Bubble & Bee Organic: The Need for Pro Forma Financial Modeling

Stephanie Greenwood, founder and co-owner of Bubble & Bee Organic (B&B) was at a crossroads. She wanted to grow her business, but for that to happen she needed an infusion of capital. Because she was passionate about maintaining control of her business and the quality of her products, bringing in an outside investor held little appeal. So, it seemed a loan was in order. But...would she and her partner Steve Thomas qualify for a loan in an amount sufficient to support their growth? What should that growth entail? Should they consolidate their operations by purchasing a building, or should they just rent additional space? They could predict their growth potential, but what if they were wrong? This decision based, undisguised case focused on Greenwood and her partner's need for financial modeling to satisfy the lender, analyze the financial consequences of their options, and to determine if B&B could manage the debt payments without putting the business in financial jeopardy. Four different pro forma modeling scenarios were proposed to facilitate informed decision making at B&B: 1) 15% revenue growth with the loan, 2) flat growth with the loan, 3) 15% revenue growth with additional rental space, and 4) flat growth with additional rental space. An in-depth financial ratio analysis was also required of all four scenarios to evaluate and understand the impact on liquidity, cash conversion, leverage, profitability, efficiency, and return.

• Start-ups
• Financial statements
• Financial strategy
• Product distribution
• Entrepreneurial management
• Financial performance measurement
• Entrepreneurship