Kristen McCormack BU MNN/AGM Conference.2009
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Kristen McCormack BU MNN/AGM Conference.2009

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Kristen McCormack\’s Presentation @ the 2009 Mass Non-Profit Network/AGM Annual Conference

Kristen McCormack\’s Presentation @ the 2009 Mass Non-Profit Network/AGM Annual Conference

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  • Source: U.S. Census Bureau, Current Population Survey, 2008 Annual Social and Economic Supplement.
  • Massarsky and Beinhacker, Enterprising Nonprofits
  • Massarsky and Beinhacker, Enterprising Nonprofits
  • Massarsky and Beinhacker, Enterprising Nonprofits, Golman Sachs Foundation
  • Massarsky and Beinhacker, Enterprising Nonprofits, Goldman Sachs Foundation
  • Source: U.S. EPA, Characterization of Building-Related Construction and Demolition Debris in the United States. 1998
  • Source: U.S. EPA, Characterization of Building-Related Construction and Demolition Debris in the United States. 1998


  • 1. November 2009
    Kristen J. McCormack
    Institute for Nonprofit Management and Leadership at Boston University
    Getting Ready for an Earned Income Venture
  • 2. Today’s Agenda
    Defining Social Enterprise/Earned Income
    Fun facts about earned income ventures
    Are you ready?
    If so, now what?
    Lessons learned from successful ventures
  • 3.
  • 4. Most Common Ventures
    Fee for service or tuition based
    Service businesses (cleaning, moving)
    Real estate
    Rental housing
    Home repair
  • 5. Why pursue a social enterprise?
    Further the mission of the organization
    Generate income
    Diversify the revenue base
    Serve constituents
    Community relations
    Revitalize neighborhood
  • 6. Did You Know?
  • 7. In U.S., 20.9 million women lived below the federal poverty threshold in 2007
  • 8. The Women’s Bean Project in Denver CO employs women from backgrounds of chronic unemployment and poverty to manufacture gourmet foods.
  • 9. The Women's Bean Project does not hire women to make and sell bean products. We make and sell bean products to hire women.
  • 10. Characteristics of organizations operating successful business ventures
    6.45-10 years old
    100+ employees
    $12-24million budget
    Top management is critical force
  • 11. Profitable?
    35% generate a financial surplus
    19% are break-even
    35% of ventures require a subsidy
  • 12. On generating revenue…
    On average successful enterprises generate 12% of annual budget revenue
    • 26% say more than 20%
    • 13. 7% between 16-20%
    • 14. 7% between 11-15%
    • 15. 24% between 1 and 5%
    • 16. 13% less than 1%
  • Source of Subsidy
    41% from foundation grants
    29% out of surplus
    11% loans and grants
    7% government grants
    5% corporate funding
  • 17. Least Successful
    Small organizations
    Less than five years old
    Under ten employees
    Budget under $1 million
  • 18. Before you Begin: Self-Assessment
    Use of resources
    Board of Directors
    Risk profile
  • 19. Self-Assessment (cont)
    Compelling opportunity
    Based on current activity?
    Can anyone else provide better?
    How big is the opportunity?
    What do we need to start?
    Is there a revenue stream?
    Do we have any customers?
  • 20. Did You Know?
  • 21. 136 million tons of building-related waste is generated in the U.S. annually, nearly 60% of all non-industrial waste in the U.S.
  • 22. But only 20 to 30 percent of this building-related waste is estimated to be recovered for processing and recycling.
  • 23. Materials Matter diverts construction waste and materials from landfills and sells the products at discounts through a Home Improvement Outlet to nonprofits working in housing and community development.
  • 24. Self-Assessment (cont)
    How much will this cost?
    Where will the money come from?
    How long are we willing to support the business before it makes money?
    What are the financial goals?
  • 25. Ready to Go? Do a Business Plan
    Process not a product
    Ongoing use as a management tool
    Benchmark real vs. projected revenue/expense
    Many business failures can be prevented with a good plan
    80% of successful businesses had a written business plan (SBA)
  • 26. Financing the Venture
    Low interest loans
    Grants (local foundations)
    Social venture capital (<10 nationally)
  • 27. How much cash to start?
    50% of organizations secured total financing before operating
    44% had partial financing
    More than half with total financing generated a profit while only 18% of those with partial funding generated a profit
  • 28. Lessons Learned: Social Purpose Business Case Studies
    Financing and Cash
    Real Estate
  • 29. Leadership
    Board of Directors: Readiness and Vision
    Executive Leader: Entrepreneurial and Risk Taker
    Social Enterprise Manager: Experienced in the same business
  • 30. People
    Management team: balance of business and program experience
    Invest in an “A” team with a “B” idea rather than the other way around
    Value of volunteer labor
    Know your population and choose businesses that match your population’s needs
    Staff up to support the new venture
  • 31. Product and Customers
    Is your service or product needed?
    Do customers want it?
    Will they pay for it?
    How much will they pay for it?
  • 32. Planning
    Business Planning is key!
    Business must be connected to the mission
    Market analysis-who else is out there?
    Run the program as a pilot first
    Build on your assets and strengths
    Strategic alliances-you don’t have to do it all
    Mitigating risk – risk analysis
    Get good legal advice
  • 33. Financing and Cash
    Have enough cash to cover losses for a pre-determined period of time
    Break even takes time
    What are the “true” costs of the business?
    Access to long term, adequate financing
    Cash flow of federal or state funds
  • 34. Real Estate
    It takes longer than planned
    It costs more than planned (contingency)
    Contractors will always “find” stuff that will cost you more money
    Tight contracts (performance based, caps, etc.), change orders and experienced real estate staff and/or consultants can help you avoid this
  • 35. Expansion
    Slow and steady growth
    Be willing to say no to business
    Be willing to say no to expansion
    Make sure your first venture is successful before starting another
  • 36. Resources
    Including local Boston chapter
  • 37. Resources for Business Planning
    Local colleges and universities
    BU Social Entrepreneurship MBA students
    Babson, Boston College, MIT and HBS
    Community Wealth Ventures
    Independent consultants
    ESC (formerly ESCNE)
  • 38. Ready to Go? Business Plan
    Description of the Business
    Industry Analysis
    Marketing Plan
    Management, Personnel and Organizational Structure
    Production/Service Delivery Operations Plan
    Assessment of Risk
    Financial Plan Narrative
  • 39. Elements of the Business Plan
    • Executive Summary (1-2 pages)
    It’s all they read!
    Should be able to stand alone
    • Description of the Business
    Nature of business
    What industry?
    What products and services?
    What stage of development
    How does it fit?
  • 40. Business Plan (cont)
    • Management and Organization
    Background & Experience
    Skills & Knowledge
    Ability to Recruit, Communicate & Manage
    Passion and commitment
  • 41. Business Plan (cont)
    • Market
    Who are they?
    Do they need it?
    Do they want it ?
    Will they pay for it?
    How much?
  • 42. Business Plan (cont)
  • Business Plan (cont)
  • Business Plan (cont)
    • Financials (3 year minimum or until B/E)
    • 55. Income statement
    • 56. Balance Sheet
    • 57. Cash Flow Analysis
    • 58. Financing Structure (if debt incurred)
    • 59. Break-even analysis (if applicable)