Social Impact August 2007 Business Plan Introduction August 2007 Hyderabad, India.

Social ImpactAugust 2007

Business PlanIntroduction

August 2007

Hyderabad, India


Presentation OutlinePresentation Outline Business plans for Social Entrepreneurs Why? What for? What?

Difference from regular plans SE Business plan components Q & A


Management tool Links strategies to tactics 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 Business Plan?

A detailed presentation about your organization’s (scaling) plans that demonstrates how it will succeed in financial terms AND the social impact that it will create.


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%

Social ImpactAugust 2007 6

Why do you Need a Business Plan?

For the investor/donor: Evidence of the nonprofit’s ability to conceive and execute scale

Articulates financial needs and uses of funds

Use – sales document

Communications tool

For the social entrepreneur: A planning framework

A management tool for resource allocation and decision-making

Use – Management and implementation 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 Project blueprint Open - treats

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


Anatomy of a Business Plan

Vision

Mission

Marketing Plan

Operations Plan

Human Resource

Plan

FinancialPlan

Concept & ObjectivesMarket Research


InterrelationInterrelationship ship

Mission

Objectives

Market Research:Target Market

Competitors/external factorsBusiness Assessment

MarketingPlan

OperationsPlan

FinancialPlan

HumanResource

Plan

Vision

FinancialPlan

FinancialPlan

ContingencyPlan


Strategies and Tactics

Strategic Goals

Objectives Objectives Objectives

visionStrategies

tactics tactics tactics tactics tactics tactics

tacticstactics


Social Entrepreneur's Market

Social Market “Beneficiaries” of impact

Client Community Environment Public Government

Competitors Role of subsidies in the market

Collaborators Strategic alliances and partners

“Business” Market Demand Competitors Industry Dynamics Trends Barriers Opportunities Market Segments & Size


Who’s your “customer” Donors are stakeholders to whom social entrepreneur is accountable for results

Clients are “beneficiaries” of social services or social impact.

Customers are those buying social enterprise products and services.


What’s your context?

Opportunities

Threats

Strengths

Competition

WeaknessesCollaboration


How attractive is your industry?

Power ofSuppliers

Power ofBuyers

Substitutes

Barriers to Entry

Rivals


The Five Plans for All B-Plans

Marketing Getting products and services to your target market

Operations Day-to-day functions of running your organization

Human Resources The people you need to execute your scaling plan

Finance Capital required to finance scaling activities

Contingency Plans What could go wrong and what will you do about it if it does?


Marketing Plan

Target Market Beneficiary/client needs/wants

Marketing mix: 4 Ps Product Promotion Price Place

On going market research


SE Marketing Considerations

What are you selling? To whom are you “selling” your value proposition?

Outreach component for the target population and community?

Obligations to stakeholders—i.e. donors and government? Partners or networks?

Pricing considerations for target group? PR component to protect organization’s reputation?


Operations Managing service delivery while scaling

Quality Assurance Including managing and measuring time

Monitoring and measuring hard and soft deliverables

Designing systems with capacity to grow transparency

Social Impact and Monitoring Systems Systems that collect and measure social impact

Customer and client satisfaction


Human Resource Plan Management team

Roles & responsibilities of various actors Staffing and recruitment plan

Incentives and reward systems Governance Capacity building plan

Staff, institution, target group Considerations for SE staffing duality (for enterprises)

Program and business


Capacity Investment ChoicesProductivity

Return on Investment?

$Job hard skills soft skills credit/savings education

$$$$


Capacity Building PlanCapacity

Building Method Benefit to Enterprise/organization 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 Social Enterprise B-Plan

Financial objectives Budget Resource Acquisition Plan

Includes grants and gifts Cash flow Income Statement Balance sheet


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


Financing & resource acquisition

Year 1 Prospect

Year 2

Prospect

Earned income (sales)

Interest income

Parent organization

Grants

Gifts/contributions

Soft Loans

Commercial loans


Risk Analysis & Contingency Planning

Build capacity to make accurate projections

Add in buffer for expenses Use “what if…” scenarios Sensitivity analysis for major decisions Major expense categories

Test business plan assumptions Objectivity


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


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.


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


Dynamic Process within Limits

Business plan changes must be based on sound business decisions.

Agree on Bplan elements that are nonnegotiable.

Educate on the conditions that warrant Bplan changes (market, environmental/industry changes).

Schedule business plan reviews to discuss.

Social ImpactAugust 2007 33

Business Plan Components• Executive Summary• Vision & mission statement • Organizational and Environmental Assessment• Market Competitive Analysis• Marketing Plan• Human Resources Plan• Operations Plan• Financial Plan• Risk Assessment and Contingency Plan• Supporting Documents


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.


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.


E.g. social impact measures

Impact from livelihoods Org

Impact social service org

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


Financial Projections

SE Revenue SE Expense Business Expense Business revenue

$$$

Years

Social EnterpriseBreakeven Point

Private Business Breakeven Point


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

Social Impact August 2007 Business Plan Introduction August 2007 Hyderabad, India.

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