social enterprise business planning
DESCRIPTION
Social Enterprise Business Planning. DEN-L July-August 2013. Presentation Outline. Business plans for Social Entrepreneurs Why? What for? What? Difference from regular plans SE Business plan components Q & A. Why Business Planning?. Management tool Links strategies to tactics - PowerPoint PPT PresentationTRANSCRIPT
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IREX Liberia SE Training 2013
Social Enterprise Social Enterprise Business PlanningBusiness Planning
DEN-L July-August 2013
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Social ImpactJanuary 2007
Presentation OutlinePresentation Outline
• Business plans for Social Entrepreneurs Why? What for? What?
• Difference from regular plans• SE Business plan components• Q & A
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Social ImpactJanuary 2007
• 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?Why Business Planning?
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Social ImpactJanuary 2007
What is a Business Plan?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.
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Social ImpactJanuary 2007
A Road Map 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%
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Social ImpactJanuary 2007
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Why do you Need a Business Why do you Need a Business Plan?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
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Social ImpactJanuary 2007
PurposesPurposes
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
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Social ImpactJanuary 2007
Business Plans vs. Proposals 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
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Social ImpactJanuary 2007
Anatomy of a Business Anatomy of a Business PlanPlan
Vision
Mission
Marketing Plan
Operations Plan
Human Resource
Plan
FinancialPlan
Concept & ObjectivesMarket Research
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Social ImpactJanuary 2007
Interrelationship Interrelationship Mission
Objectives
Market Research:Target Market
Competitors/external factorsBusiness Assessment
MarketingPlan
OperationsPlan
FinancialPlan
HumanResource
Plan
Vision
FinancialPlan
FinancialPlan
ContingencyPlan
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Social ImpactJanuary 2007
Strategies and Tactics Strategies and Tactics
Strategic Goals
Objectives Objectives Objectives
visionStrategies
tactics tactics tactics tactics tactics tactics
tacticstactics
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Social ImpactJanuary 2007
Social Entrepreneur's MarketSocial 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
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Social ImpactJanuary 2007
Who’s your “customer”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.
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Social ImpactJanuary 2007
What’s your context?What’s your context?
Opportunities
Threats
Strengths
Competition
WeaknessesCollaboration
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Social ImpactJanuary 2007
How attractive is your industry?How attractive is your industry?
Power ofSuppliers
Power ofBuyers
Substitutes
Barriers to Entry
Rivals
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Social ImpactJanuary 2007
The Five Plans for All B-The Five Plans for All B-PlansPlans• 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?
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Social ImpactJanuary 2007
Marketing Plan Marketing Plan
• Target Market Beneficiary/client needs/wants
• Marketing mix: 4 Ps Product Promotion Price Place
• On going market research
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Social ImpactJanuary 2007
SE Marketing SE Marketing ConsiderationsConsiderations• 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?
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Social ImpactJanuary 2007
OperationsOperations
• 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
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Social ImpactJanuary 2007
Human Resource PlanHuman 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
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Social ImpactJanuary 2007
Capacity Investment Capacity Investment ChoicesChoices
Productivity
Return on Investment?
$Job hard skills soft skills credit/savings education
$$$$
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Social ImpactJanuary 2007
Capacity Building PlanCapacity Building PlanCapacity
Building Method Benefit to Enterprise/organization Mission
On-the-job training
Provide a job Skilled labor
Processing skills
Training/TA Improves productivity, product quality
Inventory tracking
Training/TA Improves inventory management
Soft skills Training/practice
Stabilizes work force
Leadership development
Training/practice
Higher self-esteem, morale, productivity, self- management
Savings program
Savings service
Reduces risk aversion through financial security
Health services
Health program linkage
Improved health = higher productivity No
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Social ImpactJanuary 2007
Financial Plan Financial Plan
• Social Enterprise B-Plan Financial objectives Budget Resource Acquisition Plan
Includes grants and gifts
Cash flow Income Statement Balance sheet
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Role of SubsidyRole of Subsidy
SE Revenue SE Expense Business Expense Business revenue
$$$
Years
Social EnterpriseBreakeven Point
Private Business Breakeven Point
Social subsidy
Investment
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Social ImpactJanuary 2007
Financing & resource acquisitionFinancing & resource acquisition
Year 1 Prospect
Year 2 Prospect
Earned income (sales)
Interest income
Parent organization
Grants
Gifts/contributions
Soft Loans
Commercial loans
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Social ImpactJanuary 2007
Risk Analysis & Contingency Risk Analysis & Contingency PlanningPlanning• 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
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IREX Liberia SE Training 2013
Planning the Plan: Planning the Plan: RecommendationsRecommendations
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SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP
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Is the idea a concept? Is the idea a concept?
Social Enterprise
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IREX Liberia SE Training 2013 SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP
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Theory of Theory of ChangeChange
Get GroundedGet Grounded
Social Enterprise DesignSocial Enterprise Design
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IREX Liberia SE Training 2013 SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP
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Understand: Understand: Nature of social problem Nature of social problem Needs/limitations of clientsNeeds/limitations of clientsAssess the Market Assess the Market
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SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP
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Where to beginWhere to begin• Clarify your business and its goals• Build scenarios
Play it out your idea
• Identify deal breakers What will make or break your business
Money, laws, partners, etc.
• Identify key design influencers Competitors, industry dynamics, regulatory
environment, demand, required resources
• Reality Test Objective feedback Quick Market Test Benchmarks
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SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP
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Pare it down Pare it down
• Scope For most SEs scope is a practical issue of $ Location; (other resources) have’s have nots; Time
• Strategy Low hanging fruit Window of opportunity Proof of concept/display Inflection point for impact
• Assumptions Informs market research
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IREX Liberia SE Training 2013
Planning the Plan: Planning the Plan: RecommendationsRecommendations
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Social ImpactJanuary 2007
B-Plan EssentialsB-Plan Essentials
• Consensus and ownership • Appropriate participants• Adequate preparation time• Financial considerations• Relevant flexibility• Solid market research • Participatory methods (within limits)• Realistic (achievable) targets
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Social ImpactJanuary 2007
Planning 1-2-3Planning 1-2-3 Time spent convincing nonprofits
benefits 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.
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Social ImpactJanuary 2007
Appropriate Participation 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
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Social ImpactJanuary 2007
Set Realistic Planning TargetsSet Realistic Planning Targets
• Business planning takes weeks or months and requires resources. Develop the Business Plan work plan,
including: deadlines, key people, financial resource
Plan on time and money for research Conservatism is the rule of thumb
- do not be overly optimistic with targets Be flexible to changes
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Social ImpactJanuary 2007
Dynamic Process within Dynamic Process within LimitsLimits• 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.
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Social ImpactJanuary 2007
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Business Plan ComponentsBusiness 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
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Social ImpactJanuary 2007
Social Targets Require Brutal Social Targets Require Brutal Reality 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.
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Social ImpactJanuary 2007
Social Return and Impact 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.
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Social ImpactJanuary 2007
E.g. social impact measuresE.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
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Social ImpactJanuary 2007
Monetizing SE ValueMonetizing 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
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Financial Projections Financial Projections
SE Revenue SE Expense Business Expense Business revenue
$$$
Years
Social EnterpriseBreakeven Point
Private Business Breakeven Point
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Social ImpactJanuary 2007
Double Bottom LineDouble Bottom Line
Income StatementTotal 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
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Social ImpactJanuary 2007
Subsidy in Income Subsidy in Income StatementStatement
Income Statement
Gross 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