Burt's Bees Case Study

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Operationally, staying in North Carolina had low risk because the atomization promised with the purchase of factories will allow for significant growth in the amount of product Burt’s Bees can produce, in addition to being geographically closer to many large hubs, allowing for larger shipments able to reach a wider market. Capability risk in North Carolina is also low because Quimby had leads for a plant manager and a sales and marketing manager. Demand and brand risk were moderate since Quimby would be forced to alter her product line to support the newly automated process, yet the integrity and natural quality of her product would remain the same. Financially, the risk is high, as Quimby would have to take on debt to secure property.

In selling the company, the operations and capability risks are moderate, as the company would still possess the same capabilities and capacities, though there would be some uncertainty with the direction of operations, as Quimby would no longer be in charge. The financial risk is low, because Quimby would instantly receive money for the company, but depending on the sale agreement, this could be a large amount or a very trivial amount. Finally, demand risk is still low, as the same level of demand would exist for her product, but the brand risk is high, for there is uncertainty as to whether or not a new owner would retain the value and integrity of the product.

Recommended Solution

Following our assessments, we recommend that Quimby stay in North Carolina and grow the business. This solution would best balance the elements of the Timmons Model, opportunity, resources, and team. By growing, Burt’s Bees now enters a larger market force, in which they have a niche product. The specific type of product would have to change, but Quimby has already considered how to keep using the simple, natural products that her customers love. Staying in North Carolina expands Burt’s Bees weaker areas of the Timmons Model, resources and team, and not only does the company now have access to larger, more skilled work force, but Quimby can now bring on board experienced managers. Their experience with competitive brands will also be a crucial resource the company can leverage in the larger market. Since Quimby believes that her company can achieve much more than $3M in sales, her best option in growing her company and securing stability for the future is to keep it in North Carolina. Selling the company after at least 5 years of growth and innovation to accommodate Quimby’s desire to leave once it’s become stable is also recommended, but the company would need to stay in North Carolina to achieve that growth and value.

Appendix

Appendix A: Assumptions Made in Calculations

- Maine

- $3M max sales capacities

- $5.2M company value after 5 years

- $100,000 sunk cost to move back to Maine

- North Carolina

- Averages of Toilet Preparations Industry from case

- Industry averages = PPE Investment for Best Case

- 25% higher = PPE Investment for Base Case

- 50% higher = PPE Investment for Worst Case

- Initial bank loan (Rounded up):

- Worst case: $1M

- Base case: $900,000

- Best case: $700,000

- Interest rate

- Lowest and highest rates from 1994

- Best: 6%

- Base: 7.5%

- Worst: 8.5%

- Tax rate

- Normal commercial tax: 35%

- Add 7.5% for North Carolina’s tax rate

- Totaling: 42.5%

- Basic depreciation value

- 15-year life

- No salvage value

- Based on original PPE prices

- Growth rate for sales

- Average industry growth at 64% (As per the book)

- Best case = 30%, 40%, 60%

- Base case = 23%, 30%, 45%

- Worst case = 15%, 20%, 30%

Appendix B: Risk Assessment Matrix

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Appendix C: Financial Projections

Maine

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North Carolina (Best Case)

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North Carolina (Base Case)

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North Carolina (Worst Case)

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