Why did it take ten years to make the first sale? How did they grow to sell over three million tools a year? I’m not sure I could have done what Tim Leatherman did.
Dave Young:
Welcome to The Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Steven Semple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.
[Jim’s Razorback Pizza Ad]
Dave Young:
Hey, welcome back to the Empire Builders Podcast. Dave Young, along with Steve Semple here, and we’re talking about the Leatherman tool, which is, man, I’m going to let you just run with this because it’s like somebody that finally made a Swiss Army knife useful.
Stephen Semple:
Leatherman was founded by Tim Leatherman, hence the name.
Dave Young:
Wait, that’s his name?
Stephen Semple:
That’s his name. I know, when I first saw the Leatherman, I thought, oh, this was made by some guy who worked with leather and things along that lines, but no, Leatherman is his last name.
Dave Young:
Oh, how cool is that?
Stephen Semple:
Yeah, it was founded by Tim Leatherman. In 1982, they made their first sale of $175. The next year they sold 200 tools, the following year, 30,000 tools, and two years after that, so basically in 1986, 4 years after that first sale, they were doing 160,000 tools.
Dave Young:
Amazing.
Stephen Semple:
Then in 1993, basically 10 years after that first sale, they hit the one million tool mark. They had been basically growing at a 50% a year growth. Today, they do about three million tools a year and the business is estimated to be worth $100 million, and it’s still 100% owned by the founders.
Dave Young:
Oh, no kidding. We’re recording, we can see each other on camera, but I have this Leatherman. I don’t know, I’ve had this sense probably their early days. I don’t know if it’s got a date on it.
Stephen Semple:
Yeah, they’re cool tools.
Dave Young:
Yeah.
Stephen Semple:
In many ways, they feel like this real overnight success, where they go from one tool to 200 tools, to 30,000 to 160, to three million. That first sale that they did, it took them seven years to make that first sale happen, seven years of zero sales. Here’s what ends up happening. Tim grew up in Portland, Oregon, and he got a degree in mechanical engineering from Oregon State. At university, he met the love of his life, Chau. After graduating, he moved with her back to Vietnam, because she was Vietnamese. While in Vietnam, he noticed that there was all these kids that had these roadside stands that could repair just about anything. He realized he couldn’t repair things, and so he looked and he goes, “My degree’s really not practical. I really need to figure out some practicality,” so he started taking things apart and fixing them.
Stephen Semple:
Now, just before Vietnam fell, he managed to get himself and his wife and their family out and they returned to Oregon, but once they settled in Oregon, they decided, he and his wife, he and Chau decided they wanted to travel Europe. In 1975, they decided to travel around Europe, especially Eastern Europe. They had heard the best place to buy a really cheap ass car was Amsterdam, so they went to Amsterdam and they paid $300 for this Fiat. The way he describes his Fiat, he says, “Think about a Volkswagen van and reduce it down by two thirds, and that’s your Fiat.” It’s this little, tiny vehicle.
Stephen Semple:
They do this 10-month trip traveling around 17 countries. He had this little, like you were saying, Swiss Army knife, this little Boy Scout pocket knife, Swiss Army style. He used it for everything, for fixing things, and this beat up old Fiat needed a lot of repairs. But what he noticed was there was a lot of times he needed pliers, and there was also times when he was repairing the car he noted there was deficiencies with the knife. Every time there was a deficiency, he had a notebook, he started to write it down, wrote down all the deficiencies with this knife.
Stephen Semple:
In 1976, he returns to Oregon and he decides to make a tool. He asked his wife, “Can I make one? Can I make a tool? Can I take some time off, make a tool?” She asks him, “How long’s it going to take?” He says, “A month,” okay? She went to work to support him and he went and made a tool. He started in his brother-in-law’s garage using scrap metal and things from other tools. He’d make one and discard it because it was too big and he’d make another. Basically, it took him two years to make the first knife. Two years in, he’s got a knife. His idea was, “I’m going to make the knife and I’m going to sell the patent.”
Dave Young:
Okay, sell the patent, there you go.
Stephen Semple:
Yeah. He approaches this knife company, Gerber, and they did an evaluation. They got back to him a few weeks later and they said, “Tim, not interested. This is not a knife, this is a tool. It’s not what we do, we make knives. This is a tool.” He thought to himself, “Well, these guys might not be right,” so he approached every knife company in the United States. None of them were interested. He thought, “Well, you know what? Maybe these knife guys are right, maybe it’s not knife, maybe it’s a tool.” He starts approaching tool companies. He approached every tool company in the United States, and what they said to him is, “This is not a tool. This is a gadget, and gadgets don’t sell.” In 1983, if you think about this, he started on the tool at 1983, 7 years later, he goes to a knife show. At the knife show, he sells one.
Dave Young:
Finally, somebody bought one.
Stephen Semple:
Around this time he decided, maybe it’s time to get a real job. Tim Leatherman found a job selling welding products. It was a great job for him because he was meeting manufacturers and he shared this knife with all of them and asked for advice. He’s now almost seven years in and a friend of his, Steven Berliner, buddy from university, steps in and says, “Let’s be partners. There’s a few things we still have not tried.” Steve’s dad had a manufacturing business and Steve’s education was on the business side. Steve’s idea was let’s get an order before we go into big manufacturing. What they realized is they needed to make 4,000 knives to make some money, so they started going, “Okay, who buys a lot of knives? Well, the US Army does.” They approached the US Army and the US Army said no. They said, “Well, AT&T has all these technicians on the road?” No. They approached mail order catalogs next. At the time there were 280 mail order catalogs and they got 279 nos, okay?
Dave Young:
I know who gave them a yes.
Stephen Semple:
The last one was in Seattle, not far from Portland. They hopped in their vehicle and they drove to Portland. They paid them a visit and they showed them the prototype. The price of the Leatherman that they were going to sell to the catalog was $40, so the catalog would have to sell it for 80. Instead of saying no, they actually did them a really big favor. What they said was, “Can you make it less expensive and less complex,” rather than just saying no.
Stephen Semple:
Tim goes back to the drawing board and six months later they can offer it to the catalog at $24. “Are we good?” They said, “Yeah, that’s a great price.” “Will you take 2,000?” They said no. But Cabela’s-
Dave Young:
Right.
Stephen Semple:
Is that who you were guessing?
Dave Young:
Yeah, yeah.
Stephen Semple:
Yeah, so there you are. Ring the bell for Dave.
Dave Young:
I grew up where Cabela’s headquarters was.
Stephen Semple:
Oh, is that right?
Dave Young:
Yeah, I’m sure that’s where I got this one.
Stephen Semple:
Cool. Cabela’s bought 500 tools, $12,000 worth. They made this purchase in May of 1983 and it was for delivery in late December. After eight hard years, they finally have an order of more than one, but they’re still 1,500 short of how many they need to make it reasonable. But one of the small things that they did that Tim Leatherman feels made a big difference was what they called the product. They called it a pocket survival tool.
Dave Young:
Stay tuned, we’re going to wrap up this story and tell you how to apply this lesson to your business right after this.
[Empire Builders Ad]
Dave Young:
Let’s pick up our story where we left off, and trust me, you haven’t missed a thing.
Stephen Semple:
This appealed to the survivalist market, which is a tribe of people.
Dave Young:
Yeah.
Stephen Semple:
And it appealed to your extreme camping outdoors person. They have this order for 500 tools, and in the early winter they get a telephone call, “We’re sold out. We’d like 250 more tools.” Then they got a call in the early December and they said, “Yeah, those 250 are sold. Could we order 500 more?” A week later, “Those 500 are gone, here’s an order for 750.” A week later, a thousand tools. Now, these weren’t all coming from Cabela. What they noticed was the mail order catalogs all watch each other, and so when one saw something selling, all the others were jumping on it. Finally, it was selling like crazy.
Dave Young:
I know back in those days, Cabela’s was printing, at one point, I don’t know if it was the mid ’80s or not, but probably getting pretty close, they were printing more catalog pages every year than JCPenney.
Stephen Semple:
Oh, is that right? I had no idea.
Dave Young:
This is in the catalog days, right?
Stephen Semple:
Yeah.
Dave Young:
This is the catalog hey days.
Stephen Semple:
Yes, yes, it was. Again, in 1983 they do that first sale of 200 tools. 1984, they did 30,000 tools and turned to profit. 1993, 10 years after that first Cabela order, they’re doing a million tools. Then in 1996, they built this big facility for doing all the manufacturing in Portland. One of the things that Tim Leatherman is very proud of is the number of really good paying jobs he created in Portland, because the Leatherman is not cheap. It is made in the US, doing US labor, and one third of their sales or exports to around the world. It’s a real testament to what they did. Look, they also had a big bump in the road, 9/11 was really tough on them. Well, because what happened is you couldn’t travel with-
Dave Young:
There’s millions of them getting taken by the TSA and thrown away at airports.
Stephen Semple:
Yeah. If you’re not carrying it with you all the time, you kind of forget about them. They had to introduce some new products and do some changes.
Dave Young:
I had a mini Leatherman tool that I loved, that I carried in my pocket all the time, a tiny one. It got taken in the first flight I took after 9/11, lost it.
Stephen Semple:
Yeah. If you’re not carrying it, people aren’t seeing it in the little pouch and things along that lines, because what they know was people seeing it created a lot of the sales, because what is that. 9/11 impacted them and they had to create new products and they recovered from that. Then when the pandemic came along, they thought that would finish them, but it actually turned out, because people were home doing a lot of projects and things like that, end of 2020 was their third best year and last year was their best year ever. They now make around three million tools a year, and as I said, a third of those export around the world using US labor. Tim is very proud of that fact that he’s been able to create these net new jobs in the United States.
Dave Young:
Yeah. Oh, he should be. What a great story, I’m happy that they’re doing really well still.
Stephen Semple:
Yeah. There’s one part that I really struggled with in this story, especially when we get thinking about the lesson. There’s this perseverance, but there’s a certain point where I always struggle with the perseverance one, there’s a certain point of when do you cut and run? I’ve got to tell you, he hung in way longer than I ever would have. Seven years of not making a single sale would’ve been really tough, but a tribute to him. He believed in it, he persevered, he hung in there.
Dave Young:
He was following this dream and kept pushing on it.
Stephen Semple:
It was only in that last year that he went out and he took a job with selling the welding stuff. No, it was for most of that time, it was every day, tinkering and working on this. Now, but I wonder about something, because if he was my customer, one of the problems that you have when you’re working through somebody else, so in this case you’re working through a knife company that you want them to sell it or a tool company and you want them to sell it or a catalog and you want them to sell it, it’s their perception of the consumer.
Dave Young:
Yeah.
Stephen Semple:
What they actually discovered was, Tim was right, once it got into the consumer’s hands, consumers loved it. I would’ve probably recommended to him at a certain point going, “Test the market and run your own little ad, direct to consumer,” because if they had run a little ad direct to consumer and even made a few sales that would’ve given them a lot more power with the catalog company saying, “Well, we did this little ad and it created this, so people are interested in this product.”
Dave Young:
Did he do any sampling and things like that? If you got this in the right hands.
Stephen Semple:
All he was doing was going to the tool companies. Even when he went to the trade show, he only sold one at the knife trade show, but I think a little bit more of that working one on one with the consumer may have sped it along. But who am I to say? He’s the one who has built a business making three million tools, I haven’t.
Stephen Semple:
If I was working with him, that is the thing I probably would’ve recommended, take a little bit of money and run some sort of test market add and cross your fingers and hope to make a few sales from that. Then use that knowledge when you’re going to these other companies to say, “Hey, no, it does sell.”
Dave Young:
Yeah, cool story, great perseverance.
Stephen Semple:
Yeah. Oh, man, I’ll tell you, huge perseverance.
Dave Young:
Well, thank you for telling us the story of the Leatherman, Stephen.
Stephen Semple:
All right. Thanks, David.
Dave Young:
Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big, fat, juicy five star rating and review. If you have any questions about this or any other podcast episode, email to [email protected].
