Chris Middendorf remembers his first days as an art gallery owner quite well: No customers and no sales. Day after day, Middendorf and his former partner gazed out the window of the Dupont Circle gallery, watching expectantly for customers who never came. They passed the time sipping champagne left over from the gallery's opening and discussing world events.

He remembers, too, his first sale after three depressing months. Someone bought a $35 print, paying $5 down and $10 a month. "It was really a rude shock to my system," he said, shaking his head and smiling.

Middendorf can laugh now about those desperate first days in 1974. By all accounts, the Middendorf Gallery, now in Adams-Morgan, is one of the more successful galleries in the city.

But he also recounts it as a sobering reminder that the commercial art gallery business here is an uncertain and volatile one. It is acutely sensitive to swings in the economy, as well as swings in taste and talent.

Even in good times, sales in Washington have never hit the dizzying heights seen in New York and London, although gallery owners here suspect they receive trickle-down benefits.

Although the wealth of museums in Washington has served to draw art lovers to the city, most of the high-priced museum purchases have been out of state and not from local galleries. And although the museums have created an educated and discriminating audience accustomed to viewing works by such masters as Rembrandt and Picasso, they have also created a group unaccustomed to paying for art because the museums are free.

"People aren't less educated here, nor do they have less resources. It's just that there's so much demand on their time because of the type of city it is," said Robert Brown, a former attorney for Communications Satellite Corp. who now owns Robert Brown Contemporary Art. He opened the Washington Circle gallery six years ago.

When collectors here decide to buy big-ticket items, they usually head to New York, where the selections are significantly greater, according to gallery owners. "I feel it's unfortunate, but if someone really wants to spend money, they still go to New York," said Franz Bader, one of Washington's first and most prominent contemporary art dealers, who retired last year.

Some galleries have become more aggressive in pursuing the city's substantial number of well-paid, well-educated professionals. Other galleries see untapped wealth in the corporations moving to the Washington suburbs. But most say they believe that persuading Washingtonians to spend hundreds or thousands of dollars on art is far harder than persuading them to spend money on a trendy car or a house.

"In theory, anyone that you or I know can live perfectly fine without any of the materials that I have to offer. What we hope is that people develop some sort of excitement for the arts that propels them to want to possess it," said Kathleen Ewing, who owns a Dupont Circle photography gallery.

There are about 150 commercial art galleries in the Washington area, with about 50 dominating the business. The galleries have gravitated to two centers -- Dupont Circle, particularly along R Street, and the 7th Street corridor, a few blocks from the National Portrait Gallery.

Most of the Washington galleries specialize in contemporary art, with prices commonly ranging from $200 to $6,000. There are two prominent exceptions. Adams, Davidson Galleries handles American artists from 1840 to 1940, specializing in the Hudson River School painters. Prices range from $30,000 to more than $1 million. Hom Gallery handles 19th and early 20th century graphics and Old Master prints; its prices range from $1,000 to more than $300,000.

Few art dealers will discuss their sales, profits or clients. Because galleries are viewed as a reflection of the owner's "eye" and personality, no one wants to reveal financial figures if business is bad. Even if business is good, "a lot of customers don't like you to brag about what you buy and what you sell. It's a sort of confidential business," said Jem Hom, considered one of Washington's most successful dealers.

There are a few dealers who are not as reluctant to discuss sales. Bader said he sold $500,000 to $700,000 in his most successful years. Harry Lunn, who ran an art gallery in Washington for 14 years, has said in earlier interviews that he grossed $2.85 million in 1979-1980, then considered an industry high.

"By today's standards, two to three million is nothing" for galleries carrying museum-quality art, said Hom. Ted Cooper, the highly respected owner of Adams, Davidson Galleries, has sold one painting that alone cost about $2.8 million.

For galleries handling contemporary works of lesser-known artists, the story is quite different. Barbara Kornblatt, owner of B.R. Kornblatt Gallery on 7th Street, estimates that sales for most Washington contemporary art galleries average between $500,000 and $2 million a year.

Kornblatt declined to give her gallery's revenue, but said that sales this year had jumped 30 percent, in contrast with an average annual sales growth of 10 percent a year. Most of the increase was due to sales at the Chicago Art Fair, where she switched her strategy of previous years. Instead of introducing new artists, she showed her most established ones and carefully chose works that would appeal to the general public.

Middendorf Gallery's revenue is thought to be among the highest in the city, only 13 years after its struggling start. Middendorf said the turning point was 1978, when his gallery was hired by the Arnold and Porter law firm to travel the country and build a collection of 20th century American art. Now about 60 to 70 percent of the gallery's revenue comes from its work as an art agent for law firms and corporations. It just finished a collection for the Hogan and Hartson law firm and has done collections for about 20 to 30 companies in Washington.

Middendorf, like his colleagues, won't reveal his sales figures. "The figures you hear about the biggest galleries in the world . . . {are} somewhere between $50 million and $100 million worth of art a year," said Middendorf. He paused for several seconds and then grinned. "We don't sell that much." But he quickly added that "it's not inconceivable for us to be selling $50 million worth of art a year" in the near future.

But Cooper notes that he must also pay high prices for the art he buys to resell. And Middendorf said that if his gallery is purchasing art for large corporate collections, it works on very small percentages, sometimes as low as 5 percent of sales.

Most galleries say that profits run up to 10 to 20 percent of gross sales, although they stress that there are great variations between each gallery.

Costs associated with shows, such as invitations, catalogues, framing, shipping, advertising and the reception for the opening, are negotiated between artists and galleries. Betsy Shulman, a Washington sculptor, said that some galleries make artists pay for so much that a few have just decided "it's not worth showing, between transportation and setup costs and the costs of invitations and catalogues."

Ewing said she believes galleries should assume the major costs of the show, which means her costs are high for a small gallery. For instance, she estimated that she spends $10,000 a year just on postage for invitations and shipping of art.

Cooper said he has enormous travel, shipping and insurance costs. For instance, if he finds a painting that he thinks will appeal to a client in California, he must fly there himself or ship it by special art handlers.

Both Cooper and Hom say a majority of their clients live outside of Washington. Hom said he depends on Washington for only about 25 percent of his sales, while Cooper said his Washington clientele is about 35 to 40 percent. But he added that there are "some fairly important collectors in Washington."

One of his clients, who recently moved here, is willing to spend "in excess of a million dollars per picture . . . and they've just begun collecting," Cooper said. He declined to name any of the major collectors in the area, saying that once the names of key clients get out "they're sort of fair game" for every other dealer in the country.

The record prices being paid for major works of art have triggered more interest in art as an investment, an interest encouraged by some gallery owners like Middendorf. He said choice prints, selling for as little as $2,000, can be good investments. He added that the works of certain young artists with good reputations in New York who have had several shows and a few museum exhibits can be good bets. But the works of those artists require an investment of tens of thousands or even hundreds of thousands of dollars.

Many other gallery owners seem wary of recommending art as an investment. "The client has too many expectations. Every two years they call me and say: 'What's the value of my picture?' " said Cooper. "We advise our clients that if they want to make money, look elsewhere other than art investment, because it's too risky."

More often, however, galleries are trying to drum up business, not turn it away. Foxley/Leach Gallery owner Elisabeth Foxley Leach, who is married to Rep. Jim Leach (R-Iowa), has organized cocktail parties for trade associations and lunches for professional women to lure potential customers to her Georgetown gallery.

Kornblatt is installing a computer for inventory, sales and targeted mailings. The Jane Haslem Gallery publishes a glossy newsletter filled with color reproductions of art works and short articles on the artists.

Middendorf said that when he started he didn't have a newsletter or mailing list. "I didn't know anybody here. I figured the best thing to do was to go to other gallery openings and go to musuem openings" to find customers. He said the Corcoran Gallery used to have grand openings that lasted from 8 p.m. to 11 p.m. "I would spend the three hours standing in the main hallway trying to meet people. It was pretty grim."

Grim, too, say gallery owners, is the business of finance. Banks are leery of lending money on art. Ewing, who started her photography gallery 11 years ago, said a banker told her that, for the bank's purposes, her inventory was worth 10 cents on the dollar. "I said, 'But I paid more than that for it.' "

Middendorf's initial funds came from 70 shares of IBM stock he inherited. But realizing he will probably want to borrow money from a bank in the future, he has purchased a permanent home for his gallery to provide real estate for collateral.

Many gallery owners, including Cooper, have turned to investors instead of banks, particularly when they're starting out. Cooper said he bought the first collection of paintings for his gallery with the help of two investors who put in about $20,000 each. He sold out the entire selection and then bought out the two investors.

Dealers traditionally sell works two ways: either on consignment or by buying the art and reselling it at a higher price. Galleries without the money to purchase large inventories prefer consignment. Most galleries here take 50 percent commission from the artists, and only about 20 to 30 percent if the work is on consignment from other galleries. If the artist is particularly hot, the commission may be as low as 30 percent.

Gallery owners say the art business is not a get-rich-quick kind of undertaking, despite some eye-popping prices. "There are two ways to make a killing," said Middendorf. "One is you make a deal where you make a whole lot of money, and in the process you screw the buyer and you screw the seller . . . That's not something that we do, and I don't think there are too many people in Washington that do that."

But he added, "It's a real gray area. A little old lady walks in the door and says: 'I've got this print I want to sell. It's by some artist whose name begins with a P.' And you look at it, and it's a Picasso print." He said some galleries might offer her $500, while others would explain the value of the print and offer to sell it at $20,000 for a 20 percent commission. "That's the big ethical question that confronts a lot of galleries."

He said the second way of getting rich is by buying something that is exceptional and holding on to it until the price goes up substantially.

Middendorf and other gallery owners say it all adds up to a business where survival is always a question mark. "I knew when it first opened: It would survive because I would make it survive," Middendorf said.

"But in the same sense, you always have the same feeling that at some point nobody will ever walk in the door anymore or call up and want to buy a picture," he said. "You never know."

CAPTION;Art gallery owner Robert Brown on the top floor of his Washington Circle gallery with "Study of Light and Space" by Oliveira Cezar.

CAPTION;@Chris Middendorf, owner of Middendorf Gallery, a successful art gallery that has recently moved to Adams-Morgan after 13 years at Dupont Circle. @