To grow or not to grow -- Roxanne Quimby

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					St. Francis Xavier University




                                           Roxanne Quimby



                                Growth and the small business
St. Francis Xavier University

                                Small Business Framework

                                 Foundations of Growth: Finding and Growing Markets
                                      Opportunities and Creating Value
                                      To grow or not to grow the small business
                                 Growth Options
                                 Managing Growth
                                 Harvesting the Firm
St. Francis Xavier University


                                Objectives and Overview
                                1.   Recognize that businesses depend on opportunities
                                2.   Develop an understanding of value
                                3.   Introduce the small business perspective of value
                                4.   Develop of a theory of growth – the five stages of growth – and
                                     critique the reasonableness of this theory
                                5.   Analyze the growth decision of one business – Burt’s Bees – and
                                     it’s founder and manager – Roxanne Quimby.
                                6.   Generalize about the reasons for and against growth

                                •    Previous class – the opportunities of being small
                                •    Today’s class – the opportunities of growing
St. Francis Xavier University

                                Burt’s Bees
                                 The story of Roxanne Quimby
                                 www.burtsbees.com
                                     Overview of products
                                     History of company
                                     “Current” issue:
                                          North Carolina
                                          Return to Maine
                                          Sell
St. Francis Xavier University

                                Opportunity Analysis
                                 What opportunity did Roxanne seize?
                                      Value for customers?
                                         Primary – home, simplicity, freshness

                                              “We sell really well in urban areas….Our products aren’t
                                               sophisticated or sleek. They are down home and basic.
                                               Everyone has an unconscious desire for more simplicity…”
                                           Secondary – demand for personal care products

                                 What opportunity does Roxanne hope to seize?
                                      Increase the attractiveness of providing personal care
                                       products
                                          More sales, more expertise, more profit (less transport
                                           and tax), more efficiency (automation)
St. Francis Xavier University

                                Opportunity Analysis
                                 What do you think of this move?

                                 The opportunity shifts from:
                                      Primarily customer-driven value opportunity focus 
                                       Primarily firm-driven attractiveness opportunity focus
                                           Customer focus on handmade, home, Maine employees
                                            positioned now as natural personal care products
                                           The justification appears to be firm-driven:
                                                More sales
                                                Less costs
                                                More profits
                                           Little evidence, for example, customers demand price reduction
                                            to maintain sales or that employees were dissatisfied with
                                            employment
St. Francis Xavier University

                                Five Stages of Growth
                                 Not all business that survive grow
                                       …but those that do should formulate feasible strategies

                                 “There are sufficient similarities in the problems that they face to make
                                   a general growth model useful to the management of a small business”
                                   (45.)

                                 Small firms grow in stages
                                       Each stage has distinctive characteristics with implications for
                                        effective management
                                       Growth is accompanied by points of crises
                                       Owners/managers must anticipate these crises and proactively
                                        manage them
                                       Growth requires change
St. Francis Xavier University

                                Discussion
                                 How does the Five Stages of Growth theory relate to
                                  Roxanne’s decision?

                                      Classify
                                         At what stage would you classify Roxanne in Maine in terms of:

                                              Management?
                                              Accounting / Finance?
                                              Marketing?

                                      Anticipate challenges
                                         What, if anything, will need to change in N. Carolina to support
                                           growth?
St. Francis Xavier University

                                Mini Presentation
                                 Use the Five Stages model to analyze Burt’s Bees
                                  current situation and planned growth
                                      Kelsey and Brittany
St. Francis Xavier University

                                Five Stages of Growth
                                 Evaluate Roxanne in Maine
                                      Management
                                         Still doing everything, entrepreneurial

                                         Direct supervision

                                         Limited administrative skills by her own admission

                                         Simple organizational structure

                                      Survival stage?
                                                               Characteristics of Entrepreneurs
                                                               Opportunity-obsessed (customer driven)
                                                                             Commitment (work ethic)
                                                                           Leader (team vision builder)
                                                                 Tolerant of ambiguity (risk orientation)
                                                           Creative (unconventional perspective/learner)
                                                                              Motivated (goal oriented)
                                                             Sense of self-determination (autonomous)
St. Francis Xavier University

                                Five Stages of Growth
                                 Evaluate Roxanne in Maine
                                      Accounting / Finance
                                         Equity financed, with an aversion to sharing ownership – hates
                                          accountability
                                         Finances driven by working capital and reinvested profits, with
                                          an aversion to debt – doesn’t want to be bound – hates
                                          accountability
                                         Inadequate bookkeeping (payroll taxes)?



                                           “Totally debt free”
                                           Positive cash generation, “always turned a profit”
                                           Maintained strict credit terms

                                      Suggests mixed progression?
                                         Survival / Growth stage?
St. Francis Xavier University

                                Five Stages of Growth
                                 Evaluate Roxanne in Maine
                                      Marketing
                                         Several product lines – personal care and craft lines,

                                          products launched to “expand the product line”
                                         Many distributors? LL Bean, Macy’s, Whole Foods

                                          Market Company, independents

                                      Growth stage?
                                         Yet products are simple and unrefined suggesting

                                          survival stage
St. Francis Xavier University

                                Five Stages of Growth
                                 Observation
                                     Atypical sequence to Burt’s Bees growth
                                        Cash from beginning

                                        Operations provided source of finance

                                        Product line (broadnarrow)

                                        Intuitive (?) use of controls (strict A/R and profit policy)




                                     Sequence may link to Timmon’s Opportunity model and the
                                      process of maintaining fit among the entrepreneurial elements
St. Francis Xavier University

                                Five Stages of Growth
                                 Roxanne in Maine – Conclusions
                                      Management in Survival stage?
                                      Accounting / Finance in Survival / Growth?
                                      Marketing in Growth stage?
                                      Hybrid approach to growth



                                 According to the Five stages of growth, what, if
                                  anything, will need to change in N. Carolina to
                                  support growth?
                                      Management?
                                      Accounting / Finance?
                                      Marketing?
St. Francis Xavier University

                                Mini Presentation
                                 What, if anything, will need to change in N. Carolina
                                  to support growth?
                                      Carissa and Kody
St. Francis Xavier University

                                Five Stages of Growth
                                 What, if anything, will need to change in N. Carolina
                                  to support growth?
                                      Management
                                         Still doing everything control issue

                                             Can she delegate? Operations and marketing recruits will
                                                expect latitude.
                                             Can she make the transition to “administrator” or a
                                                manager of managers?
                                         Skills develop/acquire functional expertise and skill?

                                             Inefficiencies of Maine (incoming shipments)
                                             Payroll taxes

                                      Model suggests if she wants to grow change is necessary
St. Francis Xavier University

                                Five Stages of Growth
                                 What, if anything, will need to change in N. Carolina
                                  to support growth?
                                      Accounting / Finance
                                         Take on Debt – financing facilities and equipment will require a
                                          magnitude of financing beyond her equity/retained earnings
                                         Offer Equity – ensure buy-in from management team and other
                                          (potential) financiers

                                      Model suggests if she wants to grow change is necessary
                                         Can she live with the accountability required by financed
                                          growth?
St. Francis Xavier University

                                Five Stages of Growth
                                 What, if anything, will need to change in N. Carolina
                                  to support growth?
                                      Marketing
                                         “Trimming the Azalea bush” – reducing product lines to benefit

                                          from automating goop
                                              Perception of value to customer – shift to all natural,
                                               environment emphasis
                                              Brand positioning
                                              Competitive exposure?
                                              She is managing products counter to model
St. Francis Xavier University

                                Burt’s Bees Conclusions
                                 Burt’s Bees and Growth Conclusions
                                      Growth demands significant changes in Burt’s Bees (marketing,
                                       HR, production, location)
                                      Growth is subject to considerable risk – take on finance and fail
                                      N. Carolina presents obvious growth incentives but it also presents
                                       a strategic shift
St. Francis Xavier University

                                Mini Presentation
                                 What changes, if any, could Roxanne make to stay in
                                  Maine? E.g. what would Fritz Maytag suggest?
                                      Ashley and Brandon
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                                Fritz Maytag Recommendations for B.B.
                                 Stay small and likely stay in Maine:
                                    Focus on the opportunity of customers perception of value of down-
                                     home, basic, ‘homemade’ by Maine employees – leverage hippie
                                     welfare moms.
                                            Roxanne notes “much of the business existed in the minds of the Maine
                                             employees” and Fritz notes “Having a small loyal workforce…is key to
                                             building on our theme of unusually high quality”

                                       Make the business more attractive to her
                                            Relocate within Maine (e.g. Bangor)
                                                 To benefit from transportation hubs (air, truck, rail) to reduce
                                                   in/outbound travel time/costs.
                                                 Reduce isolation effect for recruits
                                                 Maintain key link to nature state and employees
                                            Streamline products – presumably some can be eliminated based on the
                                             North Carolina plan – to enable focused growth (market penetration
                                             strategy) and production efficiencies.
                                            Invest in efficiency in those areas that can be improved without
                                             compromising your “success” activities, such as employee training, process
                                             improvements, and small-scale automation (shipping, warehousing)
                                            Negotiate tax exemptions / reductions, relocation subsidies and training
                                             funding with governor
St. Francis Xavier University

                                Mini Presentation
                                 What are reasons for/against growing Burt’s Bees?
                                      Maura and Victoria
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                                Burt’s Bees Conclusions
                                 Can Roxanne manage growth?
                                     Great entrepreneur
                                     Understands growth requires change
                                        She recognizes “the business had developed a life of its own
                                         and it was telling me it wanted to grow”, yet…

                                     Roxanne struggles to manage small operation; can she manage
                                      growing operation?
                                     She seems unwilling to relinquish control
                                         Her personal objectives (creativity, autonomy, control of
                                          management and finance) seem to conflict with demands of
                                          growth (delegation and accountability)
                                         Roxanne’s approach to Management and Finance suggest she
                                          is loathe to change
                                     Does the move “fit” Roxanne?
St. Francis Xavier University

                                Five Stages of Growth
                                 Critique of Stages of Growth Model
                                      Change involves predictable evolution in functional management – Is
                                       growth really so sequential? (E.g. Burt’s Bees)
                                      Prescriptive approach to management that entrepreneurs may defy
                                      “Progressive”? Is stage five “better” than four?

                                      Growth is accompanied by points of crises
                                      Owners/managers must anticipate these crises and proactively
                                       manage them
                                      Growth requires change
                                         For example, could Roxanne have used the theory to anticipate
                                          the challenges that have driven her to move? Key management
                                          and finance issues could all have been anticipated
St. Francis Xavier University

                                 To Grow or not to Grow?
                                 Why grow a business? The standard argument:
                                      Effective and/or efficient delivery of value to stakeholders
                                         Customers, shareholders, employees, supply chain

                                      Market-driven Reasons
                                         Capitalizing on good market conditions: growing demand,

                                           insufficient supply, favourable competitive and broader environment,
                                           preempt competitors
                                      Organization-driven Reasons
                                         Profiting from size advantage with economies of scale, buying
                                           power and specialization of labour (effective, efficient/learning
                                           curve) to create cost/price advantages
                                         Leveraging management advantage arising from specialization
                                           (functional expertise) and professionalization
                                         Utilizing resource advantage such as availability of cheap sources
                                           of financing, proprietary knowledge, cheap inputs, etc
                                         Build brand (creates customer loyalty)

                                         Diversification of market risks, first mover advantage
St. Francis Xavier University

                                 To Grow or not to Grow?
                                 Why grow a small business?
                                      Ensure survival: among micro business strong growth is associated with
                                       the highest survival rates; for all other firm sizes, slow growth had the
                                       highest survival rates (Industry Canada)
                                          Reduce financial risk for founder/investor, open up new financing

                                          Ensure employment for workers

                                      Exploit small business advantages/strategy
                                          Deliver value offering to wider market/expand reach of niche market

                                          Leverage innovative offering

                                          Follow growth of key, profitable customers

                                      Leverage small business people and resources
                                          Management’s entrepreneurial success and growth orientation

                                          Employees’ commitment to organization, quality

                                          Network opens up attractive opportunities

                                      Create harvest opportunities
St. Francis Xavier University

                                 To Grow or not to Grow?
                                 Why grow a small business?
                                      Overcome SME limitations
                                         Human resources issues such as disorganization (e.g. work

                                          schedules), employment uncertainty, limited upward progression)
                                         Owner / manager issues such as reliance on one/few individuals,

                                          limits of that person’s knowledge/skill, attitudinal influences on
                                          company culture
                                         Operations issues such as productivity, quality, flexibility, speed,

                                          cost
                                         Finance issues such as accessing working capital and growth

                                          financing and managing cash flow
                                         Marketing issues such as achieving awareness/recognition, gaining

                                          new customers, product development,
St. Francis Xavier University

                                 To Grow or not to Grow?
                                 Why not grow a small business?
                                       Hyper growth firms have a lower survival rate than business with lower
                                        growth (Industry Canada)

                                 There is a strong argument for staying small (e.g. the small business value
                                   offering)
                                       Customer perspective –specialized, innovative, quality offering and satisfy
                                        key/lucrative customers
                                       Business perspective – leverage niche strategy, customized offering, and
                                        personalized service of “local firm”, performance, employee satisfaction and
                                        cohesion
                                       Founder/owner perspective – independence, control, skills, commitment, founding
                                        purpose. Growth alienates many founders
                                       External perspective – avoid exposure to new/more competition
St. Francis Xavier University

                                Conclusions
                                 Growth can be managed
                                     Stages of growth and causes of success/failure
                                     Success may come from anticipating issues and
                                      proactively planning
St. Francis Xavier University

                                Admin
                                 Next Class
                                     Planning for Growth and No Pudge! Foods Inc.


                                 Seminar Sign-up

				
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