JIMMY BEANS WOOL is an online yarn and fabric retailer with abrick-and-mortar store in Reno, Nev. The company, which has 37employees, was founded by a married couple who are former softwareengineers, Laura and Doug Zander, in 2002. After five years, sales were$1 million. They topped $7 million in 2013.

The Challenge

From 2007 to 2012, Jimmy Beans Wool (Links to an external site.) grew organically at an annual rate of as much as 50 percent. But about two years ago, after the company earned national recognition (Links to an external site.) forits growth, Ms. Zander began to think bigger. “Everyone in the businesscommunity was saying we could be a $100 million business,” she said.That became her objective.

But last June, after Ms. Zander had put in place many strategies togrow even higher, Jimmy Beans’s sales fell flat. In subsequent months,they dropped further. The Zanders had to stop taking salaries, payemployees out of their personal savings account and rethink their growthplans.

The Background

Founded as a small storefront shop, Jimmy Beans developed a loyalfollowing online through its creative use of social media, most notablyinstructional videos and product reviews, which it started posting onYouTube in 2008. (Links to an external site.) Sales took off.

Then, beginning in fall 2011, Jimmy Beans “fell into the trap ofthinking, if we can sell yarn, we can sell anything,” said Ms. Zander,the chief executive. The company began selling fabric, investing$150,000 in inventory. By offering fabric in addition to yarn, theZanders thought, they would double their sales in three to five years.

With visions of becoming a destination much like L. L. Bean’s flagship store (Links to an external site.),the Zanders moved Jimmy Beans from a 3,500-square-foot space into20,000 square feet that included warehouse, office, and retail areas.They put $25,000 toward renovating the warehouse and remodeling theretail store.

Ms. Zander read business books and spoke to consultants, who advisedher to spend less time guiding operations and more becoming anambassador for her company. Counseled to “hire people who are smarterthan you” and “just lead the ship,” she increasingly left day-to-dayoperations to her growing staff and embarked on an all-out, nationaleffort to make Jimmy Beans Wool a household name. She introducednumerous marketing initiatives, including a partnership with the United States Ski and Snowboard Association (Links to an external site.) and support of Heart Truth (Links to an external site.), a National Institutes of Health campaign intended to increase awareness of heart disease in women.

To sustain these efforts, Jimmy Beans bulked up its marketing staff,which had consisted of Ms. Zander and four employees who also worked inthe warehouse. Gradually, the marketing team grew to eight full-timeemployees. Additionally, Jimmy Beans made a high-level technology hireto give Mr. Zander, the chief technology officer, more time to focus ongrowth.

In her new role, Ms. Zander traveled constantly. When Stitch Mountain (Links to an external site.),a campaign to get athletes excited about knitting, began with asampling tent in Park City, Utah, Ms. Zander was there to give away yarnand teach knitting. She also traveled to meet with the Home ShoppingNetwork, discussed a partnership with 1-800-Baskets (Links to an external site.) and gave a TEDx talk (Links to an external site.). She had “grand visions,” she said, of teaching knitting at corporate retreats and supplying yarn to attendees.

Photo

After five years, sales were $1 million, and topped $7 million in2013. But a big push for growth instead caused trouble. CreditCandiceNyando for The New York Times

She also wrote books. One, “Stitch Mountain,” showed winter sportsenthusiasts how to create their own garments and accessories. Threeothers — “Crochet Red (Links to an external site.),” “Sew Red (Links to an external site.)” and “Knit Red (Links to an external site.)”— reinforced Jimmy Beans’ support of Heart Truth. Jimmy Beans donatedabout $50,000, a percentage of the sale of its Stitch Red products,including the books, to Heart Truth.

Ms. Zander was confident her efforts would pay off in increasedsales. Instead, sales flattened — and then began to decline. Expensesalso spiraled. “We were spending too much money to spread the gospel,”she said. Before long, the company ran out of cash. Morale suffered,too, Ms. Zander said, as Jimmy Beans experienced an identity crisis. Itwas no longer the family business where employees shared personalupdates during morning huddles. The thinking had become, “We’re bigguys. We need to act like it,” she said.

Desperate to get Jimmy Beans back on track, Ms. Zander hired anotherconsultant. He was the first one “who spoke our language,” she said.Working with him, Ms. Zander said, she realized that the very steps shehad taken to expand the business had hurt sales. They spent too muchmoney, and Ms. Zander got away from the hands-on, creative leadershipthat had given rise to the YouTube videos and other successfulinitiatives. Maybe, she realized, she should go back to spending moretime in the office — but how would Jimmy Beans become a $100 millioncompany? And was that even the right goal?

The Options

Working with their consultant, the Zanders developed a whiteboard full of ideas.

One of their biggest questions was whether to commit to sellingfabric or stick with yarn and knitting supplies. “Who are we?” becamethe issue, Ms. Zander said.

They considered opening more stores around the country — withcompany-owned locations, franchises or both. “Brick and mortar is stillvery important in our industry,” Ms. Zander said. While expansion couldspur the growth they sought, they wondered about the lifestyle choicesit would entail — including the travel and the need to manage retailemployees from afar.

They also considered simply continuing to build their brand online,possibly with a greater emphasis on international sales. Jimmy Beanscould begin advertising internationally and form cross-borderpartnerships. But growing outside the United States would entail some ofthe same lifestyle choices as expanding domestically. In effect, Ms.Zander said, they would be starting a new business that would requiretravel and money to master.

1. There are several factors and decisions that have created a difficultsituation for this company. Correctly identify at least 5 of thesefactors. From a financial perspective, how did these factors/decisionsimpact the company? Make sure that your explanations are clear andcomplete.

2. For each of the factors named in question #1, state specifically whatactions you would take to correct them, if you were empowered to do so.

3. Referencing the challenges previously listed and including anyadditional areas not previously discussed, what would you have donedifferently to prevent or at least minimize the issues facing thiscompany today? What tools, techniques or processes would you have usedto accomplish your goals?