Post on 25-Dec-2015
Social Enterprise Conference
October 30-31, 2006
Social EnterpriseBusiness Planning Workshop
Presented by:Kim Alter
Virtue Ventures LLC
Presentation OutlinePresentation Outline Social enterprise business plans Why? What for? What?
Difference from regular plans SE Business plan components Q & A
Great planning tool for nonprofit Strategic Grounded in reality Responds to market forces Many uses
Most nonprofits lack knowledge of how to prepare b-plans
Demanded by more donors “Failing to plan is planning to fail”
Why Business Planning?
What is a SE Business Plan?
A detailed presentation about your social enterprise that demonstrates how it will succeed in business and financial terms AND the social impact that it will create.
5
Why Do you Need a Business Plan?
For the investor/donor: Evidence of the nonprofit’s ability to conceive and execute an enterprise idea
Use – sales document
For the social entrepreneur: A planning framework
A management tool for resource allocation and decision-making
Use – Management and operations plan
Purposes Planning Framework Articulates vision and mission Sets goals and objectives Defines strategies and specific actions to achieve objectives
Measures results Communicates ideas, plans & social value
Projects necessary resources, expenses, & revenues
Provides a basis for SOUND decision-making
Business Plans vs. Proposals
Business plans are: Flexible documents
that change in accordance to market forces
Results-oriented Market-driven Internal management
tool/blueprint for project
Open - treat project as going concern
Proposals are: Fixed for the life of the project or funding period
Process-oriented Donor-driven Not usually used as management plan for project
Closed – treat projects as time-limited
A Road Map
Business plans chartthe course to realize the organization’s vision.
To Vision
2 new senior Staff hired
25Links
betweenbusiness &
citizen’s sector
Social Entrepreneur Acquisition up
20%
Anatomy of a Business Plan
Vision
Mission
Marketing Plan
Operations Plan
Human Resource
Plan
FinancialPlan
Concept & ObjectivesMarket Research
Information FlowsInformation FlowsMission
Objectives
Market Research:Target Market
Competitors/external factorsBusiness Assessment
MarketingPlan
OperationsPlan
FinancialPlan
HumanResource
Plan
Vision
FinancialPlan
FinancialPlan
ContingencyPlan
Social Enterprise Conference
October 30-31, 2006
What’s Different about Social Enterprise Business Plans?
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Business Plan Components
• Executive Summary• Business Description• Industry Analysis• Competitive Analysis• Marketing Plan• Management and Personnel Plan• Operations Plan• Financial Plan• Risk Assessment and Contingency Plan• Supporting Documents
SE vs. Regular Business Plan
Regular business plan single focus Financial bottom line only Profitability and financial return Reflects decisions to earn maximum $ Shareholders simple
Social enterprise business plan has double focus Multiple bottom lines: social, financial, environment
Social returns (impact) Reflects decisions to manage dual objectives Stakeholders complex
Final business plan documents look similar
Objectives are Aligned
Vision
Social ImpactObjectives
Social ImpactObjectives
Sustainability Objectives
Sustainability Objectives
Mission
Examples of SE Objectives Social Impact(target population) Scale
Services rendered
Clients served Economic security
Health benefits Education Skills/Capacity
Financial Viability(social enterprise) Cost efficiency Net profit/loss
Cost recovery Donor dependency
Costs savings public sectorObjectives defined by nature of social enterprise
and results being measured
Social Value Proposition Indicates the problem your social
enterprise is solving for its clients & beneficiaries and how much value they place on the resolution of this problem. You can do this by telling how your social
enterprise will create change in beneficiaries’ behavior, condition, or quality of life and how important that impact is from the clients’ perspective.
Market Research Traditional B-Plan
Opportunities & Barriers Industry dynamics Demand & Market
Social Enterprise B-Plan
Social Need Social problem enterprise is trying to mitigate
Specific social needs of clients/beneficiaries
Community and environmental Impact
Target Market Same for traditional & social enterprise Business plans Who are your customers?
What are their wants, needs, tastes, preferences?
Where are they? What are their characteristics?
Social Enterprises have several stakeholders they often view as “customers.” Target market are ONLY those buying social enterprise products and services.
Note: donors and clients may be customers
The Five Plans for All B-Plans
Marketing Getting products and services to target market
Operations Day-to-day functions of running your social enterprise
Human Resources The people you need to execute your enterprise
Finance Capital required to finance social enterprise and project income earned.
Contingency Plans What could go wrong and what will you do about it if it does?
Standard Marketing Plan Objectives Marketing mix: 4 Ps
Product Promotion Price Place
Sales Plan On going market research
SE Product Market Matrix
Existing ProductExisting MarketSelling to clients
Or donors
New ProductExisting Market
Selling to clients or donors
New ProductNew Market
Open
Existing ProductNew Market
Selling NGO services to External customer
SE Marketing Considerations In addition to standard marketing plans designed to reach paying customers for a SE’s products and services… Is there an outreach component for the target population?
Obligations to stakeholders—i.e. donors and social investors? Partners or networks?
Pricing considerations for target group? PR component to protect organization’s reputation?
Standard Operations Plan
Objectives Manufacturing Systems:
Information Management Inventory management Impact Measurement
Order fulfillment Quality control R&D Customer service Budget
Operations adaptations for SE B-Plan
Social Impact and Monitoring Systems Systems that collect and measure social impact
Direct Impact Indicators Result of social enterprise
i.e. Jobs created, income per client, scale of services
Indirect Impact Indicators Indirect result of social enterprise
i.e. improved housing, quality of life, social conscience
Human Resource Plan Traditional B-Plan
Management team Roles & responsibilities of various actors
Staffing and recruitment plan Governance
Social Enterprise B-Plan + Capacity building plan
Staff, institution, target group + Considerations for SE staffing duality
Program and business
Schizophrenic Staff Plan Business
Functional business skills
Marketing Accounting Operations
Led by Enterprise Manager
Industry Specialists
X Manufacturing Y Retail
Social Program Programmatic skills
Aid workers Social workers Humanitarian relief
Led by Program Manger
Program specialist X Doctor Food Security expert
Educational specialist
Structure and relationship to players
SocialEnterprise
Contracted Technical Assistance
Parent Organization
Partner
Clients
Parent Organization
Technical Assistance
Clients
SocialEnterprise
Capacity Investment Choices
A Job Hard Skills Soft Skills
Client Productivity
Return on Investment?
Credit/Savings Education Literacy Heath
$Job hard skills soft skills credit/savings education
$$$$
Capacity Building PlanCapacity
Building Method Benefit to Enterprise Mission
On-the-job training
Provide a job Skilled labor
Processing skills
Training/TA Improves productivity, product quality
Inventory tracking
Training/TA Improves inventory management
Soft skills Training/practice
Stabilizes work force
Leadership development
Training/practice
Higher self-esteem, morale, productivity, self- management
Savings program
Savings service
Reduces risk aversion through financial security
Health services
Health program linkage
Improved health = higher productivity No
Financial Plan Traditional B-Plan
Objectives Financial statements:
Income Statement – financial bottom line Balance Sheet
Cash flow Projections/Statement Social Enterprise B-Plan
+ SE financial objectives + Social expenditures in business activities
+ Income Statement - social bottom line + Resource Acquisition Plan
Includes grants and gifts
SE Financial Objectives In addition to regular financial objectives Decrease in donor dependency Cost recovery of social services Operating self sufficiency Cost efficiency to render social services
Target group income (also social impact)
Cost savings to social system (value of tax)
Community wealth creation
Financial Projections
SE Revenue SE Expense Business Expense Business revenue
$$$
Years
Social EnterpriseBreakeven Point
Private Business Breakeven Point
Role of Income and Subsidy
Years Enterprise Revenue Social Expense Business Expense
Breakeven AFTERSocial Costs
Breakeven Before Social Costs
Social Subsidy
Investment
EnterpriseRevenue Subsidizes Social costs
Double Bottom Line
Income Statement
Total Operating Expenses
Total Gross Revenue
NET PROFIT/LOSS BEFORE SOCIAL COSTS
= Financial Bottom Line
Less Social Costs = Social Bottom Line
NET PROFIT/LOSS AFTER SOCIAL COSTS
= Double Bottom Lines
Subsidy in Income Statement
Income StatementGross Profit Income earned
through enterprise
Operating Expenses (before taxes)
Costs related to operating enterprise
NET PROFIT/LOSS (before taxes)
Income less expenses
Subsidy Less Grants, donations, gifts
NET PROFIT/LOSS AFTER SUBSIDY
Total lost or gained after
subsidy
Financing mix and resource acquisition
Year 1 Prospect
Year 2
Prospect
Earned income (sales)
Interest income
Parent organization
Grants
Gifts/contributions
Soft Loans
Commercial loans
Social Return and Impact
“ Social Bottom Line” for social enterprises.
Social Return on Investment (SROI) measures the social value the social enterprise creates in financial terms as a ratio of the investment.
Social impact measures qualitative and quantitative social impact based on social objective and type of organization Most nonprofits are accustomed to using
this type of measurement.
Examples of social impact measures
Impact from employment based Social Enterprise
Impact from non-employment SE or hybrid
Asset accumulation Improved education
Scale Improved housing
Client income Quality of diet
Job Creation Access to health care
Skills acquisition Increased autonomy
Monetizing SE Value Enterprise Value = economic value of the enterprise. Cash flow analysis of business performance.
Social Value = direct demonstrable cost saving and revenue contributions
Blended Value = enterprise value + social value – debt
Social Enterprise Conference
October 30-31, 2006
Planning the Plan: Recommendations
B-Plan Essentials Consensus and ownership Appropriate participants Adequate preparation time Financial considerations Relevant flexibility Solid market research Participatory methods (within limits)
Realistic (achievable) targets
Clarify/Test the Vision, Mission & Values
A social enterprise can challenge an organization’s vision and mission Test assumptions/commitment to vision and mission.
Ensure strength of mission Align enterprise mission to social mission
Confirm compatibility of enterprise vision and values exists within organization.
“Planning” is a Cultural Concept NGOs often have shorter planning horizons than businesses.
Utility of plans can be questionable.
Sparse history of sticking to plans.
Planning may go well with close supervision, but comes unraveled if left alone.
Planning 1-2-3 Time spent convincing nonprofits merits of B-Plans, is time well spent!
Include appropriate stakeholders.
Link human resource incentives to achievement of B-Plan goals.
Make it official: celebrate the completion of the Business Plan or important sections.
Avoid Planning by Committee
Know the Limits of participatory planning: Too slow to respond to changing market Inefficient Can reduce quality Fails to identify the roles of generalist and specialist in the process
Believes all enterprise players must participate in every aspect of B-planning.
Appropriate Participation Identify for which Business Plan elements consensus must be reached
For each section clarify individual and small group roles for output.
Set strict deadlines Devise incentives to meet deadlines
Set Realistic Planning Targets
Business planning takes weeks or months and requires ample resources. Develop the Business Plan work plan, including:
deadlines, key people, financial resource
Plan on ample time and money for research
Conservatism is the rule of thumb - do not be overly optimistic with targets
Be flexible to changes
Beware of the Project Mentality
Lack of business acumen and entrepreneurial drive.
Inefficient operations/systems/structures supported by a history of subsidy.
One of several projects within the organization. Conflicting priorities.
Short sighted (no vision that enterprise will be a going concern)
The Market Drives the BP Low understanding of demand (due to subsidy)
Poor customer orientation. Educate NGOs about market demand and how to test demand.
Incorporate potential customers into B planning process (market research).
Prepare contingency plans for key elements of market demand.
Practice wearing the hat of the customer
Open eyes to competition
Dynamic Process within Limits
Random BP changes steers programoff course.
BP changes must be based on sound business decisions.
Agree on BP elements that are nonnegotiable.
Educate on the conditions that warrant BP changes (market, environmental/industry changes).
Schedule Business plan reviews to discuss.
Market Research is Key Conduct thorough analyses of the market
Know what constraints and opportunities exist
Understand your strengthens andweaknesses
Make Bplan decisions informed by market research
Markets are dynamic!
Business issues can overwhelm social objectives; often receive low priority.
Financial goals are easier to set and quantify, than social goals.
Insufficient funds and inadequateskills/systems to measure social impact.
Setting Social Targets is Challenging
Social Targets Require Brutal Reality
Select impact measurements early and do a baseline study
Build information system to collect and measure impact.
Collect anecdotes evidencing social impact.
Budget for social impact monitoring.
Timing and manner of social impact dependant on vision and mission.
Plan the Exit as You Enter
Often at program’s end (however determined), players are confronted with issues not anticipated during start-up. Develop exit strategy in the BP, include :
ownership of assets, and revenues. financial assistance plan if viability will not be reached by end.
Structure HR – what happens to them?
Other exit issues are linked to compatibility with vision & mission.
Plan Transition Project to Enterprise Selected a suitable partner (businesslike, compatible mission, values).
Employ results-based contracts.
Encourage an enabling environment for transition.
Create a flexible market-driven structure.
Risk Analysis & Contingency Planning
Often nonprofits don’t think through BP impact scenarios on the organization. Build capacity to make accurate projections
Add in buffer for expenses Use “what if…” scenarios Develop “Plan B” for major decisions
Test BP assumptions Objectivity