Lakland in 7/04 Forbes Magazine

[57pbass]

You can read it here....

 

http://www.forbes.com/business/forbes/2004/0705/140.html

[doc taz]

Great story here. It's nice to see how the company has made a profit in a decade. Some independent makers don't make it so far as Dan Lakin has.

[The Fonz]

ouch. THAT is discouraging. over a million in loans he doesn't have to pay back plus a huge workspace for $500 a month, free (or very cheap)major market advertising, huge industry endorsements and a huge family hookup that got him an deal for low-cost overseas production and he broke even for the first time after ten years? wow. and now he's looking at making a $150,000 profit on $1.5 million in sales. i'm starting to rethink the wisdom behind seismic.

[bassaddik]

Dan is a great guy. I believe his vision is long term, he is very adevrtisisng oriented and works hard on his artist relations.. it goes to show people aren't getting rich from making basses. It is a labor of love. And Lakland basses are extremely desirable. I have played just about everythng under the sun and i still just put an order for a US 55-94 with Dan , i miss my old one- a bass for all gigs.

[doc taz]

Originally posted by bassaddik:

Dan is a great guy. I believe his vision is long term, he is very adevrtisisng oriented and works hard on his artist relations.. it goes to show people aren't getting rich from making basses. It is a labor of love. And Lakland basses are extremely desirable. I have played just about everythng under the sun and i still just put an order for a US 55-94 with Dan , i miss my old one- a bass for all gigs.

Heh, this is what I should've said the first time. Good point.

[_Sweet Willie_]

Thanks for the link, Dan. Interesting article.

 

Originally posted by Ace Cracker:

i'm starting to rethink the wisdom behind seismic.

Remember, it might be that Dan Lakin and Lakland aren't your model to emulate. The article does comment that Lakin didn't really make things work until he had business smarts accumulated from experience to help him become more efficient. Maybe a strategy for you guys is to take advantage of the business smarts already accumulated by others and combine them with what you've learned so far.

 

It certainly makes you wonder, though, who the builders are who are making a profit and what were their paths.

 

For example, Carey Nordstrand is designing and selling his own pickups in an effort to make his bass building business more feasible. I don't know if he's turning a profit yet or not.

 

Is Chris Stambaugh turning a profit? He sells his basses for reasonable prices (at least relatively speaking for customs), but he also lives and works in NH, where cost of living and expenses probably allow him to charge less.

 

What can we learn from Leo? Fender, Music Man, and G&L are still all going strong it seems, despite Leo's absence. What made it possible for him to play a significant role in developing not one, but three (!), surviving instrument businesses?

 

All this is, Ace (and wraub), is my attempt to give you some encouragement.

 

Peace.

--SW

[bassaddik]

did i really spell "advertising" that way? whoa!! gotta lay off the caffeine!!

[The Fonz]

i guess it has more to do with a business model more than business "smarts." somehow i'm pretty sure, given his lineage and the fact that that lineage was invested pretty heavily in Lakland, that he had plenty of pretty smart people giving him business advice. he certainly had lots of help.

 

it looks to me like his model was flawed. i get the impression that he went right into manufacturing exclusively. opening up a factory, no matter what size, has got to be a daunting task. when you look at other builders, none of them live by bread alone. look at custom builders like stambaugh, sadowski, thompson, et al. they do a lot of repair/alteration work as well. i guess the key here is diversification.

 

still, i have to wonder. i've been in wood shops all my life. i can't imagine what i'd be able to accomplish with half a million and 5000 sqft of virtually free shop space.

[wraub]

Definitely some discouraging words there, as well as some helpful bits. It definitely sounds as if Lakin had (almost) limitless financing, workspace, and time on his side, and still came up short more than once. Now he has "free" advertising and promotion. It must be nice...

 

I found this part interesting as well:

 

from the article-

"A standard U.S.-made bass that wholesales for $1,700 can easily cost $1,500 to produce, a ticket for losses when you throw in marketing and administrative costs. The Korean guitars' manufacturing costs can be less than $500; because of added volume, the (Skyline series) line is profitable even with a price tag as low as $660."

 

Food for thought the next time you consider the "cost" of an instrument. Although it doesn't mention the wholesale price for Skylines,

as little as $200.00 profit per piece cost of $1500.00 does add up to a big hole until the pieces move consistently. But you need to be able to produce the pieces to make that tiny profit.

Hence, money pit.

And until (unless) the pieces you make sell, you don't even get that $200.00 to try to spend to make the next bass, leaving you with stock on hand, and no "new" stock.

 

Some simple math:

 

Five basses at $1500.00 production cost each means $7500.00 out of hand. Assuming the above margins, that's a net profit to the manufacturer of $1000.00, or less than the cost of making another bass.

And that's assuming that the $1500.00 tag to the maker includes all aspects of production (insurance, shop space, tools and accompanying maintenance/attrition, salary[ies], advertising/promotional costs, etc.) and not just materials/time.

A little daunting, true. But if it were easy...

 

Peace,

 

wraub

[The Fonz]

Originally posted by wraub:

I found this part interesting as well:

 

from the article-

"A standard U.S.-made bass that wholesales for $1,700 can easily cost $1,500 to produce, a ticket for losses when you throw in marketing and administrative costs.

yeah, i found that interesting too. i really have to wonder what he's spending $1500 on. especially as the article stated that he outsources the the neck and body. the neck, even without fretting, is the most labor intensive part of the instrument. if he outsources that then that is going to significantly lower his labor costs. a bass requires about $30 worth of lumber and anwhere from $200-$600 worth of miscellaneous parts at retail prices. even factoring in labor, and all premises related overhead one must wonder where they get a tag of $1500 per instrument. add to that the fact that Lakin is seslling those instruments for $3000 a pop. how is this guy not turning a profit?

[getz out]

Wow, something I'm actually qualified to discuss...

 

His initial business plan completely sucked. It sucked in so many ways, he would have obviously failed without family bail-out.

 

His plan worked out, but only by accident. If he had the money for the initial start-up costs and was willing to take a bath for the first dozen years, then his plan would have been fine. It was apparent from the article that wasn't the way things were planned.

 

However, don't expect any new business (generally) to turn a profit for 3 to 7 years. Each year you should re-evaluation current losses; see if there is light at the end of the tunnel. This can be done rather precisely with the right planning, budgeting, and forecasting.

 

The biggest flaw in his plan was the lack of cash inflow to support the initial fixed cost (equipment purchase and initial setup). Look at some successful, smaller luthiers for their successess; Jack Read retails Stewart, Aguilar, etc, Carey Nordstrand sells pickups, etc. Instead, Lakland was selling low margin, low volume, high-priced basses with no name recognition at the time of initial distribution. Not smart.