2017 wrap-up and challenges

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jsalk

2017 wrap-up and challenges
« on: 19 Mar 2018, 03:35 pm »
Now that the dust has settled on 2017, we’ve had a chance to review what was a record year for Salk Sound. 

Our Song3 series speakers have received glowing comments from both users and reviewers, pushing our sales volume well past previous years.  Our StreamPlayer Gen III and the new Gen III SE are proving to be very popular, as well. In addition, we have had numerous speaker designers and marketers, both here and in Canada, commission us to build cabinets for their speakers.

The bottom line is that sales volume has exceeded previous records by quite a margin. All of this should make us quite happy.  And while we are grateful for the business, it has not been without challenges.
 
Historically, we have worked on about 40 or so projects at a time.  Since last year, we’ve been working on about 90 – 100 simultaneously.  This has obviously put a strain on operations and is forcing us to make decisions as to how to proceed.

Chief among those challenges has been build time.  Our goal over the years was to complete most projects within 60 days.  Although we didn’t always meet this goal, we thought it was well worth the effort.  Now, our build time can be double that and, with certain projects, even greater.
 
Most of our customers seem to be somewhat comfortable with the longer build times and often email to say it was “well worth the wait.” We appreciate their patience.  But I’m sure they would prefer a quicker turn-around…and so would we. 

We have done very little to promote our business in the past year.  We have cut way back on the amount of posting we have done online.  Despite that, our sales volume continues to climb.  The fact is, we could easily sell even more with minimal promotion, but we are not currently equipped to handle the increased growth.
 
This past year, for example, even though we purchased two more veneer presses, veneering is still a bottleneck. Finishing is also a bottleneck, but without another spray booth or two, solutions are somewhat limited.

What are we doing to address this?
 
Sure, we could invest a few hundred thousand in additional equipment and expand our manufacturing space (which I would love to do).  But there are risks involved.  What if the economy goes into recession and sales volumes drop?  In that case, the increased overhead may put our entire operation at risk.

So it appears our best option is to make modest investments in equipment and look for additional experienced help so quality does not suffer as we expand.

A few years ago, I read an interesting interview with Albert Von Schweikert. When asked what advice he would offer to someone wanting to get into the speaker business, he said the first step is to find a backer with $2,000,000 to invest.  He indicated that this was not an absolute requirement, but without up-front capital, the process of building a volume company would take far too long.

He is likely right. Unfortunately, we started with zero up-front capital.  Had we had investment capital to work with, we would likely be in a better position to deal with our current build times. But that is water under the dam at this point.

So we will continue to work earnestly to increase our capabilities and decrease build times, while maintaining our high quality standards.  This seems to be the most viable approach at this point in time.

- Jim

abd1

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Re: 2017 wrap-up and challenges
« Reply #1 on: 19 Mar 2018, 03:44 pm »
Jim, I appreciate the communication and I understand the challenges. I've worked for the same company for 20 years. When I started we had 12 people. Now we have about 2000 in multiple locations and I'm fortunate enough to manage a group of about 200 great people. Growth can be a major challenge and if not managed properly can destroy a great company. We always joke "growth is good" and "these are good problems to have" when addressing the issues that come up from rapid growth. Stressing out about how to add and train people and maintain quality is a much better problem than figuring out how to reduce operations and potentially lay people off. As a Salk customer, I really appreciate your challenges as a small business and your commitment towards the quality of your products and service. I will wait as long as it takes for my Song3's! I think the wait will make them even more special. Congratulations on the success of your business. Remember, these are good problems!

Oh yeah, one other thought. Have you ever considered selling banner ads on your project tracker page? I must click on that thing 10 times a day - I can't help it. Just kidding about selling ads, but you probably get a ton of clicks on that page!

Roninaudio

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Re: 2017 wrap-up and challenges
« Reply #2 on: 19 Mar 2018, 03:48 pm »
Excellent problems to have- Also has a lot to do with where you see yourself and your company in 5-10 years?  New facility and 4X production or mitigate risk(s) and maintain current levels with quality a top concern....  Seems like you made your choice. Also great to know you have diversified a bit with contract cabinet making etc.  Good luck and here's to a great 2018 for you and your crew!

JonnyFive

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Re: 2017 wrap-up and challenges
« Reply #3 on: 20 Mar 2018, 02:44 pm »
These are good problems to have, Jim.  Quality products promote themselves. :)

Regarding bottlenecks.  Are your bottleneck steps active at all times?  If not, one solution would be to slide a future sale left on the Gantt chart and place it into existing current down time on those bottlenecks.  Anticipate what are the common sales and have them in production before they come in.  Songtowers, Song 3's in basic finishes etc. 

I'm happy to hear of your continued success!

DFpritchard

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Re: 2017 wrap-up and challenges
« Reply #4 on: 20 Mar 2018, 08:42 pm »
Thank you for providing the nice insight into 2017 at Salk Sound.  You and colleagues are, to an extent, the victims of your own success.  Investing in the capital equipment in order to shorten lead times and, possibly, to increase capacity may feel risky.  Oddly enough, I think that your 'nightmare scenario' of a downturn in the economy would actually mitigate your risk because your speakers have such a strong value proposition built into them.  As I and numerous others (customers and reviewers) have observed, you make $4000 speakers that sell for $2000 (and so on).  A sour economy will be a far greater threat to the makers of the MSRP $4000 speakers than Salk Sound products, at any given price point.  It would not be at all contrarian to speculate that a recession would actually increase demand for your products, based on a somewhat rigorous price-performance analysis.   

On the other hand, it isn't my money and if it gets my recently ordered Song3s to me faster, go for it!

NHSkier

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Re: 2017 wrap-up and challenges
« Reply #5 on: 21 Mar 2018, 02:43 pm »
Jim,
Thanks for your honesty and transparency. This is exactly what consumers are looking for in this day and age when almost anything can be had on Amazon.

I work for one of those stuffy Northeast financial services firms and applaud the conservative way in which you approach expanding your business. When the consensus is that a recession won't hit until 2019 or 2020, it's wise to hedge your bets anyway. The consensus is often wrong.

I disagree with the previous poster about his recession scenario. Speakers are a discretionary purchase for most people. If we're hit hard by another recession, people are going to pare back those expenses first. Your order backlog could quickly recede and you could be left with excess inventory. The only silver lining I can see is that your less financially sensitive customers might be pleasantly surprised when their 100-day wait time suddenly shrinks to 50 days, but it's probably small consolation to you as the manufacturer if year-over-year sales decline. I suspect none of this is news to you so I'll stop there!

As an aside, I do not own any Salk speakers myself but hope to someday. I have a used Salk Streamer II arriving today and plan to do some A/B comparisons with my Raspberry PI/Hifiberry Digi+ when I get time. I suspect the latter will have a hard time keeping up with your creation!

Joe Frances

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Re: 2017 wrap-up and challenges
« Reply #6 on: 24 Mar 2018, 11:18 pm »
The most important thing is build quality and turn around time.  But quality is job 1 .

Felixxia

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Re: 2017 wrap-up and challenges
« Reply #7 on: 26 Mar 2018, 01:35 pm »
maybe it is now time to use chinese / taiwanese speaker box in very nice finish like monitor audio / kef / bowers?

my argument :

1 - there are a lot of people who dont care about enclosure customization. they want sound quality in a box that look nice.

2 - you already have tons of queue, and i agree that scaling up without considering bad economy which may arise in the future is risky and could be a bad move. so, fans who want to get a salk speakers dont have to wait that long. and at the same time, they will get salk sound quality in a more affordable price / package.

3 - you may free your schedule so that you can keep on developing better speaker more frequently. how about an active salk silk, where , the low impedance of this high performance speaker no longer becomes a problem?



btw, here are my wish list for salksound website. i was having problems when looking for info.

- please include the code / type and diameter of each driver / woofer / tweeter in every product page.

- the "finish" options / gallery could be improved. first , there should be more finish we can see in the website after producing lots of speakers for 15 years... second, the search engine is cumbersome. there are instances where what i was looking for based on the options available in the search functionality return nothing. it was very frustrating. i resorted to just browse every pic that is available in there. i chose "all" or "any" to every option.

- naming convention problems! monitor audio has bronze silver gold platinum naming convention that helps user determine their class. first time i visited salksound i had no idea which is which. i didnt even know the difference between "monitor" and "bookshelf". and i thought songsurround was meant to be surround speaker only, and turns out it wasnt the case.

- veracity ST is gone, i think. i was curious about it. it looks like a broken link.


fredgarvin

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Re: 2017 wrap-up and challenges
« Reply #8 on: 26 Mar 2018, 03:59 pm »
I'm happy to see the success that Salk enjoys, I've been knocking around here for awhile and remember when it all started up. In this case quality won out! Too often we see just the opposite.  :thumb:

Brian D

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Re: 2017 wrap-up and challenges
« Reply #9 on: 26 Mar 2018, 04:49 pm »
maybe it is now time to use chinese / taiwanese speaker box in very nice finish like monitor audio / kef / bowers?

With all due respect, I think this is a horrible idea.  Dilution of one of the brands greatest strengths is not the answer.  Given the choice between a 6 month wait and a generic box, I have no doubt which I would choose.  I waited, and I am extremely happy and satisfied with the result.

woodsyi

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Re: 2017 wrap-up and challenges
« Reply #10 on: 26 Mar 2018, 05:25 pm »
What a great problem to have, Jim.  Congrats.

It means you are definitely delivering more value for the money than other places.  Perhaps there is room for raising prices... :peek:

abd1

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Re: 2017 wrap-up and challenges
« Reply #11 on: 26 Mar 2018, 06:07 pm »
With all due respect, I think this is a horrible idea.  Dilution of one of the brands greatest strengths is not the answer.  Given the choice between a 6 month wait and a generic box, I have no doubt which I would choose.  I waited, and I am extremely happy and satisfied with the result.

I think what Felixxia may be suggesting is that there's an option to have a finished product in a prefab or prefinished cabinet in order to receive the product quicker, not that all Salk speakers are constructed this way. For example, if you order speakers for Philharmonic Audio you can chose a prefab cabinet or have Jim's team build a cabinet. It will certainly cost more and take longer for the Salk finished product, and no doubt it is a nicer overall finished product (not that the prefab cabinets are bad and they should sound the same) and allows for customization. However, this allows the customer to chose and possibly get speakers sooner. This could also allow for Jim's team to unload some production and have more resources towards the custom orders and those who want Salk finished speakers.

I agree that you don't want to dilute the product since quality and customization is major part of the Salk brand. In order to not dilute the Salk product, I would create a sub-brand or different series of speakers to indicate that they are different and not tarnish the Salk brand. Quite frankly, you can get good quality manufacturing in overseas factories, which is why so many do it. I'm not saying this is feasible or what Jim should do. I'm sure it's very complicated and I also think Jim should focus on the core brand and making slow, steady improvements to the business. I'm just saying it's a way to do it if it were a viable option.

Imagine, you could have "Brand X by Salk Sound" or something like that and all of the speakers are prefab'd - no customization, limited choices of finish and models, but ready to ship. You could even change some internal components so that they're 95% of what you get with Salk products so as to further separate the brands. Heck, you could even partner with Dennis Murphy and sell them under the Philharmonic Brand. Listening Dennis?  :wink: As if you're not busy enough... and I have to get back to my day job instead of thinking about creating speaker companies.

I am patiently waiting for a pair of Song 3's. If there were a choice I know I would chose the Salk finished product. I am committed to it, prepared for it and I know I will be satisfied with the product. But others may just want a piano black or cherry veneered box that's ready to go.

jsalk

Re: 2017 wrap-up and challenges
« Reply #12 on: 26 Mar 2018, 06:41 pm »
Purchasing cabinets made in Asia is certainly an option.  But there are a couple of issues that make it less than ideal in our case.

First, we have too many models (we should probably archive a few of them to pare things down a bit).  This means we would likely need to select just a few models in order to reach the minimums required. So this approach would likely only help us in regard to a limited number of models.

Second, this requires quite a bit of upfront capital.  AV123 used to take advanced orders to cover these costs.  But then shipping delays and cabinet quality issues left them with many unhappy customers. The last thing we want to do is duplicate their experience.

Finally, we have heard horror stories regarding finishes cracking, etc., when cabinets are shipped from Asia.  There is an old saying..."build in the desert and ship to the tropics."  The idea is that if you build in the tropics and ship to locations that are drier, shrinkage in lower humidity environments can cause major cracking issues with the finish.  Most Asian cabinets are not produced in low humidity areas.  We have heard of more than one case of this happening. What do you do if an entire shipment of cabinets needs to be refinished?  Once you pay and have them shipped, it is difficult (if not impossible) to get the supplier to replace defective cabinets.

I understand the idea and have entertained it in the past.  But each time I revisit the idea, I come to the conclusion that this approach is not without risks. It can be done, but I don't know if it makes sense for us.

- Jim

DFpritchard

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Re: 2017 wrap-up and challenges
« Reply #13 on: 26 Mar 2018, 07:37 pm »
It would be interesting to know, and perhaps informative vis a vis the business opportunity to source cabinets from Asia, what % of Salk customers specify custom finishes.  Is there a breakout by product line or price point, i.e., does the %-age of custom finished speakers rise with the price per pair?  If so, this may suggest that offering the option of 'pre-fab' enclosures just for certain models at certain price points could be a logical way to extend the business without endangering that which Salk already does so well: custom finishes.  This may also depend on the availability of pre-fab enclosures.  Would vetting potential suppliers in order to ensure (to the extent possible notwithstanding differences in humidity, not to mention the vagaries of international shipping and, in the current climate, possible tariffs) quality, performance and reliability of supply be worth the investment of time and capital?

What makes a Salk Sound speaker such a widely respected and desirable product?  Drivers, crossovers, cabinets, price/value or the greater-than-the-sum-of-its-parts integrated whole?  Will the drivers and crossovers still be perceived as a Salk Sound speaker if packaged in a pre-fab cabinet?  I have never to my knowledge heard a Salk speaker.  I ordered a pair of Song3s because of the cabinets; reviews of the 'sound' mitigate the risk to a sufficient extent for me but, anecdotally, I may well have bought something else if not for the stunning cabinetry.

mresseguie

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Re: 2017 wrap-up and challenges
« Reply #14 on: 26 Mar 2018, 07:46 pm »
Hello, Jim.

Congratulations on your business growth. It really is a nice problem to have.

Fifteen years ago when we moved from Taiwan to Oregon, we special ordered some furniture from southern China. Some of the furniture was inexpensive and some was fairly expensive (different manufacturers). Within days of our furniture arriving in Corvallis, the inexpensive cabinets began splitting and cracking. It sounded like a bunch of angry gnomes chopping up wood. [Picture me misting the furniture ten times a day for a month in an effort to moisturize our furniture.]

In the end, all of the inexpensive furniture cracked and/or split. However, the higher quality products didn’t suffer these issues.

In my opinion you are wise to avoid buying pretty but humid cabinets that may well end up cracking not long after arrival.

Regards,

Michael

NHSkier

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Re: 2017 wrap-up and challenges
« Reply #15 on: 26 Mar 2018, 10:14 pm »
Jim,
First off, thanks for continuing to engage with your customer base on this even though your company's success indicates you don't necessarily need business advice from strangers! Just out of curiosity, have you looked into the operational practices of Gibson, Taylor, Fender Custom Shop, or the like? I suspect they have encountered many of the same dilemmas regarding process improvement, customization, and import/export of woods and components and might be willing to entertain the questions of a well meaning American entrepreneur in a similar but non-competing business...

One other note, I am more or less in this camp with DFPritchard when it comes to buying speakers:

"I ordered a pair of Song3s because of the cabinets; reviews of the 'sound' mitigate the risk to a sufficient extent for me but, anecdotally, I may well have bought something else if not for the stunning cabinetry."

The WAF is my primary concern, because, if God forbid, they don't match the decor, I won't be listening to them for long! There are lots of companies that ignore the WAF in favor of sound or price, but very few like Salk that successfully balance all three.

« Last Edit: 3 May 2018, 09:13 pm by NHSkier »

yetis

Re: 2017 wrap-up and challenges
« Reply #16 on: 1 Apr 2018, 02:53 am »
Thank you Jim.  Always interesting to learn insights into ones manufacturing process.  Sounds like Asian sourced cabinets aren’t your issue, it’s laminate and spray booths, so the finishing that is the bottleneck.
While always an unpopular option, I imagine your likely solution is to raise prices for complex laminate and paint jobs, and then move up production.  I have also marveled at the number of speaker lines you have, despite your more modest size. Maybe you don’t archive them entirely, but just offer in standard, less demanding finishes, leaving capacity for the higher value items.  Thank you and good luck in 2018!

Joe Frances

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Re: 2017 wrap-up and challenges
« Reply #17 on: 8 Jul 2018, 03:04 am »
Whatever you do, stick to quality and value.