Kristen McCormack BU MNN/AGM Conference.2009


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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
  • Kristen McCormack BU MNN/AGM Conference.2009

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