How to deal with small amp builders?

[CECamps]

If building amps is your day job, I fail to see how it can take 6 months to deliver an amp. Sorry......

Really? What about a one-off amp? Is it unreasonable to think that it could take 6 months to go from concept to finished, tested product? If so, why?

If however, it is a spare time hobby or money-making venture, then it makes sense and I have a lot of time for a few people.

If said builder must wait on a customer order and deposit to finance the build and go buy inventory for each order, then it becomes that pesky supplier problem. Prepare for the excuses about the chassis guy had a death in the family, or the knob supplier's wife ran out with the knob stash. Use your imagination here.

I don't think it's that cut and dry though. Even for builders who don't have to use a customer deposit to finance a build, there could be lead time issues on supply. I can give you a good example. I have transformers custom wound to my specs. They are not off-the-shelf units. Depending on when I need to place my next order, the production cycle on transformers alone can run between 8-13 weeks. I'm not yet in a position to where I can allocate $5k to a mass production run of transformers and chokes and have a lot of stock sitting on the shelf. So my ordering is based on demand and projections.

Depending on the timing of a customer order, allocation of current inventory to other builds, FIFO order delivery, and all that goes into a build and the subsequent testing & burn-in, it can take some time.

Running an amp manufacturing business is not a simple task, there is a lot involved. I'd hate for anyone to think it's a menial thing, particularly with a small company where one person is wearing all the hats (like design engineering, production, quality control, accounting, inventory control, process engineering, marketing, customer service, etc.).

It's all bullshit to the nth degree. I have dealt with the good, the bad and the ugly and adjust expectations based on the bullshit factor associated with said builder. It would be cool to hear one say that I am not taking any new orders right now.

I think it's pretty easy to tell bullshit from legitimacy. My condolences to anyone's wallet who turns over hard-earned money to someone they know is bullshitting them.

But are you saying all small builders who have a lead time are full of shit? Thankfully, I've never taken 6 months to deliver a product, but if I did I'd have certainly tried my damnedest to get it out earlier. Why anyone would want to wait that long to get paid while the costs of keeping the doors open keep on adding up is beyond me.

 

[racerevlon]

If building amps is your day job, I fail to see how it can take 6 months to deliver an amp. Sorry......

If however, it is a spare time hobby or money-making venture, then it makes sense and I have a lot of time for a few people.

If said builder must wait on a customer order and deposit to finance the build and go buy inventory for each order, then it becomes that pesky supplier problem. Prepare for the excuses about the chassis guy had a death in the family, or the knob supplier's wife ran out with the knob stash. Use your imagination here.

It's all bullshit to the nth degree. I have dealt with the good, the bad and the ugly and adjust expectations based on the bullshit factor associated with said builder. It would be cool to hear one say that I am not taking any new orders right now.

Didn't the guy who makes MAKO amps and preamps do that a while ago -- stop taking new orders because he was so back-logged?

I don't think it's that hard to do the job and provide great customer service. Every time I call Splawn Amplification Scott answers the phone himself and has no problem hanging on the phone with me and indulging my questions. All this AND I got my custom Quick Rod on time and as promised.

 

[guitarmike]

It would be cool to hear one (builder) say that I am not taking any new orders right now.

Exactly, although I understand why they don't. They do not want to lose your business, they never know when the next order will come in. Not the smartest way to run a business, but it seems the accepted norm.

Steve, I am quite sure they don't treat the pro's like this. Mr. builder gets a $20,000 order and yours goes to the back of the bus. Then he gets another big order, now you are in the trailer, and so on.

I have had good luck with Friedman and BFG. Both delivered later than originally stated however both kept communication channels open.

 

[glip22]

If building amps is your day job, I fail to see how it can take 6 months to deliver an amp. Sorry......

If however, it is a spare time hobby or money-making venture, then it makes sense and I have a lot of time for a few people.

If said builder must wait on a customer order and deposit to finance the build and go buy inventory for each order, then it becomes that pesky supplier problem. Prepare for the excuses about the chassis guy had a death in the family, or the knob supplier's wife ran out with the knob stash. Use your imagination here.

It's all bullshit to the nth degree. I have dealt with the good, the bad and the ugly and adjust expectations based on the bullshit factor associated with said builder. It would be cool to hear one say that I am not taking any new orders right now.

Didn't the guy who makes MAKO amps and preamps do that a while ago -- stop taking new orders because he was so back-logged?

I don't think it's that hard to do the job and provide great customer service. Every time I call Splawn Amplification Scott answers the phone himself and has no problem hanging on the phone with me and indulging my questions. All this AND I got my custom Quick Rod on time and as promised.

Yes he did. As standup as they come. John Suhr did also o his handwired amps. The way it should be done.

 

[rlord1974]

Here's my advice:

Call and ask for some explanation of why the quoted wait time isn't being met. I'd expect any customer of mine to do that.

Some of us small guys are proactive about notifying customers of unexpected delays and providing details so the customer understands. I know I am. But some others are afraid of pissing off the customer and/or having the customer demand a refund...so they may play the hermit crab role. Not saying it's right--cuz it isn't. Just saying that every business owner will approach these situations differently.

My personal opinion is that 3 months wait time is not uncommon in the build-to-order market. So I don't think you have much to be concerned with as far as that goes. But I can totally understand your frustration with a lack of communication. Big time no-no from the standpoint of customer service.

Again, be direct. Be tactful, but be direct. What information do you want to know (rhetorical question)? Ask.

Hope your experience turns out to be positive in the end!

Wow. I just went to your Website as I had not heard of you before. Lots of neat products there, but that Brigand (in your avatar - http://www.cecamps.com/main/amplifiers/brigand) looks like a killer amp!

 

[Anonymous]

While I agree that builders should be conservative about their E.T.A.s "just in case," I wouldn't be too upset about a 12 week wait on an 8 week order. And while it would be easy to simply stay in contact with you, that seems not to be the case most of the time. Not trying to say it is okay for these builders to do this, just saying that you shouldn't be worrying too much yet.

I've ordered 4 "small builder" items new so far:
-Surreal: very quick, on time
-Friedman: very quick, on time
-Gary Hines (LP Build quoted 6 months, took 13
-FJA: quoted 4-6 weeks, took just over 3 months

Gary was good about contacting me while Jerry (at FJA) really wasn't. I PM'd him here a few times and e-mailed him, yet I didn't receive a word back. Didn't get an e-mail for 3 months until the one that had my tracking info in it. While I was a little worried, I understood that he is a one man shop and doesn't have much time to respond to messages (although it would have only taken a few seconds to respond to an e-mail). Either way, it showed up and it was worth the wait-I would do business with him again without hesitation. The product you receive from a quality small builder is usually more than worth the wait, hang in there, I'm sure you'll be fine.

If I'm wrong and you get screwed, out that dick

Im suprized anyone does business with that prick Jerry from FJA, he can go fuck himself. Overpriced and shitty customer service seem to be the norm with that guy. He denied me service on an amp just recently because in the past I decided not to send him an amp... the POS holds grudges for some reason saying how I wasted a bunch of his time asking him questions.

Fuck him though, because Kyle from Rhodes has got my amp now and its in a professionals hands that actually cares to give up time to speak with the customer, and not act all bothered for time on the phone or in emails... and not to mention he makes a pretty killer amp!

From what your telling me it seems like its the same thing even when Jerry has your money... he feels like answering emails is a waste of time and leaves the customer second guessing. I would say that the builder the OP is talking about is Jerry, but we all know that he isnt successful building his own custom amps. I wish you luck OP!!!

Trust me, the guy has no time to answer the customer and reassure them or help them after he has their money, but he will for sure be along sometime to start a flame war and spend 10 times the amount of time defending himself than he ever will answering emails and calls... fuck Jerry!

 

[alan67]

I'm a little confused by the business model that it seems like quite a few builders use. I'm no expert but if you're going to start a business, doesn't it usually take some kind of start up capital so that you're not having to obtain what basically amounts to "investment" dollars from your initial customers?

A builder may have designed an amp that is hot as shit but of course, that's not all it takes. Just because you WANT to start a business, doesn't mean you CAN; at least not right away.

Is it because of impatience? If you're convinced you can make a go of it long term, you've got to be able to produce. Maybe you've got to work at that day job that you hate so much a little longer until you have enough of YOUR cash to completely build out 3 or 4 amps so that they're ready to go out the door and make your customers super happy.

 

[JTyson]

I've been waiting on a Landgraff mod for almost 4 years I'm trying to be patient, but its tough. It seems 3-5 years is not unusual for John.

I don't care if it is the best sounding Marshall eva', then when I'm done playing it, it turns into a supermodel, who blows me, then gets me an In-N-Out combo and a six pack of beer before immediately turning back into the amp, four f'n years for an amp mod is f'n ridiculous and there can be no justification for it.

Nothin' against you for your willingness to wait, bro, but I would never be willing to wait that long for music gear of any kind.

Steve

Yeah, F that noise. And if a fair sum of money was put down to be waiting that long, I'd have demanded it back a long, long time ago and would be raising hell if I didn't get it.

It wasent, its just the wait. And a long wait it is, but at this point I think I'm better off riding it out than picking up an amp that is not finished. Those are my options. Nobody wants to finish something that someone else started
If I had it to do over I would not be willing to wait this long, but it is what it is

 

[CECamps]

Wow. I just went to your Website as I had not heard of you before. Lots of neat products there, but that Brigand (in your avatar - http://www.cecamps.com/main/amplifiers/brigand) looks like a killer amp!

Thanks!

I'm a little confused by the business model that it seems like quite a few builders use. I'm no expert but if you're going to start a business, doesn't it usually take some kind of start up capital so that you're not having to obtain what basically amounts to "investment" dollars from your initial customers?

Oh yeah, it takes quite a bit of capital to invest in assets that don't even have a thing to do with amp parts first off--nevermind the parts themselves.

But I'm not sure why taking deposits or full payments up front is demonized as a "bad business model." Not just responding to you, but I see it commonly brought up by many others all over the web. Don't people want the business they are patronizing to survive? The average small business owner doesn't have tens of thousands of dollars in disposable income to dump in to quantity builds--and still have money left over to run day-to-day operations or even pay themselves (if they choose to). It just doesn't work that way.

The fact is that relatively speaking, in business terms, amps require quite a large capital investment to manufacture. In order to stay in business and provide products, a lot of manufacturers need to take deposits. How everyone does it is different of course, and some people are better at financial planning than others, but I don't think there's anything wrong with up front payments.

My primary transformer manufacturer (who also makes transformers for Soldano, THD, Fortin, Rhodes, and others) has been in business for 9 years and still takes up front payments before production begins. He doesn't keep stock, maybe a transformer and choke here or there, but no stock to speak of. Nothing wrong with it in my eyes. I have other suppliers of custom parts that do the same thing.

I also get transformers from EDCOR for some amps. Same thing. Up front payment required before production begins and they build to order.

To me, a "bad business model" has more to do with a total misunderstanding of the industry (entering a saturated market with no real plan) coupled with a total misunderstanding of the production cycle, inexperience with logistics, poor accounting and financial planning, etc. If that exists, one can only fly by the seat of the pants--and that is indeed a bad business model.

But taking up front payments isn't correlative to a bad business model in my opinion.

A builder may have designed an amp that is hot as shit but of course, that's not all it takes. Just because you WANT to start a business, doesn't mean you CAN; at least not right away.

Agreed. In my experience, designing and building amount to probably 30% of running the business. All consumers should take that to heart and use their better judgment to determine if the builder they choose to go with is gonna last given that.

Is it because of impatience? If you're convinced you can make a go of it long term, you've got to be able to produce. Maybe you've got to work at that day job that you hate so much a little longer until you have enough of YOUR cash to completely build out 3 or 4 amps so that they're ready to go out the door and make your customers super happy.

Could be impatience in some instances. My hunch would be that it has more to do with a lack of understanding of 1) running a business, and 2) the nature of manufacturing and production from all angles.

Regarding the cash to build 3 or 4 amps up front, it's not that simple unfortunately. And I don't think you'll find too many business owners who will dump that amount of personal money into product without any sort of marketing campaign or customer commitment. It's really kind of an outlandish concept in a lot of cases (not all cases obviously). Look at it in terms of the total cash flow cycle in a business and make the terms relative to the size of the company.

 

[alan67]

Wow. I just went to your Website as I had not heard of you before. Lots of neat products there, but that Brigand (in your avatar - http://www.cecamps.com/main/amplifiers/brigand) looks like a killer amp!

Thanks!

I'm a little confused by the business model that it seems like quite a few builders use. I'm no expert but if you're going to start a business, doesn't it usually take some kind of start up capital so that you're not having to obtain what basically amounts to "investment" dollars from your initial customers?

Oh yeah, it takes quite a bit of capital to invest in assets that don't even have a thing to do with amp parts first off--nevermind the parts themselves.

But I'm not sure why taking deposits or full payments up front is demonized as a "bad business model." Not just responding to you, but I see it commonly brought up by many others all over the web. Don't people want the business they are patronizing to survive? The average small business owner doesn't have tens of thousands of dollars in disposable income to dump in to quantity builds--and still have money left over to run day-to-day operations or even pay themselves (if they choose to). It just doesn't work that way.

The fact is that relatively speaking, in business terms, amps require quite a large capital investment to manufacture. In order to stay in business and provide products, a lot of manufacturers need to take deposits. How everyone does it is different of course, and some people are better at financial planning than others, but I don't think there's anything wrong with up front payments.

My primary transformer manufacturer (who also makes transformers for Soldano, THD, Fortin, Rhodes, and others) has been in business for 9 years and still takes up front payments before production begins. He doesn't keep stock, maybe a transformer and choke here or there, but no stock to speak of. Nothing wrong with it in my eyes. I have other suppliers of custom parts that do the same thing.

I also get transformers from EDCOR for some amps. Same thing. Up front payment required before production begins and they build to order.

To me, a "bad business model" has more to do with a total misunderstanding of the industry (entering a saturated market with no real plan) coupled with a total misunderstanding of the production cycle, inexperience with logistics, poor accounting and financial planning, etc. If that exists, one can only fly by the seat of the pants--and that is indeed a bad business model.

But taking up front payments isn't correlative to a bad business model in my opinion.

A builder may have designed an amp that is hot as shit but of course, that's not all it takes. Just because you WANT to start a business, doesn't mean you CAN; at least not right away.

Agreed. In my experience, designing and building amount to probably 30% of running the business. All consumers should take that to heart and use their better judgment to determine if the builder they choose to go with is gonna last given that.

Is it because of impatience? If you're convinced you can make a go of it long term, you've got to be able to produce. Maybe you've got to work at that day job that you hate so much a little longer until you have enough of YOUR cash to completely build out 3 or 4 amps so that they're ready to go out the door and make your customers super happy.

Could be impatience in some instances. My hunch would be that it has more to do with a lack of understanding of 1) running a business, and 2) the nature of manufacturing and production from all angles.

Regarding the cash to build 3 or 4 amps up front, it's not that simple unfortunately. And I don't think you'll find too many business owners who will dump that amount of personal money into product without any sort of marketing campaign or customer commitment. It's really kind of an outlandish concept in a lot of cases (not all cases obviously). Look at it in terms of the total cash flow cycle in a business and make the terms relative to the size of the company.

Makes sense to me, thanks for the insight. Perhaps it all really boils down to the last two points you made, the knowledge of how to run a business has got to be first and foremost.

 

[Shawn Lutz]

There are exceptions to every rule but here are a few thoughts. We see this kind of shit way too much in the world of musical gear/instruments/effects/amps etc.

I don't care who it is it is just bad business practice to not accurately estimate time of delivery. They will give you an ETA of 6-8 weeks because they fear if they say 3-6 months the don't get the sale. People should learn business, customer service and project management. Run the business with organization and structure and not guess and fly by the seat of their pants.

Just because one can modify an amp to sound great doesn't me they should be in business for themselves (cough*cough*Mark Cameron*cough*cough). A lot of these guys just happen to fall into amp building without any kind of EE background and/or business skills. I'm not saying everyone so mom and pop builders don't get your all up panties in a knot.

I never understood the down payment of 1/2. If you're running a fucking business its your overhead, your deal and your risk, not mine as a buyer/customer. How about this bright idea? Invest in your own business, get a small business loan. Build some amps and keep a low inventory. Your are in BUSINESS, not your customers YOU take the risks, not the customer mmkay? I certainly can understand a security deposit but certainly not 1/2 the price of the amp.

The other caveat here is your are building one off built to order your clientele has a high probability of corksniffer syndrome with the potential to side track you from actually building amps and getting them completed. You know the types, the people who never will be satisfied regardless of whatever you do to appease them. These types know what they want to hear but don't know how to convey that accurately to the builder. You very well can end up spending way more man hours than anticipated...thus pushing back timelines.

 

[CECamps]

There are exceptions to every rule but here are a few thoughts. We see this kind of shit way too much in the world of musical gear/instruments/effects/amps etc.

I don't care who it is it is just bad business practice to not accurately estimate time of delivery. They will give you an ETA of 6-8 weeks because they fear if they say 3-6 months the don't get the sale. People should learn business, customer service and project management. Run the business with organization and structure and not guess and fly by the seat of their pants.

Agreed!

Just because one can modify an amp to sound great doesn't me they should be in business for themselves (cough*cough*Mark Cameron*cough*cough). A lot of these guys just happen to fall into amp building without any kind of EE background and/or business skills. I'm not saying everyone so mom and pop builders don't get your all up panties in a knot.

Agreed!

I never understood the down payment of 1/2. If you're running a fucking business its your overhead, your deal and your risk, not mine as a buyer/customer. How about this bright idea? Invest in your own business, get a small business loan. Build some amps and keep a low inventory. Your are in BUSINESS, not your customers YOU take the risks, not the customer mmkay? I certainly can understand a security deposit but certainly not 1/2 the price of the amp.

I don't think this can legitimately be considered a "one size fits all" generalization.

For one, good luck getting a small business loan as a startup with no assets or collateral--even if you write a great business plan. 9 times out of 10 it ain't gonna happen.

Secondly, does it make business sense to take out a loan for a significant chunk of change to build up product that doesn't yet have any demand? It's an honest question. Even if you get the loan (which isn't likely for a startup, trust me), what happens when you have to start paying on it but are still waiting on custom made parts to arrive (for instance)? No revenue has come into the business yet, you've undoubtedly had to dump a bunch of personal funds into licensing, miscellaneous services and fees, and company assets so you can simply do business. Plus you still have to eat and pay rent, and if you have a family, they still have to eat too. Default on loan, go out of business.

I think the misconception here is that deposits taken are being considered some sort of shirking of risk. That's not at all accurate in my experience. Taking a deposit can in the long run be considered part of a very smart business model in that the deposit serves as revenue that can keep the company going! Remember that businesses go through phases and cash flow and revenue streams are not black & white issues--and they evolve.

My doors have been open since early 2010. My product R&D started in 2006. I have dumped tens of thousands of dollars of my personal money into it and still have had to take deposits on amp builds. When you factor in all the very complex variables, it makes complete sense to both the customer and the manufacturer. Revenue keeps the doors open, keeps you able to provide warranty support to older customers if the need shall arise (knock on wood I haven't had to yet), keeps you able to invest more in the business (like tools & equipment to be more productive), etc.

Businesses go through phases of growth and development, it isn't just overnight that everything comes together. A startup amp manufacturer has all odds against them in a MAJOR way. Been there, just now getting to the point where I'm entering other phases of growth. I'm able to do small production runs of some amps in advance of people purchasing them now without it killing me financially and without having to apply for loans. Never would have gotten to this point without the support of my kick-ass customers helping my company to grow. But I still have to take deposits on orders. None of my customers have ever expressed any concern over it though. I guess I'm lucky.

The other caveat here is your are building one off built to order your clientele has a high probability of corksniffer syndrome with the potential to side track you from actually building amps and getting them completed. You know the types, the people who never will be satisfied regardless of whatever you do to appease them. These types know what they want to hear but don't know how to convey that accurately to the builder. You very well can end up spending way more man hours than anticipated...thus pushing back timelines.

I suppose it could happen. Luckily, it hasn't happened to me yet.

 

[Anonymous]

[

I'm a little confused by the business model that it seems like quite a few builders use. I'm no expert but if you're going to start a business, doesn't it usually take some kind of start up capital so that you're not having to obtain what basically amounts to "investment" dollars from your initial customers?

Oh yeah, it takes quite a bit of capital to invest in assets that don't even have a thing to do with amp parts first off--nevermind the parts themselves.

But I'm not sure why taking deposits or full payments up front is demonized as a "bad business model." Not just responding to you, but I see it commonly brought up by many others all over the web. Don't people want the business they are patronizing to survive? The average small business owner doesn't have tens of thousands of dollars in disposable income to dump in to quantity builds--and still have money left over to run day-to-day operations or even pay themselves (if they choose to). It just doesn't work that way.

The fact is that relatively speaking, in business terms, amps require quite a large capital investment to manufacture. In order to stay in business and provide products, a lot of manufacturers need to take deposits. How everyone does it is different of course, and some people are better at financial planning than others, but I don't think there's anything wrong with up front payments.

My primary transformer manufacturer (who also makes transformers for Soldano, THD, Fortin, Rhodes, and others) has been in business for 9 years and still takes up front payments before production begins. He doesn't keep stock, maybe a transformer and choke here or there, but no stock to speak of. Nothing wrong with it in my eyes. I have other suppliers of custom parts that do the same thing.

I also get transformers from EDCOR for some amps. Same thing. Up front payment required before production begins and they build to order.

To me, a "bad business model" has more to do with a total misunderstanding of the industry (entering a saturated market with no real plan) coupled with a total misunderstanding of the production cycle, inexperience with logistics, poor accounting and financial planning, etc. If that exists, one can only fly by the seat of the pants--and that is indeed a bad business model.

But taking up front payments isn't correlative to a bad business model in my opinion.

Where this business model falls apart is when people take money up front, tell you delivery in 3 months and then it takes over a year, with non-existent communication, or you never get anything until you threaten and then you finally get your money back instead of the gear. So this "business" gets an interest free loan for over a year, while you get nothing. I don't think people mind paying up front so a builder knows what the demand is so they can order appropriate amounts of parts, etc., but unfortunately, the builder usually has no idea what the lead times are going to be for sourcing and in many cases, is still doing R&D on your dime. Now you just wait and wait and wait... Then the builder starts getting tons of calls from the customers who are waiting and gets frustrated, taking it out on the customer. And I bet to a large degree, the builder doesn't feel responsible for the delays because his suppliers are causing the delays. In truth, it was his fault from the start due to poor planning.

Look, I've learned all this first hand in the process of bringing my amp to market. Everything has taken 2-3 times as long as I thought it would and you make mistakes that require re-work, you have to wait for backordered parts, etc., etc., etc. Why not just get that all taken care of ahead of time on your own dime and make a run of amps and sell them when you have them. That way, no angry customers are calling you when you exceed delivery times because you only sell when you have stock. You can do a run of 10 amps, sell them and then do another bigger run, etc. If you really believe you have something that people want to buy, why not just do it that way? You have to put your money where your mouth is (sorta speak...) IMO...

Finally, it's like someone else said here, if you don't have the startup capital to start a business, too f'in bad, man - you can't start a business! You shouldn't build a business on the backs of paying customers waiting for you to get your act together. Now on completely custom amps, I get that it is different. You are designing something from scratch for someone. In that case, the customer should realize it is going to be really expensive and take a long time. If the builders are up front about that, there should be no problem.

Steve

 

[Anonymous]

I don't think it's that cut and dry though. Even for builders who don't have to use a customer deposit to finance a build, there could be lead time issues on supply. I can give you a good example. I have transformers custom wound to my specs. They are not off-the-shelf units. Depending on when I need to place my next order, the production cycle on transformers alone can run between 8-13 weeks. I'm not yet in a position to where I can allocate $5k to a mass production run of transformers and chokes and have a lot of stock sitting on the shelf. So my ordering is based on demand and projections.

Depending on the timing of a customer order, allocation of current inventory to other builds, FIFO order delivery, and all that goes into a build and the subsequent testing & burn-in, it can take some time.

Running an amp manufacturing business is not a simple task, there is a lot involved. I'd hate for anyone to think it's a menial thing, particularly with a small company where one person is wearing all the hats (like design engineering, production, quality control, accounting, inventory control, process engineering, marketing, customer service, etc.).

See, this is the funny thing to me. As the customer, why do I give a shit? This is a "YP", not a "MP", as they say...

You think the customer's of the software company I work for would put up with, "Well, hey man, sorry I couldn't deliver you the software you purchased, but my supplier couldn't get me a new test machine and I lost one of my key designers and well, shit man, developing software is a touch racket, ya know, there's a lot of testing and builds and shit that goes into it..."

Please... my ass would get thrown right the f outta there and they'd go to my closest competitor and buy from them. That is how business works, yet it seems many in the gear business don't get it at all...

Once again, I have to say, build a run of amps and sell them when ya got 'em. All problems solved. If you can't afford to fund that - you have no right to be in business anyway.

Steve

 

[Shawn Lutz]

[

.

Finally, it's like someone else said here, if you don't have the startup capital to start a business, too f'in bad, man - you can't start a business! You shouldn't build a business on the backs of paying customers waiting for you to get your act together. Now on completely custom amps, I get that it is different. You are designing something from scratch for someone. In that case, the customer should realize it is going to be really expensive and take a long time. If the builders are up front about that, there should be no problem.

Steve

Bingo! We have a winner. Well said Steve, you don't have the capital to do it alone or if you cant get a SB loan or raise capital from private investors dot not startup a business. Customers buying your product are customers, not investors in you business.

 

[Anonymous]

There are exceptions to every rule but here are a few thoughts. We see this kind of shit way too much in the world of musical gear/instruments/effects/amps etc.

I don't care who it is it is just bad business practice to not accurately estimate time of delivery. They will give you an ETA of 6-8 weeks because they fear if they say 3-6 months the don't get the sale. People should learn business, customer service and project management. Run the business with organization and structure and not guess and fly by the seat of their pants.

Just because one can modify an amp to sound great doesn't me they should be in business for themselves (cough*cough*Mark Cameron*cough*cough). A lot of these guys just happen to fall into amp building without any kind of EE background and/or business skills. I'm not saying everyone so mom and pop builders don't get your all up panties in a knot.

I never understood the down payment of 1/2. If you're running a fucking business its your overhead, your deal and your risk, not mine as a buyer/customer. How about this bright idea? Invest in your own business, get a small business loan. Build some amps and keep a low inventory. Your are in BUSINESS, not your customers YOU take the risks, not the customer mmkay? I certainly can understand a security deposit but certainly not 1/2 the price of the amp.

The other caveat here is your are building one off built to order your clientele has a high probability of corksniffer syndrome with the potential to side track you from actually building amps and getting them completed. You know the types, the people who never will be satisfied regardless of whatever you do to appease them. These types know what they want to hear but don't know how to convey that accurately to the builder. You very well can end up spending way more man hours than anticipated...thus pushing back timelines.

Thank you. Best post in the thread. This is what I've been trying to say...

Steve

 

[Anonymous]

Hey man, I want to preface this by saying that you seem to be a good dude and I'm really appreciating your level-headed participation in this discussion. That said...

I don't think this can legitimately be considered a "one size fits all" generalization.

For one, good luck getting a small business loan as a startup with no assets or collateral--even if you write a great business plan. 9 times out of 10 it ain't gonna happen.

Well... geez man... Then I guess that's too bad then, huh? Come back when ya have the capital to do it yourself then, k? Not my problem - your problem...

Secondly, It's an honest question. Even if you get the loan (which isn't likely for a startup, trust me), what happens when you have to start paying on it but are still waiting on custom made parts to arrive (for instance)? No revenue has come into the business yet, you've undoubtedly had to dump a bunch of personal funds into licensing, miscellaneous services and fees, and company assets so you can simply do business. Plus you still have to eat and pay rent, and if you have a family, they still have to eat too. Default on loan, go out of business.

Dude... once again, I have to laugh here... Can't you see that everything you are saying here is THE PROBLEM with people in the gear business?

"does it make business sense to take out a loan for a significant chunk of change to build up product that doesn't yet have any demand?"

Are you kiddin' me? I mean seriously, this is what business is all about! The people I work with start software companies from scratch, ok? We get an idea. We build a business plan. We convince ourselves there is demand. We go talk to some companies who have the problem we are trying to solve to determine requirements. We invest OUR time/money to build a prototype. We then convince angel and VC investors that this can be a business and get the capital to build the software and the company. Is there risk here? Of course, that is what starting a business IS! Have we invested a significant chunk of change and time? YES, of course! 'Cause that is what it takes to start a business. And guess what? No customer paid a penny, until I could send them a link to download the completed software. What a concept!

Waiting on custom made parts? Too f'in bad.
Out personal funds for licensing, miscellaneous services and fees, and company assets so you can simply do business? I, the customer couldn't give a shit less.
You still have to eat and pay rent, and if you have a family, they still have to eat too? Then get a job, sir!

Look, I'm being dramatic to make a point to you about business, which you and many who do what you do don't seem to understand. No one cares about your problems. If you have the balls and cash to put it on the line and start a business, this is the world you have to deal with. Business is not charity, it is a ruthless endeavor and just because you're (not you specifically, bro - I'm generalizing here) an "artiste" designing amps, doesn't mean you don't have to deal with that reality. As I've said, if I tried to have this kind of argument with my customers, I'd get laughed out of their office...

I think the misconception here is that deposits taken are being considered some sort of shirking of risk. That's not at all accurate in my experience. Taking a deposit can in the long run be considered part of a very smart business model in that the deposit serves as revenue that can keep the company going!

I'm speechless... Once again, are you kidding me? If you need to take my deposit to "keep your company going" then you are not a business.

My doors have been open since early 2010. My product R&D started in 2006. I have dumped tens of thousands of dollars of my personal money into it and still have had to take deposits on amp builds. When you factor in all the very complex variables, it makes complete sense to both the customer and the manufacturer. Revenue keeps the doors open, keeps you able to provide warranty support to older customers if the need shall arise (knock on wood I haven't had to yet), keeps you able to invest more in the business (like tools & equipment to be more productive), etc.

Deposits are not revenue. How can you be running a business and not know that? I've been in R&D since 2008. I hope to sell my first amps this year. I will not take deposits, I will build the amps on my dime in runs and sell them when I have them. If you need to take deposits to get the parts to build the amps, you are building your business on the customers backs. They are really investors. That is ridiculous. There should be no reason to take deposits if you have the startup capital to get a business going. And once again, if you don't, you don't belong in business.

Businesses go through phases of growth and development, it isn't just overnight that everything comes together. A startup amp manufacturer has all odds against them in a MAJOR way. Been there, just now getting to the point where I'm entering other phases of growth. I'm able to do small production runs of some amps in advance of people purchasing them now without it killing me financially and without having to apply for loans. Never would have gotten to this point without the support of my kick-ass customers helping my company to grow. But I still have to take deposits on orders. None of my customers have ever expressed any concern over it though. I guess I'm lucky.

You mean you never would have gotten here without your patient investor-customers, not customers. In fact, on the investment side the investor-customers never got any return on their investment. That is bad business. I'm sorry, but that is a fact.

Steve

 

[Shawn Lutz]

I view the 1/2 upfront deposit as buying the parts needed to build an amp. In a sense you really are paying labor to build you an amp from the parts purchased with the deposit.

Can you imagin Honda requiring $10-15k upfront and waiting for them to acquire parts and waiting for the car to built before you take delivery? It's more like an interest free loan to Honda. Build on your own dime not mine

 

[Anonymous]

I view the 1/2 upfront deposit as buying the parts needed to build an amp. In a sense you really are paying labor to build you an amp from the parts purchased with the deposit.

Can you imagin Honda requiring $10-15k upfront and waiting for them to acquire parts and waiting for the car to built before you take delivery? It's more like an interest free loan to Honda. Build on your own dime not mine

No Shawn. The up front deposit is paying for the builder's rent and food for himself and his family. I mean they gotta eat, right? Can't you understand that?

Oopsy... now I can't afford the parts for your amp... Better go take some more deposits for the second run!

Steve

 

[rlord1974]

.....Taking a deposit can in the long run be considered part of a very smart business model in that the deposit serves as revenue that can keep the company going!.....Revenue keeps the doors open, keeps you able to provide warranty support to older customers if the need shall arise (knock on wood I haven't had to yet), keeps you able to invest more in the business (like tools & equipment to be more productive), etc.

Deposits are not revenue. How can you be running a business and not know that?

On this point, I have to agree with Steve.

Deposits are NOT revenue - at least not in an accounting sense. They are actually LIABILITIES.

DR Cash
CR Unearned revenue liability
To recognize the receipt of a deposit on an unfulfilled customer order.

Once you complete the amp and deliver it to the customer, you can then convert the deposits into revenue.

DR Unearned revenue liability
CR Revenue
To recognize revenue on cash deposits, upon completion and delivery of merchandise to the customer.

Unless you are applying some kind of "percentage of completion" approach to revenue recognition - which is not typically permitted in a manufacturing business such as building guitar amplifiers - deposits simply do not qualify as accounting revenue.

As such, to say that deposits act as revenue to keep the company going is not accurate. You are in fact treating the deposits as financing to keep the company going. And, I can guarantee that if a builder told a customer making a deposit on an amp that "those funds will be used to cover the costs of servicing previous customers' amps", the customer would ask for a refund! This situation is a PERFECT real-life example of "borrowing from Peter in order to pay Paul".