In response to government and philanthropy’s inability to alleviate the world’s social needs, a new field that blurs the lines between the nonprofit and for profit sectors has emerged – social enterprise. This workshop examines one primarily models for creating a social enterprise: nonprofits starting for profit ventures, We will look at: *What it takes to be a social entrepreneur *Successes and failures in the sector *Choosing a business model *The steps that need to be taken to create a social venture *The challenges to finding funding for social ventures *How to assess the impact of the social venture *Strengthen analytic skills in addressing social problems *Improve practical knowledge and competencies important to personal effectiveness in social innovation and enterprising leadership

1. Creating Revenue
Through Social
Enterprise
A Workshop for The Center
for Nonprofit Resources
Presented by Geri Stengel
1

2. 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 fun
2

3. 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

4. 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 them
4

5. 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
organization
5

6. Social Enterprise:
What, Who, Why, How
6

7. 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 organization
7

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

9. 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 Alliance
9

10. Trends in Social Enterprise
• Innovative approaches
• Private ingenuity
• Use of business methods
• Craft sustainable solutions to
social problems
• Share knowledge
10

11. 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 methods
11

12. 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 Related
12

13. 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 funds
13

14. What Earned Income Ventures Do Have?
14

15. Questions
15

16. Is Social Enterprise
for You?
16

17. 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 capital
17

18. What Traits Do Entrepreneurs and
Social 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
• Luck
18

19. How Do Entrepreneurs and
Social Entrepreneurs Differ?
Are there differences between
people who solve technical
problems and those who solve
people problems?
• Idealistic
• Strong ethical fiber
• Altruistic
• Commitment to creating
some sort of positive social
or environmental change
• Interested in
social/environmental
outcomes
19

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

21. Why Small Businesses Fail
1. Lack of experience
2. Insufficient capital (money)
3. Poor location
4. Poor inventory management
5. Over-investment in fixed
assets
6. Poor credit arrangements
7. Personal use of business
funds
8. Unexpected growth
Gustav Berle adds two more
reasons in
The Do It Yourself Business
Book
9. Competition
10. Low sales
Source: Small Business Management, Michael Ames
21

22. 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

23. What Fears Do You Have About Social Enterprise
23

24. 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 coach
24

25. Questions
25

26. Case Studies
26

27. $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
annually
27

28. $1 Shopper: Inspiration for Venture
• Social enterprise director
conceived and did initial
research into the viability
and best approach for
launching a dollar store
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29. $1 Shopper: The Venture
 Sell household necessities
for $1
 Kitchen items
 Cleaning supplies
 Disposable products
 Socks
 Seasonal items
29

30. Environmental Organization
 Advocates and educates
 $100+ million nonprofit
 Publication division
 3 scientific journals and
book publishing
 2005
 Revenue: $500,000+
 Loss $200,000
30

31. 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 losses
31

32. Environmental Organization
Improved bottom line
Keep an eye on the bottom line
Move ahead with co-publishing relationships
Market, market, market, especially on the
website
32

33. 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
profit
33

34. 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

35. 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

36. Questions
36

37. Lessons Learned
37

38. 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 competition
38

39. 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 money
39

40. 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 fail
40

41. Questions
41

42. Developing and
Screening Ideas
42

43. Steps in Product Development
1. Fuel for ideas
2. Generating ideas
3. Quick filtering idea stages
4. Evaluating ideas
43

44. 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

45. 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
others
45

46. Internal Capacities – Maximizing Intellectual Property
• Program related
• Same product – new market
 Geographic
 Other customer segment
• Staff resources
• Client resources
• Hard and soft property
• Unrelated business
46

47. 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
employment
47

48. 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
Easiest
48

49. 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 ideas
49

50. 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 idea
50

51. 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 criteria
51

52. 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 here
52

53. 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

54. 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

55. Sample Decision Matrix
Site Criteria Table
Factors Grade 1-4 Weight 1-4 Points
Mission fit
Significant customer problem
Appropriate solution
Revenue potential
Leverages strengths/assets
of organization
Ease of implementation
Capital investment
Human resources needed
Ability to manage risk
Profit potential.
Total Points
55

56. Let’s Experiment: Test Subject Please
56

57. Questions
57

58. Social Impact
58

59. 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

60. GSVC Defines 3 Steps
1. DEFINE social value
proposition:
Theory of Change
2. QUANTIFY how you’ll track
social value:
Impact Value Chain: top three
social output indicators
3. 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 School
60

61. 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, Research
Initiative on Social Entrepreneurship Columbia Business School
61

62. Step 2. Quantify Top 3 Social Indicators
Identify your top indicators of
social 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, Cathy
Clark Faculty Advisor, GSVC Director, Research Initiative on Social
Entrepreneurship Columbia Business School
62

63. Tool: Value Impact Chain
Inputs  Activities  Outputs  Outcomes  Goal
Alignment
What is put Venture‟s Results that Changes How well
into the primary can be (increases or outcomes
venture 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
adjustment
Source: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, Research
Initiative on Social Entrepreneurship Columbia Business School
63

64. Tool: Value Impact Chain
Inputs  Activities  Outputs  Outcomes  Goal
Alignment
What is put Venture‟s Results that Changes to Activity and
into the primary can be the social goal
venture activities measured system adjustment

What would
have
happened
anyway
= Impact
Source: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, Research
Initiative on Social Entrepreneurship Columbia Business School
64

65. Step 3: Monetize Impact
Identify the dollar value equivalent
of your projected social impact to
create a social return on
investment.
• 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 Initiative
on Social Entrepreneurship Columbia Business School
65

66. Tool 3: SROI Steps in Calculation of SROI
1. Quantify outputs/outcomes where
possible
2. Translate into economic equivalent
where possible using proxies
3. Develop social cash flow projection
4. 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 happening
6. Cite your sources and assumptions
clearly
Source: Social Impact Assessment and Building Your SROI,
Cathy Clark Faculty Advisor, GSVC Director, Research Initiative
on Social Entrepreneurship Columbia Business School
66

67. Risk & Contingency
• Uncontrolled cash flow
• A drop in sales or
insufficient sales
• Higher costs
• New competition
• Business recessions
• Incompetent managers or
employees
• Dishonesty and theft
67

68. What’s Your Next Move?
68

69. Questions
69

70. 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

71. 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/non-
profits.htm
•
71

72. 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.org
72