky. “I knew [Gregory’s] father. I didn’t know much about [IBA’s] success, but I knew who they were. I called Greg and I gave him the listing. It didn’t take him long to find someone who wanted to buy the business,” Harry says.
“Greg knows his stuff. He works well with the buyer and the seller and he’s good at keeping things above board and very organized. You can tell that Greg is very passionate about what he does. It wasn’t just about the sale; it was about the relationship.”
Harry had put everything he had into Kitchen and Company, the business was quite literally, his American Dream. “When I decided to get out of the broadcast business, I was married, and I had two kids. We had saved $100,000 and I wanted to invest it in the business. I told my wife, ‘If I lose the $100,000, I’ll go back to working for somebody else and you’ll never hear me complain again,” he says.
“From the time I started [Kitchen and Company] until the time I sold, I never had to spend a nickel of that $100,000. Everything we did each day was built on what we did yesterday. Work hard, work smart, and figure out what it’s going to take to be successful. That’s the American dream.”
“Work is effort, but it’s not brain surgery. It’s figuring out what the customer needs. You always have to be fulfilling a need. I was lucky I was able to do it and make a profit, but I was a little guy, and my business was small.”
Harry Caraco is proof that through hard work, grit, and a keen eye for opportunity, even the little guys can achieve financial freedom and success. That is the American Dream.
Nesha Ruther is a writer and editor from Takoma Park, Maryland. She received her BA in English Creative Writing from the University of Wisconsin Madison, where she received a full tuition scholarship through the First Wave program based on academic and creative merits. She was a 2016 Young Arts winner in spoken word, a 2016 winner of the DC Commission of the Arts Larry Neal Writing Award, a 2017 winner of the Mochila Review Writing Award, which was judged by Nikki Giovanni, a 2020 winner of the University of Wisconsin’s Eudora Welty Fiction Thesis Award, and a 2022 Tin House Winter Workshop Participant. She has been commissioned to write and perform for the National Education Association, and has had work published in NarrativeNortheast, Angles Literary Magazine, Beltway Quarterly and more. She currently lives in Cincinnati Ohio and is the Lead Manuscript Developer at Holon Publishing and Collective Press.