Peter Koehl Sr. created the Skullduggery Toy Company in Anaheim, California, in 1987. The company’s unique moniker comes from the initial items it sold: museum-quality fossil reproductions. When Peter Srtwo .’s sons, Peter Jr. and Steven, joined the company, they added craft kits, games, and toy vehicles to the product range. They chose toys and games based on what they felt would be entertaining; they did not do any consumer research or testing. The brothers were losing money and were badly in debt when they appeared on The Profit. Marcus Lemonis may be able to salvage this family company.
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Marcus Takes A Tour Of Skullduggery And Makes A Proposal
Episode 5 Of Season 2 Of The Profit
Marcus first encountered Pete Jr., who was Vice-President and in charge of Operations and Logistics, as he entered Skullduggery’s huge warehouse facility. Then Steve, the President of Skullduggery, came up to Marcus and introduced himself as “the boss.” Pete, his brother, gave him the side look for that statement.
Marcus questioned the brothers about the company’s origins, particularly why they chose to branch out into craft kits, games, and toy vehicles. Pete Jr. and Steve stated that they selected things based on what they considered to be cool. They were particularly proud of their Max Traxxx Tracer Racers brand of racing vehicles, which race on flexible tracks and produce an LED light on glow-in-the-dark tracks while they race. But it was a game dubbed Aero Flix, which they characterized as “indoor frisbee golf,” that they were most proud of. Marcus played for a few minutes, but he didn’t enjoy himself. Who wants to hurl a cardboard disc at a cardboard target?
Marcus then inquired about Steve and Pete’s present financial position. They were $800,000 in debt, according to Steve, and he projected to lose $50,000 that year. Skullduggery was losing so much money that making a profit would be practically impossible until someone like Marcus stepped in and paid off the debt. Marcus explained to the brothers what they would need to accomplish with their merchandise before making his offer.
He first suggested doing focus groups with prospective clients. The brothers made selections regarding which goods to carry based on their own thoughts and expertise in the toy business, and they ignored any information linked to consumers’ demands. Steve said that the company was in debt partly as a result of a bad gamble on the Aero Flix game. They expected it to sell out and had put a lot of money into it, but it didn’t. Skullduggery, according to Lemonis, should concentrate on core items that can generate a big profit. Lemonis offered the Max Traxxx racing vehicle as the key product since a license contract would help it get distribution in a large box shop.
Marcus inquired about the pricing of the LED automobiles after viewing the production line. With just a 12-cent margin, each Tracer Racer vehicle costs $1.19 to produce. That was not a smart move. Marcus inquired as to the length of time it required to construct the automobiles. It took a long time, according to Steve. Not only would the brothers be able to boost their profits if they improved their productivity, but they would also be able to beat competing products to market, which is essential in the highly competitive toy sector.
Marcus then examined the financial records and found that Skullduggery was not only $800,000 in debt, but also $1.3 million in debt, with just $770,000 in assets. Marcus offered the brothers $1.1 million in debt forgiveness and $1 million in operating capital in return for half of the company.
This proposition did not sit well with Steve and Pete Jr. They were offended, claiming that they had worked too hard to allow someone else to manage the company. They left the table and shut the door behind them.
The brothers emerged shortly after with a counter-offer: 20 percent of the company in exchange for $2.2 million. Marcus declined, although he did offer to pay off the debt in return for a 30% stake in the company. Marcus issued them a cheque for $1.1 million once the brothers agreed.
Bumbles And Stumbles After The Deal
According to Marcus, the following stages included conducting focus groups, speaking with a company that would be interested in a licensing arrangement, and creating a toy lab to discuss concepts.
The brothers insulted both the children and their parents during the focus group, which was a concern. The boys did not take well to their parents’ criticism that the Skullduggery toys were not distinctive. Marcus intended to take away the goods that weren’t selling well after the focus group concluded, but the brothers attempted to stop him. So far, Lemonis didn’t seem to be in command.
Next, a meeting with NASCAR’s Chief Marketing Officer (to propose a licensing arrangement) went horribly wrong, as Steve displayed scorn for the corporation and informed the CMO that his brand wouldn’t be a suitable fit for their vehicles. Marcus was displeased with the brothers’ actions, claiming that they reflected badly on him. Regardless of their emotions for NASCAR, Pete Jr. and Steve would have to come up with a tie-in concept.
Was anything off to a promising start? Lemonis, for one, was thrilled with how the toy lab had turned out. It cost $100,000 to construct, but he believed it was a wise investment that would help the company grow. He also spent $240,000 on a 3D printer.
Marcus was dismayed once again when he learned that the brothers hadn’t even considered the NASCAR tie-in. He stormed out of the room, enraged and irritated. Steve arranged for Marcus to meet his father, Pete Sr. since he was unsure where they were with Lemonis. The elder Koehl was dissatisfied with the way the arrangement was worded because he felt Marcus should have all decision-making authority. Marcus sought to persuade the Koehls that his strategy would salvage the family firm, but they were not convinced. Lemonis chose to walk away from the venture after losing $100,000 on it. However, he was able to return the 3D printer.
Craft kits and fossil reproductions are still available. The company has largely sold online and to smaller, regional toy retailers, avoiding the big box wholesalers. Knuckle Headz, a pull-back racing vehicle with spring-triggered character heads, is the company’s newest toy. A car’s head flies 12 inches into the air when it collides with anything. Perhaps the brothers are finally asking children what they consider to be cool. Perhaps pounding heads is a toy that Steve and Pete Jr can relate to.
But what about Marcus’s favorite frisbee golf toy, Aero Flixx? It’s presently available on Amazon, and the reviews aren’t particularly positive.
Royal Pitch is not linked with Skullduggery, The Profit, or any of its subsidiaries, hence the material on this page is simply informative.
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