Business Planning Training for Social Enterprise

Business planning trainingfor social enterprise

Clifford ConwayEntrepreneurship & Enterprise Research Group, Brighton Business School,

University Brighton, Brighton, UK

Abstract

Purpose – This paper seeks to explain how the course content of a Graduate Certificate in SocialEnterprise was varied to meet the unique business planning training needs for social enterprise.

Design/methodology/approach – The research began with a review of the literature coveringgeneric and social enterprise business planning, the findings of which were applied into the design ofthe course.

Findings – The paper concludes that although there are a number of similarities in businessplanning needs for start-up commercial and social enterprise business plans, the differences are,however, significant enough to require that course design should take these into account and thusavoid delivering a generic programme that does not fully meet student needs.

Practical implications – Academic and professional deliverers of business planning programmesare strongly recommended not to offer generic offerings but instead tailor to the needs of the socialenterprise sector.

Originality/value – This paper will be of interest to providers of programmes aimed at socialenterprises as well as social enterprise practitioners responsible for staff training. The literature in thisarea is still nascent while the development of accredited courses is still quite new and therefore thepaper helps contribute to the development of best practice in the delivery of programmes to this sector.

Keywords Business planning, Training, Social accounting, Business enterprise

Paper type General review

IntroductionThe Graduate Certificate in Social Enterprise was funded by Brighton and Hove CityCouncil through a Single Regeneration Budget Fund. The programme was developedin partnership with Brighton & Hove Business Community Partnership (BHBCP) in2004 and the first two cohorts were taught in 2005/2006. The course was aimed atstart-up social enterprises and community organisations wishing to diversify theirgrant income to traded income. From speaking with social enterprise managers and byreviewing the literature, it was clear to the development team that generic trainingprogrammes aimed at developing business planning skills were not sensitive to theneeds of this target audience.

The business plan debateAs social enterprises are primarily small or micro size firms, this debate will bepositioned within the small firms’ literature (Smallbone et al., 2001; BHBCP, 2007).From a sample survey by IFF (2005) for the DTI, the following size factors werediscovered:

The typical social enterprise employs 10 people. Almost half (49%) employ fewer than 10people, 38 per cent employ between 10 and 49, 11% have 50-249 employees and 2 per centemploy more than 250.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1750-8614.htm

Businessplanningtraining

57

Social Enterprise JournalVol. 4 No. 1, 2008

pp. 57-73q Emerald Group Publishing Limited

1750-8614DOI 10.1108/17508610810877731

When the small firms literature is examined, it is clear that there is no consensus as towhat extent small firms write business plans and the correlation that might exist withbusiness growth and success (Kraus et al., 2006). Naffziger and Kuratko (1991) from theirsample of firms found that 83 per cent had written a business plan while in a study byGeorgellis and Joyce (2000) it was only 40 per cent. Curran (1996, p. 4513 in Georgellis,2000) offers the following potential explanation for the low usage in their sample:

All decisions revolve around the entrepreneur with little reliance on formal planning [. . .]decisions can be swift, opportunistic, instinctive and bold and are rarely committed to paper.

To what extent this would also apply to the social entrepreneur is still not clear due to alack of research in this area, it could well be the case that because of the claimeddemocratic nature of decision making within social enterprise (Dees, 2001) and or thenatural conservatism of trustees of many social enterprises (Bank of England, 2003),the above quote may not apply and formal procedures may be more common?

However, most surveys of private sector small firms appear to agree that a keymotivation for writing a business plan is to attract potential funds from investors(Hodgetts and Kuratko, 2001; Tapinos et al., 2005; Burns, 2007). Ironically, this is alsoprobably the case for the majority of social enterprises where potential investors wereeither grant funders or public sector commissioners where a business plan orequivalent would have been a normal requirement.

Other studies have shown that when business plans have been written their level ofsophistication can be quite low. Stonehouse and Pemberton (2002) found that themajority of their commercial sector sample firms reported having a business plan onlyat an intuitive level, rather than having used more formal planning tools. Georgellisand Joyce (2000), also examined the use of planning tools and found that ownermangers had a high level of ignorance of what most text books would recommendshould be applied, with over 90 per cent of their commercial sector sample firms havingnot heard of a PEST analysis and 80 per cent of a SWOT, although 82 per cent hadapplied a form of competitive analysis in their planning.

It is also clear from the few studies that have been made of social enterprise businessplanning approaches, that social enterprise managers have rather mixed experiences ofwriting and applying business planning techniques, with a low level of sophisticationalso often apparent (Bull and Compton, 2006; Bull, 2007; Chapman et al., 2007).

The prescriptive literature, however, is quite clear, that business plans play animportant role for gaining future success and implores nascent entrepreneurs to writetheir plans before launching any new enterprise (Barrow et al., 2001; Kirby, 2003; Burns,2007; Rae, 2007). According to Dees et al. (2001, p. 273) business planning for socialenterprises provides a range of beneficial outcomes, for example, by creating a “clarity ofdirection”, “knowledge of the market place”, “strong commitment from stakeholders”and “attract investment”. Scott (2001, p. 62) writes in a similar vein and claims thatsuccessful social enterprises begin with a “sound business plan . . . identifies futurechallenges, engages key stakeholders . . . is the process of testing assumptions andadjusting accordingly that is the bedrock of disciplined effective management”.

When examining surveys of economic or social enterprise business start-up needs,founders/managers usually report that their key weaknesses are often in management,finance, IT, marketing and business planning (Smallbone et al., 2001; Thompson, 2002;Bull, 2007). It could also be argued that as social enterprises tend to be even more

SEJ4,1

58

resource scarce (Young, 2006) that these problematic issues will be more apparent,particularly as social enterprises have a wider stakeholder base to appease and withmore complex funding issues to resolve (Smallbone et al., 2001). The literature citesother issues as to why business planning is problematic (for and appear equally sharedby) social and commercial enterprises, such as lack of: analysis skills, time, skilledpersonnel, funds, professional advice from their board and poor support from externaladvisors (Dees et al., 2001; Smallbone et al., 2001; Kirby, 2003; Borzaga and Solari, 2001;Bull and Compton, 2006).

In the last few years, community- and voluntary-based organisations are having todiversify their funding sources away from grants, due to increased competition, reducedfunding and a political climate that favours a social enterprise solution (Bull and Compton,2006). This will therefore necessitate the need to implement a greater level of businessprofessionalism if these organisations hope to make a success of traded income and raisefinance from more traditional sources (Darby and Jenkins, 2006), or win procurementcontracts from local authority and NHS commissioners. Yet for many of these firms, thiswill require a cultural shift from being value led only to becoming more market led(Chapman et al., 2007) while still maintaining the organisation’s mission, a difficult if notimpossible balancing act for some to follow (Burns, 2007; Seanor et al., 2007).

Assuming that social enterprises are able to manage these complexities, it is still thecase that the high-street banks and procurement commissioners have mixedexperience or perceptions of social enterprise (Bank of England, 2003) and thereforewill no doubt require convincing business plans before funds are released or contractsoffered. This challenge is highlighted by the following scenario:

[. . .] where will that first cash injection come from when the business is a social enterprise andthere are no personal savings and no property to offer as collateral? Or if it is a socialenterprise entering a new market? Or doing the sort of business the commercial sector isn’tinterested in because the margins are too small or too risky? Or with a client base or locationor staff that’s just too difficult? Or because the business model is based on the foolish notionof offering goods or services to people who may have problems paying at all, let alonesufficiently over cost to allow for an attractive return on capital? (Phillips, 2006).

Although, the perceived relevance and use of business planning is problematic, socialenterprises will need to consider writing a professional business plan at some point ifthey wish to be taken seriously by commercial funders and commissioners, and it wasthis context that formed the remit to design and run the Graduate Certificate in SocialEnterprise in Brighton and Hove.

The content design of the Graduate Certificate in Social EnterpriseThe challenge for the Business School was to identify to what extent the syllabi contentshould be the same as a programme aimed at commercial sector start-ups and to whatextent it should be different? This was resolved through a number of sources, includinga review of current accredited and non-accredited programmes as known in 2004(UCAS; Hobsons, available at: www.postgrad.hobsons.com/; SEP, 2004).

Discussions also took place with our partner BHBCP, a leading supplier ofbrokerage support services between the commercial and community sectors andfinally, internal discussions with teaching colleagues who had mentoring or priorworking relationships with the community and voluntary sector. The initial coursedesign was then reviewed by a panel of local social entrepreneurs, and the final draft


59

submitted for quality assurance and validation to a cross-disciplinary panel involvinginternal and external expertise.

Social enterprises are viewed by the DTI (2002) as being very similar to ordinaryenterprises, although with some important differences, which need to be reflected in thedesign of the curriculum content:

It has been estimated that social enterprises may be 80-90% similar to other businesses, butthat the 10-20% that is different is often the make or break factor. Social enterprises have tomeet both a financial and a social bottom line which can cause tensions and conflicts manymainstream businesses do not have to face [. . .] The real difference is often found in theorganisational culture.

This is further supported by Pearce (2003, p. 9) who claims that:

Social enterprises are not businesses; they are social enterprises. They require socialenterprise plans, not business plans. They require support and financing mechanisms whichreflect their values.

This difference means that a social enterprise plan must:

[. . .] not only demonstrate that its commercial plan is viable and achievable but also that itssocial aims are compatible and also achievable. A social enterprise plan will have socialperformance targets as well as business performance targets (Pearce, 2003, p. 93).

The business plan therefore should reflect the major characteristics of what shouldconstitute a social enterprise as opposed to a commercial enterprise, Pearce (2003):

. “The business ideas must tie in with a clear social purpose, based on a consensusvision of the host community or constituency”.

. “Social enterprise development must focus on how groups work together”.

. “Understand how social enterprise structure function”.

. “Training lay directors to understand the business and financial aspects”.

. “On making democracy work”.

. “Calculating how the social costs will be met”.

. “Managing unpaid along with paid staff”.

As with many such categorisations in business research the literature is not able tooffer a definitive profile and therefore to offer a standardised set of headings isproblematic. However, this author suggests that the following key differences areevident between a small commercial sector start-up firm and a social enterprisestart-up on the basis of social enterprise literature (cited) and his own experience ofworking with social and economic enterprise start-ups (Table I)

The social enterprise value systemThe social enterprise value system should be the driving force and the key differentiatorbetween a commercial sector profit maximiser and a social enterprise as, exemplified bythe DTI (2002) definition:

A social enterprise is a business with primarily social objectives whose surpluses areprincipally reinvested for that purpose in the business or in the community, rather than beingdriven by the need to maximise profit for shareholders and owners.

SEJ4,1

60

This definition will have a strong influence on the development of a social enterprise’s“mission” and “vision” and should take priority when reviewing profit ledopportunities (Dees, 2001). It will also have an important impact upon thedevelopment of the firm’s marketing communications, as the mission should becommunicated as widely as possible to all stakeholders and in particular to potentialclients (such as NHS commissioners who are expected to consider this issue as part oftheir purchase criteria – PASA, 2006).

As with the commercial sector, the mission should clearly identify the targetaudience to focus on and the matching products and services that should be offered.However, when future opportunities arise a social enterprise’s options are moreconstrained – in so far as they must continue to match their social mission and not bedistracted purely by commercial motives[1], so making informed decisions based onvalues and their specific social objectives. If this does not occur it could result in“mission drift” (McBrearty, 2007) and the potential loss of confidence fromstakeholders (Burns, 2007).

A democratic structure is also usually a key hallmark of a social enterprise whichsocially sympathetic funders/commissioners may be interested in discerning[2]. Thebusiness plan will need to make clear how the social enterprise operates a democraticand inclusive decision-making process that potentially involves staff, clients andstakeholders (Dees et al., 2001). The business plan will need to demonstrate that thisactually occurs and that systems are in place and a form of monitoring, reports its extent(Pearce, 2003). If the organisation is registered as a Community Interest Company (CIC)then this evidence can be used to partly help demonstrate to the regulator that the“community interest” test has been achieved (www.cicregulator.gov.uk).

It would also be expected that a social enterprise carries out a full audit of itsstakeholders which would be expected to transcend the commercial sector approach ofjust suppliers, customers and staff, to a far wider range of actors within the local andother relevant communities (Dees et al., 2001). This audit should ascertain stakeholderneeds and information requirements, so that the social enterprise can then claim tobe in tune with and influence attitudes and behaviours, creating a positive publicrelations environment from which a range of resources may potentially arise(see networking).

The social enterprise value system Mission contextDemocratic and inclusive decision makingWide range of stakeholders

Financial management Sources of fundingSocial auditingSocial costs

Human resource management Managing volunteers, part time staff, clientsAppointment of directors and trusteesManaging cultural tension

Legal issues Legal structuresAd hoc legal issues

Marketing Marketing and vulnerable clientsNetworking and cooperationVery low budget marketing

Table I.Distinctive features of

social enterprise businessplans


61

Financial managementMost start-up ventures of novice entrepreneurs will have difficulties in raising finance,as they will normally be considered to be high risk. Research sources suggest that socialenterprises are sometimes additionally hampered by a lack of knowledge amongstfunders as to the context of social enterprise (Pearce, 2003), while equity funders areoften discouraged because of low-expected returns (Bank of England, 2003).

In addition local authority and NHS commissioners are usually more experiencedwith dealing with commercial sector contract applicants and may have either noperception of social enterprises or assume they are small insufficient suppliers ofservices[3] and in part led to the DH, 2007 report being published. The business planand prior lobbying will therefore need to make a particular emphasis upon educatingsuch funders and commissioners, even though local authority and healthcommissioners are supposed to be already aware and supportive, through thefollowing publications (SEC, 2005; PASA, 2006; DH, 2007).

In practice, social enterprises will also need to consider other more sympatheticsources of debt and interest free finance. There are a range of possibilities that can betargeted, such as the Charity Bank, Futurebuilders, Community DevelopmentFinancial Institutions and equity finance from ethically minded sources. The majorityof social enterprises are, however, dependant upon grant funding to a greater or lesserextent (IFF, 2005) and will therefore need to continue to seek such resources until theybecome better understood by commercial funders of start-up finance.

A key element of the business plan for convincing potential funders and enlightenedcommissioners will need to be the social enterprise’s ability to demonstrate that itsproducts and services will meet a social and community benefit and that in particularthis can be audited (Pearce, 2003). The double and triple bottom line will therefore playan equal importance in the business plan; the challenge is its measurement!

Measuring social return (or increases in social capital) is often problematic for socialenterprises as this is usually an intangible benefit – yet investors will inevitably needsome form of social return measure to determine whether the initial investment isworthwhile (Rotheroe and Richards, 2007). Although “Third Sector” organisations havetraditionally collected funding driven user output statistics, one of the first organisationsthat has attempted to fully quantify social return in financial terms is Emmaus. Theorganisation provides accommodation and work for long-term homeless and asylumseekers, and they have found that quantifying the intangible can be quite difficult:

[. . .] there are many factors such as improved quality of life, self esteem, and personalsacrifice that are impossible to value in monetary terms (Emmaus, 2004, p. 11).

However, the existence of Emmaus services results in real savings to society in termsof: housing costs, unemployment benefit, asylum seeker costs, drug abuse treatmentcosts, legal costs, recycling costs, premature death costs and the free distribution offurniture to poorer households. All these are relatively easy to quantify, as cost data isnormally available from a range of sources, local authorities, the Office NationalStatistics and health service providers. The intangible benefits are, improved health ofthe residents, savings in terms of public order and, improved life and technical skills ofthe residents and staff and, these are quantified by finding surrogate opportunity costdata from published sources, although this analysis is more problematic indemonstrating validity and reliability in the data (Evans et al., 2000).

SEJ4,1

62

Table II shows a saving to the government and community of £370,053 per annum,a social return that many investors could certainly be satisfied with.

However, there will still be aspects of the double and triple bottom line that aredifficult to quantify monetarily. The concept of social capital is an intangible one thatdeals with the following social phenomena (Kay, 2003, in Pearce, 2003):

. trust;

. reciprocity and mutuality;

. share norms of behaviour;

. share commitment and belonging;

. both formal and informal social networks; and

. effective information channels

Although the above social capital benefits are subjective in nature the concise project(Evans et al., 2000) believe they have found a way to measure changes in social capitalby using a questionnaire with proxy questions aimed at local community members toconfirm the level of social capital development as a result of the provision communityservices. To what extent most social enterprises have the skill set to develop andimplement such a market research study is probably problematic as marketing is oftencited as a weak skill set (Smallbone et al., 2001).

A particularly problematic financial management issue for many social enterprisesis that they often incur additional “social costs” because of the way they operate, forexample “social firms” have within their remit to employ a minimum of 25 per cent ofstaff who are “disadvantaged in the labour market” (www.socialfirms.co.uk). This canbe staff with learning or physical disabilities that will require more support which willnormally result in additional costs (DTI, 2002).

Additional social costs can also arise if the social enterprise is located in an area ofeconomic or social deprivation where the costs of crime, lack of skills andlow-purchasing power impact upon operating costs. This can be a significant cost formany social enterprises as a recent survey suggests that 51 per cent of firms are basedin areas of high deprivation (IFF, 2005).

The business plan will therefore need to show how these costs are to be recovered.Particularly as social enterprises have also been more generally reported as having

Benefit/savingInputed value per annum

£ 2002/2003

Assisted furniture scheme (goods donated to households 37,354Asylum seeker support savings 4,867Drug treatment savings 21,000Legal/justice system savings 260,000A&E healthcare savings 4,475Death cost savings 4,272Recycling of waste savings to the local authority land fill sites 37,352Skills training savings 733Total benefit/saving £370,053

Source: Emmaus (2004)

Table II.The opportunity cost

savings for the intangiblebenefits of Emmaus

services


63

a poor understanding of costing, and how that might be related to service provisionpricing (Dees et al., 2001; NAO, 2005). The difficulty faced by social enterprises is thatwhen in competition with the commercial sector (that may not have these costs), thesocial enterprise can find itself at a cost disadvantage. In theory NHS commissionersare supposed to take this indirectly into account through the recommendation that thecriteria for supplier selection should include whether value for money, is balanced withsocial and health care innovation and multiple benefit outcomes (DH, 2007) forexample, employing staff with disabilities or from districts of deprivation.

Human resource managementA key issue for any firm is the recruitment, retention, motivation, training andaffordability of staff. What is characteristically different for a social enterprise is thatthey often employ a mix of full time, part time and volunteers (IFF, 2005). Volunteersare an important resource as it keeps staff costs down; they can fill skills gaps andallows for community involvement in the running of the enterprise. Therefore, thebusiness plan will need to account for this mix of employment in a sensitised waywhere a one size fits all management model is unlikely to be successful.

A major issue for social enterprises is being able to recruit staff and volunteers whohave the commensurate business skills and in addition are sympathetic to theorganisation’s social goals. Liam Black CEO of the Furniture Resource Centre Group istypical of the sector:

It is very hard to find skilled people who understand how to run a business and who buy intoour social agenda as well (Black, 2002).

Smallbone et al. (2001), Low (2006) and Spear et al. (2007) have expressed further concernsthat social enterprise directors and trustees may not have the requisite business skills andexperience to support the organisation in becoming more commercially orientatedparticularly when moving from a grant to a greater commercialised orientation (Bank ofEngland, 2003):

Because many social enterprises are either in transition from being grant dependentvoluntary sector bodies or are wholly owned by a charity, they often have boards of directorsor trustees who come from a voluntary sector rather than a business background. This canlead to a lack of business focus and prevent social enterprises from truly reaching theirpotential (DTI, 2002, p. 61).

To ensure that a social enterprise firm is being set up to meet a social benefit, therecruitment of the governing board will be important. The board applicant will need tobe able to demonstrate not only an appreciation of the social needs of the firm’sproposed clients or community but also to have sufficient commercial acumen toadvise the firm’s management; a skill set usually in short supply (Royce, 2007; Spearet al., 2007) and partly in response to this issue a consortium of community andvoluntary organisations have set up the Governance Hub (www.governancehub.org.uk) to aid in the recruitment, training and the sharing of best practice of governanceand whose vision is:

[. . .] for a future in which all voluntary and community organisations are better able to fulfiltheir missions and play a positive role in society through good governance practice (accessed21 February 2008).

SEJ4,1

64

The business plan will therefore need to clarify how current board trustees canenhance their commercial skills. There are several specialist courses available from theDevelopment Trust Association (www.dta.org.uk/) and the National Council forVoluntary Organisations (www.ncvo-vol.org.uk) which may help to alleviate this issueand also spread best practice.

Community organisations in transition may well find cultural tensions ariseparticularly for those organisations that combine commercial with non-commercialsources of funds such as grants and or moving from grant funding to traded income(Seanor et al., 2007). This can happen through philosophical and or political resistanceto the application of the enterprise culture into the delivery of “third sector” services.For some staff the use of the label “enterprise” can suggest “unscrupulous capitalism”while the term “social entrepreneur” can infer associations with “shady salespeople”rather than a dedicated community leader (Thompson, 2002).

A more common problem is professional cultural tension where those that deliverthe social service have a negative opinion of those that are involved in administration,marketing or fund raising:

In development charities for example, the front-line field works and project managers,especially in the context of disasters and emergencies have status and authority. Themangers and administrators who do the backroom logistics and negotiations withgovernment and pay the salaries – well they are mere pen-pushers and bean counters. To saynothing of the fundraisers who are little better than estate agents or turf accountants.

Piper identifies other cultural tensions that can arise, particularly in charity retailing.The selling price which is normally a financial or marketing decision can be influencedthrough pressure from the sales-volunteer staff. They may perceive the items theyhave for sale more as a recyclable gift rather than as a strict commercial exchange,where price should be minimised to the customer rather than maximised to serve thecharity’s needs.

Piper goes onto identify that redundancy strategies can equally cause tensionswhereby a social enterprise can be seen to be acting “unethically” if it places staff costsabove staff well being. Piper concludes that the social entrepreneur will need to developthe skill of balancing these apparent opposing tensions which an education andtraining programme should hope to provide:

It is crucial that social entrepreneurs are not led to believe that the only determinant ofsuccess is how well they match certain social goals to certain economic ends. The successfulsocial enterprise also does something else. It resolves cultural tensions – beliefs, values andmotivations about the social and economic. The social entrepreneur needs to be culturallyastute, needs to be aware that beliefs, values, norms, motivations and other cultural processesare crucial to the functioning of organisations, especially organisations like social enterprisesin which beliefs and values are explicitly expressed and are important motivations forstakeholders.

Cultural differences will often arise between those staff that deliver client services andthose staff that are responsible for the firm’s enterprise initiatives (Low, 2006). Thebusiness plan will need to explain how differing cultural expectations will be managedbetween staff who are based within a social mindset and those staff that areentrepreneurially driven.


65

Legal issuesA key legal difference between a social enterprise and a commercial enterprise is themyriad of very different legal structures that are available for a social enterprise tochoose from[4] (Smallbone et al., 2001; SEC, 2006):

. limited by guarantee;

. limited by shares;

. industrial and provident society; and

. community interest company.

The above list is not exhaustive but identifies the most common legal structures (IFF,2005). Each has a range of advantages and disadvantages depending upon the aimsand objectives of a social enterprise’s mission, with respect to: taxation, governance,democratic control, the distribution of profits and asset locks (SEC, 2006). A goodexample known to the author is that of certain NHS spin-out social enterpriseorganisations, some of which have registered as “limited by shares”, so that staff canremain within the NHS pension scheme, as opposed to being forced out if other legalformats are chosen. The “normal” advice before selecting a legal entity is to develop theorganisation’s mission and business plan first and then examine which legal vehicle isbest to apply (Mills, 2007).

SEC (2006) also raises a number of other ad hoc legal issues that may impact uponbusiness planning which can involve: health and safety and the minimum wage legislationfor volunteer and part-time staff some of whom may also be client groups. In the process ofvalidating the graduate certificate concern was expressed that any business plansdeveloped by students should note the legal implications for the employment of staff whowill be dealing with vulnerable groups (such as children, the elderly and mental healthclients), issues that NHS and local authority commissioners in particular will need to seeevidence of and compliance with, in the business plan, for example, Criminal RecordsBureau checks and having relevant skills and qualifications (DH, 2007).

MarketingThe small firms’ literature suggests that because of the relatively higher risks andfailure rates of small firms, the role of marketing can be critical in minimising these, as itis directly concerned with assessing market opportunities and threats and thenmatching these to firm strengths and weaknesses (Stokes, 2006; Kotler and Keller, 2006).Although commercial start-ups, have been reported as having relatively lowexpenditures and usage of marketing tools, the situation for social enterprise hasbeen reported as being even more limited due to a scarcity of funds or a lack of internalprofessional skills (Smallbone et al., 2001). Any business planning course will thereforeneed to address how marketing can be achieved on a low budget. It would therefore beexpected that the low-cost tools of marketing would be applied such as public relations,networking, press releases, newsletters, e-mail and web sites (Fill, 2006; Hastings, 2007).

There are, however, several other key differences that a social enterprise marketingplan would need to address, one of which is the likely need to identify and provideservices to vulnerable market segments. These groups are often hard to reach andcommunicate with, often because of language, disability and cultural anddiscrimination issues, creating problems in being able to bridge and effectively

SEJ4,1

66

“reach” through marketing techniques (Chisnall, 2005; Bradley, 2007). In a seminalpaper by Noelle-Neumann (1974), the concept of the “Spiral of Silence” recognised thatdiscriminated groups often do not express their real opinions and values in fear offurther discrimination from the dominant culture. The main implication for the socialenterprise is that these difficulties may make it more difficult to identify their needs,concerns and therefore the provision of relevant services.

The marketing section of the business plan will therefore need to make a convincingcase that the organisation has the expertise to research and then offer services to suchgroups. Interestingly, if this can be demonstrated, it may well contribute to theorganisation having a competitive advantage (Kotler, 2005) through its claimed forexpertise, that can be one of the selection criteria for NHS commissioners to consider(DH, 2007).

According to Dees et al. (2001) an important aspect of an organisation’s marketingstrategy should be to reinforce and remind all stakeholders of the mission andraison-dete of the organisation, as this is the key motivation for supplying tradedgoods and services rather than maximise profit for shareholders (DTI, 2002). This canparticularly help differentiate a social from a commercial enterprise when competingfor public sector health and social care service contracts (DH, 2007) becausemaximising profits for shareholders is not a requirement when pricing a proposal.

Networking and cooperation can be the hallmark of commercial sector start-ups(Birley, 1985), for social enterprises, the need for this marketing approach withstakeholders is even more essential as a means of leveraging scarce resources (Deeset al., 2001; Shaw, 2004), for accessing property, assets, finance and people (Young,2006). This can also extend to working in cooperation with the commercial sector,benefiting both parties on a reciprocal basis (CAN, 2005) (Table III).

There could be concern and reservation by some of the motivations of private sectororganisations for the need to partner, anxious that their own knowledge and skills maybe copied and then competed against, an issue sometimes evidenced in the privatesector by small firms when partnering with larger firms who then become predatory(Mazzarol, 2005).

However, a characteristic of small entrepreneurial firms, private or social is to seekout networks and partnerships because it can positively lever resources (Shaw, 2004).The business plan will therefore need to highlight how scarce resources are managedand utilised for the benefit of its stakeholders (Pearce, 2003) and the contributions madeby networking and cooperation in support of this issue can help enhance theorganisations ability to make full use of available resources. This process of networking

Benefits for the social enterprise Benefits for the commercial enterprise

Generate new income streams Access to new markets through partneringReduce grant dependencyAccess to finance and capital for particular projectsAccess to management expertiseImprove commercial skillsEmbed the commercial sector into the community

Knowledge and insight into new markets andtheir needsAccess specific expertiseEnhance staff moraleFulfil CSR obligations

Source: Adapted from CAN (2005)

Table III.Reciprocal benefits from

partnering


67

and cooperation will also support another important aspect of life for a social enterprise;in ensuring that the organisation stays close to its community and stakeholders, so thatdemocratic processes are maintained (Pearce, 2003; Young, 2006).

Conclusions and recommendationsBoth the small firms and emerging social enterprise literature appear to evidence thatbusiness planning is largely for the benefit of raising finance with little sophisticationof techniques thereafter. It was partly because of this evidence that led to thedevelopment of the graduate certificate in social enterprise, particularly as it was morelikely that social enterprise managers would need extra support as they wouldprobably have less business planning skills than their equivalent in the small firmssector, coupled with more demanding stakeholders and internal staff.

A business planning course for social enterprise will have a range of topics andbusiness plan headings that will be in common with a course aimed at commercialenterprises.

However, it is clear from Table IV that the social enterprise plan has severaladditional headings that reflect a wider audience of stakeholders as well as the need todemonstrate explicitly the role and contribution the enterprise makes to its communityand the need to satisfy its double and triple bottom line obligations. Where theheadings are similar, the findings of this paper suggests that the “devil is in the detail”and that the content of any business planning course should reflect what those detaileddifferences are, thus providing course content that is most relevant.

For marketing the key differences would be to ensure that all activities are ethicallyimplemented and probably within tighter budgets compared to the commercialsmall firm. A particular recommendation for resourcing poor businesses is networkingand partnerships; however, there is some evidence to suggest that even workingwithin their own sector, suspicions and concerns can arise (Brown et al., 2007).

Social enterprise business plan headings Commercial business plan headings

Cover page Cover pageAcknowledgements Contents pageExecutive summary General company descriptionBackground Products and servicesDemonstrating the need for the organisation Marketing planDescription of the organisation Operational planMission, values, objectives and activities Management and organisationStakeholder analysis Personal financial statementSocial accounting and audit Start-up expenses and capitalizationEnvironmental impact Financial planEconomic impacts AppendicesMarketing planFinanceWork plan and targetsSummary remarks and conclusionsAppendices

Source: Adapted from templates from Social Enterprise London, www.sel.org.uk/ and Microsoftoffice template, http://office.microsoft.com/en-gb/templates/

Table IV.A comparison of businessplan headings

SEJ4,1

68

The University of Brighton has attempted to ameliorate this by running a year longseries of monthly networking events to bring this diversity together.

Human resources are complicated by the potential mix of full time, part time, volunteersand even clients, all with varying commitments to the mission of social enterprise. Thereis also the complication of making decisions as “entrepreneur as leader” and balancing thatagainst the need for democratic decision making. The legal considerations are also morecomplex with a wider range of governance entities to choose from and legal statutes tocomply with, while the organisation’s operations will need to ensure that its economic andenvironmental impact is positive and preferably carbon neutral.

One of the biggest challenges is the philosophic one of implementing a socialenterprise culture into what may have been a grant only organisation. It should benoted that in the delivery of the graduate certificate, a range of opinions were expressedby delegates as to the use of a business and marketing rhetoric. The title “socialentrepreneur” for example was not always seen as being applicable, a finding similarto research by Shaw (2004, p. 202) where some in her sample felt:

[. . .] given the collective nature of many social enterprises, those involved are not comfortableat attributing organisational achievements at an individual level.

There were similar reactions to other terms, for example, “profit” and the use ofmarketing tools such as segmentation and marketing research, all of which could beproblematic and inhibit the application of business tools. Paton (2003, p. 164) reflectedupon this issue that even when mangers take on board the language and methodsassociated with the commercial sector these can be seen as “jargon” by some staff andresultant cynicism arising.

The necessary content differences and the arising philosophic issues had beenanticipated by the teaching team prior to launching the programme, as a result ofassessing the literature and from talking with local social enterprise leaders. The initialcourse application interviews and subsequent classes were then used to raise theseissues as a series of discussion points early on which helped clarify meaning and totemper any arising negative views.

Future researchTo what extent social enterprises use business plans beyond the need to raise financeand or win contracts would be useful. The evidence from the small firms literaturewould suggest that if business plans are continued to be used they are often not verysophisticated, whether the lack of time, training and expertise would also apply tosocial enterprise managers would help support advisors such as business link to targettheir resources more specifically.

A more focussed and developing area is that of social auditing and impact toolmeasures. The University of Brighton is currently trialling a social auditing tool(SA4SE) with Social Enterprise London and other partners with the intention ofpromoting the tool more widely if successful. There is also the New EconomicsFoundation (2004) impact tool “Proving and Improving”, both programmes may helpsocial enterprise mangers demonstrate their effectiveness and efficiency in achievingtheir social and environmental objectives but how useable are they in practice and arethey really able to quantify the intangible to the satisfaction of stakeholders? Importantresearch questions to be answered.


69

It is also clear that many social enterprise firms that have originated from a grantorientation have philosophic contradictions within them, research into how these aretackled and resolved could help identify best practice solutions for others to consider.Finally, the jury is still out concerning the relevance and usefulness of any support thatsocial enterprise may receive from training and commitment from advisory bodiessuch as Business Link and accredited SFEDI social enterprise advisors, follow-upresearch would identify to what extent it was useful, any gaps in provision and bestpractice identified.

Implications for practiceAs Paton (2003) indicated, social enterprise managers can sometimes be caughtbetween the accusation of taking on the mantle of managerial professionalism andbecoming out of touch with their staff and their community or alternatively criticisedfor not engaging with the needs of contract commissioners and government initiativesthat require management and measuring systems. Sensitively designed coursesspecifically for social enterprises such as the one at Brighton and others would helpprepare such managers for this challenge. Managers should be encouraged to networkwith others within their sector and across sectors to identify best practice and seeksupport networks for themselves and their own staff. It is clear that the currentgovernment social enterprise agenda will continue or even be enhanced by the otherpolitical parties (Conservative Party, 2006; Labour Party, 2005; Liberal DemocraticParty, 2005), and therefore working with the principles of business planning andmeasuring systems would be prudent.

Notes

1. The private sector sale of the Body Shop was seen by some as undermining their originalmission leading to boycotts by some stakeholders (Kent and Stone, 2007).

2. The private sector equivalent could be the Investors in People award which some firms willuse as a marketing tool for helping to attracting commissioner attention. This is somethingthat the social enterprise sector is also signing up to in the absence of a democracy hallmarkfor how the enterprise is run.

3. Discussions with NHS pathway social enterprises at the National Council GraduateEntrepreneurship Flying Start Programme for Social Enterprises in Health (www.flyingstart-ncge.com/health/) in April 2007.

4. Many of which also choose to register as a charity with the Charities Commission.

References

Bank of England (2003), The Financing of Social Enterprises: A Special Report by the Bank ofEngland, Bank of England, Domestic Finance Division, London.

Barrow, C., Barrow, P. and Brown, R. (2001), The Business Plan Workbook, Kogan Page, London.

BHBCP (2007), “Social enterprise in Brighton and Hove: a profile of the sector with implicationsfor future support and development”, a report for the University of Brighton, available at:www.bhbcp.org.uk

Birley, S. (1985), “The role of networks in the entrepreneurial process”, Journal of BusinessVenturing, Vol. 1, pp. 107-17.

Black, L. (2002), “The underpinning: essential elements that make social enterprise work,in C. Walsh”, The Observer, 2 November.

SEJ4,1

70

Borzaga, C. and Solari, L. (2001), “Management challenges for social enterprises”, in Borzaga, C.and Defourny, J. (Eds), The Emergence of Social Enterprise, Routledge, London, pp. 333-49.

Bradley, N. (2007), Marketing Research, Tools and Techniques, OUP, Oxford.

Brown, J., Baxter, B. and Chapman, T. (2007), “‘Why do we need to join up?’ Exploring the impactof intra-sectoral rivalry on the effective representation of the third sector”, Proceedings ofthe Fourth Annual Social Enterprise Research Conference, London South Bank University,4-5 July.

Bull, M. (2007), “‘Balance’: the development of a social enterprise business performance analysistool”, Social Enterprise Journal, Vol. 3 No. 1, pp. 49-66.

Bull, M. and Compton, H. (2006), “Business practices in social enterprises”, Social EnterpriseJournal, Vol. 1 No. 2, pp. 42-60.

Burns, P. (2007), Entrepreneurship and Small Business, Palgrave Macmillan, Basingstoke.

CAN (2005), “Match winners: a guide to commercial collaborations between social enterprise andprivate sector business”, a report Commissioned for the DTI Social Enterprise Unit.

Chapman, T., Forbes, D. and Brown, J. (2007), “They have God on their side: the impact of publicsector attitudes on the development of social enterprise”, Social Enterprise Journal, Vol. 3No. 1, pp. 78-89.

Chisnall, P. (2005), Marketing Research, McGraw-Hill, London.

Conservative Party (2006), Social Enterprise Zones, Conservative Central Office, London.

Curran, J. (1996), International Encyclopaedia of Business and Management, Vol. 5, ThomsonBusiness Press, London.

Darby, L. and Jenkins, H. (2006), “Applying sustainability indicators to the social enterprisebusiness model”, International Journal of Social Economics, Vol. 33 Nos 5/6, pp. 411-31.

Dees, J.G. (2001), “The meaning of ‘social entrepreneurship’”, available at: www.fuqua.duke.edu/centers/case/documents/dees_SE.pdf

Dees, J.G., Emerson, J. and Economy, P. (2001), Enterprising Non-profits: A Toolkit for SocialEntrepreneurs, Wiley, New York, NY.

DH (2007), Welcoming Social Enterprise into Health and Social Care, Department of Health,London.

DTI (2002), Social Enterprise: A Strategy for Success, Social Enterprise Unit, DTI, London.

Emmaus (2004), “Emmaus in the UK: building on success”, Emmaus, available at: www.emmaus.org.uk

Evans, M.D., Lawson, C. and Smith, K.E. (2000), Key Concepts, Measures and Indicators, ConsciseProject, Middlesex University, London.

Fill, C. (2006), Marketing Communications: Engagement, Strategies and Practice, Prentice-Hall,Harlow.

Georgellis, Y. and Joyce, P. (2000), “Owners and managers in small businesses and the use ofstrategic management”, Proceedings of the 23rd ISBA National Small Firms Policy &Research Conference, pp. 415-29.

Hastings, G. (2007), Social Marketing, Butterworth & Heinemann, London.

Hodgetts, R.M. and Kuratko, D.F. (2001), Effective Small Business Management, Dryden,Fort Worth, TX.

IFF (2005), “A survey of social enterprises across the UK”, Research Report, Prepared for theSmall Business Service, IFF Research Ltd, London.


71

Kay, A. (2003) in Pearce, J. (Ed.), Social Enterprise in Any Town, Calouste GulbenkianFoundation, London.

Kent, T. and Stone, S. (2007), “The body shop and the role of design in retail branding”,International Journal of Retail & Distribution Management, Vol. 35 No. 7, pp. 531-43.

Kirby, D.A. (2003), Entrepreneurship, McGraw-Hill, Maidenhead.

Kotler, P. (2005), Marketing Management, Prentice-Hall, Englewood Cliffs, NJ.

Kotler, P. and Keller, K. (2006), Marketing Management, 12th ed., Pearson Education, Inc., UpperSaddle River, NJ.

Kraus, S., Harms, R. and Schwarz, E.J. (2006), “Strategic planning in smaller enterprises – newempirical findings”, Management Research News, Vol. 29 No. 6, pp. 334-44.

Labour Party (2005), Britain Forward not Back, Labour Party, London, Manifesto.

Liberal Democratic Party (2005), The Real Alternative, Liberal Democratic Party, London.

Low, C. (2006), “A framework for the governance of social enterprise”, International Journal ofSocial Economics, Vol. 33 Nos 5/6.

McBrearty, S. (2007), “Social enterprise – a solution for the voluntary sector?”, Social EnterpriseJournal, Vol. 3 No. 1, pp. 67-77.

Mazzarol, T. (2005), Strategy of Small Firms, Edward Elgar Publishing Ltd, London.

Mills, C. (2007), “Legal forms for social enterprise: what is the right choice for you?”, CobbettsLLP, National Council Graduate Entrepreneurship Flying Start Programme for SocialEnterprises in Health, available at: www.flyingstart-ncge.com/health/

Naffziger, D.W. and Kuratko, D.F. (1991), “An investigation into the prevalence of planningin small business”, Journal of Business & Entrepreneurship, Vol. 3 No. 2, pp. 99-110.

NAO (2005), Working with the Third Sector, National Audit Office, London, available at:www.nao.org.uk/publications/nao_reports/05-06/050675.pdf

New Economics Foundation (2004), Social Return on Investment: Valuing what Matters; Findingsand Recommendations from a Pilot Study, New Economics Foundation, London, availableat: www.neweconomics.org

Noelle-Neumann, E. (1974), “The spiral of silence: a theory of public opinion”, Journal ofCommunication, Vol. 24, pp. 43-51.

PASA (2006), More for Your Money, Social Enterprise Coalition, London.

Paton, R. (2003), Managing and Measuring Social Enterprises, Sage, London.

Pearce, J. (2003), Social Enterprise in Any Town, Calouste Gulbenkian Foundation, London.

Phillips, B. (2006), “Don’t lose sight of where the cash is”, available at: www.socialenterprisemag.co.uk/sem/finance/

Rae, D. (2007), Entrepreneurship: From Opportunity to Action, Palgrave Macmillan, Basingstoke.

Rotheroe, N. and Richards, A. (2007), “Social return on investment: transparent accountability forsustainable development”, Social Enterprise Journal, Vol. 3 No. 1, pp. 31-48.

Royce, M. (2007), “Using human resource management tools to support social enterprise:emerging themes from the sector”, Social Enterprise Journal, Vol. 3 No. 1, pp. 10-19.

Scott, J.A. (2001), “After the bubble: investing in internet-based social enterprises in challengingtimes”, report for Flatiron Foundation and the Atlantic Philanthropies.

Seanor, P., Bull, M. and Ridley-Duff, R. (2007), “Contradictions in social enterprise: do they drawin straight lines or circles?”, Proceedings of the 30th ISBE – International Small Businessand Entrepreneurship Conference.

SEJ4,1

72

SEC (2005), A Guide for Procuring from Social Enterprises, jointly published by Social EnterpriseCoalition, New Economics Foundation and the Society of Procurement Officers in LocalGovernment.

SEC (2006), Keeping it Legal, jointly published by Social Enterprise Coalition and Bates,Wells and Braithwaite Solicitors, London.

SEP (2004), Training for Social Enterprise Management and Support, Training Social EnterprisePartnership GB Ltd, London.

Shaw, E. (2004), “Marketing in the social enterprise context: is it entrepreneurial?”, QualitativeMarket Research, Vol. 7 No. 3, pp. 194-205.

Smallbone, D., Evans, M., Ekanem, I. and Butters, S. (2001), Researching Social Enterprise FinalReport to the Small Business service Centre for Enterprise and Economic DevelopmentResearch, Middlesex University, London.

Spear, R., Cornforth, C. and Aitken, M. (2007), “For love and money: governance and socialenterprise”, a report for Governance Hub and the Social Enterprise Coalition.

Stokes, R. (2006), “Network-based strategy making for events tourism”, European Journal ofMarketing, Vol. 40 Nos 5/6, pp. 682-95.

Stonehouse, G. and Pemberton, J. (2002), “Strategic planning in SMEs – some empirical findings”,Management Decision, Vol. 40 No. 9, pp. 853-61.

Tapinos, E., Dyson, R.G. and Meadows, M. (2005), “The impact of performance measurement instrategic planning”, International Journal of Productivity and Performance Management,Vol. 54 Nos 5/6, pp. 370-84.

Thompson, J. (2002), “The world of the social entrepreneur”, TIJPSM, Vol. 15 No. 5, pp. 412-31.

Young, C. (2006), “Have you faced the leadership challenge?”, Social Enterprise, May, availableat: www.socialenterprisemag.co.uk

Further reading

Borzaga, C. and Defourny, J. (2004), The Emergence of Social Enterprise, Routledge, London.

Boschee, J. (2002), “Entrepreneurial strategic planning and the abandonment process”, availableat: www.socialent.org/resources

Evans, M. and Syrett, S. (2007), “Generating social capital? Collaborative relations, the socialeconomy and local development”, Journal of European Urban and Regional Studies, Vol. 14No. 1.

GHK (2005), “Review of the social enterprise strategy”, a report for the Small Business Service.

Nyssens, M. (2006), Characterising the Social Enterprise – Questions of Definition, Routledge,London.

SBS (2005), Annual Small Business Survey 2005, Small Business Service, available at: www.sbs.gov.uk

Seanor, P. and Meaton, J. (2007), “Making sense of social enterprise”, Social Enterprise Journal,Vol. 3 No. 1, pp. 90-100.

Corresponding authorClifford Conway can be contacted at: [email protected]


73

To purchase reprints of this article please e-mail: [email protected] visit our web site for further details: www.emeraldinsight.com/reprints

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

Business Planning Training for Social Enterprise

Documents

Transcript of Business Planning Training for Social Enterprise