Wednesday, May 11, 2011

The investment voltures have come back, be careful if they call your store.

There's a lot people coming into the market for all the wrong reasons.

I saw this in 2003, I saw this in 2008, and I'm seeing it again in 2011. Investors come out of nowhere, take up your time and sometimes claim they want to invest in your scooter store, distribution point, or import business and then they don't have the right amount of capital. They want to use someone else to put up the money to make the deal happen. Middle men.

They are calling some of my dealers now. Some want to build a nationwide or statewide alliance of small shops. They have a dream of 10 scooter stores all buying together. The last time I saw this happen the owner actually had money and he made it happen - see my articles on Peter Warrick and the Scooter Super Store of America.

The stores finally ended up getting shut down by General Electric one of its creditors. It was an incredibly Stupid move on the part of the banks since they closed the company in Feb and now in May the business would have made millions. They had over 2,000 scooters in stock and they sold at auction for nothing because a bank couldn't wait. This is the same company that paid no taxes last year in America and forced several hundred scooter dealers to close between 2009-2010.

This year I've had more conversations with banks that just don't get it. Our country is still at the edge and small stores are still hurting, but all they want is the next big deal.

A few weeks ago I put the word out on Malaguti in Italy and I was getting calls from as far away as Spain because they couldn't get in touch with Italy.

Over the years I've only met one investor who actually had the money and was a man of his word Rick Fine from Atlanta, Georgia. Sadly that was my first experience with the scooter market and as the years have gone by I've discovered you have lean years and good years. So far we are at the end of the two worst years the market has ever seen.

Some store owners are now tempted to sell out to investors. Some of them will promise to keep you onboard as "management." Let me tell you unless you have a good agreement you are probably the first to get fired. They also promise they will pay your debts and take care of your suppliers, most times they don't. When someone pumps in money they want immediate returns and you have to deliver, but you also have other interests and its better to do things slowly and work with the banks and everyone else than to bring someone in that could very well bail on them. Keeping your word on things sometimes is worth more.

The same is true of the vehicle market. Right now brands from Taiwan are shopping around. Export managers write emails fishing for info, going around current importers, and everyone is looking for the big names. This is why "Trust" is such a hard to come by word in the Car and Powersports Industry. Are you in it for the long term or are you going to bail. We live in a world of price not loyalty right now so loyalty goes a long way in bigger circles. You can't sell the short term for the long term goal.

In distributors the market in the US is very small compared to Europe, South America, and Asia. However, the US is the most vocal. I get more blog emails from Argentina, Brazil, and Italy than I do from the USA sometimes.

In the USA last month I mentioned that STR sold its remaining shares to Kymco Taiwan. I already talked about why this made them stronger and a more efficient operation.

Companies that have been loosing money have had to take in private investor groups all across the board. This will provide stability for these brands and ensure that parts and bikes start flowing again maybe not like before, but at least the brands wont close. The problem with outside investors is they are not "Scooter" people and will demand inquiries, audits, and to make sure the company runs lean. I've already commented many times that some of the brightest, best, and most efficient salespeople already work for much much less than they deserve.

I've seen a lot of people fall in love with brands. Some even after no longer working for a brand purely out of passion like in SYM have dedicated many hours to continue to help people. Ex-employees helping with marketing and solving parts issues despite the factory in Taiwan not caring. One of the most passionate people I ever met is Pete McIntosh who worked on SYM projects for months without getting paid. Very few industries command this type of passion or honest good people.

As much as I loved being the original SYM importer, I see it now as a business person not as a naive 20 something year old and I know that you can't love a company that doesn't love you back. Riders, store owners, consumers don't usually see all the drama that unfolds behind the scenes, but these days thanks to social networking all news is news. There is nothing hidden thanks to message boards and the reality TV we live in.

The truth is our industry exploits the best and then others come in and exploit the rest. Passion can be spread from one person to another. I always liked Italjet when I saw them in my first trip to Italy. I loved them when I saw them at the "Ride" 1999-2004 Showroom the first Italjet dealer in the country on South Beach. The store eventually carried Aprilia, Italjet, Malaguti and others. As the company faded it was great to meet new people who were passionate about the brand ( one of the coolest things about Scooter Scoop Steve.) Meeting people who loved a concept or design for new reasons. I've always wondered the potential that someone like that has for branding and what they could have done had Italjet or SYM listened.

I have the greatest admiration for some of these guys working in the field, but our industry is notorious for cutting commissions, not paying employees, and then finding creative ways to not pay benefits. Instead of paying people more the bosses find ways to pay people less. Some of the better known brands find ways to keep employees working for sub-divisions to not pay them like full employees. Amazing, while the owners buy Mansions and new cars the employees struggle. They get pay cuts and false promises.

So outside investment groups have started again approaching dealers, operators, and distributors alike. Be weary when they say they won't give you any cash up front just will take over debts (won't pay them in full just make payments on them) They could take over your dealership. Run it into the ground and then you the operator are still on the hook for the debts. As someone who has imported bikes before I am weary of investment firms looking at scooter brands or electric brands that have no long term vision for the industry. The moment gas prices go down they will pull out of the market. All this could bring further pain down the road when the margins aren't there. Investment recapitalization firms take away the ownership of management, sometimes management is left with nothing just ask Beggio the former owner of Aprilia how much stock in Piaggio he has anymore. They start pushing for profits, take away terms and push the bottom line. As the summer heats up gas prices might make this all a dull point, but the last thing we need is money from people who want to cut and run if gas prices go down.

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