The Fixer Upper

In 1995, Terry Valmassoi moved his family from Southern California to Knoxville, Tennessee, to take a job with L.A. Spas. The family’s new home in Tennessee wasn’t even fully unpacked when Valmassoi’s coworker and new friend Bob Lauter told him they needed to talk. Lauter was also new at L.A. Spas but had recently learned Fort Wayne Pools, a former employer, was looking to sell its spa division. Lauter knew an investor interested in teaming up to buy the assets. L.A. Spas was busy preparing for the Atlantic City pool and spa show, and both Valmassoi and Lauter were in New Jersey. Lauter flew from Atlantic City to Fort Wayne, Indiana, to see if a deal could be worked out to buy the business. Though nothing had been signed, Lauter flew back to Atlantic City and turned in his resignation. “People were like, ‘You sure that’s a good idea?’ ” Lauter says. “ ‘You don’t have a job if you do that.’ ” Though he wanted to keep the prospective deal under wraps, Lauter couldn’t keep it from Valmassoi. “I was feeling guilty,” Lauter says. Valmassoi and his wife, Elaine, had hit it off so well with Lauter and his wife, Sherry, that they’d based their move to Tennessee much on that relationship. Now, three months in, Lauter had to tell him he was leaving. Valmassoi’s reaction wasn’t quite what Lauter expected: Terry wondered if there might be a job for him in Fort Wayne, too. “I’ve always had the entrepreneurial spirit,” Valmassoi says. “I said, ‘Hey, I don’t know where Fort Wayne is, but I’ll call my wife and we’ll do this.’ ” Once the deal was finalized to buy Fort Wayne Pools’ spa assets, Valmassoi resigned and packed up both his and Lauter’s offices to head to Indiana. Master Spas was officially launched. The Valmassois never intended to leave Southern California, and now they found themselves moving to Indiana in the middle of a winter storm, taking a pay cut to help launch a hot tub startup. “I wouldn’t have picked that path,” Valmassoi says. He had two small children at the time, ages 1 and 5. The cold and change was a shock to the system. “It was a tough time on our family, but I would not have changed it for anything,” he says. Lauter also had to move his family back to Indiana after their brief stint in Tennessee. They had a young son and two teenage daughters. “Bob said L.A. Spas was going to be his last venture,” says Sherry Lauter, Bob’s wife. “There weren’t going to be any more new projects. I should’ve known better; he needs to have a project.”

The Project

After 25 years of working together, Valmassoi and Lauter are still friends. From the start they trusted one another, building upon a foundation of faith. Valmassoi was skilled in operations, and Lauter in sales and marketing. “It enabled us to work out of our giftedness and not out of necessity,” Lauter says. But when they first set foot on the old Fort Wayne Pools property, it became clear they had bought a fixer upper. “[The factory was] just a mess,” Valmassoi says. “It had been shut down for two to three months. Mold and raw materials were everywhere. It was a massive cleanup.” Al Herbert, whom they hired to run the factory, took one look at it and immediately quit — though Lauter talked him into staying. “[Valmassoi, Herbert and I] went to a Denny’s, and I laid out my vision for what we were going to do at Master Spas,” Lauter says. Among other issues, there were no office spaces in the building; they ran a power cord out to construction trailers in the parking lot. The state of the business was perhaps an even bigger mess. “They didn’t have any dealer customers,” Lauter says. When Lauter left Fort Wayne Pools, his replacement had gotten rid of its dealers in favor of selling to big-box stores. Their sales had dropped like a rock: “They didn’t have ongoing manufacturing,” he says. “They were building a couple spas a day.” Even though they weren’t primarily interested in the sales channel, Lauter secured some of Fort Wayne Pools’ home center clients, which gave them sales and cash flow as Lauter and the newly hired Sam Badiac started building a dealer base. Badiac worked with Lauter at Fort Wayne Pools and brought a lot to the new team, in both sales and industry knowledge/skills. Valmassoi says he was most impressed by Lauter’s initiative. They started the business in February 1996 and by April of that year, Lauter and Badiac, who now is executive vice president, had designed molds for the Legend series, its first line of dealer hot tubs. By August, all the units were done. “We had photography that made us look like we’d been in business for a long time,” Valmassoi remembers. Lauter and Badiac hit the road with new models and high-end brochures. The two drove a truck and a trailer with five spas, setting them up in hotel ballrooms all over the country. “I did a PowerPoint, and we’d invite all these dealers and sign them up that night,” Lauter says. And while Valmassoi found the efforts impressive, for Lauter it was a stressful time. Though they didn’t want to be in the big-box channel, they ended relationships with their biggest home center clients before they could afford to. Master Spas dropped Home Depot because, besides not paying on time, its store managers somehow made the Master Spas order department cry every week. “Life is too short to have this kind of stuff,” Lauter says. Lauter found dealers to fill Home Depot’s void, but in 1999 Hechinger Home Quarters Builders Square went bankrupt. It had owed Master Spas several hundred thousand dollars, which turned everything upside down. “It put us out of covenant with the bank, and we needed to quickly get from the home center business to the dealer business,” Lauter says. “I was on the road continuously and knew I had to get this done or we were going to go bankrupt. That was the toughest year for me.” Looking back, Lauter views the crisis as a blessing in disguise. “In a lot of ways, it was the best year because we got switched completely over to dealer business,” Lauter says. “We had our first good profit because we were in the business we wanted to be in — and didn’t have the bottom line dragged by the low margins of the home centers.” While building a dealer base, Valmassoi and Lauter also amicably parted ways with the original investor — but this meant Lauter had to find new backers quickly. The right people came along at the right time in the form of Dee Adcock, then owner the Philadelphia-based swimming pool distributor W.W. Adcock, and another partner. “These guys borrowed a toothpick and ended up with a forest,” Lauter says. This also gave Valmassoi the opportunity to take an ownership stake.

The Journey

Building a business is usually harder than it looks. But even with the difficulties of the early years and the challenges of the recession of 2008 and 2009, Valmassoi and Lauter, and even Sherry, describe the Master Spas journey as enjoyable. “It’s been so much fun to watch,” Sherry Lauter says — even the changes people weren’t sure about that have been successful: “I loved every minute of it. I’m sure there’s [bad] moments I’ve forgotten; I’m very grateful and thankful for that.” Valmassoi remembers when the company first put a TV in a hot tub. “It had its moment in time, then it passed,” Valmassoi says, “but it was good memory and a fun challenge. We’re always pushing the envelope on innovation.” What people probably most associate with Master Spas, though, is Michael Phelps and swim spas. When the company built its first swim spa mold in 2005, the team watched it vac-form for the first time with anticipation, Valmassoi says: “The swim spa industry did not exist much in 2005 and 2006 when we got started. We took off like a rocket and a lot of competition followed; we helped create a marketplace for it.” Master Spas now has a dedicated swim spa factory, which opened shortly before the pandemic hit. Much of the company’s success with swim spas can be traced back to its deal signed in 2010 with Michael Phelps, who was just 25 and already had 14 of his 23 Olympic gold medals at that time. Phelps had been on Lauter’s wish list of spokespeople for some time, and when he heard Phelps was looking to train in a swim spa, Lauter jumped on the opportunity. While Phelps loved the propulsion-based swim spa Master Spas sent him, there were a few issues: It wasn’t big enough, deep enough or fast enough. The prevailing thought was acrylic would fail if it was molded 10 or 11 inches deeper, but Master Spas did it. They also built a propulsion system that was twice as fast as before. “This was right after the worst year the spa industry ever had — 2009,” Lauter says. But Valmassoi and Lauter felt they were ready for the challenge. “The way I looked at it was, if I [sign Phelps] and I don’t sell any more swim spas, it’s going to sting — but it’s not going to put me out of business. And if I sell a lot more swim spas, then it’s going to work really well,” Lauter adds. As arguably the biggest swim spa manufacturer, it’s safe to say it worked. “Michael’s been an awesome partner,” Lauter says. In addition to his swimming accolades, Phelps launched the Michael Phelps Foundation in 2008, which helps provide access to water and swim lessons. Phelps has also become an outspoken mental health advocate.

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The Culture

While the early years stick out as the toughest to Lauter, for Valmassoi the coronavirus pandemic has been the most challenging time for him. “It’s been a hard year for so many reasons,” Valmassoi says. “With the impact the pandemic has had on everyone’s lives, and then the challenge and responsibility that brought to our business, our team had to focus on keeping our employees safe while working hard to increase staffing and grow the business. Supply chain issues just made this past year even more interesting. The good news is that demand is high and our industry has a great future.” With the company’s expansion to a dedicated swim spa factory, it was ready for a sales increase, but like most hot tub manufacturers in 2020, that increase was not quite what they bargained for. “With that big swim spa factory, we never thought in the next few years that we’d even be considering a second [manufacturing] shift,” Valmassoi says. “But now, both the hot tub and swim spa factories are running two full shifts; you couldn’t dream about that in the short term. But this demand has brought that opportunity to us.” Over the years, whether it be a new building or an elite athlete, Valmassoi says they trusted what was in front of them. “We’ve been blessed,” Valmassoi says. “It’s not because we’re so smart — the right things came up at the right time, and we made the right decisions to take advantage of it.” With all the highs and lows, the Valmassoi and Lauter duo is still intact. But there are many others who joined Master Spas in the early days and never left. “The fact that we have the same team together from the very beginning until now, that’s a rarity,” Lauter says. “I’m not taking credit for it; I just feel fortunate.” Valmassoi adds that good people making good decisions — who all love the hot tub industry — helps develop the company as well. Despite the unprecedented growth of the company and industry over the last 12 months, both men are always looking to the future. “We have our challenges, and they’re big challenges,” Valmassoi says. “I’ve never experienced anything like we did this last year. It makes you stronger. Consumers want hot tubs and swim spas in their backyard because they want to live life better. It really summarizes for us and our industry why things are so successful.”