Chapter 22:
Introducing the Schiithole
Okay, the last time I talked about moving out of the garage, I left you hanging—with the realtor saying, “Well, maybe we can find a way for you to do your light manufacturing in a zoned-for-commercial space, but no promises.”
To cut to the chase, we got it. What finally sold it was probably three things:
- Persistence.
- Not appearing too flaky or insane.
- Willingness to take the property as-is.
Believe it or not, #2 matters quite a bit. There are plenty of flaky, insane people in commercial real estate. Landlords want nothing to do with them. And #3 is also a big deal. Landlords don’t want to do a bunch of custom buildout—even if you’re signing a long-term lease.
And—one other thing: the willingness to take a little bit of risk. Because we were in a commercial space, after all. Not industrial. The city inspector could conceivably come by, decide we weren’t conforming, and shut us down.
Yes, it was a risk.
But it was a risk worth taking, because it got us an inexpensive space near our other office. And the risk, we told ourselves, wasn’t high. After all, we were retailers. We sold direct to customers. And if 99.99% of it was shipped via FedEx and USPS, did it really matter, as long as we had a place that someone could theoretically walk in and purchase something?
Perhaps. But that would be up to the inspector. If they ever came by. I crossed my fingers, hoped they wouldn’t, picked up our first liability insurance*, and signed the lease.
And that’s how, around March 2012, we got the worn and pitted keys to our first Schiit building.
*Hidden Expenses and DIY Dreams
I precede this aside with a * to connect it to the liability insurance mention above. I do this because this is a great corollary to “everything is your problem” reality of having your own business. Well, here’s the second harsh reality of your own business:
there are a hell of a lot of hidden expenses ready to jump up and bite you in the ass.
I sometimes get taken to task by DIYers who say, “I can build something like that for a lot less than you’re charging.”
Sure.
Well, maybe.
No. Wait.
Actually, they can’t, because the price on single pieces of stuff like transformers and chassis will make any one-off a budget-busting exercise. Even if you’re talking off-the-shelf transformers and project boxes, it really isn’t going to be that much cheaper. And that’s not factoring in the time the DIYer spent building it, nor the time it took to learn their construction skills, nor the cost of their tools, nor the cost of the new tools they had to get while making it. You get the picture.
(And, just to be clear, I love and support DIY. As far as I’m concerned, we should all be juggling soldering irons and dropping them in our laps, grabbing on to 120V (or 230V) once in a while, putting transistors in backwards, watching capacitors explode, spending endless hours wondering why the new prototype doesn’t work quite right, getting excited when the new PC boards come in…)
But DIY isn’t production. It’s not production in a garage, and it’s not a business with all sorts of crazy expenses. Expenses like:
- Liability insurance
- Product liability insurance
- Workman’s comp insurance
- Facilities lease
- Facilities upkeep
- Facilities changes/expansion
- Equipment cost
- Equipment upkeep and calibration
- Bookkeeping
- Local gross receipts tax
- Sales or VAT
- Business licensing/registration (if applicable)
And this is on top of the normal, fun stuff like local, state, and federal taxes, payroll, parts cost, shipping, assembly cost, etc.
Yep. Tons of fun.
Mike’s Perspective
Mike, of course, saw right through me, as soon as he drove by the place. He took one look at Rina running a shop-vac over the cracked and dusty floor (and vacuuming up big pieces of ancient tile in the process), and told me:
“You got it because it was cheap.”
“Right,” I told him, not even hesitating.
Rina and Eddie were also arguing over space for shipping versus space for production. Eddie was arguing that we should take all the used, battered Ikea office desks (that I got from Centric’s storage unit) back outside and blow the dust out of the space with a compressor.
“There’s about a hundred pounds of dirt per square foot up there,” Eddie said, pointing up at the sprayed acoustic ceiling. “That crap’s gonna fall down if we don’t blow it out.”
“It may fall down if we blow it out anyway,” I told him. The ceiling didn’t look too robust. We could be looking at sheets of acoustic cottage cheese if we started blowing on it.
“But it was cheap!” Mike said.
“Yes,” I snapped. “And convenient. And it keeps the HOA from shutting us down.”
“Until the city inspector comes.”
“If he comes.”
“I’m going to need more space for shipping,” Rina interrupted, indicating where she wanted her finished-goods racks placed.
“That’s two-thirds of the building,” I told her. “Eddie and Tony need more space.”
“We need more space for shipping!” she insisted.
Eddie shook his head. “And we should stop this crazy vacuuming and blow this place out. This dust is gonna get
everywhere!”
“But it was cheap!” Mike added.
I groaned. Thankfully, Tony wasn’t there, or would have probably had a comment or three as well. Suffice to say, it wasn’t our finest day moving in. The place was really a mess.
Maybe I should step back and describe the Schiithole (the name Rina dubbed it with on that first contentious day—and it stuck.)
The Schiithole was an old, L-shaped stucco-and-siding building on the corner of 6
th and Railroad in Newhall. Railroad is named because of, well, the railroad that parallels it. This railroad was instrumental in making Newhall one of the first boom towns of the late 1800s (together with the discovery of oil.) It now carries mainly Metrolink traffic. Many times a day, trains rattle by, shaking the old building. Cars rush by on the 5-lane street outside at all hours. With no insulation, it was a hollow, loud, booming space.
Outside, the stucco was fading to an off-white from what had once been a taupe color. Several large holes had been punched in it, whether from frustrated passerby, or by some other mechanism, I don’t know. The siding was peeling paint, and much of the external wood was collapsing into dry rot.
Inside, the floor was uneven and patched crudely with concrete. And by uneven, I mean “like, one side was a good foot lower than another.” Some traces of fiberglass tiles remained, but they were rapidly flaking off as we cleaned. The sheetrock walls were relatively unmarked, but the bathrooms were only partially functional, after the building had been stripped of plumbing and wiring by thieves and only makeshift restored. There was no hot water. No heating. No AC.
Out back, it had a dirt-and-concrete yard full of knee-high weeds and assorted detritus. Of the four doors, one looked out on the back area, two were on the Railroad side, plus a roll-up door the realtor warned us “never to leave open, because that’s a sure sign you’re making things here,” and a door on Market Street. None of the doors matched. None of them were handicap accessible.
I didn’t know it at the time, but it had once been the home of the Daily Signal, Santa Clarita’s newspaper that still survives (barely) to this day. We were later shown the room where they used to melt down the lead plates every night, to re-cast them for the next day’s paper. We were using it as a storeroom.
But, as Mike said, it was cheap.
So, yeah, a fun move. But by the end of that first day, we had test equipment plugged in and running, Eddie had his assembly bench set up, and we were moving things in from the garage and the rest of the house.
We had a home away from home. The Schiithole.
Interlude: Business Space Philosophy
Okay, so why did we take such a crappy place (because it was cheap) and tolerate the noise (because it was cheap) and the dust (because it was cheap) and the lack of any typical niceties, like heat and AC (because it was cheap!)
Well, yes. But also because of an observation I’ve had about business space:
The moment you build a palace is the moment you die.
Now, it may take many years for that palace to kill you. You may end up with some very good years there. It may serve as a very useful way to awe and astound customers or clients that are easily impressed by such things.
But the moment you start focusing on business
wants, rather than
needs, you’re dead.
It happened to Sherwood. It happened to Marantz. It happened to dozens of ad agencies I’ve seen come and go. It’s happened to scores of clients who spent their startup money on nice offices and celeb chefs and foosball tables and lounges. We’ll see how Apple’s “spaceship” campus does for them, but I’m betting right now I know how it ends.
Here’s the deal. I business, there are certain things you need. These are things like:
- A functional space. That is, one large enough to contain what you want to do. Trying to put a full wood shop in a 20 x 20’ space isn’t gonna work out very well. Depending on what you’re doing, you may need no more than a single office—or a home office—or a whole lot more space for stock, finished goods, production area, machinery, etc. But first and foremost, you need a functional space.
- Effective places to work. This may mean an Ikea desk and a Wacom Cintiq and a WiFi router and nothing more. Or it might mean heavy-duty workbenches with static mitigation and 10 outlets for work on sensitive electronics. It it may mean self-built 2x4-and-fiberboard tables with static mats for accomplishing the same thing. Plus chairs and such.**
- The equipment you need to do your work. This may be nothing more than a laptop, or it could be an entire suite of test equipment. Or CNC routers and laser engraving machines. Bottom line, stuff like this is critical, if it is critical for doing your work. Don’t skimp.
- The right connectivity for your business. This may mean nothing more than a simple DSL line for basic spreadsheets, web surfing, and ordering, or super-high-speed optical cable with dedicated symmetric lines for a phone bank to serve a creative shop with outbound calling.
**I have never seen such a rip-off as high-end office chairs. Please don’t get me started on this. Might as well buy audio jewelry lovingly carved from hunks of solid titanium by master craftspeople living in Monterey. Just go to Office Depot, plop your butt in a bunch of chairs that are $150 or less, and pick the ones that are most tolerable and cheapest. Our creative director once tried to talk me into getting Aerons for the whole office. I swapped his chair for a steel folding chair the next day. We bought sensible chairs.
Please notice that none of the above includes things like:
- A cool-looking building. Please. Who cares? Save money for your house.
- A cool-looking office space with polished concrete floors, $16,000 European couches, and iDevice-controlled programmable LED lighting. See above. If stuff like that impresses your customers or clients, they’re not analytical enough to understand:
- Every cent of that came from their pocket.
- You’re making far too much money.
- You’re not good with impulse control and probably won’t be around long.
- Corner offices for everyone. Geometrically impossible, anyway. Plus, let the infighting begin.***
- Nice private offices for everyone. Yep. Let’s give them reasons to close the door and hide from problems. Not a great idea, especially in a startup.
- Lounge/recliner/videogame/relaxation/informal meeting areas. Yeah, you love your employees. But it’s more important they love you and believe in what you’re doing, without having to be tempted by silly perks. The best person for the job is one who wants to work for you above all others—because of what you’re doing, not because of the icing on the cake. If nobody wants to work for you, start looking in the mirror—and hard.
- A big sign in front of the building. Might as well advertise “there’s expensive electronics in here,” in our case. In most cases, this is nothing more than ego.
***Let’s talk about this a little bit more. The biggest fights I’ve ever witnessed amongst employees was regarding “who gets what office,” or “who gets which desk.” Honestly, this is completely useless and divisive stuff that you really don’t need to deal with. Start-ups probably shouldn’t have private offices, period.
And that’s why we ended up with a space that was really nothing more than a large production floor, with no offices, in an ugly, run-down building. Because it had what we needed. And nothing we didn’t.
And it was cheap.
The Earliest Days of the Schiithole
Going to the Schiithole in the early mornings, shortly after we moved in, are some of my most vivid memories of Schiit, beyond the early start-up phase. Why? Because we were finally in our own space—and that opened up so many new possibilities.
And because I was crapping-my-pants busy.
The move, as simple as it was, put us back a few days in production. And in those times of “build tonight, ship the next day,” that means that we were very behind. Tony and Eddie would come in during the evening and build the boards that Jaxx delivered, but I was doing all the sound-checking.
So, I’d come in before going into Centric (5-6AM), take the plastic sheet off the pile of finished units on the burn rack, and run them through sound check. If any failed, I’d note it and put it on my desk for later that evening, when I’d come back in from Centric at 6-7PM, and fix whatever didn’t make it through burn.
Rina would come in during the afternoon and ship, but her time was starting to come at a premium—her own business, Twilight’s Fancy, was taking off. She had to spend more time there and less at Centric.
And I was quickly burning out from the long days. You can do 14-hour days for a while, but they’ll eventually kill you (if your significant other doesn’t do so first.)
Tony wasn’t going to be able to take over shipping—he had his hands full, especially with Mjolnir and Gungnir imminent, and Bifrost flying off the shelves. Eddie couldn’t do shipping, either—he liked to work at night, when it was cooler and quieter in the shop.
Yep, you know where this is going. It was time to grow again.
And this time, we needed to look at it more strategically. Sure, we needed someone who could ship. But what we really needed was someone who could do a lot more than that—someone who could grow to be in charge of operations.
Luckily, Rina had the “perfect” candidate…
