Post on 01-Apr-2015
Business Planning for Social Enterprise
Mick Dobson
Business Planning for Social Enterprise
Seven Stages
Business Development for Social Enterprise – The Journey
1. Motivation
2. Preparation – Risk assessment, Self assessment
3. Assessment
4. Test your idea
5. Exploration
6. Business planning
7. Start-up
Motivation
• Why are you doing this?• Do you know enough?• What options are there for you?• Are your stakeholders on board?• Is the proposal/idea sound?
Motivation
• Do you want to run a business?• Do you seek out new challenges?• Are you realistic about your
capabilities?• Are you prepared for the long
haul?• Do you fully understand the risks?• Do you find change exciting?• Do you have a clear social aim?• Do you have the full support of
your board and colleagues?• Can you motivate people and
take the lead?
• Have you got the drive and self-belief to take this forward?
• Can you make decisions?
• Are you flexible enough to learn from mistakes?
• Do you listen to advice?
• Are you determined enough and prepared to keep going when things get tough?
• How do your values influence what you want out of developing and running a social enterprise?
You Might Now Know...
• The social aim of your business• Why there’s a need for it• How you will meet that need• Your legal form• Your key stakeholders
Preparation
• Culture Assessment• Capacity Assessment• Risk Assessment
Culture Assessment
• Your style of leadership/management• Your values and principles• Who are the decision makers?• What changes might be necessary?• What relevant experience do you have?
Capacity Assessment
• Current purpose and activities• How successful are you?• What skills/experience/resources?• What changes will be necessary?• Are Board/key staff supportive?
Risk
• How are you funded now?• Are your financial systems adequate?• How’s your cash flow?• Your relationship with your bank?• SWOT of your funding
Assessment
• Ideas generation• SWOT• PEST• Commercial appraisal
External Analysis
Political Economic Social Technological
These can be political factors or policy decisions that affect the operating environment
These are issues that affect the purchasing power of customers and other businesses
These are factors that affect customers needs and potential markets
These are innovative developments or trends that might affect markets
Examples: Examples: Examples: Examples:
Tax
Employment
Environmental regulations
Trade restrictions/tariffs
Political stability
Europe
Economic growth
Interest rates
Inflation
Unemployment
Supply/Demand
Demographic and cultural changes
Population growth rate
Social Attitudes
Employment Environment
Research & development
Automation
Technology
Innovation
Now You Can Add:
• The external factors and trends affecting your business• How you plan to move towards sustainability• What IS your business idea?
Testing Your Idea
• Who, where are your customers?• Can you reach them?• What is your break even point?• Social need vs Market demand• Costs/overheads/equipment/premises• Competitors/pricing
Exploration
• Feasibility study• Market research• Customer profile• Competition• Price• Location• Marketing strategy – P’s• Resources and barriers
Draw Conclusions About:
• Price• Place• Product• Promotion • People• Process• Purpose
• Price - This should reflect the value placed on the product or service by the customer
• Product - This can refer to a service as well as a physical product as it encompasses tangible and intangible characteristics. It can also be used to include people and any values associated the brand.
• Place - The product or service should be available when and where the customer wants it.
• Promotion - The promotional mix can include advertising, direct mail, PR, cold calling, trade fairs networking events, word of mouth etc.
• People – Does your team have the necessary skills?
• Process – Will you have quality standards to promote, such as investors in people, Equal Opportunities or Environmental Standards? How will this inform your marketing strategy?
• Purpose – Will your social purpose present you with a unique place in the market? If you want to market your enterprise on its social purpose can you prove the impact you make? In some circumstances, where particular target customers empathise with your social purpose, this may get you a foot in the door.
Business PlanningYour Business plan will:
•Provide you with a route map. It is not a destination; it should and will change.
•Give you credibility and confidence in articulating your proposal when you approach other organisations.
You should consider the following questions before you start to draft the business plan:
•Who are you writing the business plan for?
•Would you fund or support your social enterprise based on the information you have provided?
Stages of a Business Plan
• Exec Summary• The Business• Organisation• Key Staff• External Relations• Product or Service• The Market
• Social Purpose• Social Impact• Business Environment• Industry analysis• C S F • Development Strategy• Turnover/sustainability
Stages of a Business Plan
• Marketing and Sales• Premises• Suppliers• Production• Equipment• Action Plan• Finance – Ops budget, cash flow• Appendices
Executive Summary
This is your best opportunity to make a good first impression . A snapshot of what the social enterprise does. A snapshot of what the organisation does, if appropriate, where you are now, where you want to go and how you will get there.
The Business Basic details – Name, Address etc.Business Idea. Social purpose. Legal Status. Structure
Organisation Background of the organisation. The mission statement/ aims of the organisation. The legal structure, Management structure and basic details as above.
Key Staff A brief summary of the skills, experience and knowledge of all the people involved in the organisation. Roles and responsibilities. Training requirements.
External relations Relationships with professional and legal representatives, funding organisations. Relationships with monitoring organisations, trade associations, networks, etc.
Product or Service Description of products, services or activities.
The market Who will buy your goods/services? Why will customers buy from you? What is your USP? Market research – including trends such as changing in age group, people moving in, features such as the seasonal effects of tourism. Competition. Market Testing. Similar social enterprises.
Social Purpose Who will benefit? Why is there a need for a social enterprise? How will running a social enterprise meet the need?What type of social enterprise is it? What are your external stakeholders’ views?
Social Impact How will you measure your social impact?What tools can support you to do this? What evidence of impact do funders and financers require? How much will impact measurement cost?
Business Environment
What support is there to help you to measure your social impact? Key issues in the external business environment that may affect your business
Industry Analysis Key issues affecting the industry in which you intend to operate
Critical Success Factors
The main critical success factors for your business
Business Development
Your strategy to ensure you meet your critical success factors
Turnover and Sustainability
Expected turnover Expected non-commercial incomeExpected profitHow long it will take to achieve sustainability How will you achieve your expected turnover, non-commercial income and sustainability? Scenario planning
Marketing and Sales
What is your marketing strategy? What is your pricing strategy?What is your promotional mix? What it your customer care policy? How do you get customer feedback? Who will be involved in marketing? What is your marketing budget? What is your distribution strategy/process?What is your e-commerce strategy?
Premises Location and property details Cost and proposed method of financing (buy/rent/lease) Planning, health and safety issues, building, renovation or adaption costs Insurance
Suppliers Who are your main suppliers? Who is in the supply chain?Are there any alternatives?The advantages of using these suppliers
Production Quality standards Production methods and supervision Health and Safety
Equipment Description and proposed costs of equipment/ vehicles to be purchasedFinance arrangements Depreciation policy
Action Plan Key milestones / timelines and associated activities Costs and personnel requirements
Finance Budget assumptions (Projected income & Expenditure) Realistic cash flow forecastBalance sheet/profit and lossFinance required and methods of raising finance Funding secured, previous funding or large scale fundingAssets you have as security Alternative methods of finance Financial management systems and resourcesPrevious experience of loan finance
Appendices CVs of all those involvedProfessional adviser’s reports if usedQuotations for equipment Details of premises References/letters of support (details of trade association, network memberships)Any other supporting material (Including details of bank, lawyer, accountant, monitoring agencies) Copies of previous years’ accounts if you have them
Sales Forecast
Sales forecast Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Total
Unit price 5 5 5 5 5 5 5 5 5 5 5 5
Volume 200 300 500 1,000 1,000 1,000 1,000 1,000 1,000 1,500 1,500 1,500 11,500
Revenue 1,000 1,500 2,500 5,000 5,000 5,000 5,000 5,000 5,000 7,500 7,500 7,500 57,500
Sales price (per duck) £5.00Purchase price (per duck £3.00
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Total
Sales revenue 1,000 1,500 2,500 5,000 5,000 5,000 5,000 5,000 5,000 7,500 7,500 7,500 57,500
Cost of sales 600 900 1,500 3,000 3,000 3,000 3,000 3,000 3,000 4,500 4,500 4,500 34,500
Gross profit 400 600 1,000 2,000 2,000 2,000 2,000 2,000 2,000 3,000 3,000 3,000 23,000
Travel expenses 150 150 150 150 150 150 150 150 150 150 150 150 1,800
Insurance 30 30 30 30 30 30 30 30 30 30 30 30 360
Telephone 20 20 20 20 20 20 20 20 20 20 20 20 240
Website 0 0 500 15 15 15 15 15 15 15 15 15 635
Bank charges/ interest 20 20 20 20 20 20 20 20 20 20 20 20 240
Depreciation* 105 105 105 105 105 105 105 105 105 105 105 105 1,260
Professional fees 20 20 20 20 20 20 20 20 20 20 20 20 240
Drawings
Total expenses 345 345 845 360 360 360 360 360 360 360 360 360 4775
Net profit 55 255 155 1,640 1,640 1,640 1,640 1,640 1,640 2,640 2,640 2,640 18,225
Profit and Loss Projection
Cash Flow Forecast
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Total
Cash Sales 200 300 500 1,000 1,000 1,000 1,000 1,000 1,000 1,500 1,500 1,500 11,500
Credit sales 0 800 1,200 2,000 4,000 4,000 4,000 4,000 4,000 4,000 6,000 6,000 40,000
Capital injection 5,000 5,000
Total cash in 5,200 1,100 1,700 3,000 5,000 5,000 5,000 5,000 5,000 5,500 7,500 7,500 56,500
Suppliers 600 900 1,500 3,000 3,000 3,000 3,000 3,000 3,000 4,500 4,500 4,500 34,500
Capital equipment 5,000 0 0 0 0 0 0 0 0 0 0 0 5,000
Travel Expenses 600 100 100 100 100 200 100 100 100 100 100 100 1,800
Insurance 360 0 0 0 0 0 0 0 0 0 0 0 360
Telephone 0 0 60 0 0 60 0 0 60 0 0 60 240
Website 0 0 500 0 0 45 0 0 45 0 0 45 635
Bank charges/ interest 20 20 20 20 20 20 20 20 20 20 20 20 240
Professional fees 0 0 0 0 0 0 0 0 0 0 0 0 0
Total cash out 6,580 1,020 2,180 3,120 3,120 3,325 3,120 3,120 3,225 4,620 4,620 4,725 42,775
Net cash flow -1380 80 -480 -120 1,880 1,675 1,880 1,880 1,775 880 2,880 2,775 13,725
Opening balance 0 -1,380 -1,300 -1,780 -1,900 -20 1,655 3,535 5,415 7,190 8,070 10,950
Closing balance -1,380 -1,300 -1,780 -1,900 -20 1,655 3,535 5,415 7,190 8,070 10,950 13,725
Costs and Pricing
• What’s the most I can charge?• Is it enough?
Price elasticity of demand
Never cut your prices.
Well, almost never.
Here’s why:
Let’s drop our price, that’ll get sales going.....
Cost priceSelling price GP
Price cut of:....
Revised SP
Revised GP
Sales vol
Original profit £
Revised profit £
extra units to stand still
% vol increas
e to stand still
75 100 25% 10% 90 17% 500 12500 7500333.333
3 67%
75 100 25% 5% 95 21% 500 12500 10000 125.00 25%
75 100 25% 2.50% 97.5 23% 500 12500 11250 55.56 11%
85 100 15% 2.50% 97.5 13% 500 7500 6250 100.00 20%
Let’s drop our price, that’ll get sales going.....
Cost price
Selling Price GP
Price cut of...
Revised SP
Revised GP
Original Profit
Revised Profit
Extra units to stand still
5 vol increase to
stand still
75 100 25% 10% 90 17% 12500% 7500% 333% 67%
75 100 25% 5% 95 21% 12500% 10000% 125% 25.00%
75 100 25% 2.50% 97.5 23% 12500 11250 55.56 11.00%
85 100 15% 2.50% 97.5 13% 7500 6250 100 0.2
Useful Links
Excellent website to guide you further:
•http://www.wrexham.gov.uk/english/business/social_economy/se_toolkit.htm#download
Very Comprehensive site - full of background information and principles:
•http://www.forthsector.org.uk/docs/New_BusPlanGuide.pdf
For more information on our services please speak to reception and ask for Wenta’s advisory department.
0845 371 0891
Follow TheWentaGroup: