All Things in Moderation

When we bought our business a little over 13 years ago we negotiated for the exclusive right to manufacture and sell two products that were invented, patented and trademarked by the original owner. This agreement would last 20 years (until 2021) and then the tooling would revert back to the family, either to his daughter or grandchildren. My husband first came on board as part of the sales team about 35 years ago right after this product was introduced. It was the launching pad for the business and “the” main product we’re known for. The last two years it was the Number One seller in Tennis Accessories on Amazon over the holiday season.  Over the years we have added numerous other products but this one still generates about 10%-15% of our sales and has actually had a bit of a resurgence in the tennis market since internet sales in general have been increasing every year and we’re able to reach the public more easily.  Funny, there is even a little nostalgia involved.  The product was copied when the patent ran out but both copies never worked the way they were designed to because a couple of steps (trade secrets) were not part of the patent and they missed them.

The tooling is getting old and outdated and part of our agreement was that the original designer/owner of the tooling would pay for repair costs and we would pay him 5% of cost at manufacturing as a royalty. This system worked for about 10 years when the owner decided he no longer wanted to pay the tooling repair costs and so we worked out a new agreement that he would forgo his royalty checks and we would be responsible for the tooling until it reverted back to the family. He is now in his nineties and in a convalescent home at death’s door.

It’s doubtful anyone in the family is interested in really having the tooling back but I’m a little afraid to ask. We are considering if the next hurdle in repairs is worth the expense unless the tooling were to become ours permanently. It apparently needs to be converted to a manifold system which will cost somewhere between 20K and 30K and that is only one of four parts which are also old and having more problems as time goes by.

It’s a great product and makes us decent money every year but we’re just not sure it’s worth the investment. The original owner’s daughter is very unpredictable when it comes to the business.  She hated it when she worked for her Dad but enjoyed the income and while anxious to let it go, tried to screw us over several times with her lawyer’s help during the purchase process. Luckily we weren’t born yesterday so we were able to protect our interests well. I don’t trust her though.

I guess what I want to know is if it seems like it would be worth the investment if we ultimately have to return the tooling anyway or should we just return it early and let them deal with it? I believe that would be the end of a great product though.

My other concern is that I really don’t know how much longer we want to work ourselves and I don’t particularly trust Walter’s health to stick it out long enough for us to recoup the expense. I really don’t want to get stuck doing all the work myself. Our son helped occasionally with putting the parts together for large orders but he’s in CO now and the work is too strenuous for our oldest daughter although she does help out here in other ways occasionally.

I’m also trying to figure out an angle where if we made the repairs how could we end up owning the tooling as I think there is a marketable value to it and we might be able to sell it, even considering the condition it’s in.

Any suggestions?

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