BASE Surfboards forced to close with crippling debts
At 10am Thursday morning the doors to BASE Surfboards closed for the last time. According to an inside source BASE had been trading insolvent for many years. In a final move the tax department shut the Gold Coast headquarters down.
The same industry insider said BASE had debts of $5.6 million and real assets of just $70,000. Combined they employed approximately 50 people in the surfing industry, most of which have allegedly not been paid superannuation for an extended period.
BASE, started in 2003 by Maurice Cole and John Cross, was a joint commercial operation that attracted some of Australia's best shapers. By combining purchasing, manufacturing and distribution they planned to combat cheap Chinese surfboards that had begun to infiltrate the Australian market.
Cole left the venture five years ago and at the time of collapse only Simon Anderson, Darren Handley, Murray Bourton, and John Cross, who oversaw finances, were left. Luke Short left the BASE operation one month ago.
Short was contacted at his Yamba factory where he said he left BASE for personal reasons and to consolidate his own brand, LSD Surfboards. Short said he was unaware of the dire financial situation, "Times were tough but they were for everybody".
"It's upsetting that such big guys can go down," Short added, "even though they are now my competition there's respect there. It's tough to see."
It's not clear what the implications are for the shapers and their labels. BASE headquarters were not answering the phone and their online store was closed for maintenance.
Latest Surfpolitik article - The BASE failure: What it means for the industry
Comments
If you want to make a small fortune in surfboards, start with a large one.
Heard those rumours on the grapevine for months.
Guess my mate who works there is out of a job.
Hey Stu, why don't you do a bit of research on the price of surfboards over the past 20 years.
I think its a miracle that any surfboard manufacturer has survived.
Wow 13 likers? I feel for those guys...Sad to hear.
Truth is there are very small profit margins in manufacturing surfboards and too many egos wanting to get into the industry without board building skills. In order to survive, one actually has to do the hard work required to make the boards. There is no room in the industry for overstaffing of admin, production management, etc.
I think you'll find the guy making under 10 boards a week while doing most of the work himself is often much better off than one doing 50 a week outsourcing his glasswork and having staff take care of all of the peripheral bullshit.
It amazes how they let it come to this.
Having said that, the world won't end for them and I wish them the best of luck.
(sorry this is off topic) - wreckybuddy, 'Liking' an article is somewhat of a mistitled function.. when you press the 'Like' button, you effectively make all of your Facebook friends aware of the article (as the notification goes straight to your Facebook feed). In my view, this means "I read this article, and thought it was interesting enough for all of my mates to read too". Facebook have just kept it simple rather than having a range of buttons to press.
I agree with you Wreckybuddy.
Seems like the only viable business models are small-time builders (who can be some of the best surfboard shapers in the world) or large Asian mass production.
Wonder if any of the big Asian pop-out makers are feeling the pinch.
Sure don't see as many surftechs around these days and I;m sure they took a bath on those TL2's
Hey Smeeagain, I already have (it's two years old but the points are still valid): http://www.swellnet.com.au/news/121-shapers-coming-up-short
It opens with a quote by Jim Banks: “To all you who reckon surfboards are expensive or a rip-off – you can get f*cked!â€
@Wrecky and Freeride,
Stay tuned for a story on Monday. Includes quotes/advice from shapers about what they think a viable business model is.
is this all stores around Australia? be shame to see Simon Anderson go from Manly
Freeride76 - I have been riding surftec tuflites for years. Snapped 3 normal (PU) boards in 3 months in about 06 and had jack of it. Got on a tuflite Al Merrick 6'4'' flyer and was stoked with the buoyancy after hearing a lot of smaller lighter guys find em too corky, it was perfect for me. Tried TL2's and thought the main functional changes there were loss of buoyancy and strength - which to my mind was the original tuflites main assets (aside from shape of course which in theory I guess should remain reasonable consistent across different materials). Not sure about different flex characteristics between tuflite and TL2 but I know my preference was definitely the original. Dont see that many tuflites in the water but TL2 seem to be as rare as hens teeth.
Re the snapping thing - tuflites still snap, I've done two of them now but they hang in there way longer
Its a pity to see any small business go under and I feel for the 50 or so guys that work for Base. Here's hoping they get their full entitlements. Boards in general are too cheap although in my discussions on this topic with people I know I seemed to be the only one saying so. I've read Stu's link article and I agree with Jim Banks and with the idea of getting a custom and talking directly with the shaper as part of the trip. Four of my five boards are fully hand shaped.
One of the big things with surfboards (I think) is that too many new boards are sold in the first place. Any KOOK with $600-700 will buy a new board and ride it one, hold onto it for a yer or so ond sell it for half the price (or less). I can bbuy a great sercond hand board that suits my needs perfectly for less than $300 every time I go loooking (for more that 10 minutes). You wont find a guy that cant strum a note on a guitar pay hundreds of $ for a new guitar too often (i think) but every KOOK and back packer will spend $$$$ on a new board they can't and wont ever ride. Some board shapers/ asian pop-pot factorys must be selling a lot of boards. I can buy a second hand board (from an over-crowded market) for FAR less than I think they are worth.
I just spoke to George at BASE Manly and it's business as usual for him. He and the other 3 BASE stores operate independently of the BASE HQ. He may change the name, he's not sure yet.
As for bargains, he just bought a whole heap of DHD's, Simon's and Bourton's from HQ and the racks are full. He's ain't hanging up a 'sale' sign but said if you're after a new board he's ready to talk.
Aust Made Surfboards ! to pricey ? $787.00 ,52 weeks = $15.13 per week ,surf 4 times per week != $3.79 !!per surf soo costly ?Back your Local Shaper /surfing culture / you choose before its to late an you dont have that option !!!!Stewart Maxwell
Strongly disagree Hairmick. The majority of beginners (if that is what you mean by kooks) are buying cheap Asian made surfboards which flooded the market and depressed surfboard prices.
Especially backpackers.
And I don't know where you get your second handies from.
I live near Byron Bay which has to have more second hand surfboards available then anywhere outside Hawaii and most of the pu/pe (normal fibreglass) shortboards I see are beatup and not worth the 200-400 they want for them.
I'd rather pay for a new custom that suits me then buy some beat-up piece of crap.
Agree with Maxwell. We have some of the finest surfboard craftsmen on the planet. Support them and get the best surfboards money can buy.
excuse my ignorance if I am mistaken, but i was talking to a guy that has a factory direct surfboard business that sells shortboards for around the $200 mark. He says he gets them made in a factory in china that also produces all the pop-out brand name boards that sell in the surf shops for $600-800. From what I understand, the popular shapes are licensed from the hand shaper for a royalty. If this is the case aren't the popular brands owners conscious of the fact that they are destroying the industry themselves by doing this?
Ignorance is never an excuse,of cause the carpetbager would say that,he more than likely sells the boards in his store on that basis, may be you should chek out his credentials,an cred,before you make statements you cant , substanciate also put a name to your writings ,and name the brands ure talking about ,I will indever to authenticate your claimes ,Stewart Maxwell. ps are you greg from bris b n way ?
debts of $5 mill plus, assets of $70k, 50 on the payroll - that sort of financial nightmare does not happen overnight - so now we are watching all these legends throw their hands up in the air and say ' what a surprise '
Lets' imagine the choice questions the directors will be asked by the ATO
(1) Did you tax your employees?
(2) Did you keep it?
(3) Did you set aside super for your employees?
(4) Did you keep it?
(5) Did you provide for annual leave for your employees?
(6) Did you keep it?
(7) Did you cover your employees for workers comp?
(8) Did you provide for long service leave for your employees?
(9) Did you keep it?
Welcome to the nightmare boys, and it doesn't matter when you left the company - the shit has hit the fan.
number 2 - good luck stu with the shapers giving you a viable business model - that's like asking a contract tradesman to provide a business cashflow - unless of course they are operating from their parent's garage and making 5 boards a week.
Thanks for heads up Ben, I understand how it works but I thought it was funny the irony of it all. Seeing as how so many in this industry love to see others go down.
@gregsurf, I think the guy you were speaking to was just trying to sell you a 200 dollar piece of shit and justify it. To my knowledge (been in the industry 30 years) there aren't many of the large name brands producing in China. Most of the brand name boards we get here are produced locally. And overseas brands are produced under license. The popouts to which he was referring are most likely of the Tuflite variety which are made in Thailand.
At a profit of 100 dollars a board (that's a liberal estimate), I just don't understand how the directors at Base thought they could trade out of this kind of debt.
Last comment: Support your Local Shaper
Well, I suppose that is the big question. What was Base's business model? Three of the biggest shaping names, the world's best riding their boards, and an impressive international distribution network - what went wrong? I assume this will all come out in the wash over the coming weeks.
The only surfing supplier that seemed to have its financial head together, in my experience, was FCS - when they began their development they applied for and got the government Research and Development Grant, or at least that was what I was told.
I don't thing many board manufacturers realise that this R&D grant exists and it effectively saves all your annual tax bill - ie, 30% of your profits. All you have to prove is that the expenses you are paying are for R&D, and they can be a new shape or design or process - plus you have to be a good record keeper.
It's not rocket science
How do you define R&D though, Pete? As such.. wouldn't it be fair to assume that most businesses are undertaking some form of R&D anyway? I know I have been for many years.
In any case, applying for said grants is a time consuming business and there's no guarantee of success.
R&D is defined (loosely) to be the money spent on a project that is being built / developed / researched / for the first time - the grant is efectively a tax concession of 125% of qualifying expenditure - and as far as most businesses let me give you an example - There is a motor mechanic in Mona Vale who does thousands of hours every year on developing engines, gearboxed, body trim etc etc and when I asked him one day whether he knew about the concession he said he would ask his accountant.
About a week later I asked him how it went and he said the beancounter did'nt knw a thing about it and didn't think they would qualify anyway.
Wrong.
I successfully submitted R&D claims for a boat buliding company for each of the ten years I was with them and the concession granted them over that time was in excess of a million dollars.
- it isn't time consuming at all, that's another get out Ben, and that's why shapers and boardmakers go to the wall. They are not speaking to the right people, and they are hiring accountants who are just bookkeepers -
- and there is a guarantee of success if you do it right and pay for some advice before you start - that's another get out Ben - you are a very financially negative chap old fellow
I'm not financially negative, Pete. I'm just trying to think of reasons why surfboard manufacturers might not consider it worth their time and effort to apply for 'research' grants.
Couldn't have said it better myself, peterb. Part of staying in business requires that you stay informed, which requires putting money aside to pay for good professional advice in the areas that you aren't expert in. Part of the costs of doing business if you're serious. Working smarter. Which is a must in such a labour-intensive industry as surf board manufacturing. As is controlling costs and overheads. How can a first world business compete with China? By using technology, maximising known advantages (eg. shaping IP) and minimising disadvantages (eg. high labour costs). Was real-time on-line sampling technology being used, per the rag trade?
As for the allegation that BASE was trading insolvent for years!!!?? Faaarrk - its directors are in deep schtook.
yes you are ben,
"In any case, applying for said grants is a time consuming business and there's no guarantee of success."
there's two
- if I had said in the meeting I had with the two lads who ran the boatbuilding company when were discussing the R&D scheme and whether we should have a look at it I would not have lasted out the day.
- you've enunciated the problem perfectly ben.
Pete, off the top of my head I know of a unsuccessful surf-related government grant for $500K (circa 2009).
At the time, the unsuccessful applicant employed two people full time just to write grants.
In my eyes, this both confirms that applying for grants is a "time consuming business" and that "there's no guarantee of success".
no it is not time consuming, and every dollar spent on the not so time consuming business X 1.25 can be taken off the profit and the tax is then calculated on the net result.
yes they can be unsuccessful but not if you seek the right professional advice before you start, and that cost of advice falls under the same calculation.
The grant itself used to take me about 5 days to write up and substantiate, each year, tops
What I meant by "was real-time on-line sampling technology being used, per the rag trade?" was this: if the major components of a board's cost are the blank and the glassing, but the real value of a custom made board is in just how its shape fits its rider's needs, then surely a business model that taps into the latest technology so as to allow a shape created in a shaper's mind in Mona Vale to be executed in real time by the same shaper's (virtual) hands in Guandong, then glassed, finished and shipped to the purchaser's home within, say, 72 hours should be investigated?
Isn't that where the R&D allowance could be incredibly useful?
offshore R&D expenses are a little harder to qualify
Well the real question now is to what extent the shapers involved in Base are going to be taken down by this deal.
Been a damm shame to see Simon go to the Wall over this, especially when it seems like some suit might have been gouging money.
I don't know to what extent Simon was involved with the buisness. As far as I'm aware he travels the world shaping. I caught up with him when I was at home at christmas and discussed my latest board. He designed it and all, but it was shaped by another shaper I didn't know at Base on the Goldy.
Great board, love it. So I agree Steve, I hope he isn't caught up in it.
Simon, I believe, isn't as implicated as the other two (Handley and Bourton). While he was once a director he'd scaled back his involvement in recent times. Word today is that the BASE fellas have already sought another factory and are planning to continue shaping. No idea how they are going to purchase supplies - they're supposedly in the dark red with FCS and their blank supplier.
More than likely this will come down to a decision by the liquidators: Do the creditors have a better chance of getting paid back if they continue shaping? If yes, they continue shaping, if no....well, who knows what will happen to DHD and Bourton?
liquidators liquidate stu, receivers are the ones who continue with the business in the hope of selling it as a going concern
To be precise, administrators are the ones who decide if a business can be salvaged; receivers are the just the secured creditors' caretakers and don't give two hoots about other creditors or employees.
BASE's current status is not yet showing on the ASIC database; let's hope it's not yet in liquidation mode; if an administrator has been appointed, there is still yet hope.
Steve, thanks to John Howard's brother, your mate and the other employees have the GEERS scheme to fall back on. He can check it out at:
http://www.deewr.gov.au/WorkplaceRelations/Programs/EmployeeEntitlements...
How about a modest factory, Shape, spray, glass, fin, sand, protek and wet rub 10 shorties a week yourself. It's not that hard and at what these guys currently charge there should be a nice weekly income. There's no more using the planer. Free lapping 2 layers of 4oz on the deck is as hard as the glassing gets. Almost always fin plugs = easy sanding then acrylic finishes and a wet rub. On a machine cut, white, fin systemed, proteked polyurethane shorty there isn't 3 hours of actual labour time ( not counting curing ). With the demand these guys have there should be a full weeks work for years to come, hell you could afford to get a grommet to do the 10 wetrubs and clean the shed after school every friday.
very odd decision to force the close, considering we're on the cusp of SUMMER !
Is John Cross an ex-pat?
Had a friend with that name moved to Oz from LA area of CA.,USA.
Awesome boards, defintely a shame to see them go down.. I must say though, I have pruchased a number of baords at their stores, however the customer service received was often mixed. One of many examples I have was when one time I was served by a complete nob at the Torquay store a few years ago. This guy was wearing a hoodie (hood pulled over his head) and sun glass's.. When asking about a particular boards he recomended a different board which he liked for quote "massive cutties and huge arials". Now he was either one of 2 things..... He either mistook me for Jamie O'Brien or was on a mission to totally big note himself.... I'm guessing the latter and yep, I headed over the road and bought a baord from Quicky instead...
Secondly (although not associated with Base for some time) when you have guys like MC blowing up in the waters around Torquay, sending people in after he dropped in on them, its a wonder why people dont want to support a brand he is associated with... I will never buy another one of his boards again, seeing the way he bahaves in the ater.. In any event he is hardly one of the better srufers in the water these days...
So anyway I have had my beef. Sad to see an Ozzie retailer go down the gurgler but remember next time boys, shaping good baords isnt enough. The whole experience of buying a new board is a huge part of the journey, especially for younger kids... After all $700 - $800 is a huge outlay for a lot of people.. DOn't employ wankers, there are enough of them out in the water... Seocondly no one likes a thug or a bully... LAy down with dogs and you get flees...
For a good example of how a board store should be run head to surf culture in Bondi Junction.. Great bunch of friendly guys always happy to help out and give good relevent advice... Add to that a great range... (No I dont work for them or know them personally)
Cheers...
You know that Al Qaeda means 'the base' in Arabic. Perhaps BASE collapsed due to a CIA plan that got fucked up in translation?
article in tweed daily december 20th 2004.
Yes? What did it say Victor?
I assume you meant to link to this article: http://www.mydailynews.com.au/story/2004/12/20/apn-board-makers-lured-to/
New article. Shapers talk about the collapse of BASE and what it may mean for the industry: http://www.swellnet.com.au/news/2609-the-base-failure-what-it-means-for-...
No one seems to care too much about the investors who lost their money, I'd like to know how much coin was pumped into Base and where it went.
Lee - your absolutely right, there will be a world of pain for the guys who backed the names and brands and the suppliers that extended trading terms.
Didnt you work for DHD /base a while ago? I am sure you have some insights
Word on the street here is that some of the suppliers might go down with the ship.
Anyone care to follow the money trail?
ASIC has "BASE" recorded as under external administrator. see here: http://www2.search.asic.gov.au/cgi-bin/gns030c?acn=104_513_653&juris=9&h...
Also, the R&D info on the ATO website is a good source for anyone looking into the rules ... is is a lot easier than people think. See here: http://www.ato.gov.au/taxprofessionals/content.aspx?doc=/content/0019377...
Looks like the first meeting of creditors was held 17 October ... from there the administrators will investigate the situation and report back to creditors within about a month ... that's when they will either recommend 'liquidation' or other options such as a 'deed of company arrangement' (which means the company may continue to trade). The creditors get to vote and decide which option is taken at the next meeting of creditors (i.e. ATO, staff, suppliers).
IF, the company was trading while insolvent as the article suggests, the Directors can be held PERSONALLY liable for all the debts of the company (including past Directors) ... interesting times ahead.
Also, if the 'brands' (i.e. DHD, Simon, Bourton, Pipedream, etc) were owned by the company the "shapers" (i.e. Darren, Simon, Muzz, etc) will not be able to start up under these 'brands' without 'buying' them from the "BASE" company ... they will have to negotiate with the 'administrators' or 'liquidators' to buy the brands if they want to continue to use them ... interesting times ahead.
As for the 'scalability' of surfboards manufacture and the future of the industry, I think we will see the 'cottage' industry come back for a while before another 'consolidation' of the manufacturing process. The shaping machine process offers the 'scale' for that most time consuming component, while glassing and sanding operations are hard to scale, they are nonetheless able to be streamlined with MANAGEABLE volumes.
I can see how a CAD based shaping process could be used by several 'brands' with outsource glassing, etc ... that way, the shaper is able to deal with customers and design, while the manufacture is looked after in the 'back end' ... but after the BASE situation it may be a few years before anyone is willing to set up this model.
I wonder who will buy the CAD system, with the all the boards designs and the shaping machine from BASE. Could be a good buy there!
Hey Saltman yeah I worked for DH but I was lucky enough to get out before it turned to base. I don't know too much about whats going on but I hope they get persecuted for their actions.
Ben, I think you and peterb are at cross purposes becuase you are referring to the R&D grants ($ for $ cash grants) and he is talking about the R&D tax concession (125% tax benefit). The tax concessions are an easier/simpler means of accessing support for all companies undertaking qualifiying R&D activities. The cash grants are competitive and not all applicants receive support.
Well spotted marbles. Pete initially referred to it as a R&D grant, hence the confusion.
12 months on ....any news on the base closure ?