#3 - Bouncing Back: The Story of SpringFree Trampoline's Disruptive Leap with Steve Holmes
Summary:
How did Steve Holmes revolutionize the trampoline industry, but with a focus on safety?
Steve Holmes saw a critical gap in the market, with retailers selling trampolines without considering the potential for injuries. Instead of accepting this status quo, he dived into the problem, seeking a solution that would prioritize safety. His encounter with Jim Senegal from Costco, a person who shared his concern for safety, sparked an idea. The market was ripe for a safe trampoline, and that's exactly what he set out to create. Join Steve Holmes in this episode as he recounts his journey of creating the world's safest trampoline. Discover the story of innovation, commitment, and the recognition of a market opportunity that led to a revolution in the trampoline industry. This episode is packed with insights on how to identify market needs, invent novel solutions, and successfully bring them to consumers. Tune in now and start your journey towards understanding the art of innovation in market spaces.
Links and Resources Mentioned:
Transcript:
Steve Holmes:
All of the retailers in America were selling trampolines, and nobody seemed to care about the injuries or safety until I dug into it and met Jim Senegal or came across him at Costco. And he had no interest in selling trampolines. And so I said, Okay, there's a market opportunity for a safe trampoline. And that's what Keith designed. That's what he invented. That's what we committed to is delivering the world's safest trampling. And Costco gave us that opportunity to create a paradigm shift from what is a mat supported by brains and a spring at the jumping surface and all those hard surfaces by Costco never selling the product before. It gave us the opportunity that there was a door we could open. And if we could do it well, it would create opportunity.
Tim Sweetman:
Hey, folks, thanks so much for listening to the Tension podcast. My guest today is Steve Holmes. Steve is the President and Chief Executive Officer of I CL Management. It's an investment and management company. In his capacity at I CL, he has been instrumental in the development of numerous business ventures, including Spring Free Trampoline, which we talk about a ton in this episode, as well as Verify Technologies, just to name two. He founded Spring Free Trampoline in 2003 and serves as the chief bouncing officer where he oversees its growth and development. Now Spring Free is sold in over 31 countries globally. He founded Verify Technologies, which is a world leader in security surveillance for the mobile workplace in 1998 and serves as their chief executive officer. Previously, he participated in the creation and growth of Club Link Corporation, Canada's largest private golf course operator, and Advantex Marketing International. Born and raised in Victoria, British Columbia, he currently lives in Toronto. He chaired hires the board of Tyndale University College and Seminary. The Holmes family is also actively involved in the Youth Unlimited in Toronto, Muskoka Wood Sports Resort, and many other Canadian camps, among others. He's a chartered accountant and holds a bachelor's degree in business management from Ryerson University.
Tim Sweetman:
You're listening to part one of a two part interview. Tune in next week for part two. Without further ado, Steve Holmes. Before we talk about trampolines, because we'll get to that at some point, I really wanted to hear what were the moments that led up to that? I mean, were you always entrepreneurial? What does your life story look like up until that 2003 that led you to this moment that really launched into this next trajectory of, well, we'll talk about, the last 20 years have been pretty monumental, but there had to be a lot more that happened before that moment. Personally, I just would love to hear what that story looked like for you.
Steve Holmes:
I think from an entrepreneurial perspective, I've always been a risk taker, and I've been a risk taker. I don't think it was intentional. I'm not a gambler in the sense of gambling with money, so I don't do that. My gambling, as it pertains to money is betting on myself or businesses that I've gotten involved with. Sometimes you win, sometimes you lose. But I always had the confidence to say, Okay, what's the worst that can happen? And I am really good at that. What's the worst that can happen? I can't be that bad. And so my journey started as a teenager, really. I used to grab the lawn mower from the yard and go and cut people's grass that needed cut. I never asked permission. I was a great one at asking for forgiveness, not asking for permission. So I go cut their grass, and then they'd come out see me cutting the grass, and they'd tell me to stop because they wanted to cut better. Or they'd go, Why are you doing this? And I said, Well, your grass needed cut, and I figured I'd do it and save you some time. And if you choose to pay me, hey, pretty good.
Steve Holmes:
And I actually did really well at about 14, 15, 16, 17, cutting people's grass that way. And now I never built a franchise of people who went out and cut grass that way, or sealed driveways, or whatever they do today that's that approach. But as a young guy, I was always somebody who was willing to bet on themselves without being arrogant and cocky or confident because I didn't necessarily have those skills. As I mentioned to you earlier, I wasn't a great student because I didn't seem to see the value in school at that age as much as I did at just trying to experience life. So yeah, that's how it really started. And it had a groundswell. But my family background, my mother's father, my mother's brother, they were all accountants. They were all CPAs. And I found that I had a really good back in university for numbers and understanding money and the analytics. And so I ended up going and getting my CPA. It's a chartered accountant in Canada, but similar as CPA in the US. And so that's what I did. And that gave me the resources, both economically but more importantly, from a learning perspective, because I had all these clients just as guys like you who were all small and medium sized and some even large business people who I got to watch and see how they behave.
Steve Holmes:
I got to take on the best practices of those. And then in 1993, I was given the opportunity to step outside of being in public accounting and really getting involved in building our first business. I did that. That's 30 years of entrepreneurial growth and commitment since.
Tim Sweetman:
I'll ask you a little bit more later about some of those moments throughout there. But at some point, you met this guy named Keith Alexander, Dr. Keith Alexander. How did you meet this guy? Because he was in New Zealand, correct?
Steve Holmes:
If any of your listeners are having fun right now, one of the things they might have fun watching is what's taking place with the world's currencies. Back in 1996, the American dollar was trading at almost two times that of a New Zealand dollar. I think New Zealand might even be worse. New Zealand dollar was like 46, 47 cents to the American. So I actually thought, Jeez, it can't get any worse than that. Boy, it's cheap to invest there. So I actually made an investment in 1996 into a company based in Christchurch, New Zealand. And one of the guys I ended up who was working there, who was running that business out of Christchurch, ultimately ended up introducing me to Dr. Keith Alexander. And so we made our second New Zealand investment when we engaged with the university where Keith was working and acquired the patents for the trampoline. I had been doing business in New Zealand before, but that's what created the opportunity, the spark, and then we carried it on through there.
Tim Sweetman:
So early on, you talked about in a couple of other interviews, you had done some research about trampolines. Why did you decide to get into this business? What was the thing that prompted you? You said, You know what? I'm going to do this. This is absolutely the right decision.
Steve Holmes:
Well, I think there was two things. One was my own... I was a father, right? I was a father and we didn't own a trampoline. And my wife, much like Keith's wife, viewed trampolines as being dangerous. And so Cheryl was like, We're not going to do that. We're not owning a trampoline. And so when I was first presented with the idea of the trampoline, I reached out to a couple of people who said, No, I won't touch trampolines. The insurance is too expensive. I said, Yeah, but this is different. And they said, Yeah, but it's dangerous. And then I reached out and did more research and found out that may be true in many regards, but all of the retailers in America were selling trampolines and nobody seemed to care about the injuries or safety until I dug into it and met Jim Senegal or came across him at Costco. And he had no interest in selling trampolines. And so I said, Okay, there's a market opportunity for a safe trampoline. And that's what Keith designed. That's what he invented. That's what we committed to was to delivering the world's safest trampoline. And Costco gave us that opportunity to create a paradigm shift from what is a mat supported by brands and a spring at the jumping surface and all those hard surfaces by Costco never selling the product before.
Steve Holmes:
It gave us the opportunity that there was a door we could open. And if we could do it well, it would create opportunity.
Tim Sweetman:
And just for maybe somebody who's never seen the product before, what sets it apart from your back in the day getting launched into outer space or getting stuck in between regular springs? I mean, everybody who's a little kid, I think has been pinched by these things if you grew up in the 90s for me. I remember it. I loved them, but man, I got hurt a lot.
Steve Holmes:
And to be clear, they still are the standard in the sense of we don't only represent a very small portion of the market, and yet we have such a strong differentiator. The simple way to say it for anybody who describes is if they think of a bun cake or the spring frame pan form or whatever it is, the maps on the top, all of the springs are on the sides and the frame is on the bottom, and the enclosure is all made of a flexible rod. So the bottom line is there's nothing that your child can hit that is product related that can injure them. There's no springs to hit. There's no frame to hit. There's no steel poles to hit. So we've eliminated 100 % of what we will call the hard surfaces. Now, of course, if you and I jumped on it together, you represent a new hard surface. But from a design perspective, we've eliminated 90 % of all of the design related injuries.
Tim Sweetman:
That's amazing. Yeah, it's incredible. I mean, absolutely incredible product. And to recently, I'd never heard of it. It's shocking to me that it hasn't broken through even further. And I'm sure we could talk more about COVID. It definitely has. But early on, I have a quote here from you. You said a small business can be a good business. So when you first got into this, what did the market look like? Did you expect this to be a huge business or just one small portion of what you were going to do over time? What did you anticipate back then, probably 2002, 2003, correct?
Steve Holmes:
Yeah. I mean, I think you used the phrase before, and it's part of our mandate and our aspiration, if you want to call it that. I'm very aspirational, so think big, start small. I actually thought we could disrupt the global market and take a massive amount of share. There were manufacturing issues that I probably didn't fully comprehend and how difficult it is to displace low, low, low cost manufacturing. It's also hard sometimes to create a paradigm shift when your cost base is more expensive. To answer your question about a small business can be a good business, one is I was brought up on the concept of stewardship. As a result, you have to have something left at the end of every day that enables you to be a good steward, whether it's for your employees, your family, whether it's on a faith based as a tithe or a donation. So all of these things enable us that when we do this business, regardless of how sized it is, it's got to be profitable. We have to be good stewards of the resources. And so I make that comment about a small business can be a good business because in the scheme of the global sense of the world, we are not Uber or Tesla.
Steve Holmes:
We're a small business, but we're a good business because we're responsible, we take care of our employees, we take care of our suppliers, and we're profitable, and we look after our shareholders in that perspective. And so that to me, boy, even though it's a small business, it can be a good business. Are you.
Tim Sweetman:
Looking for new ways to navigate the many tensions in your life? Do you want to learn how to embrace these tensions to keep reat innovative solutions you never thought possible? Then you're going to want to check out the Tension Newsletter dedicated to exploring all of the many, many tensions we encounter in life. Each week, we delve into topics like work life balance, profit versus people, profit versus purpose, the political and social tensions that all impact us. Our contributors, including myself, will offer insights and practical advice on how to embrace these tensions and create solutions and innovations that can transform your life. So if you're ready to take your life to the next level and learn how to harness the power of tension to drive innovation and growth, I ask you to sign up for our newsletter today. You won't want to miss out on this incredible opportunity to explore the tensions that shape our lives and discover new ways to thrive as human beings directly to your inbox. All right, back to the show. So you guys pushed through, you acquired the patent, and you were able to convince Costco to get this in their stores.
Tim Sweetman:
How did you convince Costco to do that? Because they obviously had a strong stance against us for a long period of time, and then somehow you ended up in their stores.
Steve Holmes:
The best part of business is people. Later, I might use the phrase the worst part of business is people, too. So it's the people you meet along the way who ultimately shift the way that your success factor. And so we met a young guy at Costco who was a buyer in sporting goods in Canada, and he was a terrific guy. He was prepared to present the management team at Costco with not only the idea of this alternative product and the opportunity from a sales perspective, but he was willing to put his name and his time at Costco and his reputation at risk to say, I've done the research, this is valid. And so in the process of that, because of the way people respected him, they came and said, you know what? If Rick says that he's done all this work, at least out of respect for him, we need to give this an opportunity. And so they gave us an opportunity. And it's interesting. I think they did it under the shadows of Jim Senegal at the time because of where we were physically starting. We started in Canada, we moved into the UK, and we were able to do it in a way that was respectful to Mr.
Steve Holmes:
Senegal's perspective on trampleins are dangerous, but yet continue to prove our success throughout the time that we did business. And then all the years that we did sell trampleins to Costco, never had an injury that impacted Costco's insurance policies or anything like that.
Tim Sweetman:
You sold a bunch, I think at one point you said it made up almost 90 % of your total sales were coming through Costco. Then in 2008, you guys were preparing for the launch in the US. Can you talk about what happened in 2008? Then I want to hear how you guys pivoted in the year after with your Experience Center.
Steve Holmes:
Yeah. So really quick, 2008, lots of things happened. As you know, with the global financial crisis, the mortgage backed securities situation in September of '08, '78, '80s, leave that as a line in the sand that was critical. It was given its own name as we've got COVID now. Back then, it was the GFC, the global financial crisis. In 2007, we had really started to build momentum with Costco, and we had built an outstanding reputation. And what we didn't want to ever have happen was have our manufacturing ever cause us to lose that reputation and momentum. And we didn't own our manufacturing. So in 2007, I made the decision that we would make an investment. Some of our raw materials then and still to this day are still made in New Zealand. 50 % of our raw materials are still made in New Zealand, and we import them into China and add value in China. But in 2007, we decided that if we were going to make this happen, we needed to control our product and excellence. We needed to produce the highest quality product, no matter what. And so we invested in a factory and it opened, if you can believe it, our first production month was October of 2008.
Steve Holmes:
And in that production month, Costco came to us and did a complete factory audit. And we passed the factory audit and we had purchase orders ready for 2009 to go into Costco in the United States. So everything was just the momentum was all moving. You're right. We were like, 90 % of our business was heading to Costco in the US. We had the momentum. And then in May 13, 2009, we had the carpet pulled up from underneath us. We thought we were riding a magic carpet. The engine stopped, the genie left the station. I don't know what analogy you want it, but everything died. And that decision was made by Jim Senegal that, hey, you know what? You guys have come under my radar. I didn't ever want to sell these things. I don't like them, and we're not going to sell them. Even though there was no injuries, even though there was no damage to the reputation, he just decided to stop. And he did it respectfully, I must say, if he's listening to this or whoever does. He was very respectful in the way in which he handled us as a supplier. But we had to pivot because we had just invested in a factory.
Steve Holmes:
The global financial prices was taking place. Everybody's money became tight. And so we had to pivot and we pivoted by saying, if we can't get in front of a customer in a meaningful way through wholesale retail, we need to do it ourselves. And so I made a decision in 2009 that we would open our first retail store, and we decided if we were going to open a retail store, we called it the Experience Center, but Spring Free Trampoline had its first retail store on the off ramp that Jim Senegal had to take to go to Costco every single day. So he saw our sign no matter what, to get to the corporate office every single day, unless he went past it and turned around and came back and then got off the exit the other way. But I don't think he did it. And so we opened our first retail store right there. And sure enough, some of our best customers in the beginning were Costco employees. And we continued to build momentum in that whole Bellevue, Kirkland, Issaquah Market, and all of Greater Seattle. It created a momentum for us, which gave us the confidence that said, we can go direct to consumers and add value to their family's experience in the backyard, and we can do it well.
Steve Holmes:
That was the moment. So while Jim Senegal, in fairness, took the carpet and ripped it out from underneath with us, we as a collective team, were enabled ourselves to pivot. Actually, we found a much better engine or vehicle to drive our business forward and be profitably growing than ever before.
Tim Sweetman:
How did that pivot prepare you for 2020 and everything that happened in 2020? I know that's zooming ahead. It seems like we're going to have to gloss over 10 years, but I've been thinking a lot about that as I've been reading your story. But that was a big pivot and big moment. And it seemed in some ways that it might have prepared you and the company for what occurred and what happened in 2020. Can you talk a little bit more about that?
Steve Holmes
Well, yeah, I guess I'm going to go back and say this. I ask our staff to do the same. There's a bunch of tools that we have internally, but one of the tools is they make a statement. And when they make that statement, it's an affirmative statement, it's a statement of clarity. And they ask themselves, if that happens, what's the best that can happen if we do that? What's the worst that can happen if we do that? What's the worst that can happen if we don't do it? What's the best that can happen? Now, some people might call that a SWAT analysis. I don't. I think there's a difference. And so what I would say to you is the Costco experience, when we opened our Seattle store, when we made the pivot, we asked ourselves, What's the worst that can happen if we do this? And the answer was, we fail. Okay, right? What's the worst that can happen if we don't do this? Well, we already failed. We don't have to have a resource. So if we don't do this, failure comes quicker. Now, how do we get there? Well, yes, we need resources.
Steve Holmes:
So we have to be really smart and wise. And what resources can we allocate to it, both financial and personal and people? And so what I would say to you is in 2020, we were faced with the same thing. So we were ahead of the curve on knowing what was taking place. And the reason we were ahead of the curve was three things. One, we own our own factory in China. So I was physically in China when Wu Hanjie got shut down. So so I flew home from China on the 23rd of January 2020, and I called all my staff and I said, There's an absolute tidal wave coming. And it's either going to destroy everybody because i. E. The world is going to lock down because this is like the Spanish flu and everybody's going to lose their jobs and this is like the Spanish flu is coming and people are going to die. We have to figure out how to protect our staff, to preserve our cash, to generate cash. We got to turn inventory and cash. So we took some and what's the worst and best that could happen based on those actions?
Steve Holmes:
And so it's so fascinating. We were more concerned that COVID was actually going to be based on all the information we were hearing, be like the Spanish flu and people would be locked in their houses and nobody's going to be buying things. And although that was true, the difference was that people actually said, Well, I'm locked in. I want to buy stuff. I'm not sure anybody predicted that. And anybody who says they did, I go back to the wave analogy. The wave analogy is really, really important because if any of your listeners are surfers, and just to be clear, nothing I say is the original thought. I listen to people just like you do. I write down stuff, and so I can't give everybody credit. And I've extended this thought process, but I think about a surfer. If you're a surfer and you want to catch a wave, you're actually looking for the wave because you know that if you're going to catch the wave, you got to start paddling before the wave starts. Because if you don't start paddling before the wave starts and you're too late in starting the paddling, you'll miss the wave, or you might catch the back of the wave.
Steve Holmes:
At some point, the wave is going to crash on short. So we're going to use the wave analogy, and what I will say to you is when we first started, we thought that there wasn't going to be a wave. We actually thought that it was like a tsunami. It was just going to hit and crash and everything was going to burn. So we better protect cash. I talked about how we're going to make sure our people got employed. And every single day I was sending out updates about whether we knew anybody within our staff family had caught COVID and had become seriously sick. Every day. Because that's how serious we thought this was going to impact our company. And over the course of six to seven weeks, nobody was getting COVID that we knew. Or if we did have somebody within the family that got COVID, nobody was running in seriously sick. And all of a sudden in Europe, we started to see the sales getting driven up. We got orders from Germany saying, Hey, we need product. People are going to be locked into their houses and they want trampolines desperately. And so we started shipping product into Europe, which was a mistake because our factory was still shut down in China.
Steve Holmes:
The wave happened, we caught the back of the wave like I believe 99 % of all consumer companies, nobody saw it coming and was paddling. Nobody was building thousands of bicycles in advance. But we all got the back of the wave, and we rode the wave really, really well. But the wave has hit the shore. So as much as you're asking me about the learning moment of 2008 and how it impacted our decision in 2020, it's really about 2008 and how it's impacting our decisions for 2023. Because 2008, we came out of a global financial crisis. 2023, we're coming out of two of the biggest years of consumer goods sales ever. And every consumer goods company is sitting on inventory, and everyone is trying to figure out how to turn it into cash. And so the resilience that we learned in '08 is really being deployed today because we got to ride the back of a wave in 2020 and '21.
Tim Sweetman:
Hey, folks, thanks so much for listening to this episode of the Tension Podcast. This was part one of a two part interview I was able to do. I hope you tune in next week for part two of this conversation. It would be fantastic if you would take just a couple of moments moments to leave a review or rate us on Apple podcast or wherever you get your podcasts. It really does help the show. Thanks so much for listening. To find out more about the Tension Podcast, visit www. Tensionp od. Com, or you can find me on Twitter @Tim Sweetman.
