Earned Income, Social Enterprise and Fee for Service

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  • Read through each point on the slide
  • There are a LOT of definitions, and people have even written 20 pages articles on this. Here is the definition that is used by the Social Enterprise Alliance, a membership organization of individuals and groups involved in social enterprise. So you can see that this is a pretty broad definition and not really helpful. But here are some examples that might help you think about it. If you are the Visiting Nurse Association and you charge fee for service, you could be considered a social enterprise--any nonprofit organization that charges fee for services or has another earned income strategy could be considered a social enterprise. You might ask for people to throw out some examples. Give the example of AETH--selling books about theology both advances their mission (of training Hispanic theologians) while also raising money for the organization.
  • Let’s talk about two more terms: Earned Income and Fee for Service. Read through-- Then, a lot of the money we receive in nonprofit organizations is contributed income--contributed by individuals, foundations, companies--
  • So how do you get started? The most important is to determine ORGANIZATIONALLY what your goals are in pursuing an earned income strategy. Goals are the most important—if you don’t know why you are considering a business venture, it will be impossible for you to conduct a business planning process and come up with a plan to meet your goals If your organization has not done a strategic plan, you should do this first…so that you understand how the business venture fits in overall with where you want to go Some common goals are: Read and explain each Advance mission--maybe you want to employ older adults in your community, so it’s important to create a social enterprise that is focused on jobs-- If you have recently lost funding and that is your motivation for thinking about it, your goal might be to diversity revenue, or simply raise cash --revenue only Sometimes having a social enterprise raises your visibility in the community or among your constituents-- Probably the next two are NOT good reasons to start--we don’t think it’s ever a good idea to do something just because someone else thinks it’s a good idea--but we also know that donors and funders applaud when organizations try to diversify their income Sometimes--it may be that you have a really, really good idea and just want to make it happen But being clear about your goals is essential. If you want to employ people, you might use a different earned income strategy than if you simply wanted to increase revenue with minimal expense and effort. To simply increase revenue, you might rent out your parking lot or increase your fees--but if you want to employ people, you might create a related business. STATE--it can also be a combination of each THINK THROUGH FOR A MOMENT-=WHAT ARE YOUR GOALS? WRITE THEM DOWN ON A SHEET OF PAPER If you’re not sure, think of who else in your organization you would have to talk to It’s really important to get consensus on this--you are going to have a really different result if your goal is primarily to advance your mission than if your goal is to simply produce revenue
  • Here are things that nonprofits sometimes worry about--sometimes people on their boards have asked them to consider all of this UBI--unrelated business income What kind of organizational structure?--the reality is that you can start a business within a nonprofit When your earned income venture starts making lots of money, you can worry about all of this--starting out, there is only one thing you need to worry about
  • Characteristics of nonprofits that have successful social enterprises. 1. Dedicated leadership The board, the executive director and other management must agree that operating a social enterprise would be beneficial to the organization. In addition, there needs to be a ringleader/champion responsible for the coordination, support and expertise in the social enterprise. This person should possess both the skills necessary to run an enterprise and the passion to carry the idea through to reality. 2. Matched mission Not only will mission match enhance community, constituents and staff support, it will ensure the organization continues to operate according to the needs of the community. If the enterprise is not directly related to the organization’s mission, then the organization may be subject to an unrelated business tax. 3. Culture of innovation The organization as a whole must be willing to try new things and think outside of the box. A positive attitude toward potentially useful ideas is extremely beneficial. 5. Quick decision-making skills Just like any other business operation, time is money. The organization should be organized to allow quick and precise decision-making for the social enterprise. 6. Low overhead cost Profit in a social enterprise does not come immediately. Most organizations report a need for subsidies in the first year. Thus, having a low overhead cost helps improve the social enterprises sustainability and impact on the organization’s budget. 7. Ability to adapt to change Creating a social enterprise will not only bring internal changes to an organization, it will also cause a need for the organization to continuously change with the outside market. Learning how to manage organizational change is a key to longevity, not only within the organization but also for the social enterprise. 8. Active business plan Having a plan/road map to follow is essential to the success of an enterprise. Studies have shown that organizations without a business plan are more likely to fail within the first year than those with a business plan (SBA). Business plans assist in identifying possible risks and hidden costs the enterprise may face. 4. Customers Market demand (customers) is a major determinant to the success of any enterprise. If the product or service created is not meeting a need, the enterprise will not be financially profitable. The product or service must have a unique quality that separates itself from competitors. Sometimes we do things because we think it’s a good idea--a successful earned income strategy needs to focus on the customers. Sources: 1. Community Wealth Ventures, Inc. (July 2003). Powering Social Change, Lessons on Community Wealth generation for Nonprofit Sustainability. Retrieved 2. Beinhacker , S. L., & Massarsky, C. W. (2002). Nonprofit Enterprise: Right for You? The Nonprofit Quarterly 3. Social enterprise alliance. Quick poll results and 4. Gees, G., Emerson, J., & Economy, P. (2001). Enterprising nonprofits: A toolkit for social entrepreneurs
  • After this webinar, We will be sending you a “risk assessment” audit to take with a team from your organization to help you determine your readiness for starting a social enterprise. But even if you aren’t ready, you can start looking around your organization to determine what earned income possibilites exist that don’t require a lot of additional effort… We’re going to talk through next how you can look around your organization and see what might be available to you to generate additional income.
  • Take a few minutes to think about your RiskAssessor results and the list of characteristics of successful social enterprises. Show the grid handout. Ask people to write these in their grid. Let them know there is an extra copy of this in the back of their packet, so please do write on this one! We believe there are 3 elements to an opportunity. 1) Your strengths & resources 2) conditions in the market--an unmet need 3) your ability to craft a solution to that need that builds on your resources, has potential customers, and advances your mission Take a moment now, pull out the yellow sheets of paper, and write down your mission on one of them
  • Social Enterprise Resources Anything a nonprofit possesses, including people, objects or intangible skills, that supports its social venture’s success.
  • Give an example of each Human capital = キ  Volunteers キ  Board, staff キ  Champion キ  Membership キ  Alumni キ  Available time Technology--computers, some software that you’ve developed that works for your organization that might help organizations with similar issues, a database Money--do you have some unrestricted cash available to invest Facilities--do you use your facilities 24-7? Can you share? Lease out? What about your parking lot? One nonprofit that we know of in a low-income community allowed people over the weekend to sell their cars and other property out of their parking lot? Could people in your community use your facility in some way? Products or service you currently offer--often the easiest way to generate earned income is to: charge, or charge more for something you are already offering; to think of new markets for something you are already offering (e.g, you are offering adult recreational programs that are grant-funded or government funded--who else might be interested who could directly pay?) What other tangible resources do you have? Make a list.
  • Think through your reputation and brand--if you are known for something, would someone pay to be affiliated with it. Similarly, you have probably developed relationships and community connections--can those be leveraged in some way? What about that data in your database? We know you probably won’t “sell” your client list, but are their people who would ilke to get in front of your clients? Offers that you could send to your clients An often overlooked resource is the knowledge within your organization--=what do you know? Who else might be interested in this? After this webinar, we will be sending you an inventory sheet--get a group of people with you to walk around your facility--bring it to a staff meeting and do a group brainstorming on what are the kinds of things that you can do?
  • In addition to looking at what you already have, it’s important to look at in the community. Do you have a waiting list? What have people asked you for that you don’t currently provide? Ask people at the front desk, in the field and out in the community to tell you what they are hearing? Very often, the best earned income ideas come from things that people have already told you that they wanted but that you didn’t have funding to provide--listen carefully.
  • Ask people to take a moment to do this…then…transition to next slide
  • Sometimes market research doesn’t have to be complicated--stop and do the “grandmother” test This is the SEEDCO example--a large foundation funded social enterprise that didn’t work because no one ever asked the potential consumer. Their idea was that employers would welcome a day care service for sick children, allowing employees to come to work instead of missing work when their children were sick. Their market research --with employers--confirmed their idea. Employers liked it and were even willing to pay for it. The problem was--the solution involved low-income workers taking their sick children by bus to a network of home-based day care providers…. If anyone on this webinar is a mom or dad, would you ever do that? Would anyone?
  • Since you are here to learn about how to generate some earned income and probably quickly, we aren’t going to talk about a comprehensive business planning process that will take months and tens of thousands of dollars to complete. (although if you want to launch a social enterprise, we absolutely recommend business planning) BUT - we also don’t recommend rolling the dice on a new idea. So, what’s a good compromise? A feasibility scan.
  • Talk about some simple ways to find out what people think
  • Read through--all of these will give you ideas of what others have done with similar ideas--call them and get a sense of how mthey are doing The wonderful thing about people engaged in social enterprise is that they usually love sharing information
  • For example, let’s say you identified that you had a specific type of knowledge. Maybe people call your organization frequently for information on a particular topic. Next time you get one of those calls, you pause, take a breath and say: Yes, we’d be happy for you to visit our program. I’d love to show you around. Our fee for that is $500. It’s a great way to test whether people will purchase or not Talk through the rest.
  • Walk through your office with a clean pad of paper. Walk in the front door. Write down what you see. Who is sitting there? What are they doing? Where are they sitting? What spaces do you have? What resouces are there? Don’t think about whether something is a good idea or a bad one, just write it all down.
  • What do you need to know to get this started?
  • And make money!!!!
  • Earned Income, Social Enterprise and Fee for Service

    1. 1. <ul><li>Earned Income, Social Enterprise </li></ul><ul><li>and Fee for Service </li></ul>
    2. 2. Today, we will … <ul><li>Define terms </li></ul><ul><li>Clarify your goals </li></ul><ul><li>Understand </li></ul><ul><ul><li>Key characteristics of successful organizations </li></ul></ul><ul><ul><li>Your current readiness and capacity </li></ul></ul><ul><ul><li>What you might do to shore up capacity </li></ul></ul><ul><li>Identify potential earned income/fee for service opportunities </li></ul><ul><li>Identify some next actions </li></ul>
    3. 3. What is social enterprise? <ul><li>An organization or venture that achieves its primary social or environmental mission using business </li></ul><ul><li>Social Enterprise Alliance, 2009 </li></ul>
    4. 4. Earned Income and Fee for Service <ul><li>Nonfundraising income from the sale of products, services, programs or infrastructure </li></ul><ul><ul><li>Rents </li></ul></ul><ul><ul><li>Licensing </li></ul></ul><ul><ul><li>Sales of products or services </li></ul></ul><ul><ul><li>Investment income </li></ul></ul><ul><li>Fee for service is one form of earned income </li></ul>
    5. 5. What are your goals? <ul><li>Advance mission (social benefit) </li></ul><ul><ul><li>Products </li></ul></ul><ul><ul><li>Services </li></ul></ul><ul><li>Diversify revenue </li></ul><ul><li>Revenue only </li></ul><ul><li>Visibility </li></ul><ul><li>Impress donors </li></ul><ul><li>My board/our funders think it’s a good idea </li></ul><ul><li>We have a transformative world-changing idea </li></ul>
    6. 6. Things not to worry about at the beginning… <ul><li>UBI </li></ul><ul><li>Should I be an L3c? How many subsidiaries do I need? </li></ul><ul><li>What programs will get the business profits? </li></ul>
    7. 7. Do worry about… <ul><li>Customers </li></ul><ul><li>And did we say, CUSTOMERS? </li></ul>
    8. 8. What does it take to be successful? <ul><li>Dedicated leadership/identified champion </li></ul><ul><li>A match with your mission </li></ul><ul><li>Culture of innovation </li></ul><ul><li>Quick decision-making </li></ul><ul><li>Low overhead </li></ul><ul><li>Ability to adapt to change </li></ul><ul><li>A business plan! </li></ul><ul><li>And did we say, CUSTOMERS??? </li></ul>
    9. 9. So what if we’re not ready to launch something big? <ul><li>Take risk assessment with multiple board members and staff </li></ul><ul><li>Look for earned income opportunities, including fee for service that don’t require huge additional investments of time or money </li></ul><ul><li>Start with what you have or know </li></ul>
    10. 10. Identifying Opportunities <ul><li>Resources + </li></ul><ul><li>Conditions/need + </li></ul><ul><li>A solution that: </li></ul><ul><ul><li>Advances your mission </li></ul></ul><ul><ul><li>Builds on your resources </li></ul></ul><ul><ul><li>Customers will buy </li></ul></ul><ul><li>= A good opportunity </li></ul>
    11. 11. What Resources, Strengths & Assets Do You Have to Build On?
    12. 12. Tangible Resources <ul><ul><ul><li>Human Capital </li></ul></ul></ul><ul><ul><ul><li>Technology </li></ul></ul></ul><ul><ul><ul><li>Money </li></ul></ul></ul><ul><ul><ul><li>Facilities </li></ul></ul></ul><ul><ul><ul><li>Products or services you currently offer </li></ul></ul></ul><ul><ul><ul><li>Other? </li></ul></ul></ul>
    13. 13. Intangible Resources <ul><li>Reputation and Brand </li></ul><ul><li>Relationships/community connections </li></ul><ul><li>Information/data </li></ul><ul><li>“ Brains”--what you know </li></ul><ul><li>Other? </li></ul>
    14. 14. What unmet needs are out there? <ul><li>In your community </li></ul><ul><li>In your field </li></ul><ul><li>Among your clients </li></ul><ul><li>Other? </li></ul>
    15. 15. Identifying Your Opportunities… <ul><li>What can your organization offer to produce income? </li></ul><ul><li>What products might people buy? </li></ul><ul><li>What services might you offer? </li></ul><ul><li>What expertise do you have? </li></ul><ul><li>Most IMPORTANT: Who wants to buy what you have to sell? </li></ul>
    16. 16. Opportunity Activity <ul><li>Based on your resources, unmet needs and advancing your mission list your possible opportunities on a sheet of paper </li></ul>
    17. 17. Apply the grandmother test <ul><li>… before doing extensive market research </li></ul><ul><li>OR </li></ul><ul><li>Would you get on a bus to take </li></ul><ul><li>a really sick child </li></ul><ul><li>to a day care provider </li></ul><ul><li>you had never met ? </li></ul>
    18. 18. Why roll the dice… … when a feasibility scan can help you learn more?
    19. 19. 1. Ask people what they think <ul><li>Surveys </li></ul><ul><li>Interviews </li></ul><ul><li>Conversation </li></ul>
    20. 20. 2. See what other people are up to <ul><li>Competitor research </li></ul><ul><li>Nonprofits in other parts of the country who do similar work </li></ul><ul><li>Go to the Social Enterprise Alliance Website, www.se-alliance.org </li></ul>
    21. 21. 3. Test your idea <ul><li>Market research </li></ul><ul><ul><li>Try something on a small scale </li></ul></ul><ul><ul><li>Create a survey </li></ul></ul><ul><ul><li>Ask people: “Do you think your friends would be interested in this?” </li></ul></ul><ul><ul><li>Try charging for something you haven’t </li></ul></ul><ul><ul><li>Try a slight fee increase </li></ul></ul>
    22. 22. 4. Put some numbers to paper <ul><li>Write down costs of implementing your idea—don’t forget indirect costs of staff time to market, etc. </li></ul><ul><li>Write down potential revenue </li></ul><ul><li>Is it worth it? </li></ul>
    23. 23. Next steps <ul><li>Walk through and around your office with fresh eyes. </li></ul><ul><li>Jot down what you see: </li></ul><ul><ul><li>People </li></ul></ul><ul><ul><li>Space </li></ul></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><li>Resources </li></ul></ul>
    24. 24. Next steps <ul><li>Get a team together and go through the list. Think of which things might be turned into moneymakers. </li></ul><ul><li>Of those items, think about which are a good fit with your mission. </li></ul><ul><li>Of those, decide which will go through a feasibility scan. </li></ul>
    25. 25. Questions?
    26. 26. Now get out there…

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