One Spas was founded by Bob Hallam in 1977 and has grown to become one of the world's leading manufacturers of hot tubs and aquatic fitness systems. The company was first established as a chain of retail hot tub stores. But because Bob and wife Linda Hallam received requests from their retail customers that were not being fulfilled by hot tub makers at the time, the husband-wife team refocused Dimension One into a manufacturing business. The company grew to 450 distributors in 35 countries with international sales comprising 35 percent of the company's business. Before the economy unravelled, 2007 annual sales hit a peak of $57 million.
But one morning in November 2009, Hallam had a lot on his mind as he strode through the lobby. The business news was bad. The housing market was in full collapse. Dealers were struggling to secure financing for their spa purchases, and few consumers seemed interested in shelling out $15,000 to $25,000 for what suddenly seemed like the most discretionary of items. For only the second time in its history, the company's annual sales were shrinking.
Hallam called a companywide meeting to confront the crisis head-on. "There's been a fundamental shift in the industry," he began. The company's sales were plummeting, he said. If Dimension One ever hoped to grow again, it would need to quickly move in a whole new direction. But how? Making what? Hot tubs were all that Hallam knew.
Sales were tumbling-2010 revenue was expected to drop to just $28 million-and Hallam knew he had to act. Doing nothing would condemn his company to mediocrity or worse. Hallam considered the option of selling the business. In fact, a buyer had approached him a year earlier. At the time. Hallam considered the offer too low and turned it down. Mother option was to lay off employees, continue focusing on hot tubs, and try to rehire when and if the market rebounded.
Just surviving was not good enough, though: Hallam wanted to thrive. What could the company do to reinvent itself? Could they produce products for other industries? He liked to think of his company as a kind of idea lab in the world of plastics and thermoforming, the process of heating plastic in order to mold it. The factory was now operating only four days a week, so Hallam looked for something to fill his excess capacity. It was not the first time Hallam diversified his product lines. Two years earlier. Hallam realized that many of his dealers were loading up with competitors' low-end spa products. So Dimension One launched a new line of colorful, portable, and lower-cost plug-in tubs under the brand Spa Berry. A group of the company's more creative staff members brainstormed business opportunities outside the hot tub market-including urinals and horse trailers. When the economy tanked. Hallam realized product tweaking wasn't enough-they needed radical change. "He told us if we wanted to be a big company again, hot tubs alone won't get us there," James Hedgecock. the company's 32-year-old director of business development. recalls Hallam saying at the November meeting. "We would have to get some other things going.'
A bad fall turned into a worse winter. "We sold nothing in November and December." Hallam says. "Literally nothing." Hallam closed the factory for four weeks. He cut his pay 50 percent and his top executives' pay 5 percent. A series of layoffs brought Dimension One's employee count to 175 from a high of 400 a few years earlier. "It's tough to swallow, because they're all like family" says Hallam. He had to do something ... but what?
Should Hallam come up with some new products or continue to concentrate on hot tubs?