How the Creator of Dugout Mugs Hit a $30 Million Home Run With a Business He Started in His Apartment "Best way to get acquired? Operate a company that doesn't have to be bought." – Kris Dehnert, CEO & Partner, Dugout Mugs
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Luck? In the right place at the right time? Or neither? I recently had a visit with Kris Dehnert, founder of the Dehnert Media Group and an expert in scaling businesses, and Randall Thompson, former Minor League Pitcher for the Toronto Blue Jays and creator of the mug-from-a-bat Dugout Mug. In just over five years they've grown the now ubiquitous Dugout Mugs brand from a one-man idea to an international business with close to $30M in sales. But how does a company scale this quickly? And what happens next?
A bit of background
Randall Thompson, designer of the bat-to-mug concept, had lived and breathed the game of baseball from the time of his first Little League T-ball game at age five. He was hooked. Through hard work he progressed from collegiate sports to professional baseball, inducted by the Toronto Blue Jays as a free agent in 2011. It was the dream of a lifetime but came to an end upon his release in mid-2012. Thompson returned to his home base of Orlando but was nowhere near ready to retire. He took a position as a college pitching coach but felt "an identity crisis happening" and resigned from coaching. He took an unpaid internship at an ad agency in St. Petersburg to explore his creative side, which he funded by waiting tables to cover the rent on a detached garage-turned-studio apartment from his sister.
The agency role fell apart at about the same time he was fired as a waiter. With no money for rent, he was living very literally in his sister's backyard. It was then he recalled an idea he'd tucked away while coaching. Why not turn the barrel of a bat into a drinking mug? It was not a dream or a vision, but the simple recollection of watching a fellow coach creating an apparatus for a "focus on the hands'' hitting drill. To bring his point home, the coach had cut off the top of the bat and left it on the bench while the players worked with the handle. The thought hit Thompson like a bit of lightning: "I could easily create a way to serve a drink from a bat." It seemed simple enough. Now that he had nothing else going, why not give it a try?
With his first earnings from a paint delivery job, Thompson purchased 25 craft bats and a chop saw from Lowe's. He worked the delivery job from 6:30 a.m. to about 2:30 in the afternoon, at which point he would shift all of his energy to the new venture. The first Dugout Mugs were born from the kitchen counter of the studio apartment. Without a plan to scale or a structure for marketing, he advanced the fledgling business for its first 6 months by using the proceeds of the first 25 mugs to build and sell 100, then 500, and finally 1,000. The majority of the sales came from simply introducing the idea on Facebook, but Thompson had also gone as far as walking around the parking area of regional games selling the mugs he'd customized with generic baseball-themed logos.
Two guys walked into a bar…
How did Thompson and Dehnert meet? Fittingly, the initial contact happened on Facebook in a group for former Major and Minor League baseball players. Technically, Dehnert shouldn't have been in the group, but Thompson laughingly admits, "Kris has a way of being in the right place at the right time."
Dehnert had posted about a country music concert nearby in Thompson's wife's hometown. This raised his curiosity. He clicked on the link and learned from Dehnert's profile he was in close proximity and that he'd been notably successful at ecommerce. Intrigued, he reached out, saying, "I've seen you've sold a bunch of things online and I'm trying to figure out how to do that, and how to build what I'm doing at a bigger scale."
"We ended up meeting in a hotel lobby for a beer and talked about the possibilities," Thompson recalls. Several months later their first work together began.
Fortuitous connections, and a near-death experience
When the meeting happened, Dehnert was in St. Petersburg for a Board of Advisors mastermind event. Intrigued by what he'd previously heard on the phone, he invited Thompson to swing by and have a beer, admitting it was an interesting concept. After their meeting, Dehnert carried the information back to his event session and talked with several other entrepreneurs about the idea. The feedback was divided, but the majority agreed it was a cool concept and right up Dehnert's alley. Fresh from a transformational shift in his life, Dehnert believed this was more than irony.
Dehnert had been seriously ill in the months before the St. Petersburg meeting, to a level he had genuinely feared he would die. Still in his thirties, with a six-month-old daughter, he began to pray fervently to survive, and beyond this, be directed to someone or something that would allow him to focus on family, live an experiential life, and leverage his unique talents. This appeared to be the project he was seeking, and Thompson appeared to be the person Destiny had placed in his path
Dehnert sensed in Thompson and the Dugout idea the foreshadowing of something far beyond a one-person business. It was a "diamond in the rough" -- a possible unicorn – in the hands of an owner/operator with a vision of something unique. "This was a project I felt I could run with, and Randall was gritty like me," he recalls.
With Dehnert driving sales and Thompson heading the operations, the two "broke every system in the place." They recreated and ruggedized their business model for the ability to deliver at scale. In six months they achieved a $1M valuation, which allowed them to bring in their first and only financial backing: $250,000 in the form of a $100,000 loan and a $150,000 line of credit.
The investor was one of Dehnert's mastermind colleagues. He says of the conversation, "I'd been wanting to find a deal we could do together because I love Kris's style. When he called, I was in."
From there, the company has leaped forward in orders of magnitude. In 2017, they produced $1.2M. The next year, they produced 2.2 – then 3.5, 8.5, and $13.5 million – which remarkably occurred during the pandemic and a year in which almost no baseball was played.
The building of an incredible tribe
Of all the contributing factors to Dugout Mugs growth, the founders agree that betting on people has been their top "secret sauce." One of their core beliefs is "focus on the people, and the business will take care of itself." This has resulted in a vast and diverse tribe of fans, friends, followers, and customers that span most all ages and surprisingly at least as many women as men. Whether it be hosting fan-centric giveaways, or interviewing baseball stars like Pete Rose, Mariano Rivera, Pudge Rodriguez, David Mickey Evans and others, Dehnert and Thompson have worked to create a "fans first" experience for all.
During the pandemic, people yearned for connection, which made them delighted to hear from great names in baseball as they made virtual appearances to talk about the sport. The company went "all in" on contests, giveaways, and other interactions with followers. The gifts included TVs, beer money, and tens of thousands of dollars in free mugs and autographed items. In cases where people were highly engaged but couldn't afford to buy something, the company gave them a mug and invited them to pay the favor forward.
Dehnert has a favorite saying: "No matter how far or fast you fall, help enough people and you'll never hit bottom." He estimates the team amassed some 50,000 new customers during 2020 through creative practices such as a free shot glass when they made a purchase, for the ability to follow up after a sale with an unexpected chance to generate good vibes.
"Where do we go from here?"
As Dugout Mugs has broken through revenue barriers, the obvious question is how to progress further – acquisition by a major brand like CocaCola, Fanatics, or Yeti? An IPO?
This, I believe, is where Dehnert's advice is fitting for every entrepreneur. The byword of every decision is "strategic', he said in our interview, noting, "You can't just hang a sign over your company that says, "buy me – we're for sale'. The secret, he says, is the same for both a prospective acquisition or an IPO: Operate a company that doesn't need to be bought.
This is counterintuitive to the tendencies of many owners, who tend to prioritize growth above quality, community, and sound fundamentals ("ubiquity first -- profitablity later') in the hopes someone will "notice them" and pay an extraordinary valuation. But suppose the market and circumstance change? (Cases in point: WeWork, and the sudden explosion and then implosion of co-working space, or the rise and collapse of traditional retail.) Companies with deftness and instinct can ride the changes with expanded offerings, brand loyalty, a tribe of aligned and delighted customers, and solid financials, Dehnert maintains. These are the strengths that support innovation and can weather the challenges of political strife, pandemics, and supply chain malaise.
With this approach, it may never be necessary or desirable to sell. And if you do choose to exit, you'll be working from a position of strength as opposed to being cornered in a position of desperation or need.
As for PR, Dehnert is increasingly in favor of being selective. He positions his company in the most ideal media and most desirable settings as opposed to chasing every chance for visibility he may see. "It's all about positioning, the leverage of time and money, and the best use of our talent and resources," he says.
Where will this lead, and what will Dugout Mugs ultimately achieve? Time will tell, but the outcome is sure to be a happy one as Dehnert and Thompson continue to innovate, invent and continue to grow both a company and a lifestyle by creative thought and design.