Contributed by John Karp, Entrepreneur-in-Residence, Maine Technology Institute
Having exited a medical device company which I co-founded, I was searching for my next opportunity. The MVF team reached out to me as one of their companies, Bourgeois Guitars, was under stress and in need of new leadership. The 2008 downturn had not been kind to luxury guitar brands, even beautifully crafted guitars like Bourgeois. The MVF team knew of my music teacher mother and my love of boats and fine craftsmanship, which must have led them to think of me.
A bit of background: original founder Dana Bourgeois is a Cum Laude graduate of Bowdoin College. While there he built his first guitar in his dorm room. Dana kept at it, and found that for a few hours of effort, he could earn a month’s rent. Over the years, Dana honed his craft and was fortunate to sell one of his custom guitars to a young, rising Bluegrass player named Brian Sutton. Brian was just joining a band with Ricky Skaggs at the time, and Brian needed big guitar power. Brian loved the guitar – he named it “The Banjo Killer”. Bourgeois makes a model named thusly to this day. Today the list of endorsing artists is longer than an NBA player’s arm, and Brian Sutton has been nominated Bluegrass Player of the Year more times than I can track.
Anyway, MVF initially asked me if I could consult with Bourgeois Guitars. We met at the company, which was located not in the oldest, dumpiest mill left in Lewiston, but in the warehouse of the oldest, dumpiest mill left in Lewiston (as I love to tell people). The space had a certain comfort to it; 7,000 square feet, 20” thick brick walls from the 1850’s, and exactly two windows, one filled with an air conditioner, and an entry with a rolling grey fire door featuring errant white overspray splattered across it. Welcome to work!
I was blown away by the craftsmanship that first time I visited, with many facets of the production process requiring machine shop level precision- but in wood vs metal. The dedicated team had amazing skills. They even created a beautiful performance space with no budget.
I next joined the company in California for their largest show of the year, the National Association of Music Merchants. My research was right. People were genuflecting in front of Dana. I’m a huge Warren Buffet fan, and he invests in companies with “Durable Competitive Advantages”. I saw Dana and the reputation of Bourgeois as such.
My instructions were clear: Get a solid handle on the true condition of the company, save it if possible, and make a plan for an orderly shutdown if not. I can be creative when necessary and, to me, insolvent is when both legs and arms are gone and the wolves are circling. We weren’t there yet, but we could hear the howling. The company was shipping only 5.5 low price guitars a week and had just 6 weeks of runway.
With input from Dana, MVF, and others, I put a plan in place for getting the company back to health. But other elements needed to be in place to make the plan achievable. Working closely with MVF, we worked to solve several issues at once. I would come in as CEO of the company with an equity “earn-in” to execute on the plan that I had developed and MVF would restructure the terms of its equity investment, working with the other investors and creditors so that their investment could be paid back gradually over time. MVF agreed to put a $50,000 line of credit in place, an exclusive license of the Bourgeois trademark was negotiated, and we worked to redesign Dana’s agreement with the company in a way that was fair and equitable to him.
With this restructuring in place, we were off. One of the first things I did was to come in on a Saturday with green paint and address that door mentioned above, adding graphics and our logo with “Through this door pass those among the finest luthiers in the world”. Yes, I totally ripped that off from Bath Iron Works, but I’m not too proud to admit it!
Dana Bourgeois and I met with the seven member crew. This was April 2011. I told the crew we were near impact, and I needed to know who was interested in grinding it out to keep the company open. I explained the financial modeling: six guitars a week keeps the lights on and paychecks rolling for a few months more. seven guitars would have us as a barely sustainable business. If we hit eight guitars, the crew gets the profit of that eighth unit if it does not get returned for quality reasons.
Within two months things were much better. We paid back the $16,000 we used on the MVF credit line and commenced monthly payments to MVF, buying back shares ahead of the agreed schedule. We gave a few raises. We increased our advertising. We built an actual show booth (we had a wrinkly vinyl banner before). We added a new employee, then another. New dealers started joining us. International business started growing; Europe, China, Thailand and beyond. We changed Sales Managers. We changed Office Managers. Twice. We continued to grow. Revenue doubled. Bourgeois started getting more mention in the media with major artists signing such as Ray Lamontagne, Luke Bryan, and many others, including the guitarists for Madonna and the Dixie Chicks (as they were then called) and many top Bluegrass and even Metal folks.
We finally redeemed all of MVF’s shares, reached zero debt, shored up our payables and generated decent cash reserves. We added 401k and HSA programs.
In 2016 we had checked the boxes of my contract to allow my exit, retaining my ownership stake and staying on the Board. But who would step in as CEO? At a Bowdoin reunion, Dana reconnected with his old classmate Bob Smallwood. Bob had enjoyed a great career with Packaging Corp of America, opening and saving plants worldwide, all the while playing guitar and not realizing what Dana had accomplished in the industry. Bob was semi-retired and looking for a “last good thing”. Dana lured him out for a visit and we all heartily agreed he would be a great successor.
Bob brought his production engineering skills to bear and boosted efficiencies in many ways, significantly accomplishing a move to a far better facility which stabilized humidity, a critical factor in producing dependable quality.
After two years per the agreement, Bob stepped aside and found Chris Fleming, whom he had trained in the shop first and placed on a track to GM / President. Chris, a former large ship Captain and passionate guitar maker, proved an extraordinary leader, establishing a company book club as a start. Bob left us in great shape by staying on the Board, with Chris as President.
Around this time, we were approached by a gentleman at that same California show where I originally did diligence who made an offer to buy most of the company. He owned many instrument companies but no high-end guitar maker. He wanted one. We counter offered. With deep gratitude to Dana and Chris who handled nearly every shred of the transaction, the deal went through very well for all, including visits to some of the buyer’s instrument companies near Boston. It was clear they were very well managed and the employees were well cared for and happy, a goal for us all.
The crew all got raises, improved health insurance and a more sustainable business model, as the buyer has worldwide distribution in place for his lesser brands, both ERP and accounting systems we could never have afforded at our scale, and more. Dana remains an owner, Chris remains engaged, and the crew and facility in Lewiston are expanding to support the increased sales worldwide.
I wound up selling my shares, and though no longer on the Board, I remain a huge fan of everyone at Bourgeois and continue to admire and be amazed at their products. I am grateful to Dana and all involved over the years, and MVF, without which the Bourgeois story might have turned out very differently.
Check Bourgeois’ Facebook page for some amazing “Artist Takeover” concerts online and visit their website here.