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Gavin Kisebach




Location: Lacey, Wa US
Joined: 01 Aug 2004

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PostPosted: Thu 30 Oct, 2008 8:35 pm    Post subject: What happens when high end makers go out of business?         Reply with quote

Since we're approaching Haloween, I thought I'd bring up a really, really scary thought: What would happen if a custom or semi-custom high end manufacturer went out of business? How would they handle back orders? Would customers be out in the cold?

I know that high end weapon makers are very low profit margin business. Really I think of them as starving artists, who make a good living only when people have a lot expendible wealth to spend on this particular art niche. I can only imagine that the next few years are going to be very, very taxing on this industry, and only the very best and most financially creative companies are going to thrive.

So what if I order a sword from a respected maker, pay half up front, and then they go under? Do they simply pay me back (assuming they can)? Does my order go into limbo until times pick up? Am I out of luck? Or is it some combination of all of the above? This is what scares me about the really tiny operations that do custom work; heaven forbid I wait two or three years for a sword and the maker dies / quits / loses an arm in a tragic blimp accident over the Rose Bowl on new years day....

Does this make anyone else a little tense? I hope that all of our creative friends are still with us, banging away when the financial scene gets better, but I know that someone is bound to drop out.

There are only two kinds of scholars; those who love ideas and those who hate them. ~ Emile Chartier
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Stephanie Maks




Location: Ontario, Canada
Joined: 04 Jul 2008
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PostPosted: Thu 30 Oct, 2008 8:44 pm    Post subject:         Reply with quote

Speaking from a strictly business point of view, if a company is forced into bankruptcy by its creditors, then any deposits you have placed with them will most likely be lost. The money is considered as being in the company's coffers, and it will be distributed to the government, the banks, the liquidators, and then if anything is left over, the suppliers.

Any undelivered merchandise will also be siezed and auctioned off to help pay off the creditors, in the above-mentioned order.

-Stephanie
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Gabriel Lebec
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PostPosted: Thu 30 Oct, 2008 9:12 pm    Post subject:         Reply with quote

Another possibility (before bankruptcy) is a voluntary closing, if a smith decides that his current business will be untenable longer-term but he is still able to meet certain obligations now. In that case, I imagine that what happens to any deposits will depend on the language of the agreement... one would hope deposits would be refunded or current orders fulfilled, but I would suspect that all bets are off if there is any contractual agreement rendering deposits nonrefundable.

There seem to be many moral, practical, and legal considerations to this question; I for one will be interested to hear from anyone able to expand on the legal issues especially. In the meantime, I hope most custom / semi-production smiths are able to weather the storm!

-GLL

"The most beautiful experience we can have is the mysterious. It is the fundamental emotion that stands at the cradle of true art and true science." - Albert Einstein
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Stu C




Location: Western Australia
Joined: 11 May 2008

Posts: 46

PostPosted: Fri 31 Oct, 2008 12:16 am    Post subject:         Reply with quote

I believe you would be an unsecured creditor and -most likely - get nothing back unless the maker decided to close the business and refund deposits before things went belly up.
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Chad Arnow
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PostPosted: Fri 31 Oct, 2008 8:08 am    Post subject:         Reply with quote

Despite the bad stretches (financially and in terms of backlogs) and smiths and production makers go through, we haven't had a ton of these business close, which is somewhat surprising.

Some smiths, like Erik Stevenson, decided to do other things but still worked off their backlog.

Tinker Pierce's Tinkerblades production venture closed shop but I believe they still had some inventory (and still might) at Lee Reeves's The Armoury. So I don't know if people were left hanging.

Some smiths have screwed people with overloaded queues and lost orders, but that's different.

I agree with some of the posts here that if a business went under, you'd probably lose your money. You could sue, but if they don't have enough money to continue operating they don't have enough to pay you and your lawyers, especially after their other bills are paid.

Owners can set themselves up as LLC's, limiting their personal liability in the event their business fails, helping insulate their personal assets in case the business fails and people want a piece of them.

So you'd probably be screwed if they went under...

Happy

ChadA

http://chadarnow.com/
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Sean Flynt
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PostPosted: Fri 31 Oct, 2008 10:22 am    Post subject:         Reply with quote

I think we're likely to find out soon enough. Until then, enjoy a holiday classic!

It's A Wonderful Sword

apologies to Frank Capra

CHARLIE
I'll take mine now.

GEORGE
No, but you . . . you . . . you're thinking of this place all
wrong. As if I had the money back in a safe. The money's not
here. Your money's in Joe's sword . . .
(to one of the men)
. . . right next to yours. And in the Kennedy sword, and Mrs.
Macklin's sword, and a hundred others. Why, you're lending me
the money to build those swords, and then I'm
going to pay it back to you as a sword financed by the fellow in line behind you. Now what are you
going to do? Foreclose on him?

-Sean

"Everywhere I have searched for peace and nowhere found it, except in a corner with a book"- Thomas a Kempis (d. 1471)
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Joe Fults




Location: Midwest
Joined: 02 Sep 2003

Posts: 3,438

PostPosted: Fri 31 Oct, 2008 1:55 pm    Post subject: Re: What happens when high end makers go out of business?         Reply with quote

Gavin Kisebach wrote:
Since we're approaching Haloween, I thought I'd bring up a really, really scary thought: What would happen if a custom or semi-custom high end manufacturer went out of business? How would they handle back orders? Would customers be out in the cold?


Its not unprecedented.

I'd assume SOL and hope otherwise.

"Our life is what our thoughts make it"
-Marcus Aurelius

"Those who make peaceful revolution impossible will make violent revolution inevitable."
-John F. Kennedy
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Bill Tsafa




Location: Brooklyn, NY
Joined: 20 May 2004

Posts: 599

PostPosted: Fri 31 Oct, 2008 3:35 pm    Post subject:         Reply with quote

The short answer is that you loose your money.

If you paid by credit card you an dispute the claim, but they have to be able to charge it back to someone. They can't do anything if the merchant account is closed. The only exception is a case of fraud (hint). There are also time restraints. Some credit card companies only give you a few months to dispute the claim. If you made a deposit a year ago, you will not likely be able to dispute.

Most business organization operate under a number or different corporate names to hide assets and money trails from potential litigants and creditors. Honestly most business expect to be sued at some point for something. They can still continue business under another name. These are common practices among small businesses. Anyone that does business on credit assumes a certain amount of debt will go bad and it is calculated into their prices to make up for it. A consumer who pays up front does not have this cushion.

Personally I do not pay for anything upfront that can not be delivered within a month (or the amount is small enough). I pay by credit card so I have recourse. I had some custom made armor done for me this past July. This was a single guy working out his homeshop. Me made me $2,000 in armor from scratch with hammer and anvil and he got zero deposit. He got paid after I tried everything on in his shop and he made the final adjustments. The secret is the person holding the cash has all the leverage. You just need to know how to use it. When you make a deposit, you give up some that leverage.

BTW, what often happens is that you put down a 50% deposit and are told to wait. You're locked into the deal. You're not going anywhere else. I show up and say I will only pay upon delivery... Guess which order gets done first Happy

I am not saying any of this applies to Albion. I expect they will ride this recession out just fine. I think their prices are a lot more padded then they let on. I had a business for years, I always made a point to complain to everyone how poor I was. If I don't my vendors will raise prices, my employees will demand raises, and my customers will want lower prices.

No athlete/youth can fight tenaciously who has never received any blows: he must see his blood flow and hear his teeth crack... then he will be ready for battle.
Roger of Hoveden, 1174-1201
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Jordan A.





Joined: 09 Oct 2008

Posts: 15

PostPosted: Fri 31 Oct, 2008 6:34 pm    Post subject:         Reply with quote

Every custom maker is different, and so is every deal. Its really impossible to predict what a maker would do in a given situation. If I were a custom maker faced wih going out of business, I would try and find a job in the meantime, and finish what deals I have to protect my name and reputation.
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Jean Thibodeau




Location: Montreal,Quebec,Canada
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PostPosted: Fri 31 Oct, 2008 7:46 pm    Post subject:         Reply with quote

Well if a single maker operation has the maker get seriously ill, injured or die or goes bankrupt I think any money sent is going to be lost and the sword unless finished in the back of the shop. .... " Maybe " someone related to the maker may be able to sent it out but this might be a low probability event.

So ordering from a small maker is always going to be taking a chance but generally the really bad things are thankfully rare events: So don't risk money you can't afford to lose and it's probably a good idea to avoid paying in full up front or giving a deposit that is too high.

Nothing in life is ever 100% certain.

You can easily give up your freedom. You have to fight hard to get it back!
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Joe Fults




Location: Midwest
Joined: 02 Sep 2003

Posts: 3,438

PostPosted: Fri 31 Oct, 2008 8:02 pm    Post subject:         Reply with quote

Vassilis Tsafatinos wrote:
I had a business for years, I always made a point to complain to everyone how poor I was. If I don't my vendors will raise prices, my employees will demand raises, and my customers will want lower prices.


There is more to this than most of us appreciate. In another life I was told (by the school) that if I intended to practice medicine in a smaller town, I should never have the nicest car, the biggest house or the most extravagant wife in the town. If I flashed money, nobody would ever pay their bills and the parade of people at my door expecting money would be never ending.

Cool

"Our life is what our thoughts make it"
-Marcus Aurelius

"Those who make peaceful revolution impossible will make violent revolution inevitable."
-John F. Kennedy
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