Dan Lakin Featured in Forbes Magazine
His Own Beat
Emily Lambert, 07.05.04
http://www.forbes.com/forbes/2004/0705/140_print.html
Dan Lakin makes terrific electric bass guitars. But earning a living from it has been tough.
Daniel Lakin could have been a contender - in recycled tires. He did manage to work for A. Lakin & Sons, the $50 million (2003 sales) Chicago company founded by his great-grandfather, on four separate occasions. Each ended in termination. Instead, he followed his bliss: making electric bass guitars.
It's been a bumpy 10-year road trip since Lakin, 40, launched Lakland Basses with $20,000 from a home equity loan. Partner Hugh McFarland, a guitar repairman, designed a model that borrowed elements from classic basses - and drew a cease-and-desist order from Fender Musical Instruments for trademark infringement. Back to the drawing board, after which the pair burned through $120,000, including a $100,000 grant from Dan's dad, Lewis. "Production was much slower than we'd anticipated," says Lakin.
In a humbling retreat Lakland became a unit of the tire recycler in 1996. McFarland defected a year later. While the guitar gained recognition among well-known artists who played it at concerts in exchange for free or discounted instruments, Lakin couldn't seem to make money. By 2000 Lakland had piled up costs of $2.9 million on cumulative revenue of $2.3 million. Lakin père was $600,000 in the hole by then and wanted out. With a couple of friends Dan rounded up $250,000. His dad matched it as a last gift, letting the partners keep 5,000 square feet of production space at $500 a month, yet predicted that the venture would be dead within three months.
"Lakin is counting on selling 1,500 Skylines this year and turning a 10% profit on sales of $1.5 million."
But slowly - slyly - Dan was acquiring some business smarts. For starters, he stopped over-ordering parts, resulting in savings of $100,000 in cash outlays for 2000. Stinting on inventory did nothing to slow down his assemblers, paid $8 to $20 an hour for installing frets, electronics and metal hardware. Greater efficiency enabled Lakin to start paying his suppliers and outsourcers in 30, rather than 90, days. "Some were getting irritated," he concedes, and he couldn't afford to lose them: The business depends on workers in Montana who carve the maple bass-neck and those in California who shape and paint the bodies.
Barter deals have spread the Lakland name around. A growing list of endorsers includes Bob Dylan's bassist Tony Garnier, U2's Adam Clayton and the Rolling Stones' Darryl Jones. They get deals on instruments in exchange for playing their Laklands at high-profile gigs - a spot on The Tonight Show With Jay Leno, say, or a televised concert. There's publicity courtesy of ad agency Leo Burnett, which approached Lakin with a deal he could hardly turn down: free creatives for print, television and the bass company's Web site - just for the fun of it. (The work has paid off for the agency, which has won four awards, including a Clio, so far.)
Lakin's smartest decision was to move some production to South Korea. In 2001 he teamed up with Westheimer Corp., a Northbrook, Ill. exporter-importer. Westheimer held a stake in a Seoul factory now used by a dozen other guitarmakers and had it build a new Lakland line, the Skyline series, whose guitars retail for $950 to $1,800, at the high end of the cheaper market. "From 20 feet away a bass player would have a hard time telling if someone's using a $1,500 or $4,000 bass, and that's what we wanted," says Lakin.
The wood comes from North America, but Koreans cut it, paint it and apply the frets and strings; the electronics are installed back in Chicago.
The mass-produced Skylines are a financial salvation. A standard US-made bass that wholesales for $1,700 can easily cost $1,500 to produce, a ticket for losses when you throw in marketing and administrative costs.
The Korean guitars' manufacturing costs can be less than $500; because of added volume, the line is profitable even with a price tag as low as $660.
By selling 1,000 Korean-made Skylines and 300 Chicago-made basses last year, Lakland broke even for the first time, on $1.2 million in revenue.
Lakin is counting on selling 1,500 Skylines this year and turning a 10% profit on sales of $1.5 million. Those revenues could easily double, he figures, if he can get into Guitar Center, the nation's largest musical-instrument chain, with 130 stores.
Lakin's dad expects no return on his investments. And if Dan makes a real business out of these guitars, he might even shake off a reputation as a prodigal son. 
