Creating Revenue Through Social Enterprise: A Workshop for the Center for Nonprofit Resources

Creating RevenueThrough SocialEnterpriseA Workshop for The Centerfor Nonprofit ResourcesPresented by Geri Stengel1

Meeting Rules• No risk environment• Confidential• One person speaks at a time• Raise your hand if you‟re concerned that you won‟t get to make your comment• Participation  Sharing insights, full input from everyone  Constructive feedback from everyone  Critique the idea, not the person  Be open to feedback• Be creative and have fun2

Introductions• What is your name?• What is the name of your organization?• What does the organization do?• What do you do within the organization?• Does your organization have a social enterprise?• Why are you taking the workshop?3

Agenda• Help you determine if social enterprise is right for your organization• Provide a few case histories• Share lessons learned• Provide techniques used for developing and screening entrepreneurial ideas• Measuring social impact• Discuss risks and how to mitigate them4

Purpose of the Workshop• Provide participants with a detailed overview of entrepreneurial techniques for diversifying revenue• Understand strategic issues, assess your organizational readiness and suitability, and prepare you to move forward• Focus on generating financial and human resources in support of your nonprofit organization over the long term• Utilize organizational intellectual capital and experience, leveraging it to create a long-term source of financial sustainability for the organization5

Social Enterprise:What, Who, Why, How6

Why Social Enterprise?• Diversifies funding sources• Funding of overhead / administration• Can fund innovation• Can fund unpopular causes• Creates an entrepreneurial spirit• Enhances understanding of clients• A test of social value• Adds skills and competencies to the organization• Enhances the profile of the organization7

Social Enterprise• Which organizations come to mind?• Who comes to mind?8

Definition of Social Enterprise• A social entrepreneur is one driven by a social mission, a desire to find innovative ways to solve social problems that are not being or cannot be addressed by either the market or the public sector. Laura D’ Andrea Tyson, Haas School of Business• “Social entrepreneurship” rather broadly as innovative and resourceful approaches to addressing social problems. Center for the Advancement of Social Entrepreneurship• Social enterprise describes any nonprofit, for-profit or hybrid corporate form that utilizes market-based strategies to advance a social mission. Social Enterprise Alliance9

Trends in Social Enterprise• Innovative approaches• Private ingenuity• Use of business methods• Craft sustainable solutions to social problems• Share knowledge10

Teach a Man to Fish, and You Feed Him for Life• “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for life.”• Experimentation with for-profit and hybrid forms of organization to serve social missions or deliver socially important goods and services• More “strategic,” “engaged,” and “outcomes-based” approaches to social sector funding• More attention paid to issues of impact, scale, and sustainability with the hopes of increasing SROI• Growing experimentation with market-based approaches and business-inspired methods11

Business Models• Cause marketing• Licensing• Government purchasing• Retail or Thrift Store• Temp Agency• Property Management• Clerical Services• Consulting Services• Restaurant or Café• Packaging and Assembly• Employee Assistance Program• Maintenance• Technology Related12

Specific Examples• Ben & Jerry‟s PartnerShop Program The franchise fee is waived. – Goodwill Industries of Greater Detroit – Life‟sWork of Western Pennsylvania – New Avenues for Youth, Portland, OR• An education foundation sold the rights to a textbook it developed -- - commercialize intellectual property• a US based non-profit sells licenses to use its programs in other countries -- - expand mission• Girl Scout cookies – although there are programmatic benefits, there is no doubt that the cash from the sale of cookies is critical to the funding stream - generate funds13

What Earned Income Ventures Do Have?14

Questions15

Is Social Enterprisefor You?16

Is Social Enterprise Right for Your Organization?• What‟s the size of your budget?• How many people work for the organization? – Which managers and staffers will be dedicated to this initiative? – Do you have a „business approach‟ to problem solving• How long have you been in existence?• Do you have existing policies and procedures?• Other resources that are critical to success – Business minded staff and board – Accounting systems – Facilities – Start up capital17

What Traits Do Entrepreneurs andSocial Entrepreneurs Have In Common?• Persistence • Commitment• Desire for immediate • Problem solving skills feedback • Tolerance for ambiguity• Inquisitiveness • Strong integrity• Strong drive to achieve • Highly reliable• High energy level • Personal initiative• Goal oriented behavior • Ability to consolidate• Independent resources• Demanding • Strong management and• Self-confident organizational skills• Calculated risk taker • Competitive• Creative • Change agent• Innovative • Tolerance for failure• Vision • Desire to work hard • Luck18

How Do Entrepreneurs andSocial Entrepreneurs Differ?Are there differences betweenpeople who solve technicalproblems and those who solvepeople problems?• Idealistic• Strong ethical fiber• Altruistic• Commitment to creating some sort of positive social or environmental change• Interested in social/environmental outcomes19

Small Business Failure Rate• Number of failures after the 5 year 50%20

Why Small Businesses Fail1. Lack of experience2. Insufficient capital (money)3. Poor location4. Poor inventory management5. Over-investment in fixed assets6. Poor credit arrangements7. Personal use of business funds8. Unexpected growth Gustav Berle adds two more reasons in The Do It Yourself Business Book9. Competition10. Low salesSource: Small Business Management, Michael Ames21

Are Board and Management Ready• CANDOR: Be honest about your strengths and weaknesses.• PASSION: Evaluate whether you really want to become more entrepreneurial.• CLARITY OF PURPOSE: Know your mission, core values and how the social enterprises complements them.• COURAGE: Are you willing to make tough decisions.• DECISION MAKING: Can you be decisive, and empower employees to make their decisions?• MAKING MONEY: Are you comfortable with the idea of making a profit?• PUTTING THE RIGHT PERSON IN CHARGE: Even if it means going outside.• PAYING FOR-PROFIT SALARIES: Even if you‟re paying more than what you‟re paying a comparably skilled person on the nonprofit side.• PLANNING: Be disciplined about your planning not skipping steps.• PERFORMANCE MEASUREMENT ORIENTATION: Measure, analyze and adjust.• FLEXIBILITY: Are you agile enough to make course corrections quickly.22

What Fears Do You Have About Social Enterprise23

Determine the Type of Additional Support You’ll Need• Take classes• Join industry groups• Join networking groups• Network• Join peer-to-peer mastermind or CEO Roundtables• Read books and magazines on entrepreneurs and entrepreneurial techniques• Find a mentor or advisor• Use a coach24

Questions25

Case Studies26

$1 Shopper: About the Parent Nonprofit Rescue Mission of Syracuse provides a place to sleep, clothes, guidance and support to those with alcohol or drug addictions or mental disease, education and job training to the homeless and poor. Generates $11 million annually27

$1 Shopper: Inspiration for Venture• Social enterprise director conceived and did initial research into the viability and best approach for launching a dollar store28

$1 Shopper: The Venture Sell household necessities for $1  Kitchen items  Cleaning supplies  Disposable products  Socks  Seasonal items29

Environmental Organization Advocates and educates $100+ million nonprofit Publication division  3 scientific journals and book publishing  2005  Revenue: $500,000+  Loss $200,00030

Environmental Organization Staff turnover – inconsistent direction Decision making not bottom line driven Lack of marketing Disappointing business results Diminished staffing Concern about and budgets ongoing losses31

Environmental Organization Improved bottom line Keep an eye on the bottom line Move ahead with co-publishing relationships Market, market, market, especially on the website32

Minnesota Public Radio America‟s largest station- based producer of national public radio programs A Prairie Home Companion Created a catalog business Developed an excellent direct marketing system Evolution from coffee mugs to customer driven Sold business to a department store for large profit33

Minnesota Public Radio• 1981 created a catalog business: Rivertown Trading Company• 1986 spins off Rivertown• 1987 reorganizes: Greenspring  Separate board with stock options• 1998 generating $200 million  $4 million in annual profit for MPR  17% of operating budget• Internet changing the catalog business• Greenspring evaluates options to expand by raising capital• MPR does want Greenspring to grow, but doesn‟t want to fund expansion 34

Minnesota Public Radio• Greenspring sells Rivertown to Dayton Hudson  $120 million  $110 million to MPR  $20 million to Greenspring• Several Greenspring employees earn windfalls from option  President of MPR makes $2.6 million• Bad publicity over windfall revenues• Rivertown bused by Dayton Hudson as infrastructure to launch e- commerce for Target.• Rivertown catalogs shut down• 30 employees laid off• Rivertown president resigns 35

Questions36

Lessons Learned37

Lessons Learned: Starting Up• Begin with your assets• Start with quick wins• Remain consistent with your values• Address organizational barriers to get everyone‟s buy- in• Different mission – separate team• Understand the marketplace including the competition38

Lessons Learned: Addressing Risks• Avoid airlines – don‟t start companies that are expensive to build and make a profit• Share risk with distributors/partners• Measure performance (financial, social and operational) and put in place systems for continually improvement• Identify and address risks as they arise• Be prepared for it to take longer than you plan for and need more money39

Lessons Learned: Final Lessons• Network• Get expert industry advice• Hire/develop entrepreneurs• Don‟t rely on your mission to sell• Don‟t be afraid to fail40

Questions41

Developing andScreening Ideas42

Steps in Product Development1. Fuel for ideas2. Generating ideas3. Quick filtering idea stages4. Evaluating ideas43

Fuel for Ideas• Internal capacities*• Community trends and needs• Potential market opportunities• Other related organizations (Community Wealth Ventures – http://208.82.213.185/resource s_search.asp)• Unrelated organizations (Community Wealth Ventures – http://208.82.213.185/resource s_search.asp)44

Internal Capacities• Competency-based - What do we do well that might be valuable to others?• Relationship Asset-based - What relationships do we have that have business value?• Property Asset-based – what do we own (assets that are under-utilized or previously unrecognized) that have market value to others45

Internal Capacities – Maximizing Intellectual Property• Program related• Same product – new market  Geographic  Other customer segment• Staff resources• Client resources• Hard and soft property• Unrelated business46

Spectrum of Activity Traditional Affirmative Full-scale Fee-for-service Business Commercial Activity Earned income is a Earned income is Earned income typical component designed to provide is designed to of nonprofit‟s system some revenue and generate excess and structure other benefits such revenue to support as job training and nonprofit‟s mission employment47

Venture Idea Ladder• Find new customers for new products• New customers for existing products• Develop new products for Hardest existing customers• Expand sales/improve profits from existing customers Easiest48

Idea Screening 5 seconds Brainstorming 100 ideas 2 minutes Screen 1 10 ideas 2-3 hours Screen 2 2 ideas 2 days Feasibility 0-3 ideas 6 weeks B-Plan 0-2 ideas49

Screen I: Fast Screening• Criteria  Is it consistent with the mission?  Does it meet a significant customer need?  Does it leverage the strengths and assets of the organization?• Guidelines  Go for clear winners  Accept that some good ideas will not be selected  No more than 2 minutes per idea50

What Is a Good Idea?• Meets a significant customer need – a market• Fits with mission• Leverages a strength / asset• Competitive advantage – Cost – Performance• Return on investment• Risk managed• Create your own criteria51

Screen I: Sample Decision Matrix Leverage in house POSSIBLE QUICK WIN HIGH PRIORITY expertise No in house DON’T PURSUE LONG TERM, IF AT ALL expertise Low Revenue High Revenue • Use any two criteria that work for you or your organization • Expertise and revenue potential used here52

Screen II: Set Up• 2-3 hours discussion / best guesses• Create a concept statement  Describe product  Who will buy?  How frequently will they buy?  Where will they buy?  How will they buy?• Product attractiveness  Financial results  Marketing issues and competitors  Risk factors• Does it fit with the Organization? 53

Screen II: Evaluation• What is the potential for generating “big” bucks?• Will we need a “big” investment to launch? (ie hire new staff before $ in; $50K technology investment)• Is anyone enthusiastic? Who will champion the idea?• Do revenue and expense assumptions make sense and are they realistic?• Can risk be managed?• Can we pilot on a small scale?54

Sample Decision Matrix Site Criteria TableFactors Grade 1-4 Weight 1-4 PointsMission fitSignificant customer problemAppropriate solutionRevenue potentialLeverages strengths/assetsof organizationEase of implementationCapital investmentHuman resources neededAbility to manage riskProfit potential. Total Points55

Let’s Experiment: Test Subject Please56

Questions57

Social Impact58

Metrics: Understandable, Inexpensive and Useful – Acumen • What social impacts is your venture aiming to achieve? • What is the relationship between these impacts and the activities of your venture? • How well is venture achieving them? What are you learning about how to improve this? • Can you afford to regularly produce these impacts? • How much value is being created for society as a result? Source: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, Research Initiative on Social Entrepreneurship Columbia Business School 59

GSVC Defines 3 Steps1. DEFINE social value proposition: Theory of Change2. QUANTIFY how you’ll track social value: Impact Value Chain: top three social output indicators3. MONETIZE intended social value: Social Return on Investment (SROI) Source: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, Research Initiative on Social Entrepreneurship Columbia Business School60

Step 1. Define Your Social Value Proposition:Tool 1. Theory of Change• Focused: concise IF-THEN statement or statements that define the intended social impact and how the operation intends to cause it to happen – “If poor women in East Africa have access to a microbicidal contraceptive, then AIDS will spread less rapidly in those countries.”• Detailed: fine-grained set of cause and effect assumptions at the core of a strategy to create social change or achieve social impact.Source: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, ResearchInitiative on Social Entrepreneurship Columbia Business School61

Step 2. Quantify Top 3 Social IndicatorsIdentify your top indicators ofsocial value• These are outputs you can measure directly as part of your business operations• They should relate in a compelling way to the ultimate desired social outcomes of the venture• We call them “indicators” or “social outputs.”• Competition requires that you specify the 3 most important.Source: Social Impact Assessment and Building Your SROI, CathyClark Faculty Advisor, GSVC Director, Research Initiative on SocialEntrepreneurship Columbia Business School62

Tool: Value Impact ChainInputs  Activities  Outputs  Outcomes  Goal AlignmentWhat is put Venture‟s Results that Changes How wellinto the primary can be (increases or outcomesventure activities to measured by decreases) to align with produce the venture – the social intended financial and Social system goals; activity social value Indicators and goal adjustmentSource: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, ResearchInitiative on Social Entrepreneurship Columbia Business School63

Tool: Value Impact ChainInputs  Activities  Outputs  Outcomes  Goal AlignmentWhat is put Venture‟s Results that Changes to Activity andinto the primary can be the social goalventure activities measured system adjustment  What would have happened anyway = ImpactSource: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, ResearchInitiative on Social Entrepreneurship Columbia Business School64

Step 3: Monetize ImpactIdentify the dollar value equivalentof your projected social impact tocreate a social return oninvestment.• There is no standard methodology in current use to monetize social return and teams are strongly encouraged to build on existing work, innovate, and rigorously defend your decisions.• That said, we will walk through the social return on investment (SROI) model used to date in the GSVC and by REDF. (www.redf.org)Source: Social Impact Assessment and Building Your SROI,Cathy Clark Faculty Advisor, GSVC Director, Research Initiativeon Social Entrepreneurship Columbia Business School65

Tool 3: SROI Steps in Calculation of SROI1. Quantify outputs/outcomes where possible2. Translate into economic equivalent where possible using proxies3. Develop social cash flow projection4. Subtract outputs/outcomes that would have happened anyway (refer to proxy data)5. Where outcome is qualitative, discuss what it is and how you will know it‟s happening6. Cite your sources and assumptions clearlySource: Social Impact Assessment and Building Your SROI,Cathy Clark Faculty Advisor, GSVC Director, Research Initiativeon Social Entrepreneurship Columbia Business School66

Risk & Contingency• Uncontrolled cash flow• A drop in sales or insufficient sales• Higher costs• New competition• Business recessions• Incompetent managers or employees• Dishonesty and theft67

What’s Your Next Move?68

Questions69

Resources• Toward a Better Understanding of Social Entrepreneurship: Some Important Distinctions. Jerr Boschee and Jim McClurg https://wiki.brown.edu/confluence/download/attachments/33494/better_understanding. pdf?version=1&modificationDate=1188407297000• A Double „Bottom Line‟: Lessons on social-purpose enterprise from the Venture Fund Initiative http://www.redf.org/download/other/dbl.pdf• Venture Forth! The Essential Guide to Starting a Moneymaking Business in Your Nonprofit Organization http://www.redf.org/download/other/VentureForth-samplechapter.pdf• The Limits of Social Enterprise: A Field Study & Case Analysis www.seedco.org/download/?id=10• Community Wealth Ventures http://www.communitywealth.com/resources.html#SOCIAL_ENTERPRISE_RESOUR CES• Profiting from Purpose: Profiles of Success and Challenge in Eight Social Purpose Business http://www.seedco.org/press-releases/?id=258• Social Enterprise Alliance https://se-alliance.org/70

Resources• Business Planning for Nonprofits: What It Is and Why It Matters http://www.bridgespan.org/LearningCenter/ResourceDetail.aspx?id=2382• Getting Ready to Grow: The Tools You’ll Need http://ventureneer.com/sites/default/files/ebooks/ventureneer-ebook-getting- ready-to-grow.pdf• Get Ready to Grow Your Business webinar http://ventureneer.com/webclass/get- ready-grow-your-business• Developing a Growth Business Plan: A series based on the Social Impact Exchange, which has a business plan competition http://ventureneer.com/special-friday-series- developing-growth-business-plan-0• Business Planning (For nonprofits, for-profits and hybrid organizations) http://managementhelp.org/businessplanning/index.htm• Nonprofit Sample Business Plans http://www.bplans.com/nonprofit_business_plan_templates.cfm• Sample Nonprofit Business Plans http://www.bridgespan.org/sample-nonprofit- business-plans.aspx?parentid=106&taxid=130• One Page Solutions for Non-Profits http://www.onepagebusinessplan.com/nonprofits.htm•71

Resources• L3C or a B corporation – http://nclawlife.com/2011/03/04/l3c-and-b-corps/ – http://www.americansforcommunitydevelopment.org/concept.php – http://www.nonprofitlawblog.com/home/2011/08/the-l3c-3-years-later.html – http://www.bcorporation.net/why – http://www.inc.com/guides/201106/how-to-become-a-benefit-corporation.html• The Global Social Venture Competition is the largest and oldest student-led business plan competition providing mentoring, exposure, and prizes for social ventures from around the world http://www.gsvc.org/about_gsvc/• Stanford Social Innovation Review http://www.ssireview.org/• Social Enterprise Alliance, www.se-allliance.org72

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Creating Revenue Through Social Enterprise: A Workshop for the Center for Nonprofit Resources

by Geri Stengel on Sep 12, 2011

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Creating Revenue Through Social Enterprise: A Workshop for the Center for Nonprofit Resources — Presentation Transcript