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Introduction to social enterprise for nonprofit organizations
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April 26, 2011
Manonamission.biz - @plamb - facebook.com/pauljlamb
Agenda
Overview of Social Enterprise Sector Readiness ExerciseQ&AVenture Ideas Brainstorming &
Troubleshooting
Thinking outside of the Escalator
What is a Social Enterprise“An organization or venture that
achieves its primary social or environmental mission using business methods”
-Social Enterprise Alliance
Social Enterprise is not…
Why Launch A Social Enterprise?
• Sustainability• Increase social return on investment
(SROI)• Cultural transformation• Diversify & Leverage new funding sources• Honoring your social mission
Legal Structures
• For profit• Nonprofit• Hybrid (i.e., L3C)• Benefit Corp• Flexible Purpose Corp
See: Effective Social Enterprise — A Menu of Legal Structures
Sample nonprofit Social Enterprises
Social Enterprise Quiz (T or F)
Nonprofits can’t make a profit Nonprofits can’t (or shouldn’t) pay taxes It’s a quick financial fix If we earn money, we will lose our
nonprofit status Our staff already has all the skills needed
to run a social enterprise
A new era for Social Enterprise
Increased Federal investments-Office of Social Innovation-Office of Entrepreneurship &
Innovation Greater foundation interest New models (L3C, B Corp, etc.) Economic motivators
Profit-motivationMission-motivation
•Primary purpose is mission advancement
•Integration between social programs and business activities
Mission-Centric Social Enterprise
Social Program
s +
Enterprise
Activities
Mission-Related Social Enterprise
•Provides revenue for nonprofit operations and mission-related activities
•Often expands mission to achieve greater social impact
Social Program
s Enterprise
Activities
Non-MissionRelated
Social Enterprise•Not related or intended to advance mission
•Profit/funding potential is primary purpose
Social Program
s Enterpris
e Activities
$
Social enterprises vary depending on Enterprise Strategies
Source: Virtue Ventures, Social Enterprise Typology, Kim Alter
© REDF – Please do not distribute without prior permission from REDF
Planning for a social enterprise versus a small business
Business PlanBusiness Plan
Set up BusinessSet up Business
$ Returns$ Returns
$ Returns$ ReturnsSet social and financial goals
Set social and financial goals
Social impactSocial impact
Select business idea based on goals
Select business idea based on goals
Business PlanBusiness Plan
Set up BusinessSet up Business
The desired outcome of for-profit business is already known: to make a profit
The desired outcomes of a social enterprise are not obvious and so the goals need to be established first
© REDF – Please do not distribute without prior permission from REDF
Development Timeline
Why is it important to set goals? Ensure agreement between stakeholders
◦ Gain agreement from staff with different roles, the board and any other stakeholders on the objectives of the enterprise
Select a business idea and guide the business planning◦ Business ideas can be evaluated objectively
using the enterprise criteria Guide business operations
◦ Clear social and financial goals help the enterprise manager make operational decisions
Evaluate whether the enterprise is successful◦ Tracking financial and social metrics against
initial goals shows whether the enterprise is fulfilling stakeholders’ expectations© REDF – Please do not distribute without prior permission from REDF
Sample Social Enterprise Metrics Dashboard
Operational Metrics Benchmark Baseline Projected Actual Variance New clients New contracts Average size of contracts Customer Satisfaction Rankings
Financial Metrics Benchmark Baseline Projected Actual Variance Gross Revenue Expenses/COGS
Operating Profit or (Loss)
Operating Margin New Grants for Business
Social Metrics Benchmark Baseline Projected Actual Variance Homeless clients put to work Youth trained Average increase in client wages Community participation numbers
Used with prmission from ZeroDivide
Advanced Measurement Tools
Stride Center/ReliaTech
Founded in 2004 through $100K grant 3 Stores around Bay Area $400K in gross income 2011 (expected) 62% Earned income, 38% Grant income Covers 15% of nonprofit budget Currently profitable
If factor in grant funding…and/or SROI
Used with permission from ZeroDivide
Used with permission from ZeroDivide
Used with permission from ZeroDivide
Start With Some Basics
What are your core values? Are your values compatible with a venture
approach? What are your motivators for exploring a
venture? Who are your stakeholders (internally &
externally)? What are your long term social & financial
goals?
21
Key Steps
Assess readiness Build an inventory of assets Brainstorm ideas Conduct market research Business planning Piloting Launch
The Readiness ChallengeReadiness Questions PointsIs your Executive Team & Board able to get fully behind an earned income strategy?
10
Is your organization open to a totally new way of doing business, both culturally AND operationally?
10
Are you willing to invest 6-9 months doing feasibility work, market research, business planning before going operational?
10
Do you have or are you able to raise startup and operational capital?
10
Is your staff and other stakeholders open to an earned income venture in house?
5
Are you prepared to organize an outside advisory team of experts?
5
Are you willing to hire outside operational staffing? 5Will your venture align fully with your social mission?
5
Are you open to revising your business model, if needed?
5
Are you in it for the long haul? 5Total
Do’s…Identify clear goals & planGet full stakeholder buy-inSet up an advisory group of expertsConduct market researchWrite a business planLet the venture type determine the legal
structureBe clear on your business model, but open to
revisionsAlign your business model with your
capabilitiesHire the right people
Don’ts…
Expect immediate results Just target nonprofit clients Give short shrift to marketing Neglect financial planning for
VENTURE Forget to track & measure results Ignore long term & growth planning
Resources Social Enterprise Alliance Rootcause Business Planning Guide for SEs Business Plan Pro Social Enterprise Edition Social Return on Investment (SROI) from REDF Effective Social Enterprise — A Menu of Legal
Structures ZeroDivide Community Investment Resources Social Enterprise Books
Don’t wait for the escalator to get fixed – it may never happen!
Social Enterprise Concept Brainstorming
What ideas do you have for starting a venture(s)? What relevant physical, financial capital, and social capital to you
have available(s)? What kind of investment would you need to launch this
venture(s)? Where would you get the seed money to start your venture? Do you know of anyone else who is doing a similar venture in the
nonprofit space? Any idea who your competitors are? What might your unique value proposition or differentiator be? Who would your main customers be? How would you market the venture (both offline and online)? What would be your process to get the venture off the ground?
Thanks from…
Paul [email protected] www.manonamission.biz @plamb (on Twitter)
NOW GO OUT AND CHANGE THE FACE OF NONPROFITS AND HOW THEY IMPACT THE WORLD!!!