social enterprise business planning

IREX Liberia SE Training 2013

Social Enterprise Social Enterprise Business PlanningBusiness Planning

DEN-L July-August 2013

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


• 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?


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.


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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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


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


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


Anatomy of a Business Anatomy of a Business PlanPlan

Vision

Mission

Marketing Plan

Operations Plan

Human Resource

Plan

FinancialPlan

Concept & ObjectivesMarket Research


Interrelationship Interrelationship Mission

Objectives

Market Research:Target Market

Competitors/external factorsBusiness Assessment

MarketingPlan

OperationsPlan

FinancialPlan

HumanResource

Plan

Vision

FinancialPlan

FinancialPlan

ContingencyPlan


Strategies and Tactics Strategies and Tactics

Strategic Goals

Objectives Objectives Objectives

visionStrategies

tactics tactics tactics tactics tactics tactics

tacticstactics


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


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.


What’s your context?What’s your context?

Opportunities

Threats

Strengths

Competition

WeaknessesCollaboration


How attractive is your industry?How attractive is your industry?

Power ofSuppliers

Power ofBuyers

Substitutes

Barriers to Entry

Rivals


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?


Marketing Plan Marketing Plan

• Target Market Beneficiary/client needs/wants

• Marketing mix: 4 Ps Product Promotion Price Place

• On going market research


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?


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


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


Capacity Investment Capacity Investment ChoicesChoices

Productivity

Return on Investment?

$Job hard skills soft skills credit/savings education

$$$$


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


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


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


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


Planning the Plan: Planning the Plan: RecommendationsRecommendations

SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP

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Is the idea a concept? Is the idea a concept?

Social Enterprise

IREX Liberia SE Training 2013 SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP

29

Theory of Theory of ChangeChange

Get GroundedGet Grounded

Social Enterprise DesignSocial Enterprise Design

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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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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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


Planning the Plan: Planning the Plan: RecommendationsRecommendations


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


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.


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


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


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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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


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.


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.


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


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


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


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

social enterprise business planning

Documents

social entrepreneurswhy

social enterprise products

proposals business plans

business planning

management plan

decisionmakinguse management

objectivesdefines strategies

target market operationsday