Business model development in Social Business

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stylized business models, social business model canvas, legal forms

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Business model development in Social Business

  1. 1. Business models in Social Entrepreneurship and Social Business Dr. Linda Kleemann 27/01/2014 1
  2. 2. Agenda for today  Introduction on business models  Options for social business models  Legal forms  Social business model canvas  What is your business model? 2
  3. 3. What is a business model?  The plan implemented by a company to generate revenue and make a profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs.  Answers the question: How are we going to make money to survive (and grow)? >> builds on cost plan, product plan, market analysis (business language) >> builds on expected expenses, impact plan, stakeholder analysis, statement of need (social sector language) 3
  4. 4. The traditional business model process 4
  5. 5. The traditional business model process Need? Customers? Costs? Demand? Competitors? Revenues? 5
  6. 6. The traditional business model process Need? Customers? Costs? Demand? Competitors? Revenues? 6
  7. 7. The traditional business model process Need? Customers? Costs? Demand? Competitors? Revenues? 7
  8. 8. The traditional business model process Need? Customers? Costs? Demand? Competitors? Revenues? $ 8
  9. 9. The traditional business model process Need? Customers? Costs? Demand? Competitors? Revenues? $ 9
  10. 10. The business model process today 10
  11. 11. The business model process today Need? Customers? Costs? Demand? Competitors? Revenues? 11
  12. 12. The business model process today ( ) Need? Customers? Costs? Demand? Competitors? Revenues? 12
  13. 13. The business model process today ( ) Need? Customers? Costs? Demand? Competitors? Revenues? 13
  14. 14. The business model process today ( ) Need? Customers? Costs? Demand? Competitors? Revenues? $ 14
  15. 15. The business model process today ( ) Need? Customers? Costs? Demand? Competitors? Revenues? $ 15
  16. 16. Stylized social business models (1) Traditional business model ( ) $ 16
  17. 17. Stylized social business models (2) Impact investor type with government, investor or public as interested third party 17
  18. 18. Stylized social business models (3) Cross-subsidized model ( ) 18
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  21. 21. Fairtrade is an alternative approach to conventional trade and is based on a partnership between producers and consumers. Fairtrade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. Fairtrade offers consumers a powerful way to reduce poverty through their every day shopping. When a product carries the Fairtrade Mark it means the producers and traders have met Fairtrade standards. The standards are designed to address the imbalance of power in trading relationships, unstable markets and the injustices of conventional trade. 21
  22. 22. VisionSpring has developed several innovative models for bringing high-quality, affordable eyeglasses to customers in developing countries. Through mobile optical units, optical shops, and Vision Entrepreneurs, more than 600,000 pairs of eyeglasses have been sold. 22
  23. 23. Social business model categories (1) Business category Entrepreneur support Market intermediary Employment Fee-forservice/product How it works Examples Key success factors Sells business support to Microfinance Appropriate training for its target population. organizations, consulting, the entrepreneur or tech support Provide services to clients Supply cooperatives like Low start-up costs, to help them access fair trade, agriculture, and allows clients to stay handicraft organizations and work in their markets. community Disabilities or youth Provide employment Job training, opportunities and job organizations providing appropriateness and work opportunities in training to clients and commercial viability then sells its products or landscape, cafes, … services on the market. Selling social services or Membership Establishing the products directly to clients organizations, museums, appropriate fee or a third-party payer. and clinics, solar lamps, structure vis a vis the microfinance, … benefits 23
  24. 24. Social business model categories (2) Business category Low-income client Cooperative Market linkage Service subsidization How it works Similar to fee-for-service: offering services to clients but focuses on providing access to those who couldn’t otherwise afford it. Provides members with benefits through collective services. Examples Healthcare (prescriptions, eyeglasses), utility programs Key success factors Creative distribution systems, lower production and marketing costs, high operating efficiencies Members have common interests/needs Bulk purchasing, collective bargaining (union), agricultural coops, credit unions Facilitates trade relationships Import-export, market Does not sell clients’ between clients and the research, and broker products but connects external market. clients to markets services Sells products or services to Consulting, Can leverage tangible an external market to help counseling, assets (buildings, fund other social programs. employment training, employees) or intangible The business activities and etc. (expertise, network, social programs overlap. methodologies) 24
  25. 25. Social business model THEMES Business THEME Education Environment Poverty Disabled or disadvantaged people Disaster relief How it works Key success factors Provides additional or improved Quality of service, demand by educational opportunities or advocates beneficiaries, WTP of interest groups for it Provides or advocates environmental Measurable improvement, WTP of improvement in exchange for donations, interest groups payments or grants Provides products or services to the Products or services offer relief and poor, similar to low income client are demanded, cross-subsidization or like low income client Usually self-help groups, advocacy Members have common interest, groups or employment creation WTP of interest groups Usually government and donations funded quick help Fast response, efficient processes, ability to mobilize funds For all examples: do the beneficiaries demand it? 25
  26. 26. Legal forms 26
  27. 27. Legal forms  Social enterprises can take various legal forms from non-profit to for-profit.  The legal form is particularly relevant for: Tax Funding Liability  Legal forms differ from country to country 27
  28. 28. Legal forms for social enterprises in Europe  Europe Social enterprises take various legal forms in different countries across Europe, e.g. solidarity enterprises, co-operatives or limited liability social co-operatives, collective interest co-operatives (Italy, France, Spain, Portugal, Greece), social purpose or collective interest companies (Belgium), community interest companies (United Kingdom). A number of European countries have adopted national laws regulating social enterprises, e.g. Belgium, Finland, France, Italy, Poland, Portugal and the United Kingdom. Those specific laws include the definition of social enterprise, asset allocation, stakeholder and governance systems, and accountability and responsibility towards internal and external stakeholders. 28
  29. 29. Legal forms for social enterprises in Europe  …. Europe ctd. Roughly three different models according to organisational form: the “co-operative”, the “company” and the “open form”: no specific legal form but rather defines the criteria that need to be met to be considered a social enterprise (Cafaggi and Iamiceli, 2009), e.g. “Community Interest Company” in the United Kingdom benefits from improved tax treatment and other support.  Germany: no explicit legal form (yet) New government is planning a “bureaucracy-free” legal form for social enterprises (Koalitionsvertrag) Until then: gUG, gGmbH, for-profit or non-profit or both 29
  30. 30. gUG, gGmbH  gUG= gemeinnützige Unternehmergesellschaft = mini gGmbH  gGmbh = gemeinnützige Gesellschaft mit beschränkter Haftung …are variants of UG and GmbH and fall as such under those laws …have tax advantages due to a charitable status … have to act accordingly to keep their charitable status … profits have to be used for the charitable purpose and cannot be distributed unless its shareholders are themselves charitable organisations  … are becoming more popular in particular due to restrictive regulations for business activities of charities     30
  31. 31. Non-profit vs. For profit non-profit for profit  Tax advantages  Specific funding only available for non-profits  Funders don‘t expect financial return  Activities highly regulated in particular towards income generation  Risk of being not sustainable financially  Less regulated  Stronger identification and responsibility by owners due to financial involvement  Risk of turn towards (too much) focus on financial returns  More difficult to get funding for social purposes  Usually no tax advantage 31
  32. 32. Social Business Model Canvas 32
  33. 33. How to – (Social) Business Model Canvas The Business Model Canvas is a template for developing new or documenting existing business models. It is a visual chart with elements describing a firm's value proposition, infrastructure, customers, and finances. (Alex Osterwalder)  Business model: helps to design and articulate how a business could work.  Business plan: detailed document setting out the goals of a business and how they are to be achieved. Adapted social business model canvas (Burkett)  Separation between ‘commerce’ and ‘impact’ to see how they interact.  Neither the commercial nor the impact story is sufficient in and of itself – a good business model story needs a coherent and sensible relationship between commerce and impact. 33
  34. 34. roughly HOW? WHAT? WHO? HOW MANY €? 34
  35. 35. WHO? HOW? WHAT? HOW MANY €? 35
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  37. 37. Value Proposition Commercial Value Proposition Examples Impact Value Proposition Examples Tasty drinks with a new style made in Germany Fair trade: quality products that improve producers‘ lives Fresh seasonal food from the region conveniently delivered to the doorstep Local economic development: revitalising the local economy Employment: good jobs for people with disabilities 37
  38. 38. Channels Awareness Evaluation Purchase Delivery After Sales Questions raised by Osterwald er and Pigneur (2009) How do we raise awareness about our company’s products and services? How do we help customers evaluate our organisation’s value proposition? How do we enable customers to purchase specific products and services? How do we deliver a value proposition to customers? How do we provide postpurchase customer support? Additional questions for social enterprise How does this social enterprise stand out in a crowded market? How do we raise awareness of products/ services AND impact? Why should customers buy from us as a social enterprise (especially if we compete directly with mainstream businesses)? How do customers find and access us? Who can we partner with to extend our sales reach? Are there more efficient, effective or innovative ways we can deliver our goods/ services and/or impact? How can we ensure that our customers will champion social enterprise? 38
  39. 39. Channels ctd. Awareness Examples of where this can be important Evaluation Purchase Delivery After Sales There is a growing interest in social procurement but many procurement officers are not aware of social enterprises. How could this change? Many corporate and government customers are interested in the value proposition of social enterprises but are looking for evidence. How could this happen? It can be difficult to build financial sustainability into retail focussed social enterprises. How could you address this challenge? Some social enterprises turn their ‘customers’ into their ‘communities’. How could you connect your customers more directly? Dissatisfaction can have a flow-on effect not just for repeat custom in this enterprise, but for purchasing from other social enterprises. How do we ensure satisfaction? Source: Burkett: Using the Business Model Canvas for social enterprise design 39
  40. 40. Typical costs Business Operation Impact Rent and inventory Wages/salaries Equipment, machinery and tools Utilities Communication and postage Insurances Printing and Stationary Advertising /marketing Bank charges and interest Vehicles / transport Accountancy and other professional fees Tax Depreciation License and compliance costs Training Support and participation costs (extra staff costs for people to support workers) Work readiness costs (licences, permits etc. for disadvantaged workers) Provision costs (for non-attendance, extra sick leave etc.) Impact training (eg. training for support staff) Opportunity costs (eg. reduced productivity) Fundraising costs Impact assessment costs Ethics costs (eg. premiums for fair trade goods) Source: Burkett 40
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  42. 42. It‘s your turn  …to develop your business model  What is your business model and why this one?  On what points are you „blank“?  What do you need to work on to turn it into reality? 42
  43. 43. contact: Linda.kleemann@ifw-kiel.de kleemann@heldenrat.org 43

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