As the founder of Barrick Gold, the world’s largest gold mining
company, Peter Munk is one of the highest rollers in Canadian
business. During the 1960s, Clairtone, the high-end
electronics company he founded with his partner, David Gilmour,
grew at breakneck speed and became synonymous with the
youthful style of the age. Its ultimate collapse in 1970 is still a sore
spot for the man many people once considered a potential
prime minister, but Munk’s story bears lessons for anyone looking
to make their mark.
The Birth of Clairtone
My future business partner, David Gilmour, was a central figure in the social scene I ran with. He came from one of the country’s oldest and most connected families, and his sister ran the hippest and most successful furniture business in Toronto’s Yorkville district. She sold sleek and modern Scandinavian designs before anyone else caught on to the trend. David worked as a buyer for her before starting a business called Scantrade, which imported Swedish and Norwegian furniture to stores across the city.
As it became increasingly clear that people wanted hi-fi stereos stored in fashionable, modern furniture units, David approached me about handling the components that would go in his cabinets. After I had provided him with a few installations, we starting talking about a more ambitious endeavour. “I can get these cabinets wholesale,” he said. “Do you think it’s worthwhile to buy ten and standardize a product?” I went around to see what Simpson’s and Eaton’s and the other big retailers were selling. I was astounded. They got $400 a pop for poor-quality merchandise. I knew that with his designs and my engineering, we could do much better. At our company, we’d sold around five hundred machines in two years. I knew people would pay for quality and David’s success proved that people loved beautiful, high-end designs. We stood to make a huge margin.
David and I spent six months at the end of 1957 perfecting our models. Then, when we were sure we had a great product, we incorporated Clairtone. The company consisted of the core staff from Peter Munk & Associates, plus David. I was president and David was a vice president. At the beginning, we offered two standard models: a monaural high-fidelity unit and a stereophonic unit, both housed in low-slung Scandinavian cabinets with sliding doors. We charged $599 for the hi-fi and $695 for the stereo design, knowing that we could target people who wanted quality and had the money to pay for it.
After showcasing the models to the major distributors, orders began flooding in. By November of the next year, we had to move into a five-thousandsquare-foot factory space. We were too busy to even think about our finances. We started the company with $3,500 in capital, and after a seven-month period, we had made a net profit of $28,555, before taxes.
The problem was that every cent coming in the door went toward buying new components. Not only did we go without earning any salary, but we were heavily overdrawn, with many outstanding cheques. Luckily, the numbers were good enough to impress our banker and secure an extended loan. Clairtone’s success was a whirlwind. We were winning design awards and getting all kinds of positive attention. The press loved that David and I had recognized our different and complementary skill sets. They loved our enthusiasm too.
Almost right off the bat, we began gunning for the American market and soon we were succeeding there as well.
“Kickstart: How Successful Canadians Got Started”, © 2008 by Alexander Herman, Paul Matthews and Andrew Feindel. Published by Dundurn Press, www.dundurn.com