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Business lessons from the Gotcha era

By Tiffany Montgomery
February 29, 2008 7:30 AM

I've been reading the new book about rise and fall of Gotcha and talking to Gotcha founders Joel Cooper and Michael Tomson about their experiences.

The two became friends while going to the University of Natal in Durban, South Africa. Michael became a professional surfer and Joel became an accountant. They teamed up to start Gotcha in 1978, and moved to Laguna Beach to get it off the ground in the international arena.

They were in their early 20s and the company experienced explosive growth. According to the book, sales went from $17 million to $40 million in one year; $40 to $70 million the next. Michael handled design and marketing while Joel ran the back end.

Gotcha is considered a groundbreaking brand in the industry. It was the first to sell long, Madras walk shorts. It introduced denim and jackets to the surf market. It ditched the typical advertising campaign showing a guy surfing for more creative images. It was also one of the first to expand its distribution beyond the core and into department stores around the country. All this happened before the rise of PacSun.

The company grew too fast for Michael and Joel to keep up. The aggressive sales force sold into accounts that hurt the brand later, Michael says. While the company eventually reached about $150 million in sales, it lost its way in the 1990s after the recession and outside investors got involved.

I asked Joel and Michael what business lessons they learned from that time, and how they managed to stay friends through all the ups and downs.

Michael's business lessons

Take chances: "The bottom line is we created a culture at Gotcha, a culture of adventure and experimentation. We took chances and we made good on them. We were not afraid."

The price issue: "Somebody will always beat your price and only one brand can be the cheapest, the rest compete on the strength of their brand."

Hard work: "There are no free rides, no shortcuts, and no overnight sensations because nothing of value comes easily - behind every success is pain, sacrifice and a long road trip."

Control sales: "Nurture the brand and never allow the sales force to pressure you on distribution decisions. You have to grow from the roots up, which is to say specialty stores first."

Joel's business lessons

Fight complacency: "When you're on top you think it's never going to end. Now, knowing that nothing lasts forever is a good way to run a business. Make sure success doesn't go to your head."

Control distribution: "Don't be greedy. Know when enough is enough. That's the challenge with having a public company (today). You make decisions not for the brand, but for the public markets."

Have courage to downsize: "When it was at the end, we should have said, hey, $100 million in sales, that's great. We can stay that size. But we had all these people we didn't want to fire. We were emotionally involved in the business - we were young. We should have cut overhead."

How they stayed friends

It wasn't always easy. Joel and Michael - and many who worked with them during those times - told me they had contentious times.

"But at the end of the day, we are brothers. Brothers fight, they hate each other at times, but they stick together," Joel said.

Bryan Friedman, Joel's cousin and a lawyer who worked for Gotcha almost from the beginning, told me people tried to get between Michael and Joel.

While their relationship had some very rocky times, "They stood shoulder to shoulder. People tried to divide them, but they couldn't," Bryan said.

Joel admitted they both have egos, but they have different skill sets that compliment each other. And they always trusted each other. "There was never an issue about money, or division of profits." In fact, the two own several real estate investments together today and still own Gotcha in South Africa.

"I'm good at picking up his pieces," Joel said. "It doesn't bother me. "He got the notoriety, it didn't bother me."

One key was letting each other handle their own area of expertise, Michael said.

"Joel and I respect each other even if we disagree, and we each let the other do his job and make the necessary decisions."

The party

Paul NaudeMany successful industry people worked at Gotcha at some point, including Shawn Stussy, Paul Naudé (right), Shaheen Sadeghi, Mark Price and Nicholas Bower.

Many were at the party last night.

Mark Price, Kevin O'Sullivan Price, former president of marketing at Gotcha and now president of Firewire USA, posed with Kevin O'Sullivan, the book's author. Kevin owns a theater company in Los Angeles called Pharmacy.

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