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Think sustainable earning income for your health and human services agency


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Introduction to social enterprise for nonprofit organizations

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Think sustainable earning income for your health and human services agency

  1. 1. April 26, 2011 - @plamb -
  2. 2. Agenda <ul><li>Overview of Social Enterprise Sector </li></ul><ul><li>Readiness Exercise </li></ul><ul><li>Q&A </li></ul><ul><li>Venture Ideas Brainstorming & Troubleshooting </li></ul>
  3. 3. Thinking outside of the Escalator
  4. 4. What is a Social Enterprise <ul><li>“ An organization or venture that achieves its primary social or environmental mission using business methods” </li></ul><ul><li>-Social Enterprise Alliance </li></ul>
  5. 5. Social Enterprise is not…
  6. 6. Why Launch A Social Enterprise? <ul><li>Sustainability </li></ul><ul><li>Increase social return on investment (SROI) </li></ul><ul><li>Cultural transformation </li></ul><ul><li>Diversify & Leverage new funding sources </li></ul><ul><li>Honoring your social mission </li></ul>
  7. 7. Legal Structures <ul><li>For profit </li></ul><ul><li>Nonprofit </li></ul><ul><li>Hybrid (i.e., L3C) </li></ul><ul><li>Benefit Corp </li></ul><ul><li>Flexible Purpose Corp </li></ul><ul><li>See: Effective Social Enterprise — A Menu of Legal Structures </li></ul>
  8. 8. Sample nonprofit Social Enterprises
  9. 9. Social Enterprise Quiz (T or F) <ul><li>Nonprofits can’t make a profit </li></ul><ul><li>Nonprofits can’t (or shouldn’t) pay taxes </li></ul><ul><li>It’s a quick financial fix </li></ul><ul><li>If we earn money, we will lose our nonprofit status </li></ul><ul><li>Our staff already has all the skills needed to run a social enterprise </li></ul>
  10. 10. A new era for Social Enterprise <ul><li>Increased Federal investments </li></ul><ul><li>-Office of Social Innovation </li></ul><ul><li>-Office of Entrepreneurship & Innovation </li></ul><ul><li>Greater foundation interest </li></ul><ul><li>New models (L3C, B Corp, etc.) </li></ul><ul><li>Economic motivators </li></ul>
  11. 11. Social enterprises vary depending on Enterprise Strategies <ul><li>Primary purpose is mission advancement </li></ul><ul><li>Integration between social programs and business activities </li></ul>Mission-Centric Social Enterprise Mission-Related Social Enterprise <ul><li>Provides revenue for nonprofit operations and mission-related activities </li></ul><ul><li>Often expands mission to achieve greater social impact </li></ul>Non-MissionRelated Social Enterprise <ul><li>Not related or intended to advance mission </li></ul><ul><li>Profit/funding potential is primary purpose </li></ul>Source: Virtue Ventures, Social Enterprise Typology, Kim Alter © REDF – Please do not distribute without prior permission from REDF Profit-motivation Mission-motivation Social Programs + Enterprise Activities Social Programs Enterprise Activities Social Programs Enterprise Activities $
  12. 12. Planning for a social enterprise versus a small business Business Plan Set up Business $ Returns $ Returns Set social and financial goals Social impact Select business idea based on goals Business Plan Set up Business The desired outcome of for-profit business is already known: to make a profit The desired outcomes of a social enterprise are not obvious and so the goals need to be established first © REDF – Please do not distribute without prior permission from REDF
  13. 13. Development Timeline
  14. 14. Why is it important to set goals? <ul><li>Ensure agreement between stakeholders </li></ul><ul><ul><li>Gain agreement from staff with different roles, the board and any other stakeholders on the objectives of the enterprise </li></ul></ul><ul><li>Select a business idea and guide the business planning </li></ul><ul><ul><li>Business ideas can be evaluated objectively using the enterprise criteria </li></ul></ul><ul><li>Guide business operations </li></ul><ul><ul><li>Clear social and financial goals help the enterprise manager make operational decisions </li></ul></ul><ul><li>Evaluate whether the enterprise is successful </li></ul><ul><ul><li>Tracking financial and social metrics against initial goals shows whether the enterprise is fulfilling stakeholders’ expectations </li></ul></ul>© REDF – Please do not distribute without prior permission from REDF
  15. 15. Sample Social Enterprise Metrics Dashboard Used with prmission from ZeroDivide
  16. 16. Advanced Measurement Tools
  17. 17. Stride Center/ReliaTech <ul><li>Founded in 2004 through $100K grant </li></ul><ul><li>3 Stores around Bay Area </li></ul><ul><li>$400K in gross income 2011 (expected) </li></ul><ul><li>62% Earned income, 38% Grant income </li></ul><ul><li>Covers 15% of nonprofit budget </li></ul><ul><li>Currently profitable </li></ul><ul><ul><li>If factor in grant funding…and/or SROI </li></ul></ul>
  18. 18. Used with permission from ZeroDivide
  19. 19. Used with permission from ZeroDivide
  20. 20. Used with permission from ZeroDivide
  21. 21. Start With Some Basics <ul><li>What are your core values? </li></ul><ul><li>Are your values compatible with a venture approach? </li></ul><ul><li>What are your motivators for exploring a venture? </li></ul><ul><li>Who are your stakeholders (internally & externally)? </li></ul><ul><li>What are your long term social & financial goals? </li></ul>
  22. 22. Key Steps <ul><li>Assess readiness </li></ul><ul><li>Build an inventory of assets </li></ul><ul><li>Brainstorm ideas </li></ul><ul><li>Conduct market research </li></ul><ul><li>Business planning </li></ul><ul><li>Piloting </li></ul><ul><li>Launch </li></ul>
  23. 23. The Readiness Challenge Readiness Questions Points Is your Executive Team & Board able to get fully behind an earned income strategy? 10 Is your organization open to a totally new way of doing business, both culturally AND operationally? 10 Are you willing to invest 6-9 months doing feasibility work, market research, business planning before going operational? 10 Do you have or are you able to raise startup and operational capital? 10 Is your staff and other stakeholders open to an earned income venture in house? 5 Are you prepared to organize an outside advisory team of experts? 5 Are you willing to hire outside operational staffing? 5 Will your venture align fully with your social mission? 5 Are you open to revising your business model, if needed? 5 Are you in it for the long haul? 5 Total
  24. 24. Do’s… <ul><ul><li>Identify clear goals & plan </li></ul></ul><ul><ul><li>Get full stakeholder buy-in </li></ul></ul><ul><ul><li>Set up an advisory group of experts </li></ul></ul><ul><ul><li>Conduct market research </li></ul></ul><ul><ul><li>Write a business plan </li></ul></ul><ul><ul><li>Let the venture type determine the legal structure </li></ul></ul><ul><ul><li>Be clear on your business model, but open to revisions </li></ul></ul><ul><ul><li>Align your business model with your capabilities </li></ul></ul><ul><ul><li>Hire the right people </li></ul></ul>
  25. 25. Don’ts… <ul><li>Expect immediate results </li></ul><ul><li>Just target nonprofit clients </li></ul><ul><li>Give short shrift to marketing </li></ul><ul><li>Neglect financial planning for VENTURE </li></ul><ul><li>Forget to track & measure results </li></ul><ul><li>Ignore long term & growth planning </li></ul>
  26. 26. Resources <ul><li>Social Enterprise Alliance </li></ul><ul><li>Rootcause Business Planning Guide for SEs </li></ul><ul><li>Business Plan Pro Social Enterprise Edition </li></ul><ul><li>Social Return on Investment (SROI) from REDF </li></ul><ul><li>Effective Social Enterprise — A Menu of Legal Structures </li></ul><ul><li>ZeroDivide Community Investment Resources </li></ul><ul><li>Social Enterprise Books </li></ul>
  27. 27. Don’t wait for the escalator to get fixed – it may never happen!
  28. 28. Social Enterprise Concept Brainstorming <ul><li>What ideas do you have for starting a venture(s)? </li></ul><ul><li>What relevant physical, financial capital, and social capital to you have available(s)? </li></ul><ul><li>What kind of investment would you need to launch this venture(s)? </li></ul><ul><li>Where would you get the seed money to start your venture? </li></ul><ul><li>Do you know of anyone else who is doing a similar venture in the nonprofit space? </li></ul><ul><li>Any idea who your competitors are? </li></ul><ul><li>What might your unique value proposition or differentiator be? </li></ul><ul><li>Who would your main customers be? </li></ul><ul><li>How would you market the venture (both offline and online)? </li></ul><ul><li>What would be your process to get the venture off the ground? </li></ul>
  29. 29. Thanks from… <ul><li>Paul Lamb </li></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>@plamb (on Twitter) </li></ul></ul><ul><li>NOW GO OUT AND CHANGE THE FACE OF NONPROFITS </li></ul><ul><li>AND HOW THEY IMPACT THE WORLD!!! </li></ul>