June 21, 2004
Tuning up | Guitar maker Dana Bourgeois hopes a new business infrastructure will finally pull Pantheon Guitars into prosperity
By Sean Donahue
Dana Bourgeois likes to say that every guitar made in his Lewiston shop is an individual. Between selecting woods for their tonal qualities, shaping braces inside each guitar body to fine-tune the sound it creates, then adding detailed trim and immaculate finishes, the process requires a mixture of engineering, art and intuition that has fascinated Bourgeois since he built his first guitar 30 years ago, while a student at Bowdoin College. "They say our species is defined by the big cranium and the opposable thumb and forefinger," says Bourgeois. "I get to exercise both."
That approach has made his vintage-style acoustic guitars revered among bluegrass and country players. Nashville stalwart Ricky Skaggs has used Bourgeois guitars since 1997, while Steve Earle recently told Mix magazine that he used a Bourgeois almost exclusively for the acoustic guitar parts on his latest record, Jerusalem. But even those endorsements and a reputation for supremely crafted high-end guitars hasn't been enough turn Bourgeois' Lewiston guitar shop into a stable business.
Last fall, a slowdown in high-end guitar sales sent the company skidding. With no cash in the bank to cover operating expenses as revenues slowed, the company fell behind on its payments to vendors and suppliers. And the geographically dispersed management structure of Pantheon Guitars, the corporate entity that controls the Bourgeois brand, wasn't suited for the type of rapid decision-making needed to handle the situation. As the company neared a crisis, John Burns of Maine's Small Enterprise Growth Fund, an investor in Pantheon, began looking to install someone in the Lewiston shop who had the business and operating experience to complement Bourgeois' design and guitar-making skills.
Burns found an operations expert in Roger Brooks, the former CEO of Saco-based Intelligent Controls, an electronic measurement and monitoring equipment maker that was acquired in 2002 by Indiana-based Franklin Electric Co. Brooks, a member of the Maine Angels investing group, admits that his only experience with guitars is through his two guitar-playing sons. But he was immediately intrigued by the idea of helping Pantheon examine and fine-tune its manufacturing, distribution and marketing efforts. "[Burns] presented it asˆ a small business that certainly could use lots of generalized business experience and some gray-haired, adult supervision," says Brooks.
In March, Brooks joined Pantheon as its business manager. What he found when he walked into the Lewiston shop was a company that had sold about 375 guitars, at $3,000-$10,000 each, and recorded about $850,000 in revenues in 2003. The company had even made a small profit for the entire year, but was still struggling from the year-end slowdown and a lack of cash reserves. During Brooks' first week with Pantheon, he says he received a disconnect notice from the power company, Bourgeois' cell phone service was shut off and the landlord showed up looking for back rent.
In the 90 days since then, though, Brooks has stabilized Pantheon by appeasing creditors, examining all the numbers, organizing the company's procurement and inventory management practices and encouraging shop workers with the mantra "Do the same with less." The company is now current in all its accounts, says Brooks, and operating on its cash flow. He's added three new dealers to the company's network of about 50 and contracted with a new sales representative in the Southeast. He's even freed up some money for a new advertising and promotional campaign.
Now, as the company tries to change its mantra to "Do more with less," Brooks and Bourgeois hope they've found a corporate structure to help Pantheon grow again. "My preference is to focus on the production and the creative side" of the business, says Bourgeois, 51. "But in order to do that, what I need is sort of a sympathetic technocrat ˆ someone who's a really good nuts-and-bolts business administrator but who's also sympathetic to what the heart of the business is, what makes it tick."
The Skaggs effect
Though the guitar-making world is still dominated by big companies such as Pennsylvania-based C.F. Martin & Co. and Gibson in Montana, Bourgeois belongs to a generation of smaller, high-end guitar makers that have emerged since the 1970s, including Collings in Austin, Texas and Taylor in San Diego, Calif. After Bowdoin, Westbrook native Bourgeois gradually built up his guitar-making business, creating his own designs and partnering with guitarist and luthier Eric Schoenberg in the 1980s to build a new guitar for Martin. That partnership, along with a design consulting gig for Gibson, helped attract attention to the Bourgeois name, and in 1993 he launched his own guitar line and manufacturing operation: Dana Bourgeois Guitars in Lewiston.
Bourgeois' reputation received another big boost in the mid-1990s when country singer Skaggs and his bandmember Bryan Sutton began using Bourgeois guitars to record a series of traditional bluegrass records. The relationship eventually turned into an endorsement deal, with Bourgeois designing the Ricky Skaggs Signature Model. "In this business, having a star play your instruments is worth a thousand words," says Joel Eckhaus, a former Bourgeois employee and the founder of South Portland-based Earnest Instruments, which makes mandolins, tenor guitars and ukuleles ˆ including one used by Pearl Jam's Eddie Vedder. (Such praise for Bourgeois guitars helped inspire Lewiston's upcoming guitar and arts festival, The Source [see "Guitar town," page 15].)
By capturing the interest of hot bluegrass players and amateurs who wanted to emulate them, Bourgeois' production jumped from 70 guitars in 1993 to 525 in 1999 ˆ when Bourgeois suddenly found himself in the midst of his first business crisis. A year earlier, Dana Bourgeois Guitars had signed an exclusive distribution deal with Akai Musical Instrument Corp., which Bourgeois says appeared to be going strong. Then, in 1999, Akai began to experience its own financial problems and simply stopped ordering guitars, according to Bourgeois.
Though Bourgeois tried to sell guitars direct from the factory and through the Internet, the company couldn't generate the sales volume to keep lenders such as the Finance Authority of Maine from seeking to foreclose, and he had to file for bankruptcy.
Out of that crisis, though, Bourgeois attracted new investors, including the Small Enterprise Growth Fund, which invested about $200,000, and private investor Patrick Theimer, who resurrected the company as Pantheon Guitars in 2000. Theimer's idea for Pantheon was to use the Bourgeois brand to anchor what would become a manufacturer of several different guitar lines. Theimer acted as CEO, but remained at his home in Florida; Pantheon's sales and marketing director lived in Baltimore. The company did hire a CFO at the Lewiston shop, however, which allowed Bourgeois to insulate himself from day-to-day business responsibilities such as managing payroll and bookkeeping.
This spring, though, as Pantheon struggled with its cash flow, the limitations of its organizational structure quickly became apparent. "The management of the company was just not centralized enough," says Bourgeois.
Stemming the cash flow crisis
To John Burns at the Small Enterprise Growth Fund, as well as other Pantheon board members who know Roger Brooks, the former CEO and investor had the mix of business expertise and a calm, reasonable demeanor that could provide Pantheon's management center. Brooks "has a very strong understanding of the working capital needs of the business," says Burns. "I think [his strength] is the combination of those financial skills and the operational experience of managing employees, inventory, accounts payable and receivable, distribution channels and sales and marketing efforts."
Brooks' first task at Pantheon, though, was to turn around the company's cash flow crisis. While sales had begun to pick up again after last fall's slump, Pantheon still owed several key vendors money for previous shipments, so Brooks developed payment plans to clear that debt and arranged to have new materials supplied in the interim on credit card or COD basis. He arranged similar installment payment plans to catch up on past-due power and phone bills.
His next task was to cut the shop's operating costs so it could survive if sales slowed again. One quick solution presented itself when a long-time shopworker left the company. Rather than replace him, Brooks helped Bourgeois and his team shuffle their production duties so they could continue making about eight guitars a week.
Finding further operating efficiencies with similar impact has been more difficult, though, because so much of a Bourgeois guitar is handmade. It takes 40 hours of manual labor over the course of about eight weeks to build a guitar from start to finish, says Bourgeois, and the process isn't easily scalable for higher-volume production. "You can't buy a robot to do one thing [in the guitar-making process] that saves you five hours," says Bourgeois, "so you have to find 15 minutes here and there."
Bourgeois already outsources production of his bridges and guitar necks, which are based on the design of a hand-carved neck from a 1930 Martin guitar he once owned. But selecting wood for the guitar backs, sides and tops literally requires Bourgeois to tap on the pieces by hand to test their tone; internal bracing must be shaved down by hand to achieve the proper "voicing." If the company were to change that process too much in order to save time or money, it could risk compromising on quality.
Instead, Brooks is asking shop workers to look constantly for small changes that will help them work more efficiently. For example, Brooks and Bourgeois have been reconfiguring the shop's layout and developing new workflows, so employees who perform multiple tasks on guitars in several different stages of completion can be more efficient as they move from one job to the next.
Longer term, Brooks would like to implement more basic manufacturing processes such as just-in-time ordering. The trouble is, making high-end guitars requires boutique ˆ and in some cases, rare ˆwoods like mahogany, curly koa, Adirondack spruce and Brazilian, Indian and Honduran rosewood. Though some of those supplies can be ordered in advance, Bourgeois still needs the financial flexibility to jump on a supply of choice wood whenever it becomes available. "One of my biggest fearsˆ was as our demand was starting to come up, would we end up not being able to ship product because we didn't have certain raw materials that we needed?" says Brooks. "Knock on wood, we've not had that problem."
Wanted: Guitar hobbyists, preferably affluent
With the campaign to increase efficiency underway, both Brooks and Bourgeois are eager to begin growing the company again. As a first step, Brooks is working to expand Pantheon's dealer network. Though Bourgeois guitars are currently strong sellers in the Southeast, probably because of the region's bluegrass tradition, Brooks and Bourgeois want to increase brand awareness and sales in major metropolitan areas like Los Angeles and Chicago, which have large populations of musicians and the affluent guitar hobbyists who can afford a handbuilt guitar. "For every Ricky Skaggs, we need about 100 people who consider my guitars a luxury purchase," says Bourgeois.
Along with new dealers, a renewed marketing push will be a key growth strategy. Since 2000, the company's marketing centered on the Pantheon name and its goal of building a collection of guitar lines. That model never worked out ˆ there were no other brands under the Pantheon umbrella ˆ so the company essentially spent three years downplaying its best asset, the Bourgeois name.
Now, Pantheon is working on a new series of small print ads aimed at consumers that likely will express a variation on the informal testimonials Bourgeois enthusiasts often post in Internet guitar forums. In addition, the company is in the process of assessing whether the Pantheon name causes confusion for consumers looking to buy a Bourgeois guitar.
Despite his popularity in the bluegrass community, Bourgeois says he never set out to become just a maker of vintage-style acoustics. He'd like to expand beyond that niche, noting that he has enough space in his current location to double production. Potential avenues for growth include expanding his current guitar line and adding a lower-priced, entry level guitar, which would allow to him outsource certain portions of the assembly.
Despite intense competition between brands in the high-end market, there is still room for Bourgeois to increase its sales, says Stan Jay, president of Mandolin Brothers in Staten Island, N.Y., which for 33 years has been selling new and vintage acoustic guitars, including Bourgeois. But the crucial test will be whether Pantheon can create enough demand for those additional guitars, Jay says, best achieved by a focus on advertising, marketing, promotions and relationships with artists. "What [guitar makers] really want is to be sold out all the time, and to tell customers they have backlog of at least five months," says Jay. "It's not an ideal situation to have too much capacity and not enough sales, so one should be extremely cautious in making any move toward expansion."
Also, buying new equipment or making other significant changes to boost the company's production likely will require further capital investment ˆ which Brooks admits may be a tough sell given the business' previous bankruptcy. But the challenge of attracting additional investors, says Brooks, is one of the things that lured him to the job. And by putting proper controls and operating procedures in place, Brooks hopes to create a business infrastructure that's as strong as the Bourgeois brand. "When you're a business investor, once you get past the questions of whether the business concept makes sense or the brand is viable, the issue is management, management, management," says Brooks.
For Dana Bourgeois, helping increase production, creating new designs or attracting new investment carries an additional responsibility: making sure each of the guitars passing through his shop remains unique. "I believe we can still build an individual guitar. The core workforce has been with me for 10 yearsˆ They're very well trained, they think like I do, they're kind of extensions of me," he says. "How you scale that up is the question."
That approach has made his vintage-style acoustic guitars revered among bluegrass and country players. Nashville stalwart Ricky Skaggs has used Bourgeois guitars since 1997, while Steve Earle recently told Mix magazine that he used a Bourgeois almost exclusively for the acoustic guitar parts on his latest record, Jerusalem. But even those endorsements and a reputation for supremely crafted high-end guitars hasn't been enough turn Bourgeois' Lewiston guitar shop into a stable business.
Last fall, a slowdown in high-end guitar sales sent the company skidding. With no cash in the bank to cover operating expenses as revenues slowed, the company fell behind on its payments to vendors and suppliers. And the geographically dispersed management structure of Pantheon Guitars, the corporate entity that controls the Bourgeois brand, wasn't suited for the type of rapid decision-making needed to handle the situation. As the company neared a crisis, John Burns of Maine's Small Enterprise Growth Fund, an investor in Pantheon, began looking to install someone in the Lewiston shop who had the business and operating experience to complement Bourgeois' design and guitar-making skills.
Burns found an operations expert in Roger Brooks, the former CEO of Saco-based Intelligent Controls, an electronic measurement and monitoring equipment maker that was acquired in 2002 by Indiana-based Franklin Electric Co. Brooks, a member of the Maine Angels investing group, admits that his only experience with guitars is through his two guitar-playing sons. But he was immediately intrigued by the idea of helping Pantheon examine and fine-tune its manufacturing, distribution and marketing efforts. "[Burns] presented it asˆ a small business that certainly could use lots of generalized business experience and some gray-haired, adult supervision," says Brooks.
In March, Brooks joined Pantheon as its business manager. What he found when he walked into the Lewiston shop was a company that had sold about 375 guitars, at $3,000-$10,000 each, and recorded about $850,000 in revenues in 2003. The company had even made a small profit for the entire year, but was still struggling from the year-end slowdown and a lack of cash reserves. During Brooks' first week with Pantheon, he says he received a disconnect notice from the power company, Bourgeois' cell phone service was shut off and the landlord showed up looking for back rent.
In the 90 days since then, though, Brooks has stabilized Pantheon by appeasing creditors, examining all the numbers, organizing the company's procurement and inventory management practices and encouraging shop workers with the mantra "Do the same with less." The company is now current in all its accounts, says Brooks, and operating on its cash flow. He's added three new dealers to the company's network of about 50 and contracted with a new sales representative in the Southeast. He's even freed up some money for a new advertising and promotional campaign.
Now, as the company tries to change its mantra to "Do more with less," Brooks and Bourgeois hope they've found a corporate structure to help Pantheon grow again. "My preference is to focus on the production and the creative side" of the business, says Bourgeois, 51. "But in order to do that, what I need is sort of a sympathetic technocrat ˆ someone who's a really good nuts-and-bolts business administrator but who's also sympathetic to what the heart of the business is, what makes it tick."
The Skaggs effect
Though the guitar-making world is still dominated by big companies such as Pennsylvania-based C.F. Martin & Co. and Gibson in Montana, Bourgeois belongs to a generation of smaller, high-end guitar makers that have emerged since the 1970s, including Collings in Austin, Texas and Taylor in San Diego, Calif. After Bowdoin, Westbrook native Bourgeois gradually built up his guitar-making business, creating his own designs and partnering with guitarist and luthier Eric Schoenberg in the 1980s to build a new guitar for Martin. That partnership, along with a design consulting gig for Gibson, helped attract attention to the Bourgeois name, and in 1993 he launched his own guitar line and manufacturing operation: Dana Bourgeois Guitars in Lewiston.
Bourgeois' reputation received another big boost in the mid-1990s when country singer Skaggs and his bandmember Bryan Sutton began using Bourgeois guitars to record a series of traditional bluegrass records. The relationship eventually turned into an endorsement deal, with Bourgeois designing the Ricky Skaggs Signature Model. "In this business, having a star play your instruments is worth a thousand words," says Joel Eckhaus, a former Bourgeois employee and the founder of South Portland-based Earnest Instruments, which makes mandolins, tenor guitars and ukuleles ˆ including one used by Pearl Jam's Eddie Vedder. (Such praise for Bourgeois guitars helped inspire Lewiston's upcoming guitar and arts festival, The Source [see "Guitar town," page 15].)
By capturing the interest of hot bluegrass players and amateurs who wanted to emulate them, Bourgeois' production jumped from 70 guitars in 1993 to 525 in 1999 ˆ when Bourgeois suddenly found himself in the midst of his first business crisis. A year earlier, Dana Bourgeois Guitars had signed an exclusive distribution deal with Akai Musical Instrument Corp., which Bourgeois says appeared to be going strong. Then, in 1999, Akai began to experience its own financial problems and simply stopped ordering guitars, according to Bourgeois.
Though Bourgeois tried to sell guitars direct from the factory and through the Internet, the company couldn't generate the sales volume to keep lenders such as the Finance Authority of Maine from seeking to foreclose, and he had to file for bankruptcy.
Out of that crisis, though, Bourgeois attracted new investors, including the Small Enterprise Growth Fund, which invested about $200,000, and private investor Patrick Theimer, who resurrected the company as Pantheon Guitars in 2000. Theimer's idea for Pantheon was to use the Bourgeois brand to anchor what would become a manufacturer of several different guitar lines. Theimer acted as CEO, but remained at his home in Florida; Pantheon's sales and marketing director lived in Baltimore. The company did hire a CFO at the Lewiston shop, however, which allowed Bourgeois to insulate himself from day-to-day business responsibilities such as managing payroll and bookkeeping.
This spring, though, as Pantheon struggled with its cash flow, the limitations of its organizational structure quickly became apparent. "The management of the company was just not centralized enough," says Bourgeois.
Stemming the cash flow crisis
To John Burns at the Small Enterprise Growth Fund, as well as other Pantheon board members who know Roger Brooks, the former CEO and investor had the mix of business expertise and a calm, reasonable demeanor that could provide Pantheon's management center. Brooks "has a very strong understanding of the working capital needs of the business," says Burns. "I think [his strength] is the combination of those financial skills and the operational experience of managing employees, inventory, accounts payable and receivable, distribution channels and sales and marketing efforts."
Brooks' first task at Pantheon, though, was to turn around the company's cash flow crisis. While sales had begun to pick up again after last fall's slump, Pantheon still owed several key vendors money for previous shipments, so Brooks developed payment plans to clear that debt and arranged to have new materials supplied in the interim on credit card or COD basis. He arranged similar installment payment plans to catch up on past-due power and phone bills.
His next task was to cut the shop's operating costs so it could survive if sales slowed again. One quick solution presented itself when a long-time shopworker left the company. Rather than replace him, Brooks helped Bourgeois and his team shuffle their production duties so they could continue making about eight guitars a week.
Finding further operating efficiencies with similar impact has been more difficult, though, because so much of a Bourgeois guitar is handmade. It takes 40 hours of manual labor over the course of about eight weeks to build a guitar from start to finish, says Bourgeois, and the process isn't easily scalable for higher-volume production. "You can't buy a robot to do one thing [in the guitar-making process] that saves you five hours," says Bourgeois, "so you have to find 15 minutes here and there."
Bourgeois already outsources production of his bridges and guitar necks, which are based on the design of a hand-carved neck from a 1930 Martin guitar he once owned. But selecting wood for the guitar backs, sides and tops literally requires Bourgeois to tap on the pieces by hand to test their tone; internal bracing must be shaved down by hand to achieve the proper "voicing." If the company were to change that process too much in order to save time or money, it could risk compromising on quality.
Instead, Brooks is asking shop workers to look constantly for small changes that will help them work more efficiently. For example, Brooks and Bourgeois have been reconfiguring the shop's layout and developing new workflows, so employees who perform multiple tasks on guitars in several different stages of completion can be more efficient as they move from one job to the next.
Longer term, Brooks would like to implement more basic manufacturing processes such as just-in-time ordering. The trouble is, making high-end guitars requires boutique ˆ and in some cases, rare ˆwoods like mahogany, curly koa, Adirondack spruce and Brazilian, Indian and Honduran rosewood. Though some of those supplies can be ordered in advance, Bourgeois still needs the financial flexibility to jump on a supply of choice wood whenever it becomes available. "One of my biggest fearsˆ was as our demand was starting to come up, would we end up not being able to ship product because we didn't have certain raw materials that we needed?" says Brooks. "Knock on wood, we've not had that problem."
Wanted: Guitar hobbyists, preferably affluent
With the campaign to increase efficiency underway, both Brooks and Bourgeois are eager to begin growing the company again. As a first step, Brooks is working to expand Pantheon's dealer network. Though Bourgeois guitars are currently strong sellers in the Southeast, probably because of the region's bluegrass tradition, Brooks and Bourgeois want to increase brand awareness and sales in major metropolitan areas like Los Angeles and Chicago, which have large populations of musicians and the affluent guitar hobbyists who can afford a handbuilt guitar. "For every Ricky Skaggs, we need about 100 people who consider my guitars a luxury purchase," says Bourgeois.
Along with new dealers, a renewed marketing push will be a key growth strategy. Since 2000, the company's marketing centered on the Pantheon name and its goal of building a collection of guitar lines. That model never worked out ˆ there were no other brands under the Pantheon umbrella ˆ so the company essentially spent three years downplaying its best asset, the Bourgeois name.
Now, Pantheon is working on a new series of small print ads aimed at consumers that likely will express a variation on the informal testimonials Bourgeois enthusiasts often post in Internet guitar forums. In addition, the company is in the process of assessing whether the Pantheon name causes confusion for consumers looking to buy a Bourgeois guitar.
Despite his popularity in the bluegrass community, Bourgeois says he never set out to become just a maker of vintage-style acoustics. He'd like to expand beyond that niche, noting that he has enough space in his current location to double production. Potential avenues for growth include expanding his current guitar line and adding a lower-priced, entry level guitar, which would allow to him outsource certain portions of the assembly.
Despite intense competition between brands in the high-end market, there is still room for Bourgeois to increase its sales, says Stan Jay, president of Mandolin Brothers in Staten Island, N.Y., which for 33 years has been selling new and vintage acoustic guitars, including Bourgeois. But the crucial test will be whether Pantheon can create enough demand for those additional guitars, Jay says, best achieved by a focus on advertising, marketing, promotions and relationships with artists. "What [guitar makers] really want is to be sold out all the time, and to tell customers they have backlog of at least five months," says Jay. "It's not an ideal situation to have too much capacity and not enough sales, so one should be extremely cautious in making any move toward expansion."
Also, buying new equipment or making other significant changes to boost the company's production likely will require further capital investment ˆ which Brooks admits may be a tough sell given the business' previous bankruptcy. But the challenge of attracting additional investors, says Brooks, is one of the things that lured him to the job. And by putting proper controls and operating procedures in place, Brooks hopes to create a business infrastructure that's as strong as the Bourgeois brand. "When you're a business investor, once you get past the questions of whether the business concept makes sense or the brand is viable, the issue is management, management, management," says Brooks.
For Dana Bourgeois, helping increase production, creating new designs or attracting new investment carries an additional responsibility: making sure each of the guitars passing through his shop remains unique. "I believe we can still build an individual guitar. The core workforce has been with me for 10 yearsˆ They're very well trained, they think like I do, they're kind of extensions of me," he says. "How you scale that up is the question."
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