These kinds of business are worth very little because the “profits” really just go to the payroll of the owner/operator.
He’s stuck because he IS Rivendell but at the same time is the biggest reason it’s particularly not profitable. He’s sucking out enough to live on and draining the business of capital in the process.
Small owner/operator businesses all suffer from this. It’s the same reason most bike shops are not really “worth” much. Unless your model is scaleable it’s bordering on worthless as a capitalist venture. It’s a vanity project at best.
The “brand” has value but any potential changes to make it viable are just as likely to kill it among its core customers. It’s not widely known enough to be bought for that purpose by anyone with any real money to throw at it.
I bet even QBP would be a hard pass. Why bother when you’re already slinging Salsa at rei?
Hell, they don’t even have any real assets beyond current inventory. No real estate, no machines, nothing. Just every increasing overhead and an ever shrinking customer base.
So a loan of $500k would need to return $12k/year for 30 years to match the bank just buying T-bills? Given flat sales over 12 years and increasing debts to the point where today it’s only raking in $8900 the trendline does not point to a miracle of trickledown.
Jesus, he’s gotta get out of the bay area. That’s probably worth $200k/year in rent alone, and that’s a margin that would make a bank more interested in loans.
You also don’t know their assets. It’s a different story if their profits are low because they have invested in inventory that is more profitable in the long run.
Bike industry as a whole is shrinking.
His core customer base is aging.
He’s facing increased focused competition for new customers from Crust and VO (not to mention old adversaries like Surly, Soma, Salsa etc).
His Hail Marys have been successful so far…
You make good points about how to try and right the ship. But it’s still a ton of risk for little reward. “Smart” money just goes into some tech stocks fund or something equally predictable.
It’s only worth what someone will pay. On a list of things to throw more than $50k at its pretty low.
I think the hard truth it’s that we all know HOW to probably fix Rivendell but it’s probably not for sale at a low enough price to be actually viable.
Purchase price of brand and assets.
Cost of relocation.
Cost of revamping everything from the website to the individual models.
Cost of new inventory.
Reduced but still very real overhead.
Even if you got the brand for cheap the REAL cost is rebooting. Ideally at least half million bucks for that.
Or the per-item price is rising enough to compensate for losing customers. His description of how few packages have been mailed recently may just be post-christmas blues, or it may be this.
Not only is Grant the brand, but I wonder about the institutional knowledge and personal relationships he embodies. Could a new owner expect to work with the same factories and receive the same treatment from other suppliers? I truly have no idea but I wouldn’t discount the value of his personal involvement in the non-public facing parts of the business.