What a summer it's been at Sugarloaf Creations; in fact, what a year it's been. To be totally frank (oh, sorry, that's the other past AMOA president who writes for this publication), life at Sugarloaf Creations has been a wild ride for some time now. I'm frequently asked what goes on at Sugarloaf, so let me give anyone interested some insight.
For starters, I'm learning about this side of the business every day. Today it's clear that Sugarloaf Creations is "in the financial game." This company has gone from privately owned to a primarily franchisee company to being publicly traded and now private owned again, this time by a New York equity group, Wellspring Capital. Since becoming a privately owned company in 2002, our new owners have injected some welcome financial expertise and have funded some very synergistic acquisitions/mergers for our company. Our CEO's little crane company in 1986 will have sales far in excess of $200 million in 2004 if all goes according to plan.
Industry people, customers and friends, lectured me about what to expect when working for a group of equity investors based in New York City. Of course, the first thing that happens is that they fire everyone and bring in their own management team. That is generally a given from the people that offer up the advice. To my knowledge, this hasn't happened even once at Sugarloaf. Randy Fagundo is still our CEO and runs the business on a daily basis. The dreaded re-organization forecast by some hasn't occurred.
Secondly, I was assured that no doubt they will move us to New York or somewhere back east where all the action is. That hasn't happened either. Actually, we did move this year, but into a new building closer to my house in Westminster, Colo. It's been wonderful not having to fight the highway rush hour traffic between Denver and Boulder. We're now in Louisville, Colo., a bedroom community located near Boulder, where the mountains are still majestic but the land isn't priced as though the streets are paved with gold, as it is in the city of Boulder. I've also been warned about how equity investors, especially those in New York (why do they all live in New York, anyway?), will squeeze every penny out of our company and then sell it to the highest bidder. Well, let's say that it's clear that they do prefer to make a profit, but squeeze? Not the word I would use. Rather, we've been made more efficient as our buying power increases. As for selling it to the highest bidder? Well, they are here to make money so we can't rule that out, and you shouldn't either. That is, sell your business if the opportunity presents itself. In the book E-Myth, Michael Gerber says that whether you know it or not, you are selling your business to someone - either to another party or to yourself, one day at a time. If you're buying it, be sure the price you're paying isn't too high, personally as well as monetarily. Buying and selling companies has become the American way.
We've all gotten to know the Wellspring Capital gang including Bill Dawson, Alex Carles, and Dan Han. These are the principles, officers and analysts from Wellspring that we interface with periodically, and our CEO interfaces with frequently. Bill's a Harvard graduate, Alex comes from William and Mary College. These are smart guys. I'm 15 years older than Alex and Dan, and believe me, I'm older than board chairman Bill Dawson as well. Anyone who feels discriminated due to their young age needs to move to NYC. I think retirement age in N.Y. must be 45. Bill, Alex and Dan must be the exception to the rule of equity investors. They're nice guys. Perhaps we're lucky. Perhaps the other shoe is yet to drop? Time will tell.
A few of the other companies that are owned by Wellspring Capital (wellspringcapital.com) include Lionel, maker of model trains; Vistar, formerly Multifoods Distribution Group, a food service and vending distributor; Far & Wide, a Florida tour operator for the travel industry; Brook Mays, a retailer of musical instruments; The Hockey Company, a manufacturer of ice and roller hockey skates; and Vatterott College, a large, private postsecondary education company.
What our new owner has brought to the table is specific expertise. I think we're more effective at analyzing our business than we were. Numbers fly fast and furious, but all the whiz kids seem to have an impressive handle on this industry and its trends in the very short period of time they've been involved.
Wellspring has made it possible for us to pursue acquisitions that have made sense for us, but that require a greater access to capital than we've had before. For those that are tracking, let me summarize how Sugarloaf has grown in the last two years.
The assets of Rainbow Crane were purchased in 2002. This has allowed us to manufacture our own crane machines. We still sell the brand to other operators, just as Rainbow has always done. It's a great brand with a great team. Much of the Rainbow expertise is still intact, with Larry Sadler and JP O'Neil still at the helm. This production site is in Lecanto, Fla. Not sure exactly why it's in Florida, but it's a very nice place to visit.
Shortly thereafter we purchased the assets of kiddie ride manufacturer and operator Kiddie World, based in California, Mo. The expertise of kiddie ride industry veteran Rob Schlup has proven invaluable to the Sugarloaf management team. That plant remains in Missouri today. Another kiddy ride acquisition was NCE, a kiddie ride operating company that primarily services Toys R Us.
This year's big news was the integration of Folz Vending into the Sugarloaf system. Roger Folz's fingerprints can be found in most every aspect of the bulk industry today. The combination of these companies - Sugarloaf, Rainbow Cranes, Kiddie World and NTN, and Folz Vending - makes Sugarloaf the national leader in every category we operate.
The most recent acquisition of Gameplan, an East Coast company owned by Tony DeMarco, has been icing on the cake of a very exciting year. Tony's company integrates into our company, primarily due to his Wal-Mart coverage, hand in glove. We were bumping into each other all over the East Coast. Tony and his nephew, Buddy, continue in their respective roles at Sugarloaf, contributing every day.
I never liked being public. All the money had been spent by the time I came along. Luckily, some of it was spent acquiring Chilton Vending in 1998. The constant public scrutiny is difficult to manage. Yahoo chat rooms were filled with the latest rumors about our company. That got old quickly. I don't know what's next for us. More acquisitions, perhaps, maybe being sold to someone else. Who knows? Maybe status quo for a while. That would be a change in itself. The only thing certain around Sugarloaf is that things constantly change. People (the same people mentioned before) always ask me if I miss the entrepreneurship that I enjoyed in Kansas. They don't know what we do around here. Entrepreneur talents built this company and keep it going today. There's no lack of challenges at work.
I think the future for this industry holds even more consolidation, with the large getting larger. It's a fact that many of the economies of this industry simply don't work for the majority of the industry today. When's the last time you put a $15,000 video game in a street location? When's the last time you put a $10,000 video game out? It just doesn't pay any more. In a recent study, I read that what people would like to do most with their spare time is to stay home. The Internet, home video games and all the other comforts of home make staying at home America's number one recreational destination. You're not going to compete with that effectively. Sugarloaf has really keyed on new and innovative merchandising concepts. That has led to an expanding offering of merchandising machines on our routes. You see it in the shrinking trade shows. I received a survey from the president of AMOA the other day. It asked what I thought of combining trade shows. Please, do it now! I would like to stay home, too.
This monolithic 800-pound gorilla that is Sugarloaf has turned into something that I'm not sure anyone could have predicted. As it says in Good to Great, a book that analyzes companies that have become quite successful, there is not a single magic moment that you can identify where everything changed. Success is not a period in time, but rather something that is accomplished over a period of time. It's a series of singular decisions, made correctly, that when added together equate to the successful company that is Sugarloaf today. There are other examples of industry operators and manufacturers who have enjoyed great success, and I believe their formulas are the same. Make the right decisions time and time again, and success can be yours. Unfortunately, there are becoming fewer and fewer success stories to tell in this industry.
I hope this post-AMOA issue finds everyone well and getting ready to
have a prosperous Christmas season. Hard to believe summer has gone, and
the trade show season is upon us. Best wishes in this crazy industry.