JIMMY BEANS WOOL is an online yarn and fabric retailer with a brick-and-mortar store in Reno, Nev. The company, which has 37 employees, was founded by a married couple who are former software engineers, 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 earnednational recognition(Links to an external site.)

for its growth, Ms. Zander began to think bigger. "Everyone in the business community 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 to grow even higher, Jimmy Beans's sales fell flat. In subsequent months, they dropped further. The Zanders had to stop taking salaries, pay employees out of their personal savings account and rethink their growth plans.

The Background

Founded as a small storefront shop, Jimmy Beans developed a loyal following online through its creative use of social media, most notably instructional 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 of thinking, 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, the Zanders thought, they would double their sales in three to five years.

With visions of becoming a destination much like L. L. Bean'sflagship store(Links to an external site.)

, the Zanders moved Jimmy Beans from a 3,500-square-foot space into 20,000 square feet that included warehouse, office, and retail areas. They put $25,000 toward renovating the warehouse and remodeling the retail store.

Ms. Zander read business books and spoke to consultants, who advised her to spend less time guiding operations and more becoming an ambassador for her company. Counseled to "hire people who are smarter than you" and "just lead the ship," she increasingly left day-to-day operations to her growing staff and embarked on an all-out, national effort to make Jimmy Beans Wool a household name. She introduced numerous marketing initiatives, including a partnership with theUnited States Ski and Snowboard Association(Links to an external site.)

and support ofHeart 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 in the warehouse. Gradually, the marketing team grew to eight full-time employees. Additionally, Jimmy Beans made a high-level technology hire to give Mr. Zander, the chief technology officer, more time to focus on growth.

In her new role, Ms. Zander traveled constantly. WhenStitch Mountain(Links to an external site.)

, a campaign to get athletes excited about knitting, began with a sampling tent in Park City, Utah, Ms. Zander was there to give away yarn and teach knitting. She also traveled to meet with the Home Shopping Network, discussed a partnership with1-800-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 in 2013. But a big push for growth instead caused trouble.CreditCandice Nyando for The New York Times

She also wrote books. One, "Stitch Mountain," showed winter sports enthusiasts how to create their own garments and accessories. Three others "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 donated about $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 increased sales. Instead, sales flattened and then began to decline. Expenses also 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. It was no longer the family business where employees shared personal updates during morning huddles. The thinking had become, "We're big guys. We need to act like it," she said.

Desperate to get Jimmy Beans back on track, Ms. Zander hired another consultant. He was the first one "who spoke our language," she said. Working with him, Ms. Zander said, she realized that the very steps she had taken to expand the business had hurt sales. They spent too much money, and Ms. Zander got away from the hands-on, creative leadership that had given rise to the YouTube videos and other successful initiatives. Maybe, she realized, she should go back to spending more time in the office but how would Jimmy Beans become a $100 million company? 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 selling fabric or stick with yarn and knitting supplies. "Who are we?" became the issue, Ms. Zander said.

They considered opening more stores around the country with company-owned locations, franchises or both. "Brick and mortar is still very important in our industry," Ms. Zander said. While expansion could spur the growth they sought, they wondered about the lifestyle choices it would entail including the travel and the need to manage retail employees from afar.

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

Question 1:

There are several factors and decisions that have created a difficult situation for this company.Correctly identify at least 5 of these factors.From a financial perspective, how did these factors/decisions impact the company?Make sure that your explanations are clear and complete.

Question 2:

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

Question 3:

Referencing the challenges previously listed and including any additional areas not previously discussed, what would you have done differently to prevent or at least minimize the issues facing this company today?What tools, techniques or processes would you have used to accomplish your goals?