Bootstrapped, Profitable, & Proud: Rivendell

“When I’m interested in something and want to know about it, or at least want to, or need to, get a good one — whatever it is — I want to talk to somebody who knows everything about it. Specs don’t tell me that, but the guy who sells them, or has sold them for 20 years, or the guy who repairs them — he knows. And I want to know what he does. Who doesn’t?”

The rest of the Rivendell team is encouraged to speak out too. “Everybody here has opinions,” says Petersen. “You can’t work here without them, because if you don’t have opinions, you’re just going to be a spec-reciting mannequin and no help to anybody. People want more than specs. They want specs, for sure. But they aren’t robots, so they want more than that.”

If you don’t have opinions, you’re just going to be a spec-reciting mannequin and no help to anybody.

One thing Petersen avoids is the word “very.” He explains, “In 16 years of newsletters, catalogues, brochures, and web stuff, I have never used the word ‘very.’ It’s not a bad word. But I read once that it’s a weak word and that if you describe around it, the reader will feel the ‘very.’ And it’s more effective to have them feel it.

“Spencer here once put a new item up on the site and wrote a few lines describing it and used the V word. And I changed it and felt bad and explained to him that I wanted to keep a clean nose, that it was just a dumb obsession of mine, and don’t be mad or feel scolded. Just try to understand.”

The Roadeo from Rivendell

Formed out of Bridgestone’s ashes
Before Rivendell, Petersen worked at Bridgestone Cycle (U.S.A.) for ten years as Marketing Director. He also had design input, wrote ads, was the media contact, and served as in-house technical guy. While there, he spearheaded Bridgestone’s attempt to bypass dealers and sell what he calls “out there gear” directly to customers via direct marketing and newsletters. When Bridgestone shut down, Petersen had developed a reputation that allowed him to start Rivendell with a built-in audience.

As for money, Petersen got by with his severance package and a little help from his friends. “I left Bridgestone with $23,500 in after-tax severence pay. I took that, cashed in some IRA money, made Rivendell an S-Corp, and sold stock at $1 a share to friends (before we made our first sale). All that combined came up to $89,000 to start the business, with me owning about 60 percent of that.

“I got some office supplies from Bridgestone, had my used Mac, and hired an outside company to put together a customized Filemaker program to run the business. I sent out a mailing with flyer and a letter saying ‘Hey, I’m in over my head, help out, let’s go!’ I hired one guy, we worked out of my garage and kept inventory in my backyard and in a 10×10 storage facility, and two years later we moved to a small warehouse.”

One thing Petersen didn’t worry about while starting up: how to get out. He says, “When you write a business plan, the last thing you address is your exit strategy. And when I started Rivendell and got a book of business plan templates, I’d never even heard the term. My reaction was, ‘What’s this stuff about getting rid of the business? I want to make a business and have a job!’”

Profit isn’t the only thing
From there, revenue began climbing. According to Petersen, sales last year were about $2.7 million dollars. Still, much of the company’s value is in its inventory. “I’d say we’re wildly successful, but don’t have wild profits to show for it. We’re established, more people know about us, and we have loyal customer who tell their friends about us. And, especially important to me, we employ about 13 terrific people, and I think every one of them would tell you this is the best job they’ve ever had.

“I think, if your main reason for being in business is to maximize profitability, you must hate the work itself. We recently got in some custom-made-for-us tiddly winks made out of tagua nuts. They cost us $13 a set (of 25) and we sell them for $20 and donate the difference to charity. A profit-first business could never do that. It would miss out on the fun.

I think, if your main reason for being in business is to maximize profitability, you must hate the work itself.

“It sounds stupid, but little unprofitable projects that aren’t huge time-resource sucks can pay their way without being profitable. Because they add to the fun, the make the business more interesting, and sometimes when you’re working on several projects that take a year or more to mature, you need quickies like this to keep you going. I value sustainability over that kind of profitability. I really want to be here as a business, because employing people is more important to me than super profitability.”

That attitude helps to explain the company’s charitable streak too. It raised over $50,000 for Smile Train last year and gives money to other charities too. Petersen says, “Everybody here knows he or she can give a bike away to somebody who, for whatever reason, clearly warrants a free bike and can’t afford it. They’re expensive bikes, too.”

Running hot and cold
One thing employees must deal with is a workplace that runs hot and cold. Literally. “We have six continguous 900-square foot units in an uninsulated building intended for car repair businesses,” explains Petersen. “Our record cold morning was 38 degrees — cold enough to solidify the olive oil. Our record heat was 111F, and I’m talking about in the work area, not outside. At this moment, I’m freezing. Bad planning, clothes-wise, today.”

Employees know what they’re in store for when they start. Petersen says, “Every new hire gets told the story before they commit, and nobody’s left because of the weather. You have your main task, and you can grow it as you like, or take on other work as you’re interested in it. Everybody works really hard, and that feeds on itself. We’re all friends, and it makes work fun.

“We spend $20,000 a year on employee lunches, because even though everyone is free to take the hour the law allows, it’s rare that anybody does that. There’s great food around here, and anybody who leaves and gets another job may make more money there, but their lunches will be way worse.

“Also, everybody here knows they have the power to do anything they want for any customer. They know to always take the customer’s side, and that the worst thing they can do is take the company’s side in a quibble involving service or money or anything else.

“I want to sell it to the employees within ten years, continue to have some involvement, but see them continue the direction and increase our influence.”

Pick something the big guys don’t care about
Petersen’s advice for others who want to get a business off the ground: “Don’t copy anybody else. So many businesses look at the trends and follow the leaders hoping they can be a leader, or can at least live in the wake of the leader. There’s a cliche that, ‘If it’s a good idea, it’s too late,’ and I go along with that. Pick something the giants in that industry don’t care about, or something they can’t get into without shooting themselves in the foot.

“For instance, we do hand-made lugged steel bikes with decidedly anti-racerlike qualities to them. They’re comfortable, strong, versatile, and will last 20 to 50 years. We hate carbon fiber, and we can say that. Now, if Trek or Giant or somebody catches wind that a certain segment of the bike market is getting into lugged steel bikes, they still won’t be attracted to it, for two reasons. One, it’s so small. That shouldn’t matter to a new business, but it limits the appeal to an established leader. And two, we can position lugged steel bikes as the better-safer-smarter alternative to carbon, but they can’t, because carbon’s their bread and butter. It would be like a smoke shop selling anti-oxidants or jumpropes. It can’t work.

“So for anybody starting up, I’d say don’t copy. Find a weakness in the giant, something they can’t cover. And make it important enough to you that even if it doesn’t work out great at first, you can at least know it matters enough to do. And do it in a way that allows you a large measure of self-respect. The worst thing I can imagine, as a business owner, is doing something I don’t believe in and having no customers to boot.

“Do something that matters enough to you that you can honestly tell yourself that if business is bad, if nobody’s buying, it’s because they’re misinformed, backwards, or just dumb. You have to have a purpose that keeps you committed, independent of success.”

The Rivendell Bikes “classroom.”

This is part of our “Bootstrapped, Profitable, & Proud” series which profiles companies that have over one million dollars in revenues, didn’t take VC, and are profitable.

Related: Interview with Grant Petersen of Rivendell Bicycle Works [Push Button For]