He retooled, fixed a struggling furniture factory into machine
I AM FASCINATED by people who buy troubled businesses, then fix them and make them profitable.
Gaston “Gat” Caperton’s story is compelling because Caperton, the son of a former governor, fixed a sickly furniture company in little ( population 610) Berkeley Springs, West Virginia, two decades ago and runs it to this day.
He didn’t sell it to XYZ Corporation or a private- equity firm. He didn’t break it up and liquidate the parts.
Caperton has owned Gat Creek furniture, which manufactures beds, chairs and tables from Appalachian cherry trees and sends them across the country, since 1996.
“There’s not many people crazy enough to manufacture wood furniture in this country these days,” Caperton said. “We’re a little crazy and have enjoyed most of the ride.”
It took him all of an hour to decide to buy the ailing furniture factory.
It was spring 1995, and Caperton, eager to test his business chops, was touring the Tom Seely Furniture company in Berkeley Springs.
“I decided I wanted to buy a small business next in my life,” said Caperton, now 50. At the time, he was analysing businesses for real estate mogul Sam Zell in Chicago while working on a master’s in business administration at night. “I thought manufacturing was different and cool. I wanted to find a small manufacturing business I could buy.”
Enter Tom Seely Furniture. It was a US$ 10 ( RM40 million)million- a-year business founded by a 75-year- old former pilot with World War II’s Flying Tigers. And it needed rescuing.
“The manufacturing process was a disaster,” Caperton said. “The factory wasn’t clean. There was a lot of sawdust around. But it was dirty in both senses. Inventory was all over the floor. Stuff wasn’t organised. There were piles of works-in-progress all over.”
Caperton was an hour into the tour when he had his diagnosis.
“If you could fix the manufacturing in this operation, make it leaner and more efficient, you could generate a lot of cash to pay down the debt and have a profitable business,” Caperton said later.
The target was US$ 3 million in the half-built, unsold furniture and raw materials lying around the factory. Reducing that by half and keeping it that way would throw off US$ 1.5 million in cash that would be used to reduce the debt.
At the end of the tour, he turned to Seely and said that he would move to the community and run the business in a way that Seely would be proud of.
Caperton had one other demand: He wanted Seely to finance the US$ 4 million purchase price.
“One, I didn’t have enough money,” he said. “And two, if he would not finance me, I would think the business was a ticking time bomb. I would walk away.”
Seely agreed to a five-year promissory note for about US$ 3 million. Caperton borrowed and put in his own money to fund the rest of the purchase. He became the owner of Gat Creek furniture in January 1996. The name came from a backyard creek he and a brother splashed around in during their childhood in Charleston.
Caperton went to work cleaning up the business. He instituted a practice called “lean manufacturing” that was popularised in business circles by the Japanese.
“In lean manufacturing, you try to eliminate everything your customer does not pay you for,” he said.
In other words, make the stuff as efficiently as possible and get it out the door to the customers. Electrical costs were shaved. Floors were swept, and then the sawdust was used to power the heating system.
New clamps were bought to cut in half the time it took to make some pieces.
He modernised the shop with spray booths and baking ovens. He installed dust collectors that kept the air clean.
Furniture was built one piece at a time on order so that it didn’t sit around, waiting for a buyer.
“If you can build stuff one at a time as efficiently as 10 at a time, you get rid of inventory and become far more costcompetitive,” Caperton said.
Within a year, he saved his US$ 1.5 million and used it to pay down his debt, almost exactly according to plan.
The company was soon growing 10 per cent a year and turning a profit.
Gat Creek now employs 140 workers at US$ 20 an hour, including health care, a retirement fund match, holidays and vacation. Gat Creek sells US$ 18 million worth of tables, chairs and beds annually.
The factory turns a six-figure profit. Caperton said he takes a salary and a dividend from the profit. He owns 75 per cent of the company. The rest is owned by a brother who lives in California.
“We make a bit of money,” Caperton said. “It’s not Apple.” — WP-Bloomberg