Rick Alden of SkullCandy out-rides the economic avalanche and lets our readers know what he did to survive.  Live and learn.

Listen up.  Ernst & Young named this man Entrepreneur of the Year in 2008.  This year SkullCandy was listed as Number One for Consumer Electronics by Inc. Magazine (Ranked #14 in the Inc. 500 overall).  Did I mention they’ve grown over 6,251% in the past three years?

Snowboarder, entrepreneur, Deadhead.

We caught up with Rick Alden between impromptu business meetings and guest speaking at Weber State University to talk about how he figured out how to make serious money doing exactly what he loves.

 

Alister & Paine: I see SkullCandy brought in 86 million dollars in revenue last year—expected to hit $120 this year. How did a headphone company based out of Park City do that?

Rick Alden: Haha. We asked ourselves the same thing. We had intended to sell some cool lifestyle headphones to skateboard snowboard type lifestyle shops and we genuinely lucked into a great time in the market.

Fantastic companies like Seinnheiser and Sony that had been selling headphones before us had just been under attending to a very useful, very young new user of headphones focused on the iPod demographic.

Alister & Paine: How do you feel about a third of your profits being taken as taxes after all the blood, sweat and tears that goes into making it?

Rick Alden: Taxes just gut you. On one hand you say, the taxes are going to support both the state and federal government that allows us to be able to do business and to be successful and to create an economy where we can be successful, so you have to grin and bear it a little bit, but still…

Alister & Paine: If you had 24 hours in the Oval Office to do anything, what would it be?

Rick Alden: Whew. I don’t often get asked questions that I’ve never thought about before. One, secure borders. Two, go to a fixed tax program.

Alister & Paine: What’s the best perk of the job?

Rick Alden: When you actually start to scale the business and you’ve got enough money to hire a fantastic team. We have managed to assemble this world class dream team of management across the company. Not only does it make you a bunch of money but it just makes them the coolest people in the world to work with.

Anytime I want to go anywhere in the world I just schedule a meeting in that country and go.

Alister & Paine: We all know how the idea for the SkullCandy headphones came about, trying to answer your cell phone on a ski lift while listening to your iPod—what song were you listening to?

Rick Alden: Oh my goodness! Come on. I have no idea. I was probably listening to either The Grateful Dead or Phish. That’ll probably make a lot of people wonder what kind of guy I am.

Alister & Paine: Is SkullCandy a C-Corp or an S-Corp and what made you decide to go that route?

Rick Alden: Started out S-Corp but when you bring in investors you pretty much need to be C-Corp because as soon as you’re making money the tax effect for investors in the business passes a tax obligation onto the owners of the business.

Alister & Paine: Once you had the idea, what were the preliminary steps to get it going?

Rick Alden: First it was having the time to do it. Then it was finding a factory that could develop the technology—I’m just a dumb snowboarder, not an electrical engineer.

Then it was coming up with the first customers, developing some demand creation, and actually building the product.

Where it got really hard for us was figuring out how to buy large volumes of inventory. We almost had to close the doors because we didn’t have the ability to finance the production of that first major purchase order.

Alister & Paine: How did you raise capital?

Rick Alden: You can’t grow the business on debt, cause you need money. Literally my wife and I started this business off our family savings and then a home equity loan. Having sufficient capital to be able to buy inventory in the early days and to be able to build the company in the early days was a real challenge.

Debt is expensive, equity is really expensive if the company is successful, but revenue doesn’t cost you anything. We’ve worked hard and have been reinvesting that money into the business every year.

Alister & Paine: What was your startup strategy?

Rick Alden: We went to Burton Snowboards and we started doing audio beanies with Burton and really unique headphone jackets with Bonfire Snowboard clothing all powered by SkullCandy. We did dozens of these collaborations building audio into other people’s products.

Suddenly we had a dozen fantastic world class companies inside the skateboard snowboard community that were advertising and promoting ‘Powered by SkullCandy’ in their campaigns.

We also gifted headphones to every pro skater, pro snowboarder, pro surfer, pro mountain biker, any super cool athlete, and made sure everyone one of them got free headphones.

Alister & Paine: Where do you find your motivation?

Rick Alden: A big part of the desperation and inspiration for me has always been I just want to work for myself, I don’t want to work for anyone else.

The real motivation for growth right now is the investors. If you’re going to take investors into your business and take their money, you have a real responsibility that you get them a return on their money.

Alister & Paine: There are thousands of hungry entrepreneurs out there. What advice do you have for them?

Rick Alden: Get to market. So many people try and spend so much time trying to perfect a product before they go out and sell it and what they don’t realize is that every year they’re expected to have better product.

There’s always a new version of software because software always gets better because it was never perfect the last time they released it. Cars are never perfect when they release it. That’s why they have the next changing model with all those things improved on it.

Alister & Paine: If you could be any person, dead or alive, who would you want to be—besides yourself?

Rick Alden: I’m going to have to go with Craig Kelly. Do you have any idea who Craig Kelly is?

Alister & Paine: I have a feeling I should.

Rick Alden: No you shouldn’t, because if you did you would live in the small knit world that I live in. Craig Kelly was one of the first and greatest snowboarders that ever lived. He snowboarded in places and with more style than any snowboarder that ever lived in his time. I would love to be able to know the places and the freedom and the amount of creativity and style that he snowboarded with.

How shallow an answer is that? I’m not coming up with Gandhi, I’m not coming up with Jesus Christ, I’m coming up with Craig Kelly. How about that.

  • Kyle D

    I have had an excellent time with skullcandy’s customer service. I filled out the form online, printed it off, sent in the headset, and then a few days after i got an email with a code to get another one 100 percent free of charge. Also if you take care of your stuff you shouldn’t be complaing about low quality stuff because i bought a pair of hesh’s almost half a year ago and they are still in almost mint condition.

  • Will Morgan

    Hey Rick- I have beef to pick with you on your RMA process. Long story but basically 2 of the 3 sets of headphones I bought as Christmas presents have broken and the process for getting these replaced has been very frustrating. Maybe you’ll read this or maybe you won’t but I think there should be some serious changes need to be made to this process.

  • Rick Alden

    Wow… My wife just pointed this post out to me and she says I need to respond. Sorry I’m coming in a bit late to this game (6 months late). Really bummed to hear about the broken headphones… however, we have a plan for that. Our Skullcandy Warranty reads:

    “Skullcandy is proud to provide he best product warranty in the industry. If this product should fail in your lifetime, we will replace it at no charge. If the product is damaged by aggressive music listeners sliding a rail, sliding down the emergency ramp of your aircraft, slammed in your locker, slammed in your car door, run over by a car, running into a wall, getting run out of town, mountain biking, road biking, sky diving…, blown up in an accidental experimentation with flammable substances, or damaged in any other every day experience, it means you are living your life the way we want out product used! In these, or any other damaging events, we will replace the product for a 50% discount from retail. — Love Skullcandy.”

    In other words, we are really sorry if your headphones went bad, but we can’t wait to make it good for you. Please call our customer service department at 435.940.1545, and we will set you up.

    Funny story about that phone number that i think about every time I give it out… it used to be our family’s home phone. When we started the company, we never knew things would get this big, and we were so broke that spending money on a second phone number was never going to happen. When customers started calling and asking my 6-year-old questions about headphones, I realized we’d have to break down and get a second number. Since my home number was already printed on business cards, that one went to the business.

    Back to the warranty question… if you have ANY problems at all, call me direct. My personal phone number is 435.214.3675. However, i suspect that if you call Customer Service first you will have such a GREAT experience, you won’t even want to talk to me.

    Peace

    Rick Alden
    CEO, Skullcandy, Inc.

  • Ian Kauffman

    Hey – just saw Ricks video on Youtube, looks like a great company to work for!

  • Steve Kelly

    I have a bit of a bone to pick with SkullCandy – maybe Rick will read this and do something about it. Rick: your headphones look sick and have great graphics but they break way too easily. I didn’t even have a chance to wear them on the mountain because they broke while I was packing my SUV for this weekends ski-retreat. Maybe if you spent more time on R&D and less time posing on your skateboard this wouldn’t be an issue. Here’s a question: How much of your revenue is made up of refusing to exchange broken headphones? Bet that saves you a nice chunk of change, a–hole.

  • Kevin King

    Craig Kelly! The Godfather of Freeriding – that’s a solid answer. I might’ve gone with Terje though. Great interview, keep em coming.

  • Burton snowboarder

    Hey, that is cool – I picked up some skull candy at http://www.tightboards.com this year and I love them.