By 1976, the Taylor acoustic guitar company provided an affordable and viable alternative to Martin acoustic guitars. The Taylor acoustic guitar had a low-profile neck, and they offered several different selections as to neck widths, this was a real advantage over other acoustic guitars. Plus, they sounded good, and, because they were made with bolt-on necks, they were able to make repairs instantly, which was greatly appreciated by their customers.

At the time that Taylor acoustic guitars got into the business of manufacturing acoustic guitars the market was dying a cruel death.

In 1981, Taylor Guitars purchased equipment that would enable them to smooth out some production wrinkles. But without any marketing, unsold guitars continued to pile up.

In 1983, Listug and Taylor purchased the Schemmer guitar company equipped with machines capable of handing the majority of the arduous aspects of tooling and processing raw materials, the company was running more efficiently, and began to make a profit. The extra money coming into the company was spent on technical modification that resulted in higher quality acoustic guitar.

In the mid-'80s, synthesized rock so dominated the charts and airwaves that acoustic guitars seemed outdated. Even the Martin acoustic guitar company was singing the blues about how lousy business was.

While trying to entice rock guitarist into trying out their acoustic guitars, Listug and Taylor agreed to take up Glenn Wetterlund's challenge to build a 12-stinge guitar for superstar Prince. At the time Prince was going through a purple phase, so Taylor produced a purple-stained 655. The only problem was that Prince would not play an instrument that had a visible brand name on it. Prince played it in both his Live Aid and Purple Rain videos which was seen by millions of people, but the Taylor logo was no where to be seen.

Whether or not the purple "Prince guitar" had any effect on the comeback of the acoustic guitars is debatable, but it certain that did not harm Taylor Acoustic Guitars. The word of Bob Taylor's guitar making was spreading through out the music world. Famous musicians and unknown musicians were buying up his guitars.

In order to sell more guitars the company felt that it was in their best interest to expand upon its Artist Series of acoustic guitars and cater to some of the demands of its elite clientele, which included Jeff Cook of the country-rock band, Alabama, Steve Stevens, Billy Idol, and Bonnie Raitt.

In 1986, flatpicking guitarist Dan Crary teamed up with Bob Taylor and created the Dan Crary Signature Model acoustic guitar. Demand for Taylor Acoustic Guitars was growing. In 1987, Taylor Guitars relocated to Lemon Grove. They moved into a 5,000-square-foot factory in the Santee area, and two years after making the move Listug and Taylor invested a great deal of money in hi-tech computer-operated milling machinery that continue to be the core of the factory's wood-processing section.

In 1990, Leo Kottke and Bob Taylor got together to create the Leo Kottke Signature Model 12-string acoustic guitar. Both the Dan Crary and Leo Kottke 12-string acoustic guitar are still very popular to this day.

Business was going so well that they soon outgrow their Santee plant. In July 1992 Taylor Guitars moved to their present location in El Cajon.