John Case

Hot Seats;

 

* The fickleness of fashion. Designers; never-ending quest for the new gives K-B a window of opportunity. But those who live be novelty can be die by it. Product life cycles in the industry, acknowledges Blodee, run four to five years. He hopes his designs will last longer. If they don't, the company will have to introduce more new products, with corresponding risks.

In this business, even success can have its perils. "We have two nightmares," says Keener with a laugh. "One is that we get no orders at all. The other is that we're swamped with orders and can't handle the volume." Fully staffed, Keener-Blodee's plant will have an annual production capacity of roughly 13,000 pieces. Most manufacturers would just farm out excess pieces; this one may not be able to. When Keener approached a local chair-frame maker to discuss the matter, he was dismissed out of hand. Looking at the samples, the fellow growled, "That's European style. I wouldn't begin to know how to make it."

Ah, well. You get the idea that the two men would rather face Nightmare Number Two than Nightmare Number One. A few years down the road, if the company is as successful as they hope, they even plan to build a wholly new factory -- custom-designed by Leif Blodee. I expressed an interest in the plan, the Blodee proudly got out a little drawing he had made. The building looked stylish; modern; costly.

Maybe even a little glitzy.

EXECUTIVE SUMMARY

* THE COMPANY: Keener-Blodee Inc., Holland, Mich.

* CONCEPT: Make and sell stylish, expensive office chairs, pitching quality of craftsmanship and uniqueness of laminated-wood design

* PROJECTIONS: Fifth-year sales of $6 million with $1-million pretax profit. Profitable from year one

* HURDLES: Stagnant market; pleasing the tastes of architects and interior designers; getting products through the sales and installation chain with no company sales staff

KEY PERSONNEL

Richard N. Keener, 59, Cofounder and president and CEO

Worked at American Seating Co., 1955-1986, in sales and sales management, then as president and general manager of $58-million operating division . . . B.S., University of Wisconsin, 1950

Leif Blodee, 60, Cofounder and executive vice-president

Owner/operator since 1982 of Leif Industries, small manufacturer of lounge seating systems for American Seating Co. . . . independent designer since 1967 . . . previously product designer at Herman Miller Inc. and elsewhere . . . B.A., Institute of Technology, Aalborg, Denmark, 1951

FINANCIALS

Keener-Blodee Inc. Operating Statement

Projected Projected

calendar year calendar year

1989 (thousands) 1992 (thousands)

SALES $ 1,700 $ 6,000

COST OF GOODS (including overhead)

Labor 440 1,310

Materials 580 2,050

Total cost of sales 1,020 3,360

GROSS PROFIT 680 2,640

Gross profit/sales 40% 44%

SELLING EXPENSES

Commissions 180 650

Marketing materials 80 120

Travel & entertainment 20 40

Royalties & miscellaneous 60 210

Total selling expenses 340 1,020

GENERAL AND ADMINISTRATIVE

Salaries 160 360

Other fixed costs 40 120

Total G&A 200 480

OPERATING PROFIT 140 1,140

FINANCE COSTS 80 140

NET PRETAX PROFIT 60 1,000

Net pretax profit/sales 3.5% 16.7%

COMPETITIVE ANALYSIS & NOTES

Keener-Blodee Projections Industry

1989 1992 Average

Sales $ 1.7 million $ 6 million $ 22.7 million

Gross profit/sales 40% 44% 25.3%

Pretax profit/sales 3.5% 16.7% 3.3%

Unit sales 7,100 24,300 * NA

Number of manufacturing employees 22 60 * NA

Sales/employee $ 77,273 $ 100,000 * NA

Independent sales reps 11 15 * NA

* Not available

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