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Angling into a compelling business


Start-up lesson number one, if experience is our guide, is to invest in a product unique to Oregon that is about to be the topic of a major motion picture. It worked fabulously for Oregon Pinot Noir following Sideways. But before that, it worked even better for those in the business of angling for fish with a rod, reel and fly.

The Pacific Northwest’s boutique fly fishing industry found its unexpected spokesman when Brad Pitt chased big fish against the incredible backdrop of Montana in A River Runs Through It. Talk about a visual marketing campaign.

“That movie kicked the fly fishing business in the tail,” Jon Bauer, founder of Bauer Fly Reels in Ashland, Ore. recalled recently. “That propelled the fly fishing industry for ten years. All these people saw the movie and fell in love with it and had to go do it.”

Bauer was one of those caught up in the momentum, which also grew because of a dramatic sweep of history. In addition to Pitt, another big name of that era – Ronald Reagan – had a little bit to do with it. The Cold War Era fell with the fall of the Soviet Union and the destruction of the Berlin Wall. Defense spending dropped. Back in places like California, machine shops bore the brunt. Many had to reinvent themselves just like a Bauer, a race car driver with a machinist background.

“Everybody and their brother who had a machine shop was trying to make a fly reel in the 1990s,” Bauer said.

Bauer beat them all to the punch and he did it by literally reinventing the wheel.

Re-inventing the wheel

Bauer, now 65, was in his early forties with a new family when he needed a new career. Being a race car driver doesn’t prepare you for much outside of racing. He said he considered a startup business within the field of racing that he knew well.

11043050_929517320414677_4805936100096403220_n“That was, for me, deep water,” he says. “You had to have a lot of money and I didn’t.”

What being a race car driver did prepare him for—combined with his machinist background from his youth—was to make things.

“In racing we were designing widgets all the time. That’s how you stay ahead and win,” he says.

So the next career move, he figured, would involve some type of new widget that he could put his name on and sell. Riding the aforementioned wave of interest in fly fishing and being an angler himself, he thought a lot about the reel.

“It’s a pretty simple device and they’ve been made in a certain manner for many, many, many years,” he says.

That lack of innovation created an opening. Also, coming from a different industry all together, he thought differently than those trying to improve the reel. He thought about truck winches and race car wheels and how both generate power and speed. He applied some basic physics, a larger wheel (called an arbor) and new clutch technology, all of which came together in a patented design that makes Bauer Reels one of the best reels on the globe still to this day.

“Large-arbor fly reels are the hottest thing in fly fishing since the introduction of graphite rods in the 1970s,” wrote Field and Stream magazine.

“It’s illogical to have it any other way,” Bauer says. “It was not only large arbor, but a one-way clutch that I designed. Eliminating the number of parts, better costs, less things can go wrong. It was a game- changer. It was totally different and that’s what made such a big splash. As a result, any reel company of any consequence today all make large arbor reels. We really changed the industry.”

Oregon made craftsmanship

So start-up lesson number two might just be this: if you expect to profit from a major motion picture and the glamorous star power of a Brad Pitt, your product better be good – industry-leading to be precise. Here, like Oregon Pinot Noir, fly fishing in environmentally protected free-flowing rivers and streams elevate the quality of the experience throughout the Pacific Northwest.

Bauer’s reel remains an industry leader.

10710554_844675922232151_5783647888767386693_nStill made by hand (often Bauer’s hand) in an Ashland shop, Bauer reels are an industry leader in a sport that dates back to second century Rome and the art of Tenkura in Japan. Fly fishing is above all, to those who enthusiastically defend and participate in the sport, an art form. Bauer is a foremost artisan, his supporters enthusiastically say.

“Passionate fly angler, precision fly reel designer and a champion race car driver, I personally don’t think Jon has it in him to do anything in life less than perfect,” blogged Greg Darling, internet sales manager for Gorge Fly Shop. “The first thing I took interest in was Jon’s workbench… clean, neat and all in order.”

From that workbench comes reels others rave about.

“The new RX5 performed flawlessly and this reel just might be Jon Bauer’s masterpiece,” wrote Dylan Rose of Fly Water Travel.

Dave McCoy, owner and guide of Emerald Water Anglers, says Bauer’s reels have served him well fishing in every part of the globe, from Alaska to New Zealand and virtually every continent in between.
“It is very smooth, and has wonderful sensitivity to the drag so it can be set perfectly,” McCoy says.

Business challenges

As it turned out, inventing a new reel system for centuries old technology was the easy part.

“We didn’t quite pull off that plan to retire up here,” Bauer says of his move to Ashland in 2005. “We did hit the peak when we moved out of California, which helped a bit I guess.”

The fly fishing industry had cooled. Again the sweep of history played a hand, this time not for the better. First came Sept. 11, 2001, which dramatically impacted travel. The next few years were bumpy, full of peaks and valleys not uncommon to a small business, even one with a globally recognized brand and industry leading patent.

Then, off-shore manufacturing provided stiff competition as quality increased.

“The whole model has changed because of the influence of what’s being made in China and Korea,” he says. “It hasn’t gotten any easier, but I think there is a little swing of manufacturing coming back into the states. But that takes a long time.”

The tough business climate was only going to get worse.

“2008 really put a stop to everything,” Bauer says. “Fly fishing is a small, tiny, miniscule industry. The recession hit the distribution hard. The larger companies with a broader product line gobbled up the retail side of it which takes us out of the equation.”

Bauer only makes reels. Not fishing poles, not waders, not even an inexpensive bulk manufactured knock-off reel made in China. Distribution networks are critical and most are on life support.

“A lot of fly shops couldn’t make it,” Bauer says. “We use independent sales reps, and of course a lot of them couldn’t make it either. It’s been difficult.”

10849946_872572852775791_3502392861608260093_nBut confidence in both Bauer quality and Bauer himself remains high as those within the industry appreciate Bauer’s contributions.

“Jon is a charismatic, knowledgeable and passionate purveyor of his product,” McCoy says. “In this sport, we need as much of this as possible to inspire and lead the next generation to carry that torch forward and Jon is doing an exemplary job of it.”

The obvious question begs to be asked, so I do. Will the brand be bought out?

“That’s a big topic right now. Because of the ups and downs of the economy we’ve been approached several times, but it’s never been completely done. We’ve built a good brand but there are fewer companies that can afford to buy up these brands.”

Personally, he says, he’d like see an independent like himself—another machinist looking to keep the machines running—buy him out. But he’s listening to offers. He’s considering the exit strategies and thinking seriously about the future of the sport he loves. He still has a place on the Williamson River in Southern Oregon, the place he bought to retire and fly fish that still beckons.

“I gotta figure out that puzzle,” he says, which is not altogether unlike the puzzle of the reel itself that he solved and launched himself into the history books of a historic sport.

For more information, visit Bauer Fly Reels or like Bauer on Facebook.

Craftsmanship meets impact


The old Quonset hut situated near the I-5 freeway has been a fixture for decades in this southern Oregon town, but the energy level and innovation taking place inside is entirely new.

The Quonset also represents a calculated gamble that not only can manufacturing re-energize this rural Oregon community with good jobs and high return on investment, but that the business within – Roguewood Furniture Company– can compete with venture capital dollars that are most often associated with 21st century technology rather than old-school product making.

Harmony in discord

But don’t tell Elizabeth Bauer this gamble isn’t prudent. Her whole business is built on taking discordant ideas like this one: scaleable investment in rural manufacturing, or like this one: sustainable forest products, and making them not only meaningful, but profitable and of high community value.

20141021_Roguewood_0162Bauer, 37, is the president and founder of Gilded Rogue, an Ashland, Ore. investment company that launched last year. It has since purchased three southern Oregon businesses, including Roguewood and its retro Quonset hut.

“This is a good company that just needed a little bit of love,” she says of Roguewood.

Bauer came out of the grocery industry where she worked as a CFO for massive company with 2,700 employees and annual sales of nearly half a billion dollars. She said her time in corporate finance taught her that many businesses are lacking the language to compete for investment dollars.

“I’d hear all the time,” she says. “There is nothing to invest in. I know it isn’t true but I realized they are speaking different languages.”

Which lead to those seemingly discordant terms being merged together in an old-school business model that can attract cutting-edge investment dollars.

Embracing rural Oregon

“There is a lot of angel money for startups, but not as much for ready-to-scale investment. That’s our sweet spot,” Bauer says. “We’re really about accelerating. We’re trying to get companies out of that first stage and into stage 2 or 3 expansion.”

Bauer said the mission is straightforward and simple. They are looking for companies within the rural Pacific Northwest that have potential sales growth and potential social impact.

Both, she insists, are critical.

“The impact is built into the costs, say, like the wood we use,” she says, because compromising local impact would dissolve the mission. Each company under the Gilded Rogue umbrella must be focused on “benefiting a social issue and making a difference in the world,” according the company’s website.

Building on what works

“The do-good stuff is more than a slogan in the daily operations of Roguewood. It translates in observable ways into the work place, just as when Quin Wilson, a Roguewood furniture designer, returned from a hunt for reclaimed wood. Wilson described the value of the large beams he brought back like trophies of his latest expedition.

20141008_20141007_Roguewood_0175-3I got this out of a saw mill they are tearing down in Klammath Falls,” he said.

He struggled to hold the massive beam—perhaps a 2×12 to an inexpert eye—on its end.

“See how tight that grain is. New timber today may have as much as 1/3 of an inch gap. But this is so much higher quality…” Wilson explained, then segued seamlessly into his plans for converting the beams into a new artisan table.

Wilson plans to smooth out the grain (“just a little, so it’s smooth, but still looks right”) and fill in some holes. On the spot he bought a significant amount of the wood on site and dragged plenty back in his truck.

“How much?” Bauer asked.

“$2.50 a square.”

“Very nice,” she said.

Wilson was also excited about a new wood he’s exploring as a potential product.

“I just found another type of wood I think we might want to take a look at. It is yew wood. It’s a salvage wood. It has a lot of potential,” he reported.

Bauer encouraged him to take a look. No micromanaging here. That freedom, Bauer says later is a big factor in Roguewood’s plan. Bauer, who is now serving as the company’s CEO, is building the business around the craftsmanship and quality that already existed. The employees will be the eventual owners, so autonomy now—with a guiding hand on the business side—is critical. Empowerment is a big part of the growth strategy.

“It’s like putting floaties on a company instead of tossing them into the deep end,” Bauer says.

Economic Rebound

Based on the early explosive growth under Bauer’s leadership, Roguewood won’t need the floaties for long. The word is out in the community as well. Former employees are returning, applications in hand.

“I shouldn’t have left,” one man says as he quickly dropped off his application.
Inside the Quonset hut energy and activity hums. Different sections are used for making different products. The smell of steel saws burning through hard wood mixes with the noise of machines in high gear. But the relaxed vibe of the work represents more high-school woodworking class than high-pressured manufacturing.

In October Roguewood hit $250,000 in sales and ramped up to 60 employees, up from $120,000 in sales and 17 employees back in July. November sales will hit $350,000, Bauer says.

“We just need to get them out the door,” she says of recent sales.

November will also be the first month of a new strategic partnership with Sawyer Paddles and Oars, which agreed to move its manufacturing into the Roguewood site. Employees will be able to cross-train in both furniture manufacturing and paddles, according to Sawyer President Peter Newport.

“I think Liz is an amazing leader,” Newport says.

The partnership fits with what industry experts say is the future of American manufacturing. John Bova, director, MTN Capital Partners LLC, told Industry Week streamlining is the future of American manufacturing.

“The types of decisions that needed to be made include streamlining of go to market, successful new product introductions from a strong pipeline and steady global business investment. Those will be key characteristics for manufacturers poised for higher growth levels,” Bova said.

Lead with sales

It’s all part of the process Bauer envisioned when she first focused on Roguewood.

“Sales came first,” Bauer says. “Then came the employees. Now we’re connecting all the dots,” said Mariam McVeigh, Roguewood’s director of sales. She shares that the arrival of Bauer and her team has infused the company with creative energy.

20141021_Roguewood_0472“It’s like my handcuffs came off,” she says. “The potential always has been there. We have the product and quality and we have the reputation. Now we have the possibility.”

McVeigh used her personal connection to an employer at the Wild River Brewing Company to land a new account. Shaun Hoback, manager of the brewing company, said he just signed a contract with Roguewood for new dining room tables and matching décor that includes old photos of the mills in town and new sustainable products made there including Sawyer paddles.

“Those paddles are gorgeous,” Hoback said. “We want to connect first and foremost with local companies. But the story behind the wood, the company, the industry here, all plays a part in why we want to do business with them.”

Bauer also brought in a team of professionals to help Roguewood organize its front office. One of those is Sam Leaber, systems administrator for Gilded Rogue, on loan to Roguewood.

“Companies don’t always know what they need until it all goes wrong,” he says.

By having Leaber available, Roguewood can improve its online presence without the added cost of a full-time IT guy. Bauer’s husband also pops in, helping out with any number of tasks as needed.

“The more we do this kind of stuff,” Bauer says, arms sweeping across the spartan office space, “the more they can do what they do best, building a great product.”

Significant impact

For all the business savvy, the mission remains impact-centered, much like Wilson’s hunt for reclaimed wood and Bauer’s determination to build a solid, permanent workforce. It also is evident in the exit strategy Bauer has in mind, which is to eventually sell the company to the employees themselves.

Because the company was undervalued and is now getting the lift it needed it should soon hit industry standards, Bauer says. That realized growth will allow the employees to buy her out. It means a company will sustain in the community that gave it life and will benefit that community long after Bauer is on to other projects.

20141023_roguewood_0240-2Bauer knows profits are critical. But unlike much of the venture capital world that is looking for the explosive dividends of tech companies that require 10 times the amount invested in returns, Bauer says the same return can be realized with a lower rate of growth with fewer failed investments.

“There are a lot of companies out there that don’t fit the 10x model,” Bauer says. “But we sort of put them together to outperform that model. We don’t have the eight in ten failure rate to absorb. It allows us to succeed.”

It also allows them to continue to make an impact, like donating money to the Ashland-based Lomakatsi non-profit that educates children about forest health. For every piece of furniture Roguewood sells, Lomakaski is given money to plant a tree, Bauer says.

Bauer says the company must excel and the impact must be reflected in the product, which “drives money into impact.”

She says the overall aim of the company is connecting the diverse artisan craftsmakers in the Pacific Northwest to the burgeoning market of clients across the globe.

“If we can do wood products right, in a sustainable way, here in Southern Oregon, in timber country, well that’s a great model for everyone,” Bauer says.

A model Bauer is willing to gamble on.

For more information, visit http://www.roguewood.com, follow Roguewood on Twitter, or like Roguewood on Facebook.