For luggage maker, taxes a ‘blood-sucking parasite’ on business
FROM the outside, Don Chernoff looks like he has the life.
The 57-year- old former Intel engineer lives comfortably in Reston, Virginia, where he runs his one-man luggage company, answers only to himself and pockets a low six-figure income.
It doesn’t look so glamorous from where he sits.
Chernoff and his 16-year- old luggage firm, called SkyRoll, have weathered two recessions, a retail downturn, occasional problems in his supply chain and an 18 per cent import- duty tax (it came to US$ 100,000 last year) that the curmudgeonly businessman really, really dislikes.
“It is analogous to having a blood- sucking parasite attached to your body, except it’s the federal government and they attach themselves to my wallet,” he said.
The story of how a materials engineer and inventor ended up selling luggage comes down to a simple motivation: “I wanted to work for myself.”
His road to self- sufficiency includes educating himself on patent law, joining an inventor group, endless cold- calling of retailers and - the fun part - creating new products.
Chernoff asked me to write about the unglamorous side of business ownership after reading my recent column about another entrepreneur who had to unload a big chunk of his stock portfolio at a big loss to keep his family fed during the lean startup years.
“I really hope you can write in more detail about the other issues that make it hard to survive as an entrepreneur,” he said. Between recessions and taxes, “sometimes I feel like, no matter what I do, I’m at the mercy of forces beyond my
It is analogous to having a blood-sucking parasite attached to your body, except it’s the federal government and they attach themselves to my wallet.
control. No one writes about the unglamorous side.”
This lone- eagle entrepreneur spends his day at home trying to get the word out about SkyRoll by working social media and talking to journalists like me. He also checks in with his manufacturers and his shipping company to keep tabs on the supply chain.
So what is the hard part?
“All of it,” he said. “But for me personally, it’s sales and marketing. I am not (emphasis his) a sales and marketing type person. ( No kidding, I thought.) Then accounting, which I hate.”
SkyRoll’s product line is made up of three polyester-andnylon luggage pieces, including - in order of sales volume -a cylindrical garment bag that slings over your shoulder for US$ 149( RM671), a SkyRoll on two wheels ( US$ 249) and something called the Spinner ( US$ 299). SkyRoll’s “differentiator” is that they are “roll up” bags that allow you to carry suits and dresses without folding them and risking creases. The military tends to be good customers because they need to keep their uniforms sharp.
The products are made in Thailand and China and sold through SkyRoll’s website, as well as at Men’s Wearhouse and Jos. A. Bank bricks-and-mortar retail stores. They are also in a Canadian men’s store called Moores and some independent Washington-area luggage shops. The retailers account for 75 per cent of total sales; the rest is direct to customers through SkyRoll’s online site.
The luggage is shipped in containers to the Port of Los Angeles, where they are then moved by truck and train to distribution centres or, sometimes, directly to the stores. The cost to ship a 40-foot container from Asia to the United States is around US$ 5,000, not including import duty. SkyRoll’s annual revenue drifts between US$ 1 million and US$ 2 million, depending on how many units are sold. A good year will bring 25,000 in sales. A poor year will see that number drop to 10,000. Chernoff prefers online sales because he gets to keep more of the sale price.
So Chernoff’s bottom-line profit, which he lives on, can run from more than US$ 100,000 to well over US$ 200,000 after subtracting costs for manufacturing, shipping, Web design, accounting and that dreaded import duty. The company has zero debt.
Chernoff began his business career at Intel, where he helped make computer chips for US$ 25,000 a year in California. He had just graduated from the University of Florida in 1982 with a materials engineering degree. He developed a speciality in something called electron microscopes - expensive technology used in industry.
Around the mid-1990s, when he was a 30- something, he was on a flight when he saw a fellow passenger trying to jam his garment bag into the overhead compartment by folding it in half.
“That just gave me the idea that the shape is wrong,” he said. “The solution may be to make something that rolls up.”
He experimented in his spare time, building prototypes, buying fabric and messing around with different shapes at his Silicon Valley apartment. He took a night class on intellectual property at the University of California at Berkeley, learning enough to file a patent for the SkyRoll.
“It was a great introduction to the nuts and bolts about patents, trademarks and copyrights,” he said. “It should be a required class for any inventor.”
He had no idea he wanted to start a luggage company. But he did know he wanted to invent something to turn into a business. — WP-Bloomberg
Don Chernoff, luggage firm owner