INTERVIEW | Make Money by Turning an Idea Into a $90 Million Product Empire with Tim Leatherman

0:00your listening to the Travis Makes Money Podcast. What's going on everybody welcome back to the Travis Makes Money Podcast. We're at the mission help. You make more money on this episode of the show. I have a new friend Tim Leatherman. Tim invented the Leatherman multi-tool. He's the co-founder, owner, chair, and a very engaged part-time employee of Leatherman Tool Group, incorporated. He's appeared at events and retail stores all over the world to sign tools and greet Leatherman fans. He and his products have been covered in many national international publications and programs. Plus, he's won national championships in Pickleball, which is pretty cool. Swallowed more of the Zambezi River than his considered healthy and hit the only tree north of the Arctic Circle when to the hinterlands of Mongolia, attended the Bullshye Ballet without wearing a suit, occasionally cast a fly for trout and drops a lure for salmon. So he is somebody who's all over the place doing a lot of really interesting, cool things all built on what we talk about here on the show, which is figuring out a way to make more money so you can engineer a life that you really, really are excited about living.

1:03And Tim is a shining example of doing that in his own life. Tim, what's up? Welcome to the show. Thank you. It's a pleasure to hear. So let's go back in time, Tim. Tell me the first time that you ever made a dollar that was exciting or shocking or surprising to you. The first time was both surprising and shocking. It was the first sale we made of a Leatherman tool. It was an order from Cabellus that came in late May of 1983. It came eight years after I first jotted down the idea adding players to a pocket knife. And then many years in the garage building the prototype and even more years looking for a customer. Wow. So you built everything yourself first off? Yes. And I would offer that as advice to any of your listeners that if you have an idea anything creative that you do to work yourself, if it's something physical, especially if it's

2:07physical object like the Leatherman tool turned out to be very important, I think, to make your own prototype. Did you have any sort of background in engineering or any sort of building or constructing? My background in education is to have a degree in mechanical engineering. Okay. But I didn't learn my lessons very well. I had a king dying to design a tool that would actually function. I was picked up a file in the axon, tried to build those in my mind and test the parts and I broke a lot of prototypes before I ended up with something that was really worked. How many prototypes do you think that you went through? There were basically three distinct four distinct versions of a tool. And within each version there were tens or 20s of prototypes that I bought or parts of prototypes that I would test in

3:07break and then have to continue to design. What were you doing to make money during that time? Nothing. Oh really? So you didn't have like a full-time job or something you were doing this on the side, you were just focused on building this. Now the background is that the idea came during a budget trip to Europe that my wife and I took starting in 75. It was a long trip, it was nine months. We drove all the way to Tirani, Iran and back. Wow. And during that trip I often, we often stayed in cheap hotels where the plumbing needed fixing. And I was carrying a pocket knife, a multi-blade pocket knife, but to do it, which started the job, but often needed pliers to finish a job. And that trip was a, what are we going to do if the rest of our lives trip? So I was jutting down notes. And one of them, in essence, said add pliers to pocket knife. And when we returned, I decided to focus on this particular idea. And my, I asked my wife, is it okay if I build one,

4:15just one, just for me? And she said, how long will it take? And I said, maybe one month. She said, okay, so she went to work to support us. And I went to the garage and picked up a file in the hacksaw, started trying to build what was in my mind. And how long did it add taking? Three years. Man, well, you got a rock star wife. That's awesome. That's true. But you did ask, was that my, so for the first three years, I was, you, you finistically self-employed. And the next five years, when I, well, first, I had a created approach to have I liked filed for a patent. And I thought, now it's going to be easy. All I have to do is show my prototype and patent application to a knife manufacturer. They'll pay me about a million dollars. And I'll sit back and live happily over after. But the knife company said no. So I went to the tool company, or the knife company said no,

5:16it's not a knife. It's a tool. So I went to the tool companies, the tool company said, sorry, it's not a tool. It's a gadget gadget still itself. So at that point, my wife and I did have a little talk. And we decided that I should get a day job. And then have the trying to get still get this tool in the market, be my second job. So what was the path that you ended up finding to get the tool to market? First key part of the path was to bring in a partner. I had done all this all alone all this time. And a couple of key lessons from that were to start with a goal. And then first of here. And especially learn what you need to know as you go alone. I spent a lot of time in libraries. Yeah. A lot of time learning skills. But as I say, the seven years, seven years that you got by and it about giving up in a friend of mine from university days

6:18to step down and said, there's still a few things you haven't tried. So this person, this person was more like on the business side, like business development or sales or marketing or what exactly were they operations specific, what exactly were they bringing to table in your mind? Yes. Originally the business side and the sales side. Although his name is Steve Perliner, he's a friend going clear back to university days. We met playing table tennis. And his degree is more on the business side. He worked in his father's business as on sales. But Steve is a super smart guy. And he can grasp the concept on a if we suggest a new product and are a way to make it or he can grasp the concept faster than I can. Anyway, it became a super good partnership. And Steve's thought was that in order to get the tool in the market, the only way left is to make it to start a company and make it ourselves. But we were both smart enough to realize

7:24that before investing in the money to start a company, we should get an order large enough to justify doing it. And we're very naive. We thought that if we can make a cell of 4,000 tools in our first year, we could pay ourselves back for our cash investment. But we were not so naive to think that we would not pay ourselves a penny for our time. So we were seeking order for 2,000 of the 4,000. That was your first order. No, it's a turn down. We were trying to pitch a prototype that was too complex and too expensive for the market to accept. And that lesson or that experience came to us when we pitched our tool in person to a catalog in Seattle. And they told us it is too expensive and it is too complex. But we do think it has real cost abilities. And they said instead of letting the door hitch on your way out, go away,

8:28they said, sit down, let's talk about this. And so they said, asked, how could it be less complex, less expensive? And you can imagine at this point I had a lot of ownership in this tool. I really didn't want to give anything up. But they said, well it has two kinds of pliers. Couldn't you have the needle nose pliers are separate from but driven by the regular pliers? Couldn't you just have your needle one-fire pliers, the needles at the top and the regular pliers in the middle and the work harder to the bottom? And I realized, yes, all right, we could do that. So I reluctantly said, okay. Yeah, it's time to go back to work I guess. And then they said, we see your tool has a pair of scissors. And I said, yes, I really admire the Swiss. I had no idea how difficult it was to make a small pair of scissors and put it in a knife or tool until I tried to do it myself. And they said, take it out, substitute a screwdriver

9:30or something. So I said, again, reluctantly, okay. So then we did go back to Portland. By now, my wife and I had a small starter home with a single card for rush that didn't have a car in it, but they'd have some machines in it and went to work from building a new prototype. And that prototype, and then when we took that prototype back to the catalog company in saddle, they said, we like it. How much? We said $24. They said, yeah, that's fine. That means we could sell it for under 50. And they said, so we are hopes for risings. So I said, you're ready to order 2000. And they said, no, we don't think we can sell that many. So then we took a picture of that tool, wrote a cover letter, mailed it to about a hundred other catalogs and said, if you want to see my precious handmade prototype, just reply and we'll be happy to send it to and we'll take

10:31it from there. From that mailing, we got one reply and it came from Cabellos. And we sent them the prototype and then there must have been some other correspondence that went back and forth because in late May, 1983, eight years after first sent you the idea, we got this order from Cabellos for $12,000, but it was for 500 tools. Wow. Not 2000. Yeah, right. So you still got like 3500 tools to sell to hit the number you targeted. Right. So at that point, we were so excited to get an order finally after eight years. Yeah. But then we realized it's only 500. But we decided to accept it. And Cabellos gave us seven months from the time of order to delivery back no say took a long time to print a catalog and create all the products, take photographs and write copy to the mailing.

11:32So we got very lucky that Steve's father had a metal working business and he allowed us to bring the equipment I had in my garage into his shop. Elbow or Wanda about a thousand square feet. And now also he used his machines and his employees on a subcontract basis. Oh wow. So you can imagine that was he was an angel that was that will carry it very helpful for cash flow. Yeah, right. And so you were you were basically making a lot of these yourself and directly overseeing the they were all hand built tools and things like that. Yes, it was manufacturing. They were being manufactured rather than as opposed I would say in the garage I was literally making my hand. But so we had manufacturing processes. And early on we were making six of the parts in subcontracting the other parts. Okay. And we did do all the finishing on the parts and then all the assembly are on the parts. And there was just Steve and I and a couple of other

12:33employees at the beginning. And were you able to fulfill the 500? No, at least at least none on time. Okay. And there's a little bit of a backstory there too because during that seven month period the catalog and Seattle that it suggested that we simplify the tool. But didn't want to order 2000 they called and said is anything happening? And they said yes we're in production. So they said put us down for 250 also for delivering late December. We can imagine time went by pretty quickly. Yeah, and a couple of days after Christmas we got a call from the catalog and Seattle saying our 252 where are they? They said sorry sorry sorry we're a little bit late. We'll have them for any day now. They said we need them really badly because they've all been sold. Oh wow. And here's an order for 500 more. Wow. What are you thinking during that time? Are you is it like a mixture of like

13:37anxiety in terms of fulfilling the order but also excitement that you got another order and that they sold? Like can you describe how you're feeling? For sure it was excitement. And to continue the story a week after the first calls and up the order to 500 they called and said the 500 have been sold. Here's an order for 750. Wow. Two weeks after that 750 are gone. Here's an order for a thousand. Oh my gosh. And then you can imagine what happened after that? Cabello sold their 500 just fine. They reordered. The mail order catalogs were all seen to be monitoring each other. They got a sensor. It was a hot product they called and they would call up and and say hey here you have a new product. Would you mind sending us a sample? And Steve and I were sparting up instead of saying don't you remember the letter we sent you? You could have had an exclusive. You never even replied.

14:41Right. No we did not say that. We said of course we happy to send you a sample. So we started getting orders from catalogs like Eddie Bauer and LL Bean and Sharper Image and even even Marcus. Wow. And then at first year when we're hoping to make and sell a 4000 tools we're actually able to make and sell 30,000 tools. You're able to make that many too. Yes. So what changes in the manufacturing process to fulfill that type of orders? It was just chaos. We just started hiring people. We started upping our orders to our subcontractors. We had a really one of our employees that came in to do work. We realized how that assembly was a real bottleneck. And he volunteered to take on the assembly as the contractor. We accepted his offer. Eventually he eventually came to the point where he had four employees and we did

15:42assembling the tool that we had making the tool. So it was and I remember once seeing a bankruptcy notice of a life company back in Ohio that was going out of business and all their equipment was for sale. So I called the company and I asked to speak to the plant superintendent and I introduced myself and I explained what it was I was making that it wasn't a life but I felt like some of the equipment they had could possibly work for what I was making. It would be okay if I flew back, I'll show it in my tool and then he suggested he would tell me what equipment he had that he thought would work for us. And so I ended up buying 13 all these equipment was for sale at salvage value on the books. And I ended up buying 13 machines for $10,000. Wow. Wow. And I said well I don't have a way of shipping this but you might be handling that too. It's okay I'll do that too.

16:46So that's that was sort of a acquired your way into leaner manufacturing and a distribution facility essentially. Yes we quickly allowed through our thousand square feet and needed and building across the parking lot that Steve's father owned opened up that had 5,000 square feet. We rented that pretty soon we needed more space so he expanded it to 75 hundred square feet. We needed more space so he started running here around there up to 17,500 feet square feet. Still needed more space. So we decided to buy land and build our own building. We bought enough land if we thought for enough for 10 years built enough building 30,000 square feet. We thought we'd be big enough for five years. Two years later we doubled it. Brothers after that we tripled it that took away our parking we bought land across the street for parking. So in that first year when we thought we could hope to be able to make and sell 4,000

17:53tools and it was 30,000 10 years later that one tool the original Leatherman Fox Survival tool were able to make and sell over one million of that single tool. Do you have the numbers to date like what that number looks like now? The grand total of all Leatherman tools sold today is over 90 million. 90 million. To more than 70 countries all over the world. Man Tim congrats on the success man. I mean obviously I love this part of the story because this is a money podcast and we talk about bringing ideas into the world and taking risks and all that. But the part of your story that's I think the coolest part is all of the list of things that I read after the company accolades which is swallowed more of the Zambiesie river than is

18:55considered healthy national champion and pickleball hitting a tree north of the Arctic Circle. Like this is why the mission of convincing people to get their money right means so much to me because you have chosen to live life with all of the money that you've been able to make and it has objectively given you a better version of ideal version of what you have found makes life awesome. And that to me is like the core reason like money is just like your tool. It's just a tool. You know it's just something that you can use. It's just it's a means of exchange to gain other things that make life more worth living rather than just an end in and of itself. Can you talk about your money philosophy and how you've used it to enrich your life for the lives of those around you? Yeah my philosophy on money is that I don't deny myself any needs but my needs are very modest.

19:58And I am most proud in this whole little driven journey of the jobs created and that the jobs are created here in Portland, Oregon. And I want to do everything I possible again to continue to have those jobs remain here in Portland, Oregon. Yeah. And then I'm also very proud that because the Lotherman tool ended up being in a whole new product category. Whereas I thought it was on the on the edge of pocket knives but within pocket knives and others may have thought it was in hand tools but but it turned out that the connector would be pocket tools and when I my tool came out to my surprise people said thank you where have you been we've been waiting for you. Yeah. Because they didn't they had no concept that they that there was a need for this that they had a need for this until they actually saw it but once they did see it they started using it

20:58when their friends saw them using it. They their friends started buying it and then the sales to skip mushrooming from word of mouth. Yeah. But my own lifestyle is too is quite modest and as you mentioned I enjoy lots of other things. I also remind you that there's a caveat to that Pickleball championship. It was in an ancient age group and then a pickable champion is a pickable champion. And don't tell yourself sort. Yeah. And then a middling skill level. But the that the but I have had tried to try to keep a life in the very beginning Steve and I were just working super long hours and very near the beginning Steve and I realized that we we need to give at least a couple of days just stop work and time to be on a at that time a racquetball court at 6 p.m. Yeah. Yeah. So I've had family I've had lots of other activities that

21:59I've enjoyed. What did what what did your wife say when things started picking up at the beginning after eight years of turmoil? My wife is very calm. She was of course happy. We had a child in 1981. We didn't start the business till 83. So she was busy with the well she was busy doing a large part of raising her child and and also continued to keep her job. But then eventually we were able to come to the point where she was able to to become a full-time show for her first time. Yeah. Yeah. Somewhere in between zero and 90 million tools I assume she would probably be cool. We take some time off. So Sam I appreciate you for taking the time man. This is a fascinating story. Congrats to you and all this success. You deserve it and that more and more than that. Thank you for sharing some of it with us here today on the show. Where can people go to

23:00connect with you a little bit further learn more about you and what you're working on? I've just written a book and the book will be launching on October 6th. Great. It's one of the few times the working title has become the actual title. The title is called The Leatherman Book and it'll be available wherever books are sold. Love it. The Leatherman Book. If you're listening now go pick up a copy of The Leatherman book a story of building an insanely successful tool company back in the 1980s. Almost like a sort of a pioneer of this direct consumer model which a lot of e-commerce brands use today and I'm sure is a big part of your Ezeco system now. But back before all of that used mail order catalogs and that was direct to consumer and you had to go direct to consumer and cut out all these other people and vertically integrate not because you wanted to or was part of some big strategy but because it was a constraint in the business. Nobody would manufacture the tool for you. Give you the orders that you needed and so you figured out a way

24:02pioneered your own path and that's led to all the success that you have now. Tim, I appreciate you taking the time to come on the show. For those listening, The Leatherman Book is out in October. Please go pick up a copy of that book and if you're tuning in remember money only solves your money problems but it's easier to solve the rest of your problems and you got some money in the bank. So let's solve that one first here on The Travis Makes Money Podcast. Thanks for tuning in. Catch you guys next time. Peace.