IO4/Unit 5: Initial Business Planning

IO4/Unit 5:
Initial Business Planning
2017-1-BG01-KA202-036212

Table of content
The unit will provide knowledge on initial business planning. This will include a
practical template which will provide guidance onto key activities, resources,
values, channels as well as customer segments.
5.1 Importance of business planning
5.2 Steps at initial business planning
5.3 Practical template for initial guidance in business planning

Introduction
A business plan describes what business does. This written document states the
company’s operational and financial goals for the future and how it proposes to
meet them. A business model describes how and where you choose to operate
your company. The model you choose is detailed in your business plan.
In many cases, the business plan is the home of the business model and the
business strategy. The business model and the business strategy provide the
framework for business to achieve its goals. The business model serves as the
core of the business. The business strategy defines the path that business will
take to achieve its goals.

The business model is at the center of
the business plan
The business model describes how the company is positioned within its industry's
value chain, and how it organizes its relations with its suppliers, clients, and
partners in order to generate profits.
The business plan translates this positioning in a series of strategic actions and
quantifies their financial impact.

5.1 Importance of business
planning
 to evaluate the feasibility of a new
business idea in an objective,
critical, and unemotional way
 to provide an operating plan to
assist you in running the business
and improves your probability of
success
 to communicate your idea to
others, serves as a “selling tool,”
and provides the basis for your
financing proposal

Why write a business plan?
A business plan helps you evaluate the feasibility of a new business idea in an
objective, critical, and unemotional way.
• Marketing – Is there a market? How much can you sell?
• Management – Does the management team have the skill?
• Financial – Can the business make a profit?

The essence of the business plan
It provides an operating plan to assist you in running the business and improves
your probability of success.
• Identify opportunities and avoid mistakes
• Develop production, administrative, and marketing plans
• Create budgets and projections to show financial outcomes
It communicates your idea to others, serves as a “selling tool,” and provides
the basis for your financing proposal.
• Determine the amount and type of financing needed
• Forecast profitability and investor return on investment
• Forecast cash flow, show liquidity and ability to repay debt

Every business needs to have a written
business plan
Whetherit’s to provide direction or attract investors, a business plan is vital for the
success for your organization.
A typical business plan could include:
 Executive summary - a snapshot of your business
 Company description - describes what you do
 Market analysis - research on your industry, market, and competitors
 Organization and management - your business and management structure
 Service or product - the products or services you’re offering
 Marketing and sales - how you’ll market your business and your sales strategy
 Fundingrequest - how much money you’ll need for next 3 to 5 years
 Financial projections - supply information like balance sheets
 Appendix - an optional section that includes résumés and permits

Business plans and strategic plans
 There is often a great deal of confusion about the difference between
business plans and strategic plans. They are similar in many ways, and since
each plan has to be tailored to the organization it is prepared for, one can
easily blur into the other. In both cases, you begin with internal and external
research to get clarity on the best direction for the organization and where
its best opportunities are to obtain the funds it needs to succeed.
 What sets a business plan apart is its singular focus on market and operational
feasibility. In contrast, a strategic plan clarifies the long term direction of the
organization; most business plans look at a shorter period of time, typically 2-
3 years.

Business plan
Business plans typically take more resources, both internal and often external (in
the form of consulting assistance) to develop the kinds of operational and
financial analysis necessary to fully test the feasibility of business venture or an
organization as a whole. It gets down to specifics about who the customers will
be, what they will pay (with research backing that up), what marketing will be
needed to reach them, who the competition will be, and how the finances will
work out, in detail.
The feasibility part of the business plans means that it’s entirely possible that
the idea you seek to develop is not feasible, at least not with your current set of
assumptions. While strategic plans in theory have that escape clause also, rarely
is it used. Finally, a credible business plan has to include who (the skilled
managers) who will carry it out. It’s not a business plan if it doesn’t include the
people who will implement it.

The differences for the social sector
What do I want to do?
How will I do it?
Source of the picture:
https://managementhelp.org/blogs/business-
planning/2014/05/01/business-plans-vs-strategic-
plans/

SWOT Analysis
Discover New Opportunities, Manage and Eliminate Threats
SWOT Analysis is a useful technique for understanding your Strengths and
Weaknesses, and for identifying both the Opportunities open to you and the
Threats you face
What makes SWOT particularly powerful is that, with a little thought, it can help
you uncover opportunities that you are well-placed to exploit. And by
understanding the weaknesses of your business, you can manage and eliminate
threats that would otherwise catch you unawares.
More than this, by looking at yourself and your competitors using the SWOT
framework, you can start to craft a strategy that helps you distinguish yourself
from your competitors, so that you can compete successfully in your market.

SWOT
You can use it in two ways – as a simple icebreaker helping people get together
to "kick off" strategy formulation, or in a more sophisticated way as a serious
strategy tool.
Strengths and weaknesses are often internal to your organization, while
opportunities and threats generally relate to external factors. For this reason,
SWOT is sometimes called Internal-External Analysis and the SWOT Matrix is
sometimes called an IE Matrix.

Strengths Weaknesses
What advantages does your organization have?
What do you do better than anyone else?
What unique or lowest-cost resources can you
draw upon that others can't?
What do people in your market see as your
strengths?
What factors mean that you "get the sale"?
What is your organization's Unique Selling
Proposition (USP)?
What could you improve?
What should you avoid?
What are people in your market likely to see
as weaknesses?
What factors lose you sales?
Opportunities Threats
What good opportunities can you spot?
What interesting trends are you aware of?
Useful opportunities can come from such
things as:
Changes in technology and markets on both a
broad and narrow scale.
Changes in government policy related to your
field.
Changes in social patterns, population profiles,
lifestyle changes, and so on.
Local events.
What obstacles do you face?
What are your competitors doing?
Are quality standards or specifications for your
job, products or services changing?
Is changing technology threatening your
position?
Do you have bad debt or cash-flow problems?
Could any of your weaknesses seriously
threaten your business

SWOT
SWOT Analysis is a simple but useful framework for analyzing your organization's
strengths and weaknesses, and the opportunities and threats that you face. It
helps you focus on your strengths, minimize threats, and take the greatest
possible advantage of opportunities available to you.
It can be used to "kick off" strategy formulation, or in a more sophisticated way
as a serious strategy tool. You can also use it to get an understanding of your
competitors, which can give you the insights you need to craft a coherent and
successful competitive position.
When carrying out your analysis, be realistic and rigorous. Apply it at the right
level, and supplement it with other option-generation tools where appropriate.

Business Plan vs. Business Model
The business plan describes what your company does. This written document
states your company’s operational and financial goals for the future and how it
proposes to meet them. A business model describes how and where you choose to
operate your company. The model you choose is detailed in your business plan.
The differences between a business plan and a business model lie in purpose
and substance.
A business model helps us to design and articulate how a business could work,
and how we can innovate inside the business.

Business model
The purpose of a business model is to help stakeholders understand and clearly
articulate how a business is configured so that it creates, delivers and capture
value.
In the case of a social enterprise this would ultimately be about how the
enterprise will generate both financial and social value, and what the
relationship is between the two types of value in the enterprise.
The business model should be able to be articulated in one page, and its
substance focusses on how an organization does business, how that business
generates revenue, what value a business offers to whom, who the customers
are, and why customers would keep coming back to us. It can help us understand
how and why our business works, and it can help us to design and innovate our
business.

Business plan
A business plan is a detailed document setting out the goals of a business and
how they are to be achieved.
A business plan is a much more detailed, lengthier document that sets out in
detail the goals of the business, how they will be attained and what evidence
there is that the methods employed will attain those goals.
Business plans outline our mission, vision, goals, strategies, our financial
assumptions and projections, and our marketing strategies.
Business plans have dominated the business strategy landscape.

The business model is like a destination
The planning is how you’re going to get
there
Increasingly there are suggestions in both practice and research that business
plans are too static and cumbersome to help businesses survive complex and
constantly changing environments. They may still be helpful in setting directions,
or to access some forms of finance and investment, but they won’t necessarily
help us design and test business ideas, nor to innovate within a constantly
changing environment.

Business models for social enterprise
Social enterprises are often started by people who are passionate about making a
difference. Often it is not the actual ‘business’ that captures their imagination,
but the impact it will have for the social or environmental issues they are seeking
to address.
Understanding the business model of a social enterprise can have two key
benefits:
1. It can help us to understand, design, articulate and discuss the ‘nuts and bolts’
of our business concept;
2. It can help us to test, and develop prototypes so that we can see if what we
passionately believe about our impact and our business actually ‘stacks up’ in
practice.

5.2. Steps at initial business
planning
1. Research, research, research
“Research and analyze your product, your market and your
objective expertise” - Bill Pirraglia
2. Determine the purpose of your plan
3. Create a company profile
4. Document all aspects of your business
5. Have a strategic marketing plan in place
6. Make it adaptable based on your audience
7. Explain why you care
Source: 7 Steps to a Perfectly Written Business Plan -
https://www.entrepreneur.com/article/281416

What is the Business Model Canvas?
What is the Business Model Canvas?
The Business Model Canvas (BMC) was developed by Alex Osterwalder and Yves
Pigneur. It offers a simple, visual, one-page canvas on which we can design,
innovate and dialogue about our business models. It is not the only framework
that has been developed to articulate business models. Like many of the
frameworks this one was built out of careful research, but unlike many others, it
has also been tested and enhanced through the input of many practitioners
around the world.
The canvas can be very helpful, particularly in early exploratory stages of
development and in relation to growth and innovation stages of the social
enterprises.
The canvas at the first level is a brainstorming tool

The shared values
The values of the people carrying the business
model are at the center of the canvas and are
more a statement than a question, because
they probably already exist and are shared,
thus influencing the business model. They are
the foundations of the business model
because when integrated with the culture of
the organization, they will manifest
themselves in behaviors, further transcribed
into action principles, and finally will be
reflected into the actions and so will be
impact generators. Source of the picture:
https://www.socialbusinessmodels.ch/en/content/social-
business-models-canvas

Why?
This basic question basically refers to the societal impact that the model
business may cause. You can decline it into:
 What are the major problems the social business model will face?
 What are the causes of these problems?
 What are the real and relevant needs related to these problems?
 What are the objectives that the business model wants to achieve?
 Are there unexplored opportunities?

Who?
This basic question refers to all audiences for which the business model will meet
and try to solve the needs. You can decline it into:
 What will be the direct beneficiaries of the business model?
 Will they be simple users?
 Who will pay for the proposed benefits, users or other persons or
organizations?
 Are there indirect beneficiaries, who will gain some advantage from the
benefits, even if they are not for them?
 Are there indirect impacts in some segments of society?

Where?
This basic question refers to the context in which the business model will be
developed. You can decline it into:
 In which geographical areas the business model will be active?
 The activities will be subject to temporal, seasonal constraints?
 Can the political or legal context strongly influence the business model?
 The social context plays an influence on the business model?
 Can the model benefit from the technological context?
 Environmental constraints exist?

What?
This fundamental question refers to what the business model will provide to its
customers segments. You can decline it into:
 The business model will provide products, which ones?
 What will be the services developed by the business model?
 Your business model will work by projects or streamed?
 Will there be intangible products, such as "information packets"?
 Services will be produced directly at the user’s places?
 Can they be divided in primary and secondary?

By what?
This question refers to the bridge between the future products and services,
generated by the business model, and its different target audiences. You can
decline it into:
 How will users know about your business model services and products?
 What relationship do you have with your users, direct and customized or self-
service?
 How will your benefits arrive in the hands of your users?
 Are there some ways for your users to return you products?

With what?
Behind this question lies the whole production of the business model, including:
 With what human resources (internal teams, external persons, service providers,
volunteers...)?
 What are the specific skills needed for the core business?
 Which raw materials, consumables will you need?
 What will be the process of production, the support activities, the administrative tasks?
 Will you need production and maintenance equipment's, software support?
 What will be your installations, furniture, infrastructure, logistics equipment, vehicles?
 How many financial resources do you need for investment and funding working capital?
 From where do these financial resources come (revenue, grants, investors, sponsors,
other donors...)?

With whom?
This question reflects the saying "Alone we run faster, together we go far ahead."
You can decline it into:
 What will be the decision making process?
 What governance model will be internal?
 Is it possible to have partners in the business model? Or allies?
 How do we integrate volunteers?
 Organizations or individuals can play the role of prescribers (relays)?

Verifiable?
This last question closes the loop, looking back at the "Why", assuming the
premise of which is not measurable is pure subjectivity. You can decline it into:
 How will we know if the social business model has been successful?
 How to measure immediate results?
 How to check the impact caused by the social business model?
 What will be the measurement tools?
 What will be the sources of information?
 When measuring?

Some advice
 Write only keywords on post-its, preferably with large markers;
 Respect the time allowed to each person putting a post-it on the canvas;
 Follow the basic rules of brainstorming: no censorship and so on...
 Bounce again on presented the ideas and concepts!

Recommendations
It takes at least an hour to the exercise of creating a business model through the
canvas. This can allow the group to make two or three versions of the canvas, in
the space of half a day, before working in more detail.
It is recommended, if the exercise is done on a poster or with a beamer
projection on a white wall, to take several photographs during its creation.
A good practice is that everybody prepares several post-its, and when he affixes
them onto the poster or the board, to talk time for short explanations, which
allow other participants to "bounce" over the ideas and concepts presented.

How to Develop Business Models
To develop an effective business model for your company, draw a picture that
establishes a structure so your employees can produce products or services for
customers in a profitable way.
A business model typically includes a description of your customers, how
customers use your product, how you distribute your product and details about
how you promote your business.
The model also describes key operational tasks, staffing and other resource
requirements as well as details about how business is conducted.
A business model describes your business using visual images, typically on a single
page, while a business plan describes your business in a more lengthy document.
Source: https://smallbusiness.chron.com/develop-business-models-3864.html

1. Collect information about your business and analyze it so that you can create a
visual description of your company. Keep your business model simple.
2. Define your target market. Summarize how you plan to attract customers who
allow you to charge a profitable price for your company’s products or services.
Successful business models tend to require minimal marketing expenses by
targeting the right population. These customers may also be resellers or
distributors of your product.
3. Establish your value proposition. An effective business model relies on clear
definition of valuable features and benefits associated with your product or
service. Show how your company intends to get or maintain a competitive
advantage, such as through better distribution, more innovative solutions to
customer problems, lower pricing or faster delivery.

4. Describe how you intend to run your business more efficiently and produce
higher quality products than your competition. For example, identify
opportunities to manufacture products overseas or to use improved technology or
processes. Streamline your sales and support operations. Implement quality
management systems, such as Six Sigma, as part of your business model to
reduce defects, improve quality and decrease costs.
5. Use the resources provided by websites, such as the Small Business
Administration Small Business Planner, Business.gov and the Business Valuation
Resources website to get data on industry standards that may impact your
business operations.

6. State your strategy for ensuring customer satisfaction. Operations with
extensive technical support and customer service tend to incur high warranty
costs but maintain high levels of customer satisfaction, retention and loyalty.
Depending on your strategic goals, establishing partnerships with other service
providers may be a more cost effective way to conduct business.
7. Describe how you intend to improve your market position. For example, list
ways you can locate new customers, add new products or expand your business in
other ways. Potential investors typically want to see details about projected
growth in your business model and associated plan. Estimate the return on
investment. Use the resources provided by the Census.gov website to locate
details about the overall outlook for your industry.

Steps in writing a business plan
1. Research
It’s your responsibility to know everything you can about your business and the
industry that you’re entering. Read everything you can about your industry and
talk to your audience.
Main question: Do you really need a business plan?
Source: https://www.entrepreneur.com/article/281416

2. Determine the purpose of your plan
The business plan can serve several different purposes.
The business plan is also a road map that provides directions so a business can
plan its future and helps it avoid mistakes. That’s important to keep in mind if
you’re self-funding or bootstrapping your business. But, if you want to attract
investors, then your plan will have a different purpose and you’ll have to write
your plan that targets them so it will have to be as clear and concise as possible.
When you define your plan, make sure you have defined these goals personally as
well.

3. Create a company profile
Your company profile includes the history of your organization, what products or
services you offer, your target market and audience, your resources, how you’re
going to solve a problem, and what makes your business unique.
Company profiles are often found on the company’s official website and are used
to attract possible customers and talent. However, your profile can be used to
describe your company in your business plan. It’s not only an essential
component of your business plan, it’s also one of the first written parts of the
plan.

4. Document all aspects of your business
Investors want to make sure that your business is going to make them money.
Because of this expectation, investors want to know everything about your
business. To help with this process, document everything from your expenses,
cash flow, and industry projections. Also don’t forget seemingly minor details like
your location strategy and licensing agreements.

5. Have a strategic marketing plan in place
A great business plan will always include a strategic and aggressive marketing plan. This typically
includes achieving marketing objectives like:
Introduce new products
Extend or regain market for existing product
Enter new territories for the company
Boost sales in a particular product, market or price range. Where will this business come from?
Cross-sell (or bundle) one product with another
Enter into long-term contracts with desirable clients
Raise prices without cutting into sales figures
Refine a product
Have a content marketing strategy
Enhance manufacturing/product delivery

Each marketing objective should have several goals (subsets of objectives) and
tactics for achieving those goals.
In the objectives section of your marketing plan, you focus on the ‘what’ and the
‘why’ of the marketing tasks for the year ahead. In the implementation section,
you focus on the practical, sweat-and-calluses areas of who, where, when and
how. This is life in the marketing trenches.
Of course, achieving marketing objectives will have costs. Your marketing plan
needs to have a section in which you allocate budgets for each activity planned.
It would be beneficial for you to create separate budgets for internal hours (staff
time) and external costs (out-of-pocket expenses).

6. Make it adaptable based on your audience
The potential readers of a business plan are a varied bunch, ranging from
bankers and venture capitalists to employees. Although this is a diverse group, it
is a finite one. And each type of reader does have certain typical interests. If you
know these interests up front, you can be sure to take them into account when
preparing a plan for that particular audience.
For example, bankers will be more interested in balance sheets and cash-flow
statements, while venture capitalists are looking at the basic business concept
and your management team.
Because of this, make sure that your plan can be modified depending on the
audience reading your plan. However, keep these alterations limited from one
plan to another. This means when sharing financial projections, keep that data
the same across the board.

7. Explain why you care
Whether you’re sharing your plan with an investor, customer, or team member,
your plan needs to show that you’re passionate, dedicated, and actually care
about your business and the plan. You could discuss the mistakes that you've
learned, the problems that you’re hoping to solve, listing your values, and what
makes you stand out from the competition.
By explaining why you care about your business creates an emotional connection
with others so that they’ll support your organization going forward.

Basic Business Plan Guidelines
 Writing a Business Plan will probably take a lot of time. Up to 100 hours or
more is not uncommon for a new business that requires a lot of research.
 A typical plan will have three sections.
 Section one is a written section describing Management and Marketing aspects
of the business.
 Section Two includes financial projections.
 Section Three is supplemental information.
 A short (3-5 pages) Executive Summary is often added at the beginning of
more complex business plans.
Source: https://www.va.gov/osdbu/docs/vepbusinessplanoutline.pdf

Business plan
Section One should be thorough, but concise and to-the-point. Use headlines,
graphs and "bullets" to improve readability. Length of this section is usually 10 -
20 pages.
Section Two describes in numbers the outcome of your business strategies and
plans. Your financial projections should be based on facts and research, not “wild
guesses.” Be prepared to justify your numbers.
Section Three contains supporting information to reinforce the first two sections.
This section’s contents will vary with your type of business.
Owners should be very involved in the planning process. Hiring someone to do it
or delegating it to someone who is not a key member of the company will result
in an inferior plan.
No plan (or a poor plan) is a leading cause of business failure. You can improve
your chances of success with a good Business Plan.

Ten Ways to Ruin Your Business Plan
These errors in business plan preparation and presentation will undermine the
credibility of the plan and hurt your chances to receive funding:
1. Submitting a “rough copy” tells the reader that management doesn’t take the
planning process seriously.
2. Outdated historical financial information or unrealistic industry comparisons
will leave doubts about the entrepreneur’s planning abilities.
3. Unsubstantiated assumptions can hurt a business plan; the business owner
must be prepared to explain the “why” of every point in the plan.
4. Too much “blue sky” - a failure to consider prospective pitfalls - will lead the
reader to conclude that the idea is not realistic.
5. A lack of understanding of financial information. Even if someone else
prepares the projections, the owner must be able to explain them.

Ten Ways to Ruin Your Business Plan
6. Lack of specific, detailed strategies. A plan that includes only general
statements of strategy (“We will provide world class service and the lowest
possible price.”) without important details will be dismissed as fluff.
Especially important if the business plan is prepared for a lender.
7. No indication that the owner has anything at stake. The lender expects the
entrepreneur to have some equity capital invested in the business.
8. Unwillingness to personally guarantee any loans. If the business owner isn’t
willing to stand behind his or her company, then why should the bank?
9. Starting the plan with unrealistic loan amounts or terms. Do your homework
and propose a realistic structure.
10. Too much focus on collateral. Even for a cash-secured loan, the banker is
looking toward projected profits for repayment of the loan. Cash flow should
be emphasized as the source of repayment.

Business Plan Outline
Cover Sheet: Business Name, Address, Phone Number, Principals
Executive Summary or Statement of Purpose
Table of Contents
Section One: The Business
A. Description of Business
B. Products/Services
C. Market Analysis
D. Marketing Plan
E. Location
F. Competition
G. Management and Operations
H. Personnel
I. Application and Effect of Loan or Investment
Section Two: Financial Data
A. Projected Financial Statements
- Income Statements
- Cash Flow Statements
- Balance Sheets
- Assumptions to Projected Financial Statements
B. Break EvenAnalysis
C. Sources and Uses of Funds
Section Three: Supporting Documents Historical financial statements, tax returns, resumes, reference letters,
personal financial statements, facilities diagrams, letters of intent, purchase orders, contracts, etc.

5.3. Practical template for initial
guidance in business planning
A business plan and a business model
 The purpose of a business model is to help
stakeholders understand and clearly articulate
how a business is configured so that it creates,
delivers and capture value
 A business model helps us to design and
articulate how a business could work, and how
we can innovate inside the business
 A business plan is a detailed document setting
out the goals of a business and how they are to
be achieved
Source: Using the Business Model Canvas for Social Enterprise Design -
https://mbs.edu/getmedia/91cc0d01-3641-4844-b34c-
7aee15c8edaf/Business-Model-for-SE-Design-Burkett.pdf

What’s special about social
enterprise?
It is not that we need totally different business model canvasses nor that there
are wildly more complex business characteristics. It is just that somehow we
need to build into the canvas a clear picture of the social objectives (or the
mission) of the enterprise, in addition to all the dimensions of the actual business
of the social enterprise.
For social enterprises, the business model canvas should provide an opportunity
to see not just the business, but also to identify the social impact they are trying
to achieve. And importantly, to see clearly how the two interact - how they are
symbiotic, how they compete, what opportunities there are to bring them into
alignment and what tensions exist in between them.

The key to using the BMC in social enterprise is to
separate out our commercial and impact models, but
then to integrate them inside the story of the business
model

Source: Using the Business Model Canvas for Social Enterprise Design -
https://mbs.edu/getmedia/91cc0d01-3641-4844-b34c-
7aee15c8edaf/Business-Model-for-SE-Design-Burkett.pdf

Mapping both impact and commerce models on the one canvas helps us to
understand and innovate around not just each element alone, but about how
they interact and support each other.
This is an essential part of social enterprise design.

How are ‘social impact’ and
‘commerce’ related?
One of the first decisions that need to be made when you establish a social
enterprise and you start to look at the potential business models is the decision
about what your social mission means for you (and the stakeholders) and for the
business of the enterprise.
BMC can help us to visualize and understand when it’s time to reassess whether
there will ever be real social impact or opportunities for financial viability, and
to either decide to redesign or to walk away.

Value Proposition
When exploring the business model of social enterprises we start with the
question, ‘what value are we creating?’.
When we use the BMC in commercial businesses we often start with the
customers - because ultimately they are at the heart of the business.
Of course this is the case for social enterprises as well, however, most social
enterprises begin with a quest to generate some kind of ‘social value’ alongside
or indeed through a commercial value proposition.
Social value is defined as the social outcomes and benefits that are generated
through the enterprise - it ’s what makes the enterprise a ‘social enterprise’!

Value Proposition
Articulating the social value that we are seeking to generate inside our social
enterprises is a critical first step in designing a social enterprise.
However, a social enterprise cannot exist through generating social value alone!
As an ‘enterprise’ it also needs to generate ‘commercial value’ - the goods or
services that you are wanting to sell in the marketplace.
So, a social enterprise often has two value propositions - the impact value
proposition (the social value you are seeking to deliver, and what makes it
attractive to customers) and the commercial value proposition (the goods and
services you are producing and selling, and what makes these attractive to
customers).

Questions to ask about the value proposition of a
social enterprise
What value do you provide your customers? Why would they keep coming back?
What is the relationship between your commercial value proposition and your
impact value proposition?
How visible or prominent is your impact value proposition? Who values and
would pay for your impact value proposition? Who understands it?
How do you account for / measure your value proposition (both commercial and
impact)?

Commercial Value
Proposition Examples
Impact Value
Proposition Examples
Catering
Quality, affordable catering using local
produce
Employment
Sustainable and meaningful jobs for people
with disabilities
Garden maintenance
Careful, chemical free and knowledgeable
garden maintenance just the way you
want it
Local Economic Development
Revitalising the local economy of this rural
town
Retail
Clothes with a difference, flair and style
Fair Trade
Quality coffee that ensures quality of life
for producers
A social enterprise can’t run on an impact value proposition alone! It is also
important for social enterprises to work out how they will present their value
propositions to customers.
The way a social enterprise communicates its impact value proposition is an
important design decision, and requires a deep understanding of customers and
of the nature of the impact itself.

Customer Segments
Given that social enterprises are in the business of trading for the purpose of
generating social impact, they can have at least two different (though
potentially overlapping) categories of customers - the customers who are wanting
to purchase their goods and services (ie. the commercial customers) and the
‘customers’ who are wanting to support the social impact that they generate
and/or potentially benefit from this impact (ie. the impact customers).
Understanding these two key customer segments (which could potentially be
segmented down further within these categories) is critical to understanding a
social enterprise business model.
When social enterprises use the BMC for discussion and design purposes it can be
helpful to distinguish business and impact customers.
Commercial Impact
- Walk-by commuters
- Localbusinesses, offices, services (retail and
catering)
- Regulars
- Ethical consumers
- Not-for-Profits, other social enterprises
- social procurement customers (catering)
- Government – purchasing jobs for people with
disabilities, and training

Questions to ask about customer segments in
a social enterprise
For whom are we creating value - and what kind of value are we creating for
them?
Who are our commercial customers and why will they continue to be our
customers? Who are our impact customers and what value are they seeking
from us (and how much are they willing to pay for this)?
How important is the linkage between our products / services and our impact
to our customers? Are they prepared to pay more for the impact? Who else
would / could pay for the impact?
Are our constituents customers? co-creators? partners?
Are our funders customers or partners, or both?
What kind of value proposition will keep customers coming back over the long
term?

Channels
Working out how to reach and communicate with customers and help them to
evaluate a value proposition is a key part of opening business opportunities in
social enterprises.
For social enterprises it may not only be about helping customers to evaluate
business value propositions – some customers may also need to understand our
impact value proposition.
Commercial Impact
Retail - high traffic near public transport station
- Word of mouth
- www
- Social enterprise networks and directories
- Social procurement directories

Awareness Evaluation Purchase Delivery After Sales
Main questions
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
post-purchase customer
support?
Additional questions
for socialenterprises
How does this social
enterprise stand out in a
crowded market?
Do we raise awareness
of products/ services
AND impact? If so, how?
Particularly if we are
wanting to raise
awareness of our
impact, how do we do
this in a way which
highlights our business,
not just our cause?
How do we help our
customers evaluate our
organisation’s impact
value proposition? What
evidence and stories
can we / should we
share? Why should
customers buy from us
as a social enterprise?
Do we compete directly
with mainstream
businesses? If so, why
would customers choose
to buy from us?
How do customers find
and access us? Are
direct sales through
retail outlets the only
way customers can
purchase from us? How
can we extend the ways
customers can find and
purchase our
goods/services?
Who can we partner
with to extend our sales
reach?
Can we extend our
range of delivery
mechanisms? Are there
more efficient,
effective or innovative
ways we can deliver our
goods/ services and/or
impact? How can we
connect our customers
more effectively
through our delivery
mechanisms?
Do we follow-up our
customers to ensure
that they will be repeat
customers? What after
sales support or
information do they
need or want about our
products/services
and/or impact? How can
we ensure that they will
champion social
enterprise?
Examples of where this
can be important
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
focused 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?
Five phases that are important in designing and nurturing effective channels
inside businesses:

Customer Relationships
In social enterprises customer relationships are critical. For social enterprises it
can be interesting to push out what we would consider ‘traditional’ customer
relationships with a business, and explore how customers could become our
‘community’ or how they could co-create or co-produce the business with us.
Another interesting way to approach customer relationships from the perspective
of social enterprises centres on the idea of building customer loyalty, and in turn,
exploring what customer loyalty can build in terms of social impact.
Commercial Impact
- personalised service, repeat custom,
loyalty
- long term customers
- personalised service, repeat custom,
loyalty
- long-term impact customers

Questions to ask about customer
relationships in a social enterprise
What kind of relationships do our customers want? Are they or could they be
interested in our social impact?
What could happen if customers fell in love with our impact? What other roles
would they be willing to play if they did?
What do we need to be mindful of to ensure that we retain our customers?
A re the relationships with ‘impact customers’ different?
What do they expect when they ‘purchase’ impact from us? How can we ensure
that they fall in love with our products/ services too?

Revenue Streams
Revenue streams are what enables social enterprises both to run the business and
generate the impact - but they can also be the source of much debate and
tension. The contention comes predominantly from different interpretations of
the mix of revenue that flows into social enterprises. Sometimes the contentions
stem from ideology rather than practical reality.
Different revenue streams can have different functions in a social enterprise.
The trick is to find the best fit between form and function of revenue in the
model, and this will vary according to the impact, the industry, and the business
model itself. But as a broad proposition, using grant or philanthropic funding to
cover up an inherently inefficient or failing business is not effective use of such
monies, and neither is it helpful, in the long run, to delivering sustainable social
impact.
Commercial Impact
- Retail sales
- Catering sales
- Participation and support funding
- Training funding
- Donations

Questions to ask about revenue in a social
enterprise
Can we unpack and unpick the revenues that are generated through the
commercial activities of the business from the revenues generated through the
impact?
 This effectively means knowing what revenue is derived from and driving what part
of the business.
Have we examined analogous commercial business models to explore potential
revenue streams from our chosen business sector, which can help us to predict,
to a certain extent, the potential for profits to cover impact costs;
What ongoing sources of revenue could be generated in relation to impact
delivery, and how are we ‘valuing’ this?

Key Resources
Key resources are the assets, tangible and intangible, that make your business
model work - and in the case of social enterprise, this refers to the resources
that drive your commercial model AND the resources that drive your impacts.
The table below outlines both the commercial resources that may be needed by
social enterprises and the impact resources.
Decisions need to be made within social enterprises about whether these
resources are needed inside the enterprise, or whether key partnerships can be
developed to ensure that these resources are accessible to the enterprise.
Commercial Impact
- kitchen / coffee equipment
- Shop (asset)
- Location
- Brand
- Staff
- Support expertise
- Support staff
- Impact brand

Resources Commercial Impact
Physical
Facilities, infrastructure, buildings,
vehicles, systems, distribution
networks
Special equipment and
infrastructure,
systems, accessible buildings
Intellectual
Brands, knowledge, contact
management systems, partners,
business knowledge and skills
Impact knowledge and skills, pro-
bono support partners
Human People, staff, partners Champions, support staff, brokers
Financial
Cash, lines of credit, access to
finance
Access to funds to cover impact
costs
Impact
Methods and networks to assess and
evaluate impact, all other assets
needed to ensure impact delivery

Questions to ask about resources in a social
enterprise
What physical, intellectual, human, and financial resources are needed for your
commercial operations?
What physical, intellectual, human, financial and impact resources are needed
to ensure you deliver on your impact objectives?
How could lack of commercial resources impact on the achievement of impact
objectives? And vice versa?
Do all the resources need to be located inside the social enterprise, or can
some of them be located with and accessed through partnerships?

Key Activities
The key activities of your social enterprise encompasses the things you must do
to deliver value to your customers - so, to ensure both commercial and social
value.
Being specific about what activities are critical to support and deliver your
impacts is helpful not only in understanding what needs to be done on a daily
basis to maintain your impact focus, but also to costing your impact. Unpacking
your impact activities is an important part of understanding your business model
as a social enterprise. Your impact customers and partners may also benefit from
understanding just what it takes to achieve your impacts.
Commercial Impact
- Baristaring
- cooking / catering
- customer service
- Front of shop and backroom management
- support and participation activities

Questions to ask about activities in a social
enterprise
What are the key activities that we undertake to deliver our commercial value
propositions to customers?
What are the key activities that are needed to deliver our impact value
proposition?
What overlaps are there between the two sets of activities?
What are the complementary activities? Are there ways we can build
efficiencies into these complementary activities?
What oppositional activities are there? How can we address these so that they
are more balanced?

Key Partnerships
Partnerships refer to the network of suppliers, allies, supporters, co-creators and
champions that are needed to ensure that a social enterprise can deliver on both
impact and commercial objectives.
Partnerships can support and enhance both the commercial and the impact
objectives of a social enterprise.
The enterprise may have an active network of supporters who promote products
and services or who are vital as a distribution network. Equally, the enterprise
may have a network of partners who offer value-adds to your impact - they may
support the participation of employees who have been unemployed, or they
might help a social enterprise to scale its impact through social franchising
mechanisms.
There may be different motivations for engaging in partnerships according to
whether the partnership is centred on commerce, impact or both.

Questions to ask about partnerships in a
social enterprise
What partnerships are critical to helping us achieve our commercial objectives?
What partnerships can help us deliver, strengthen or scale our impact
objectives?
What motivations underpin our partnerships?
How do we structure our partnerships? How do we demonstrate the value of our
partnerships to each other and externally?
Commercial Impact
- Coffee distributor
- Drink distributor
- Localchamber of commerce
- Not-for-profit partner supporting people with a
disability
- Social Enterprise Alliance
- Social Investor

Potential Motivations for Partnerships
in a Social Enterprise
Commerce
Commercial
Partnerships
Impact Partnerships
Impact
Optimisation and
economy of scale
Scaling / Maximising
Impact
Reduction of risk and
uncertainty
Ensuring and Measuring
delivery of impact
Acquisition of particular
resources and activities
Optimising economies of
depth and
scope (in relation to
impact)

Cost Structure
Like other parts of a social enterprise business model, the cost structure needs to
take account of both the commercial operating and production costs AND the
costs involved in delivering an impact. For most social enterprises this means
understanding the costs involved in keeping the ‘business’ going, and unpacking
what extra costs are needed to actually deliver on the impact of the enterprise.
Commercial Impact
- Inventory
- Equipment
- Utilities
- Staff
- Insurance
- Compliance costs
- Support and participation costs
- staff
- productivity
- training
- work readiness cost
- Impact assessment costs

Three Critical Questions to ask about Costs
in a Social Enterprise
What is the impact you are seeking to achieve in the social enterprise (and
what is the difference between your ideal and real impact!)?
What activities do you have to undertake to achieve this impact? Which of
these activities would not be undertaken if this was a typical commercial
business? What costs do these activities incur?
What resources are needed to achieve this impact? Which of these resources
would not be needed if this was a typical commercial business? What costs do
these resources incur?

Typical Business Operation Costs Impact Costs
Inventory
Premises
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,
uniforms etc. for disadvantaged workers)
Provision costs (for non-attendance, extra
sick leave etc)
Impact training (e.g. training for support
staff)
Opportunity costs (e.g. reduced
productivity,
costs of recruiting and training new staff
constantly if you are an intermediate
labour market social enterprise)
Fundraising costs
Impact assessment costs
Ethics costs
(e.g. premiums for fair trade goods)

Additional reading
The triple layered business model canvas – a tool to design more sustainable
business models:
 Economic layer (based on the original BMC)
 Environmental life cycle layer
 Social stakeholder layer
Joyce, A., Paquin, R. The triple layered business model canvas: A tool to design more sustainable
business models. Journal of Cleaner Production, Volume 135, 1 November 2016, Pages 1474-1486:
https://www.researchgate.net/publication/280044131_The_triple_layered_business_model_canvas_a_too
l_to_design_more_sustainable_business_models

Examples: The business model canvas
reinvented for social business
Source: http://www.socialbusinessmodelcanvas.com/

Examples:
'How can we learn more quickly what works, and discard what doesn't?’
– Tim O’Reilly, CEO O’Reilly Media
Source: https://sehub.stanford.edu/pro-1

Examples: Business solutions to address
unmet and emerging social needs and gaps
Source: https://www.raise.sg/social-enterprises/social-enterprises-menu/starting-a-social-enterprise.html

Examples: Create sustainable models for
social economy organisations
Source: http://redochre.org.uk/singapore-masterclass/

Examples: The Triple Layered Business
Model Canvas – A Tool to Design More
Sustainable Business Models
Source: https://blog.ssbmg.com/2015/04/17/the-triple-layered-
business-model-canvas-a-tool-to-design-more-sustainable-business-
models/

Examples: The canvas at the first level is a
brainstorming tool
Source: https://www.socialbusinessmodels.ch/en/content/social-business-models-canvas

Assessment
Preparation of an initial business plan:
See Annex 1 – The BMC Template for a social enterprise

References
 10 Initial Steps When Starting a Business: https://www.localenterprise.ie/Fingal/Start-
or-Grow-your-Business/Start-a-Business/Taking-the-Initial-Steps/
 10 keys to a successful business plan:
https://assets.entrepreneur.com/article/1392332798-how-build-business-plan-
infographic.jpg?_ga=2.175743266.1207379152.1543560697-1982612500.1543560697
 7 Steps to a Perfectly Written Business Plan:
https://www.entrepreneur.com/article/281416
 Active Business Planning: https://pioneerbusinessventures.com/our-services/active-
business-planning/
 Business Model vs. Business Plan vs. Business Planning:
https://articles.bplans.com/business-model-vs-business-plan-vs-business-planning
 Business Model Vs. Strategy: http://smallbusiness.chron.com/business-model-vs-
strategy-4652.html
 Business Plan Vs. Business Model: http://smallbusiness.chron.com/business-plan-vs-
business-model-58223.html

 Business Plans vs. Strategic Plans: https://managementhelp.org/blogs/business-
planning/2014/05/01/business-plans-vs-strategic-plans/
 Create a New Business Model Canvas: https://canvanizer.com/new/business-model-
canvas
 Entrepreneur: https://www.entrepreneur.com/
 How to Develop a Business Plan in Six Easy Steps: https://www.score.org/event/how-
develop-business-plan-six-easy-steps
 How to Develop Business Models: https://smallbusiness.chron.com/develop-business-
models-3864.html
 How to Master the Business Model Canvas for Social Entrepreneurs:
https://www.tbd.community/en/a/business-model-canvas-social-entrepreneurs
 Need Help Writing a New Business Plan?: http://esadvisors.net/business-plans-and-
start-up-services/

 Social Business Model Canvas: http://redochre.org.uk/singapore-masterclass/
 Social business model canvas: Reconciling commercial and social value propositions of
social enterprises:
https://www.researchgate.net/publication/318983176_Social_business_model_canvas_
Reconciling_commercial_and_social_value_propositions_of_social_enterprises
 Social business models: https://www.socialbusinessmodels.ch/en/content/social-
business-models-canvas
 Stanford University Social Entrepreneurship Hub: https://sehub.stanford.edu/pro-1
 Starting a social enterprise: https://www.raise.sg/social-enterprises/social-
enterprises-menu/starting-a-social-enterprise.html
 SustainableBusinessModel,org: https://blog.ssbmg.com/2015/04/17/the-triple-layered-
business-model-canvas-a-tool-to-design-more-sustainable-business-models/
 SWOT Analysis: https://www.mindtools.com/pages/article/newTMC_05.htm

 The 20 minute business plan: Business model canvas made easy:
https://www.alexandercowan.com/business-model-canvas-templates/
 The business model canvas reinvented for social business:
http://www.socialbusinessmodelcanvas.com/
 The Business Model Canvas: https://strategyzer.com/canvas/business-model-canvas
 Using the Business Model Canvas for Social Enterprise Design"
https://mbs.edu/getmedia/91cc0d01-3641-4844-b34c-7aee15c8edaf/Business-Model-
for-SE-Design-Burkett.pdf
 What Are Initial Business Planning Ideas?: http://smallbusiness.chron.com/initial-
business-planning-ideas-787.html
 Writing a Business Plan: https://www.va.gov/osdbu/docs/vepbusinessplanoutline.pdf

Disclaimer
For further information, related to the ECOGARD project, please visit the project’s website
at https://ecogardening.eu/ or visit us at https://www.facebook.com/Ecogard/.
Download our mobile app at
https://play.google.com/store/apps/details?id=com.ecogard.mobile.
This project ( ECOGARD project - 2017-1-BG01-KA202-036212) has been funded with
support from the European Commission (Erasmus+ Programme). This publication reflects
the views only of the author, and the Commission cannot be held responsible for any use
which may be made of the information contained therein.

IO4/Unit 5: Initial Business Planning

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