Detkowski was able to take advantage of one connection he thought could help. His son, Rick Jr., after working at Moon Valley, had gone on to run production and logistics teams at electronic manufacturing services provider Jabil Circuit and Philips Electronics' automotive unit. Rick Jr. said he would come onboard to help clean up the manufacturing plant and rethink the production process. But even Rick Jr. admitted it would be quite an undertaking. "My first impression is there is a lot more to it than what I realized," he says. "I knew I would need to learn a lot, and fast."
The Decision
Throughout the summer, Detkowski worked hard to nail down financing. He secured a paired loan for the full amount for $2.3 million from two local banks at an annual rate of about 7 percent. That eased the decision. Additional discussions with dealers gave him more confidence. We can sell more, they told him. Initial conversations with log cabin homebuilders and some larger retailers garnered positive responses, too. Detkowski also spoke to a competitor who said he might have bought the company. In August, Detkowski and his bankers signed the papers on the loan. With loan in hand, he finalized the acquisition with Beattie and Brown.
On September 1, 2006, Detkowski and his son took over as the proprietors of Moon Valley Rustic Furniture. They set to work cleaning house, installing new computers, and renovating offices. Detkowski kept the entire work force and even convinced Brown, his high school friend, to stay on as head of sales and customer service--at a reduced salary--capitalizing on his dealer relationships. Detkowski brought in Marc Spindler, a former defensive lineman with the Detroit Lions, to acquire new accounts. Detkowski put $60,000 into a marketing budget and revamped Moon Valley's website. "This was the first time the company had spent anything on marketing ever, from what I could tell. It really upped our visibility," he says. A more aggressive presence at industry shows helped land a contract with Barna Log Homes, a national homebuilder, and DirectBuy, a homebuilding supplies company.
On Brown's advice, Detkowski has expanded the product line. He introduced prefinished cedar porch railings to offset the seasonal nature of Moon Valley's sales. He expects railings to make up 15 percent of the company's gross sales in 2007, which are on track to hit $2 million. He also added a high-end line of red cedar furniture that caught the eye of President George Bush and his wife, Laura, on a visit to Michigan. The First Couple got free chairs, and sales rose.
In a stumble, Detkowski underestimated the demand his marketing would create. He had insufficient parts made for the spring assembly season, when Moon Valley puts together furniture for summer, the key sales season. Some dealers this summer didn't get as much furniture as they wanted. Detkowski has vowed that for 2008, the parts will be ready to go by spring.
Detkowski, now a furniture man, expects the company to go into the black in 2008 after his next inventory turn. Rick Detkowski Jr. now runs the manufacturing side, and his changes have boosted operating margins by several percentage points. Says the elder Detkowski, "He's a lot smarter than his dad. I'm old school. But I guess I don't scare easy, and this was a risk that seemed worth taking."
The Experts Weigh In
Keep the price premium
Moon Valley has the beginnings of two things it needs to survive as a domestic furniture manufacturer: a quality story to tell and the operational agility to get consumers what they want. Detkowski's challenge will be growing while retaining both. He should choose his dealers carefully and provide them with the quality story that supports the price points he needs to survive. Consumers will pay more for furniture that gives them a reason to do so, and Moon Valley can carve out a profitable, sustainable niche doing just that.
Now for the hard part
While the higher volume will help the company grow, I would be making certain that my local operations infrastructure was as efficient and effective as it could be--which it clearly is not at the moment. I'd also keep pushing to identify market trends. Moon Valley's true competitive advantage is its broad local knowledge, from a style, climate, geography, and trend point of view. Under the new ownership Moon Valley has the chance to really step up business by enhancing quality and adding product variety.
Add imports to the mix
Detkowski should not underestimate the ability of importers to produce products of similar quality at much lower prices. Perhaps he should consider supplementing the company's line of domestically produced rustic furniture with an imported line of products. Assuming that a reliable offshore vendor can be located, Moon Valley should explore the feasibility of leveraging its reputable brand name and dealer network with an offering of lower-priced imported products. That could provide insurance over changes in the market.
