What's Your Strategy?

[Dave Barousse]

With all of the rider owned company debates on here recently, I wanted to see how you guys responded to it from a different perspective. The following is just an example I made up and is not directed towards any company in particular. It is purely for educational purposes and nothing more, so don't read too much into it. Just do your best to put yourself in the situation and solve the problem.

You are an avid wakesakter who has been into board sports since you were a kid and have done it all from skateboarding to wakeboarding and everything in between. You have been active in the wake industry by reading the mags, visiting the online communities, attending clinics and pro tour events and you know some people in the industry. You have been playing around in your garage with some board designs and you have recently developed a board that you know will be able to compete with the leading wakeskates on the market.

You work a normal day job as a salesman for a software company that sells software for writing business plans. You only work at this job to pay the bills and to help fund your passion of building boards in your garage. You save every penny you can as your dream is to one day mass produce your new board design to sell to wakeskaters because you know your board will help improve their riding and will make a difference in the industry.

Finally, you have enough money saved to move ahead with your dream. You already have the details lined up, so you give the manufacturer a payment and your molds to start producing your boards. You then scrounge up just enough money to put together the best marketing plan you can afford. It sparks some interest, and you start making some sales. Your dream is finally coming to life and you soon realize that if things keep going the way they are going, you will get to quit your day job soon.

A year or two passes and the small company you started in your garage is now a hit in the wakeskating industry. You are selling boards on a regular basis, but you are only making enough money to keep the business going and to put food in your stomach. But you are happy because you are living your dream and you see kids enjoying your boards. They consider them boards, but you see them more as your own sweat and blood.

As you are preparing for year 3, the manufacturer you had an agreement with goes bankrupt and you already paid them for the materials needed to produce the full run of boards for the new riding season that is fast approaching. There is nothing you can do to get your money back. Most of that money was from a loan you had to get from the bank because in year three you were attempting to grow your business. The profits from year two would not cover the additional costs of producing the extra boards needed to grow in year three, so you had to get a loan. At this point, you are pretty much broke, owe lots of money to the bank, still have to support previous customers and you are running out of time if you are going to have boards ready for the next season.

Because your company has been solid in the industry for a few years, the name recognition and branding is very attractive to a business man who's son is into wakeskating. He had heard about your current situation and contacted you to entertain the idea of investing in your company. The business man specializes in starting up small companies, growing them and then selling them off for millions of dollars once a stable business system is in place. He is also a savvy real estate investor and has a large team of legal assistants and accountants that will take over that portion of your business, as well as the marketing of your products.

His offer was to buy 51% of the company so that he can control the business operations of the company, but wanted you to stay in control of the board design and production process (that is what you loved to do anyway and hated all of that other stuff the goes with running a company). If you take his offer, then all the hard work you have put into building your dream board company will stay alive. Otherwise, your only option is to go bankrupt and find another day job to hopefully do it all over again one day.

What would you do?

[Mr. Top Hat]

i would sell it in a heartbeat.

[seven11dmd]

yikes dave, thats tough. id say id have to take the mans offer becuase at that point id be so desperate to keep my dream alive. in a few years when i get 49% of the multi millions id go off on my own once again to the redicule of many for only wanting to make a "quick buck"

yikes.

[freerider4]

That was a cool example I would probably sell it and do something along the lines of what seven11dmd did.

[colorless]

Seems only logical to sell.

[Steven M]

i most likely would sell.

dave what would you do in the situation?

[colorless]

It seems rather odd that you ask this Dave, it seems to much into detail. I think that a company is going through this now, so you posted about it for some reason. :thinking: .....

[Grouch]

There is no guarantee that you will even be able to continue making the products the way you want. Thinking long term...What happens when he decides to sell the company. Where are you in this process?

The logical thing would be to sell, but negotiate some contract where you have complete control of board production, the company cant be sold for X amount of years and once it does sell you will still maintain control of board design.

Highly unlikely that you could negotiate all of the above, but that would be the best in my opinion.

ell

[Morphine]

You make the deal, have the 51% guy terminated and make it look like an accident, then BAM, you get the rest of company back along with the financial support from his company.

[Grouch]

Morphine,

we give him some cement shoes and put him at the bottom of the Potomac.

[Greg T]

sell it, and keep saving the money just as you did with your day job before you started the company in the first place. keep living your dream and then when things start to not work the way you would like them, leave, tell your story on wakeskating.com and start a new company and everyone will be sympathetic and follow your board designs to the new company.

[senorbueno]

I don't know if you guys realize this, but this seems to be a very similar situation to the whole Kent Sports group. A lot of the companies owned by that operation were all small independent ROCs at one point and time. They do their part to try and advance wakeskating, whether it be to come out with a new type of board, or be able to sell a good board at an affordable price in order to get more riders involved in the sport. Don't get me wrong, I love the ROC's of Kampus, Cassette, and Integrity just as much as anyone else on these forums, but a lot of companies are unable to be as successful independently as these companies are and have to go to a larger company such as Kent in order to provide the financial backing in order to continue growth. I say we start supporting Rider Driven Companies, for that little man that can only maintain 49% of the company that he started, and of course all of the ROCs that were able to do it on their own.
Or just buy an Integrity and all will be good.

-dammit Pirate, you've got me saying it too

[senorbueno]

Greg T, well said

[catalyst112]

the orgininal manufacuter's first priority when going out of business is to pay off his depts through liquidating his assets. i would hope that a manufacturer would pay back the amount to which he was given and provided nothing in return. im pretty sure how the whole liquidation of assets to pay off depts works. so if that happens to work then hopefully the partnership wont have to happen. but if no then partner up.

[Morphine]

PART 2

OR: Go to ole Mexico, find a manufacturer, ship into the U.S. through the black market. Make a name for yourself by murdering a couple of local criminals, that way, people will loan you money, and you can be like "you not pay me money, you get shot yeah". Then you'll have your company and the U.S. government can't do anything about you. That's core.

[-=AlexXx=-]

senorbueno, i think u hit the nail on the head with that one.

[kento911]

Dave Barousse, I hope some body beside senorbueno, gets the analogy, obviously any person would sell, you cant just trash your dream, the smart thing to do would be to get some sort of paper agreement to the effect that you maintain creative control,and have thewm give you a position like head of research and development or something of the sort, and much like somebody else said you save for a rainy day, b/c at some point no matter how great your ideas are a bean counter will come along and decide your not worth it anymore, then you do a Schmaltz, you fire up your contacts, get something going and take it to the riders, and hopefully you can smash the rep of your prior emplyer enough to dip into their sales numbers, giving you a fresh base to start over with.

You know whats funny? If you supported rider driven companies, you would have to support every body but O'brien and Mutiny(nothing against Obrien just bear with me here) b/c they are just about the only companies in the industry, that don't still have their founder involved,(Herb Obrien who left to start HO after a brief prison stint).
This is what happened with jobe, Herb O brien helped Jeff Jobe start that company in the interim before he started HO and later became his finacial backer when he was in trouble, so I think we wont see even support of rider driven companies, b/c people dont consider all the factors, like the fact that every company in this industry was started by a "rider" some of them were skiers, some of them were wakeboarders, I think the truth is if you belive in ROC's (and I do) and you want to support only them with your money great you should alway support what you belive, but have repect and support the other larger companies that make all the fun we have possible by, NOT bashing them, b/c the truth is the amount of people on here that can bash a company b/c of an actual negative personal experience with the company (not some tool at a shop who wouldn't warraty that brand of board for you) are in the single digits, and those people I am referring to know who they are and know that I generally wont even argue with them on their opinion.

and the other fact of the matter is as much as I love and respect all the ROC's that push the envelope and try to lead the sport in the right direction, they cant afford to sponsor vid after vid, and protours, and ad 3 page spreads in WBM and Alliance, and so on and so forth

[RUSSIAN]

what does mutiny have to do with it?

[kento911]

RUSSIAN, mutiny is another company that had it's owner and founder leave, them and Obrien are the only 2 I could think of where the creative genius, or driving force had left. Im sure theres more, those were just the only two I could think of right then

[RUSSIAN]

kento911, I see. you brought them up and then didn't give your reason....tis all good