Tom Kartsotis is an entrepreneur who thinks American manufacturing still has a future. He created Shinola, a high-end watch company in Detroit. After all, it’s a city that knows about manufacturing. But with recent economic struggles in the Motor City, some might see Detroit as the last place to start a business. Kartsotis saw an opportunity to be part of its revival.

The company says it expects to produce up to 500,000 watches annually by 2014 or 2015. With an average price of $600 apiece, Shinola watches are sold at Barney’s, Saks, Neiman Marcus, Bloomingdales and Nordstrom. Besides watches, Shinola also sells custom-built bicycles and leather goods. Courageous SMB owners can learn a thing or two from Shinola and its meteoric success.

Experience is valuable

Kartsotis is best known for founding Fossil, the popular clothing and accessories brand. He served as CEO from the start in 1984 until 2000, and remained on as chairman until 2010. The experience he gained from his previous company helped him with starting Shinola.

Branding is important

The original Shinola brand was founded in 1907, and gained notoriety during World War I. It’s where we get the popular colloquialism, “You don’t know s— from Shinola.” One of the managers at Bedrock, Kartsotis’ venture capital firm, made the crack to a colleague. The joke turned to a discussion about restoring the brand. The trademark, conveniently, was available.

Look for opportunities in unlikely places

Why Detroit, a city that can’t afford to provide even the most basic services to its shrunken population? Kartsotis and company responded with “Why not?”

“I don’t pretend Detroit doesn’t have challenges,” said Heath Carr, Bedrock chief executive. “There’s no hiding that. But there’s such an energy there. It’s wildly contagious.”

Find talent and test your business theories

With no established workforce for watch-making in the United States, Detroit is manufacturing heritage would lend a degree of authenticity to Shinola products. They were able to hire from a large pool of talented autoworkers who had recently lost their jobs.

Bedrock commissioned a focus group and asked participants whether they preferred a $5 pen from China, a $10 pen made in the USA or a $15 pen made in Detroit. People preferred the cheaper Chinese pen, but were willing to pay the higher premium for one made in Detroit. That was a signal that consumers would pay for an authentic American-made watch. Detroit’s reputation as an industrial leader was still intact.

(excerpts and quotes taken from a 2103 Forbes article)