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Vested Interests

[ 0 ] Apr. 1, 2009 | SBO Editor

Jon Goldman’s plan backfired but he’s happy the way things turned out. Goldman was Managing Director at Elite Formal Accessories, a company that manufactured formal wear accessories—tuxedo vests, neckties, cummerbunds and cufflinks. Doug Black was a top salesman at Mel Howard Accessories, Goldman’s biggest competitor. Goldman wanted to hire Black but Black wasn’t interested—he had a plan of his own.

“Instead of me hiring him, Doug convinced me that we should buy the two companies we worked for and merge them,” said Goldman.

Goldman and Black pulled it off. They approached Elite’s principal owner Jerry Parness and became partners in his company. Goldman, Black and Parness bought Mel Howard and merged Elite and Mel Howard into a new company—BlackGold International LLC. BlackGold roared out of the starting blocks in 2006 and within a year surpassed Elite and Mel Howard’s combined sales of $12 million. Last year BlackGold topped $15 million in revenues. “The market applauded our move,” said Goldman.

BlackGold’s products today are sold in 2,500 menswear outlets across America and control 50 percent to 60 percent of the nation’s accessory market, said Goldman. None of this surprised BlackGold’s founders. Goldman slipped into men’s apparel through a side door. He was an accountant and had a client who had a stake in Macy’s. Through the client Goldman met Parness, son of a tailor, who grew up in the industry. Parness borrowed $13,000 and launched Elite in 1985 in Long Island, New York. He was looking for someone to help grow the business from regional to a national provider and hired Goldman in 1995.
Elite sales erupted 20 percent to 30 percent annually over the next six years and Goldman advanced to Managing Director.

Doug Black was a struggling actor who needed work and took a job managing a tuxedo store in New York City. An exec at Mel Howard Accessories was impressed with Black and hired him as a salesman. Black moved up to sales manager and vice president.

When Goldman approached Black about joining Elite, Black shook his head no. “I don’t want to do that,” he told Goldman. “I think we should buy Mel Howard and Elite.” This jolted Goldman, who replied, “I don’t want to do that.”

“Yes, you do,” countered Black. Finally, Black prevailed. Goldman and Black then enlisted Parness. Black made the approach to Mel Howard. He was blunt. He said, “We want to buy you out.” The three partners snagged a bank loan with relative ease.

One of the company’s first moves was acquiring a brand of its own. They asked around and located a designer in Paris who owned the name, Jean Yves. “We loved it,” said Goldman. “We paid in the high fives to get it.”

BlackGold got the industry’s attention quickly. “Men’s Wearhouse officials saw our line and contacted us,” said Goldman. “They sell our products under their label in 1,200 stores.”

In purchasing Elite and Mel Howard, the partners got leases on 25,000-square-foot factories in Long Island City and Davie, Florida, manufacturing equipment and 200 employees. They manufacture 80 percent of their products in those factories; the rest of production is done in the Dominican Republic. Domestic production, said Goldman, costs 10 percent to 30 percent more than China but it is worth it, said Goldman. “We have greater quality control and this gives us an edge over competitors. Seventy-five percent of our products are rented. They’re washed 40 or more times over a two-to-seven-year shelf life.” Fabrics are purchased from France, Germany and China.

Formal wear sales and rentals, of course, are seasonal. “The wedding business operates with peaks and troughs—never really bad or good,” explained Goldman, but he is upbeat about the industry’s future. “The population’s growing,” said Goldman. “So there will be more weddings, graduations and proms. Down the line sales should reach $25 million to $35 million.”

Jon Goldman had no experience in the men’s apparel or formal wear business, but that didn’t stop him from creating a company that is poised to generate $30 million in revenue in the next few years. Last year the company sold 350,000 vests in vivid colors such as red and hot pink. Bow ties come in eleven styles and cummerbunds in four styles.

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Category: Magazine, Start Your Own Business, Start Your Own Business Spring 2009