WILLIAM Ackerman has to be pleased. Seven years ago, he was a contractor, building record warehouses for small Bay Area independents by day, and an improvisational guitarist, playing coffeehouses by night.

Now, Ackerman has a warehouse filled with records released on his own Windham Hill label (he sold more than a million of them last year) and a number of major companies are courting him with distribution deals. In an era of dipping growth margins, Windham Hill's sales have jumped 1,000 percent in two years. In a time of increased consumer concern, the California-based label has established an audiophile reputation for near-fanatical technical standards, but its prices have yet to break the double-digit barrier.

Windham Hill's marketing strategy may be more practical for a small independent label than for a larger company, but that's only one factor in its phenomenal success.

The label has managed to carve a unique position in the marketplace by creating a distinctive sound: Windham Hill's "unknown" artists, most of whom play acoustic guitar or piano and perform in solo or duo settings, pursue a pastoral, meditative type of music that's evolutionary rather than revolutionary.

"Autumn," a collection of introspective piano solos by George Winston, has sold 250,000 records since its release two years ago; Winston had given up music 10 years earlier when a self-produced album failed to catch anyone's ear.

Born in the primitive simplicity of folk music, the complex structure of classical music and the improvisatory spirit of jazz, the spacious Windham Hill sound is melodically rich and esthetically soothing, light years away from the dominant harshness and volume of today's music. One jazz critic defined it as "the perfect aural and psychological antidote to the urban madness."

It's also been called New Age music, impressionism, folk-jazz. With many people buying whatever comes out on the label, some record stores have taken to setting up special Windham Hill bins.

"The music is above all emotionally evocative," Ackerman says. "Many of the artists on the label are super musicians and technicians, but first and foremost the impact is emotional."

some critics, dubbing it "mood music" and "SoCal Pop," have attacked the music as ersatz jazz. "Jazz is typically a black, urban experience, and that's one valid experience," Ackerman says. "But Windham Hill is more pastoral and it's almost as if that part of life has become a cliche to the 20th century, as if it's not valid. I think [nature] is every bit as profound as the human experience."

Ackerman, 33, learned the record business from the ground up. Literally. As a contractor and carpenter, he was hired to build warehouses for Arhoolie and Kicking Mule, two small, folk-oriented Bay Area record companies. Between sawing and hammering, he observed the companies' day-to-day operations; he also asked a lot of questions. His actual entry into the business, however, was accidental. "I was a contractor who did an album of guitar solos for my friends. We pressed 300 and I thought that was going to be the end of it. I didn't plan to get into the record business."

So basic was the operation that Ackerman accepted several boxes of blank album covers from the recording engineer and "when we'd get an order, we'd get out the spray and hand-glue a cover on and send it out. It was a real hobby, a cottage industry sort of thing. I had a cousin, Alex [DeGrassi], who played a pretty mean guitar. He was working in my building crew and didn't even want to do an album. We never amassed capital and went into business. Money made was reinvested and it grew -- and I hate to use the word cause it's going to sound so California -- organically."

Windham Hill moved into an audiophile line almost accidentally in 1976, through a chance meeting at an engineers convention. Ackerman's engineer ended up sitting next to Stan Ricker, the premiere half-speed mastering engineer in America: At this point few people had heard of half-speed mastering or its deeply enhanced sonics. Ricker insisted on using quality pressings, and today the company boasts premium pressings on high-quality imported vinyl, double-laminated covers, plastic inner sleeves and superb graphics.

""Quality begets quality" is the summary," Ackerman insists. "You need to be economically viable to be able to do any work in this society, but there are so many people whose principal desire is to see quality fostered in the marketplace that if you stand for that, people will come to you." In fact, Sony came to Windham Hill with its new digital equipment, as did other audio equipment manufacturers.

The first, and should have been only, record that Ackerman made was titled "In Search of the Turtle's Navel," a humorous bow to guitarist John Fahey.But a promo man for another label sent off 10 copies to radio stations: Seven started playing it. Soon, Windham Hill, named for Ackerman's Palo Alto contracting business, was in gear; last year it released seven records. Ackerman is the company's chief talent scout, producer, art director, quality control watchdog and marketing strategist; he has two full-time promotion people.

As it grew, Windham Hill established a triple-tiered network of independent and alternative distributors and "new age" retail outlets, many of which gave over separate bins to the product. "It established an identity," Ackerman says. "Stores found people coming back saying, "What's the next Windham Hill record?""

In the last year or so, the catalogue has evolved to include duet and ensemble projects; one group, Shadowfax, even uses a bit of electricity. "It's important to go on subtly challenging the parameters of what the label is regarded as," Ackerman says. "As soon as you stop developing, you're dead in the water. But I think that our audience has been going through the same progression that I have -- learning new things, going a little bit further out, leaving simple major keys for minor keys, getting into a little bit more blues, a little bit more swing. And there's enough room in the music for people to put their own dream, their own thought, into it."

As the small independent has grown, both in stature and sales, it's been approached by a number of major companies about distribution, which presents a major dilemma: balancing the artistic impulse to widen audience against the practicality demanded by a major.

"Part of the mystique at Windham Hill is that it's an artist-owned cooperative venture," Ackerman says."We're conscious of wanting to maintain all of our independence -- and that's where a lot of negotiations fall apart. Most majors want us to go into their manufacturing machine, but I'm demanding that we maintain the same record presser, use the same printers, and that I have full control over changing the inner sleeves if I see something better.

"The majors realize quality is a really important part of Windham Hill but then they start wanting to cut corners: "Do you really want that inner sleeve? They don't see it when they buy it." But you haven't made the sale just in selling the record. You've made the sale when somebody gets home and feels utterly happy with that record. I did that when I was building houses, too. The last handshake when you walked out the house was when you sold the house, not when you signed the contract to build it; it's leaving them happy with what they've bought. In the long run, it brings about an audience loyalty that can't be overemphasized as an element of our success."

While trying to limit the Windham Hill releases to eight a year, Ackerman (who now gets upwards of 40 audition tapes a week) is developing several auxiliary lines, including one that will be vocal-oriented. He's also negotiating with tape manufacturers to bring out the first $9.98 list chrome cassettes, $6 or $7 below most of these high-quality tapes. "And we're going to be first domestically manufactured CD [compact-disc] with three to five CDs out by the end of this year."

The demands of running the company have also restructured Ackerman's career as a musician. "They don't let me out of my cage very often," he laughs. "I'm down to 25 concerts a year, but it's fun because I get to do the ones like Carnegie Hall and Symphony Hall. I think I've now relegated my music to the position it originally had, which was an avocation rather than a vocation. When I started the label I was working as a general contractor, building houses and just doing music as a hobby. My own music has come to be that again."

Music's loss, in this case, is also music's gain.