Latest / Scaling Up with Fexingo: How Small Businesses Become Mid-Market Companies / How One Hat Maker Scaled to 100 Million Without a Factory
Transcript
- Lucas: There's a hat company that's been around since 1895 — and it hit a hundred million dollars in revenue a couple years back without ever owning a single factory. Luna: Wait — Goorin Bros., right? The one with the little animal logo on the inside of the brim? Lucas: Exactly. Goorin Bros. Started as a door to door hat seller in Pittsburgh, then moved to San Francisco in the 1950s. Four generations later, they're a hundred million dollar brand. But what's wild is that they manufacture exactly zero percent of their product. Luna: So they're essentially a design and marketing company that happens to sell hats. Lucas: That's the frame. And it's a really instructive case for any small business thinking about how to scale without taking on the capital burden of a factory or a warehouse. Goorin's approach was licensing. They licensed their name and designs to a manufacturer — who then produced the hats exclusively for Goorin. In exchange, the manufacturer got a reliable volume order and a brand that could command higher retail prices. Luna: But isn't that risky? You're handing over quality control to someone else. If the stitching's off, it's your brand that takes the hit. Lucas: Absolutely a risk. And they've had hiccups. But the logic is that the manufacturer's incentive is aligned — they want repeat business, so they maintain standards. Plus Goorin's team does frequent audits. The trade-off is that you avoid millions in capital expenditure. A hat factory can cost anywhere from two to ten million to set up. Goorin used that money instead to open retail stores and build their direct to consumer channel. Luna: And they have a pretty strong retail presence now. I've seen their stores in a few cities — they feel more like a vintage shop than a hat store. Lucas: That's intentional. Each store is designed to feel like a discovery. They don't just sell hats — they sell the story. The fourth-generation owner, Ben Goorin, talks about how his grandfather would hand-write receipts. They've kept that personal touch even as they scaled. And in 2020, when retail got crushed, they pivoted hard to e-commerce and actually grew. Luna: So the licensing model gave them flexibility. They didn't have a factory sitting idle. Lucas: Precisely. Their fixed costs are relatively low — mostly rent for stores and salaries for designers and marketers. The variable costs are the hats themselves, which they only pay for when they order. That's a huge advantage when demand is uncertain. Luna: What about the manufacturer's perspective? Why would they agree to an exclusive deal with a single brand? Lucas: Good question. In Goorin's case, they picked a manufacturer that was underutilized — a factory that had capacity but was mostly doing low-margin private label work. Goorin offered them a premium brand with consistent orders and higher margins. So the manufacturer got a better use of their production line. It's a win-win if structured right. Luna: That makes sense. You're basically turning a vendor into a partner. Lucas: Exactly. And Goorin's been doing this long enough that they have deep relationships. They've been with the same manufacturing partner for over twenty years. That stability is key. Luna: But not every small business can just find a factory willing to do an exclusive license. How did Goorin get that leverage early on? Lucas: They didn't start with a licensing deal. For decades, they sourced hats from various suppliers and sold them in their store. The licensing model came later, when they had enough brand recognition to be valuable to a manufacturer. So the lesson is: build the brand first, then use it as collateral for the manufacturing deal. Luna: That's a chicken and egg problem for a lot of founders. How do you build a brand without a product to sell? Lucas: You start small. Goorin had a single store in San Francisco for decades. They built a local following. Then they expanded slowly — a few more stores, a wholesale business selling to other boutiques. By the time they had thirty stores, they had enough purchasing power to approach a manufacturer with a compelling proposition. Luna: So the licensing model is really a scale play, not a start play. Lucas: Exactly. It's for when you're past the proof of concept stage and you need to grow without blowing up your balance sheet. Luna: Quick honest thing — a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making this many of these. Lucas: Yeah, we keep the show ad-free that way. If these conversations have moved your work forward in some small way, that link is there. No pressure. Luna: Right. And it really does help us keep digging into cases like this. Lucas: So back to Goorin — another interesting piece is how they handled the shift from wholesale to direct to consumer. At their peak, about 70 percent of revenue came from wholesale. Now it's flipped — around 60 percent direct. Luna: That's a big pivot. Did they lose wholesale accounts? Lucas: Some, yes. But the margins on direct sales are much better. When you sell wholesale, you're giving up roughly half the retail price. Direct, you keep it all. The challenge is that you need to drive traffic yourself. Goorin invested heavily in content — they have a blog, a podcast, a strong Instagram presence. They treat their customers like a community, not just a funnel. Luna: And that's easier when you have a distinctive product and a story. Hats are inherently personal — you wear them on your head. People want to identify with the brand. Lucas: Exactly. And Goorin's hats have a bit of an edge — they're not basic baseball caps. They do fedoras, flat caps, bucket hats with linings that have playful designs. It's a product that people feel a connection to. Luna: So the licensing model plus a strong brand plus a direct channel — that's the recipe. But what about the risks? If the manufacturer goes under, Goorin is in trouble. Lucas: That's the single point of failure. And it's real. Goorin mitigates it by maintaining design files and patterns themselves, so they could theoretically switch manufacturers. But in practice, finding a new partner at scale takes time. They also carry some safety stock. But yeah, it's a vulnerability. Luna: Would you recommend this model for other small businesses? Say a food company or a cosmetics brand? Lucas: It works best for products where manufacturing is a commodity — where many factories can produce similar quality. Hats, apparel, simple electronics, some packaged goods. For products with proprietary process or IP, you might want to own the plant. But for a lot of physical goods, licensing or contract manufacturing is a smart way to scale. Luna: So the key is to focus on what you're uniquely good at — design, brand, distribution — and partner for the rest. Lucas: And that's what Goorin did. They never became a hat manufacturer. They became a hat brand. And that's a very different business with very different economics. Luna: It's a good reminder that scaling doesn't always mean owning more. Sometimes it means owning less. Lucas: Yeah. The question is: what do you want to be the best in the world at? For Goorin, it's the story and the experience. The stitching? That's someone else's expertise.