Max Chafkin | Inc. magazine

Case Study Update: Down, But Not Out

 

The Problem: Last February, we introduced you to Magnet America, the King, N.C.-based creator of Support Our Troops car magnets. The iconic yellow ribbons, released after the U.S. invasion of Iraq in 2003, were a big hit, sending Magnet America's sales to $17.5 million in 2004. The company's founders--brothers Dwain, Dwight, and Brian Gullion, who also run a chain of four Christian bookstores--donated some of the profits to charity. There was one big problem: The brothers hadn't copyrighted the magnet, and overseas manufacturers were flooding the market with cheap imitations. Dwain was exhausted and wanted to shutter Magnet America. But Dwight and Brian were determined to parlay the yellow ribbon craze into a sustainable business.

What the Experts Said: Stephen Orleans, creator of the Baby on Board sign, thought an expansion plan was feasible. "Magnet America can probably carve out a niche market by developing other patriotic products," he said. But consultant Ken Hakuta, a.k.a. Dr. Fad, said the success of the magnet was "a Pet Rock moment," and that Dwain should "move on with his life."

What's Happened Since: After traveling to China to adopt his second daughter in the summer of 2004, Dwain left Magnet America to become an adoption activist. "I saw a room full of babies with nobody to love them," he says. He now receives a stipend from the company, along with a cut of the profits. Unfortunately, in 2005 there weren't any. As Dwight oversaw the development of more than 300 lapel pins, bracelets, and car magnets--including Christian bumper stickers--sales plummeted 83%, to $3 million.

What's Next: Dwight says revenue will surpass $6 million in 2006, when the new line of products appears in Dollar Tree, Walgreens, and Wal-Mart stores. The Gullions also secured a copyright on the yellow ribbon magnets, and Dwight is thinking about trying to recoup some losses from knockoff companies. Dwain, for his part, has no plans to return to the business.

Senior contributing writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York. @chafkin