Deal Radar 2010: Bozeman Watch Co.

We were in Montana and Wyoming recently, and as we walked through downtown Bozeman, we came upon a company called Bozeman Watch Co. As we looked at their beautifully crafted watches, I started asking questions about the business.

Christopher F. Wardle, CEO of Bozeman Watch Co. is a self-trained professional and has been a watch fanatic since he first discovered his grandfather’s modest Wittnauer mechanical watch at the age of 12. As he grew older and his own collection of both antique and modern watches grew, he discovered the unique history of American watchmaking and was disturbed by the abrupt end of American involvement In the industry. The knowledge that America dominated the watch industry from 1850 to 1950 and then disappeared with the introduction of quartz watch movement led Wardle to the idea that America needed an industry revival.

Bozeman Watch Company's U.S.S. Montana

The concept of the Bozeman Watch Company was put to paper planning in 1995, but it was not until 2001 that Wardle initiated design and manufacturing planning. In 2005, the company opened its first showroom in downtown Bozeman, Montana, with only one new watch to exhibit, the Smokejumper Chronograph, which was endorsed as the official watch of the Missoula, Montana-based National Smokejumper Association, the elite organization that fights wildfires all over the country and world.

Patrick Ayoub, co-owner and main designer, has participated in the venture since its inception and remains a major contributor to the company’s watch designs. He was educated at the Art Center College of Design in Pasadena, California, and has worked at as the chief designer of the advanced studios for Volkswagen in Dusseldorf, Germany, and in Barcelona, Spain.

“The Bozeman Watch Company’s value proposition is not complex,” says Wardle. “Buy into an American company’s passion, get something that is not mass produced but handmade, and help put American watch manufacturing back in its place.” The company’s timepieces offer clients a brand that is not spoiled by mass distribution and that can be kept as a cherished piece of art and technology to be passed from generation to generation as an important and emotional gift. “This is the message most commonly delivered by our clients,” adds Wardle. Bozeman’s target is made up of upper income collectors and enthusiasts who would like to support American industry and innovation and who have an affinity with the western lifestyle and appreciate the effort to return to artisanship, including those who recognize that large brand and mass manufacturing removes the personal touch and exclusivity. Wardle calculates the TAM at more than $5.1 billion in the U.S. market alone.

Bozeman sells nine models of watches, ranging in price from $5,225 to $8,100. One model, the Gallatin, also comes in a women’s version. No more than 100 individual pieces of each model are made, and all of the company’s watches are certified Swiss chronometers – “the highest level of distinction a mechanical timepiece can attain for accuracy in timekeeping, and the most coveted distinction a timepiece can ever earn.” The company also sells handmade leather briefcases, messenger bags, carry-on bags, belts, and shotgun holders.

Sales are generated from three different places: the store (about 15%–18%); the 1-800 number (60%–65%); and online (12%–15%). Bozeman is on Facebook and Twitter and is also covered by blogs on the luxury goods industry, such as Luxist.com. The company says that Facebook and Twitter have increased its exposure but have not yet resulted in more online sales. Wardle wants to do more in terms of online sales and marketing.

The largest markets are Southern California, the New York area, Dallas, Washington, DC, southeastern Pennsylvania, and the manufacturing areas of the Midwest. Bozeman has over 420 clients, and the average client owns 1.8 watches. Most are successful executives, entrepreneurs, government officials, and celebrity sports and movie and TV personalities. The average client age is 58. Bozeman says that many of its clients are attempting to find something more understated and different from what large brands offer.

The company advertises in industry watch magazines such as International Watch, regional lifestyle magazines such as Big Sky Journal, and travel and adventure magazines such as National Geographic Adventure. The Web site tracks an average of unique home page visits of about 11,000–14,000 monthly, more than 90% of which are American based. But the site has had visitors from every continent and Bozeman has sold watches to people from England, France, Switzerland, Germany, Australia, Hong Kong, Mexico, and Canada. There are numerous celebrity clients, including Jim Rome (Smokejumper); David Letterman (Sidewinder Retrograde, U.S.S. Montana, and Smokejumper); Josh Beckett (Sidewinder Retrograde); Philip Winchester (Sidewinder Retrograde); Cuba Gooding, Jr. (Sidewinder Retrograde); and Matthew Morris (Smokejumper).

The venture was privately funded by its owners in phases. The first was in 2002–2003 when the company sought out artisan experts to assist it through its initial designs. In 2004 the owners made their first official contributions of $45,500 to initiate tooling and parts production. Thereafter, small, frequent interest holder capital contributions were made until about 2006, bringing total investment to $495,000 until self-sustaining revenues were met. Additional financing came from client sales where Bozeman offered what its terms “preproduction incentives.” The company would bring a design to market and make it available for sale with the caveat that it may be anywhere from 10 months to 18 months. The incentive was a substantial discount (20%–30%) before Bozeman incurred major manufacturing expenses. Bozeman sold over 200 timepieces before the initial prototype was displayed. One issue, called the Cutthroat GMT, delivered 71 sales before the first one was ever assembled. This helped greatly with investment expenses.

As of May, the company has retained an investment banker who is finalizing a plan to seek $5 million in private equity to expand the product line and assist Bozeman in moving into new markets for the next three showrooms. The ideal investor is one who realizes what the company has accomplished with little investment and just one retail showroom and who can envision an American company penetrating a multi-billion- dollar-a-year worldwide industry.

Bozeman Watch Company is following its original business plan, which called for adding four more showrooms between years 5 and 7 and then an additional five between years 7 and 9. In its fifth year of operation, the first showroom reached almost $1.1 million in sales in 2009. The company reached profitability in its third year of operation and has maintained 30%-plus revenue growth annually: sale revenue was $296,000 in 2006; $560,000 in 2007; and $760,000 in 2008. Revenues are up over $100,000 in the first four months of 2010 over 2009. Wardle says that Bozeman’s growth, which is against the grain of the import decline, shows there is a market that desires American-made timepieces. Bozeman does not supply any companies from an OEM standpoint and distributes only through one other showroom in Florida. There are no plans to supply other distributors at this time.

The growth strategy includes expanding into new physical markets: Jackson Hole, Wyoming; the New York City area; and San Antonio, Texas, to start. One expansion will include a new small factory with new infrastructure to display the company’s abilities and expertise. Bozeman does not have a firmed-up exit strategy, because “it isn’t often you can say you love what you do. If I had to choose one I would build and pass this enterprise on to my children to further take our family name and place it in a location where Americans know us, and know we fought and succeeded in repositioning the lost art of watch manufacturing in the United States,” says Wardle.

What intrigues me about the company is that it has been successful in building a luxury watch brand of its own from an unlikely place in the American West. And although still very niche, it has found a clientele that is willing to pay several thousand dollars for a watch that is not Breitling or Patek Philippe. I am not sure how scalable the business could be, but it is certainly impressive and wonderful to see it succeed so far. It is worthwhile investigating further the formula of why consumers are buying this particular brand. I am also intrigued by the e-commerce potential of this venture.

This segment is a part in the series : Deal Radar 2010