Out of necessity, Saul Jodel
took one of his
product lines and sold it to a competitor.He
made out so well that he
did it again.Now it's part of his
In 1995, Saul
Jodel's toy company, The Original San Francisco Toymakers, suffered a decline in sales and consequent cash shortage.Without quick action, the company could have gone under.After a quick evaluation, Saul
grabbed a product line that had been under development for 12 months and approached a major toy company to buy it outright.Three weeks later, he
had a check in his
hand for $2.5 million, plus a contract that gave Toymakers future revenues based on royalty payments.Saul
suddenly realized that he
had a tiger by the tail.
To people who know Saul
ability to suddenly change direction and hit the ground running is nothing new.Although he
had originally intended to study medicine in college, Saul
wanted to try his
hand in starting a restaurant after graduation.While accompanying a business broker to visit a small toy company called Adult Leisure Products, he
became very intrigued with the business and ended up buying the company himself.
It was baptism by fire.Given his
struggled with his
newly acquired company and closed it after 3 years.In 1977 he joined Ideal Toys as a Sales Promotion Specialist and became head of the Toy Division.
Over the next three years he
toy sales from $7 million to over $100 million.After Ideal's purchase by CBS in 1983, Saul resigned to join Lewis Galoob Toys as the Senior Vice President of Marketing and R&D.
...Saul worked close-ly with Li & Fung to source from Asia products that he helped create, such as Micro Machines®, Sweet Secrets®, Game Genie®, Bouncing Babies®, and The Animal®.
success at Lewis Galoob, Saul
was eager to try his
hand again at running his
own toy company.In 1991, he
resigned to start The Original San Francisco Toymakers.One of the first investors he
approached was LFI.LFI not only gave him an initial equity investment, but also extended his
fledgling com-pany a credit facility, and Li & Fung
again became its buying agent.
Based on his
knowledge of the toy industry, Saul
knew that one "hit toy" could make Toymakers
a huge success overnight.
therefore devised a three-pronged strategy to generate multiple revenue streams.
therefore approached several major toy companies to purchase the entire line with designs, tools and packaging included.After just three weeks of negotiating with one of them, he
had successfully obtained a $2.5 million up-front fee in addition to future royalty payments.The large sums involved were unprecedented.
What Saul did to save his
company all of a sudden looked like a good business decision.Instead of repeat-edly swinging for the home run and spending millions of dollars to design, tool, package and market a product line, Saul
would instead hit singles and doubles by sell-ing a line for an up-front fee and royalty stream."Perhaps you don't realize all that you could make," says Saul
, "but by selling a product line, you remove the risk, and you still have part of the upside."Reinvigorated by this new strategy, Saul
approached the major toy companies in 1997 with two product lines: a toy race car with interchangeable parts, and a "smart" doll that eats, cries, sleeps and talks depending on a child's request.This time he
negotiated a $5.0 million fee with future royalty pay-ments.
For 1998, Toymakers
will introduce new FOB products such as Nerf and WCW figures, and will develop a private label product line for Toys "R" Us.However, Saul
is particularly excited about selling off a 3-D game called "Room Wars".Discussions are already underway with several major toy companies."This product line will require major advertising support, and it will generate significant revenues for whoever buys it."If it is as successful as he
expects it to be, Toymakers
could go public in a few years based on the fees and future royalty payments.
What if it doesn't?Knowing Saul
will come up with other innovative solutions.If necessity is the mother of invention, Saul
is certainly a man who is not short on needs.
We knew Saul
days at Lewis Galoob, which had gone public and made a lot of money for us.When he
left to start up Toymakers
, it was an easy decision to back him because we were confident in his
ability to do it again.
JC: When Toymakers faced a cash shortage and had to sell off its kitchen toy line, how did you feel about that?
MH: At the time we considered raising additional equity for the company, but it would have diluted management and Saul
felt strongly that he
could overcome this short-term problem with an innovative solution.He
was right and really outdid himself.