March 12, 2019

Founder Interview: $100,000/mo Selling Carbon Fiber Guitars and Ukuleles

Hi everyone, Dean from Sumo. We recently started an interview series where I interview successful small business owners to learn more from their entrepreneurial journey.

Today, I have Adam Klosowiak from KLOS Guitars.

KLOS Guitars make the most affordable, durable, and portable guitars and ukuleles built for traveling, playing at home, and any other environment.

  • Product: Guitars and ukeleles
  • Founded: 2015
  • Location: Salt Lake City, Utah
  • Revenue: Avg. $100,000+/mo
  • Profit: Prefer to keep confidential
  • Founders: 2
  • Employees: 23

Now let’s dive into Adam’s story in his own words:

. . .

How it all started…

My brother Ian was studying mechanical engineering, and was in a class where they had to come up with a product that had not been made before.

He had done a lot of road biking and worked with bikes before. He was very familiar with carbon fiber. And he was also a guitarist for about 10 years at that point. He found that almost all carbon fiber guitars were $1,600 or more, and realized they didn't necessarily need to be that expensive to make, if you look at all the parts.

That process was happening at about the same time my travel guitar broke during winter, that he’d sold me a few years before. The wood had cracked because it was too cold. Coincidentally I was also getting more into entrepreneurship at the same time, at Princeton University where I studied electrical engineering.

All of those factors culminated together when I was visiting Ian out in Utah one winter. That was in February 2015, and there was a business competition that Ian asked me to write a pitch for his prototype. We entered the competition and won $1,000, which was enough to make a second one, and it kind of started rolling from there.

. . .

Prototyping for the competition v.s. the Kickstarter campaign v.s. building an actual product for the customers

There is a different mindset for creating a product with the intent of only ever making one product, compared to creating a product for mass production with the idea of scaling in mind.

For the first prototype Ian made, he didn't envision a company coming out of it at first, so sourcing and supply chain was not an element. He just wanted to get the parts he needed to make one.

For example, he bought a guitar from the pawn shop that was really cheap, took the neck off, cut the neck to the size that he wanted, and made the carbon fiber body.

There are several different processes you can use to make carbon fiber parts. One of them is having a female mold, then doing what's called an infusion process. That process took many hours for Ian to make the first one.

The key difference in making the initial prototypes for the crowdfunding campaign was that instead of trying to make three, we were trying to make the actual jig and the machine that would then allow us to make 70 or even hundreds after that. We spent a lot of time, almost more time I would say, building the machinery to make the parts, then the actual parts themselves.

We then moved on to build up the supply chain from finding suppliers to negotiating prices — all the elements that are part of bulk production. Which really wasn't part of the process when we were making one prototype.

For us, we have suppliers all over the world. For whatever part we need, we first reach out to our network. For example, Graph Tech is the biggest manufacturer of nuts, saddles, and machine heads for guitars. We met them at a trade show, so that in-person relationship existed.

We've also used Alibaba in the past to find suppliers for some of the parts. That would be a huge topic in and of itself about how to navigate Alibaba and how to sample.

Essentially it all comes down to having a good understanding of what the goal is, what the product is, and what the parts are. Once you have that, you sample prototype, get a small batch order, then a bigger batch, and move forward in that direction.

. . .

The first Kickstarter campaign that got 224% funded

I truly believe that crowdfunding is one of the greatest inventions currently for entrepreneurship.

Before crowdfunding, you either had to know people or take significant risks to obtain capital. Even when you do obtain capital, you still have to find a product-market fit. You still need your first customers, and you still need to launch. Now you can do all of that at the same time on crowdfunding platforms like Kickstarter and Indiegogo.

For us, because we had a physical product, Kickstarter was a natural platform. To launch our Kickstarter campaign, we made three prototypes.

Kickstarter has a few different elements:

  • The campaign page/pages
  • The video, which is a critical one
  • The distribution of your page (how you get traffic to your campaign)

For each of those elements, we were looking at the most popular Kickstarter campaign and figuring out what they did well, and then looking at at the worst campaigns and seeing what they did poorly to avoid that. We created our page and video based on these references. For video, we watched tons of videos as we storyboarded and outlined our pitch. Once we created the campaign page and video, we launched the first campaign.

We've done six crowdfunding campaigns now that have raised over a million dollars combined. For the first campaign, we definitely didn’t know what we were doing. We thought that if you have a good product and you launch it, everybody will magically see and know about the product, and want to buy it.

So in the summer of 2015, we launched our first Kickstarter campaign. We contacted all of our family and friends, and on the first day, we sold $5,000 worth of product. Our goal was $15,000 in 30 days. So we were feeling pretty optimistic. Then literally for the next 10 days, there was no activity on the page at all. We started getting really worried. We thought, “You know, maybe this idea isn't that good...”

We then discovered you have to come up with a distribution plan for it — advertise it, promote it, reach out and talk to blogs, and everything else. So halfway through the campaign, we started aggressively promoting it in various ways, and that campaign ended up getting to $33,000 (with 140 backers) and 70 customers.

We worked on those guitars and started building them for the next eight months. We were pretty late on the campaign delivery, but backers were pretty flexible and understanding. They knew that we weren't just creating 70 guitars. We were creating a system that could then continuously produce hundreds of guitars going forward.

. . .

Using Kickstarter as a product launch platform

Obviously, our product is not a recurring purchase product. We've had some customers who buy several travel guitars, but in general, you only need one travel guitar for yourself. So for us, the more important part of the question is the initial acquisition.

There are two types of campaigns in crowdfunding.

  • One-off campaign. Where someone does one campaign. Then once they’ve finished with the campaign, they're done.
  • Product launch campaign. Where people treat crowdfunding as a product launch platform for every new product they create.

For us, we now treat it as a product launch platform because there's a thriving community there that gives feedback. There are early adopters in these crowdfunding platforms, and they want to be the first to have the product. So we're always going to continue using crowdfunding as our testing ground for new products and new customers.

For our website, we generally promote it via Facebook and Google. Those are the two main advertising channels we use. Both those platforms reach hundreds of millions of people, so they’re great tools to drive traffic to the store.

In addition to that, we also reach out to blogs that write about guitars. As we get bigger, there's more word of mouth traffic and traction.

. . .

Seeing retail as a huge growth opportunity for the years to come

We've been growing pretty fast. In 2018, we broke the $1 million mark in sales. That’s 30x growth in four years since raising $33,000 from our first Kickstarter campaign in 2015.

We’ve refined our products consistently since the first launch in 2015. We truly think we have the best travel guitar out of all the competition. And our ukulele is one of the nicest ukuleles you can get in the market. Also, our third product, the full-size guitar sounds amazing. So we’re really happy with where the products are.

For now, we’re going to keep introducing new products. We have a few different products that we’re thinking about this year. They’re still not polished, so I won’t say which ones they are, but we do have some very exciting new instruments coming.

As for marketing, we’re exploring some retail strategies, like going to stores and partnering with them. It’s a new initiative that we’re starting this year. From what we’ve learned, instruments are very physical products. Most people want to pick up the instrument, see how it feels, does it look good with them, does the instrument sound good. So there are definitely objections and challenges when we’re selling online.

Although we’ve had good success online, the reality is that the bulk of sales (of the industry/market) still happen in stores. So it’s going to be a large opportunity for us to go to retail.

Another thing is there's a belief that direct-to-consumer online has a much bigger profit margin than retail, and that's definitely the case for some products. But for many products the cost of customer acquisition online is significant, and often that cost is not that much smaller than a wholesale discount to a dealer. So, we’re starting to explore the retail strategy. We think it could be a great addition to our business and won't impact the profitability of the product necessarily.

. . .

The most influential resources to the KLOS Guitars’ team

There are definitely many great resources out there for entrepreneurs. Here are a few that are incredibly helpful and valuable for me and my team:

[Podcast] Masters of Scale by Reid Hoffman
One podcast on the business side that I've enjoyed listening to is Masters of Scale by Reid Hoffman, the former founder of Linkedin. He talks about scaling businesses, so that's always exciting to listen to.

[Book] The Goal by Eliyahu M. Goldratt
It’s a great book on manufacturing. It presents the challenges and bottlenecks in manufacturing, and how to overcome capacity constraints in a story-based fashion. That's interesting because manufacturing can often be a dull subject, but the book makes it an exciting topic.

[Book] The Toyota Way by Jeffrey Liker
Another book that I know has been very helpful for our team has been the Toyota way, which also talks about manufacturing principles.

[Other] Good relationships and strong network
Honestly, for me personally, I always try to reach out to people that have already done what we're trying to do in a different industry, or have gone through similar challenges. And I seek out advice from people that I really respect. Also, I've been fortunate to have several friends in my network that have been helpful along the way.

. . .

Adam’s advice for aspiring entrepreneurs

1 / Entrepreneurship is an excellent experience, but not for everyone
I think entrepreneurship is great. It's been one of the best experiences I've had, if not the best professional experience I've had. But I do think it's important for people to go in for the right reasons. It's definitely not for everyone.

It can be very stressful. It's not always stable. Things don't always go well. If someone knows they're the type of person that likes having a stable job and steady salary, I wouldn't recommend entrepreneurship necessarily.

Anyway, it’s a great learning experience. Many people think they’re not cut out for it but when they give it a try, it might actually be a good match.

2 / Keep an open-mind to different learning opportunities
I can see that some people feel like they should rush into starting a company, they have to be a founder, or they have to be on the starting/founding team. But there is a lot you can learn from companies that have already started, well established, and are doing a lot of things well.

In fact, I think many times you can learn much more at a company like that than in a small scrappy startup. If you go to a company, let's say that has 20 to 50 people, and you stay there for three years, you can learn excellent interpersonal skills, you can dip your hands in different buckets like marketing, supply chain, distribution, etc.

Oftentimes you'll be much better equipped to start your own company than had you forced an idea three years earlier with no experience.