APS1015H Class 7 - Business Model Considerations for Social Enterprise


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APS1015H Class 7 - Business Model Considerations for Social Enterprise

  1. 1. APS 1015H: Social Entrepreneurship Class 7: Business Model Considerations for Social Enterprise Wednesday November 9, 2011Instructors:Norm Tasevski (norm@socialentrepreneurship.ca)Karim Harji (karim@socialentrepreneurship.ca) 1
  2. 2. © Norm Tasevski & Karim HarjiTony Pigott 2
  3. 3. Break 3
  4. 4. © Norm Tasevski & Karim HarjiAgenda•  Tony Pigott•  Marketing for social enterprise•  Operational considerations•  Legal Considerations•  What did we learn – today? 4
  5. 5. Marketing for Social Enterprises… 5
  6. 6. © Norm Tasevski & Karim HarjiA caveat… “Social “Social Media” Enterprise” 6
  7. 7. © Norm Tasevski & Karim HarjiA Second Caveat… Marketing! ≠! Sales! 7
  8. 8. © Norm Tasevski & Karim HarjiWhere does Marketing Fit? 8
  9. 9. © Norm Tasevski & Karim HarjiSome Definitions•  Social Marketing is the systematic application of marketing, along with other concepts and techniques, to achieve specific behavioral goals for a social good. –  The primary aim of social marketing is "social good", while in "commercial marketing" the aim is primarily "financial". This does not mean that commercial marketers can not contribute to achievement of social good. Wikipedia•  Cause Marketing (or cause-related marketing) is a mutually beneficial collaboration between a corporation and a nonprofit in which their respective assets are combined to (1) create shareholder and social value, (2) connect with a range of constituents (be they consumers, employees, or suppliers), and (3) communicate the shared values of both organizations. Jocelyn Daw (Marketing Consultant) –  Cause marketing differs from corporate giving (philanthropy) as the latter generally involves a specific donation that is tax deductable, while cause marketing is a marketing relationship generally not based on a donation. Wikipedia•  Sustainable Marketing is the process of planning, implementing and controlling the development, pricing, promotion and distribution of products in a manner that satisfies the following three criteria: (1) customer needs are met (2) organizational goals are attained, and (3) the process is compatible with ecosystems. Donald Fuller (Sustainable Marketing Consultant) –  Sustainable Marketing encourages the process of innovation by turning the marketing process into an experimental, iterative process that has close ties to the customer. Individuals and interactions on a daily basis are important. Customer Collaboration over customer transactions. Responding to change over blindly following a plan. 9 Ivan Storck (founder, SustainableWebsites.com)
  10. 10. © Norm Tasevski & Karim Harji Social Marketing Individual Mind Heart SpiritSocial Enterprise Mission Deliver Practice (why) Realize Aspiration Satisfaction Compassion Vision ProfitAbility ReturnAbility SustainAbility (what) Values Be Better Differentiate Make a Difference (How) 10
  11. 11. © Norm Tasevski & Karim HarjiExamples of Social Marketing… 11
  12. 12. © Norm Tasevski & Karim Harji Examples of Cause Marketing…One of the first… Another… Most Recently…1983 – American 2006 – Bono & 2010 – Pepsi & theExpress & the Statue Product (Red) Refresh Projectof LibertyRestoration Project 12
  13. 13. © Norm Tasevski & Karim HarjiAnother Example of Cause Marketing… 13
  14. 14. © Norm Tasevski & Karim HarjiSustainableMarketing…
  15. 15. © Norm Tasevski & Karim HarjiSustainable Marketing…is tricky…h"p://www.youtube.com/watch?v=p6aSlb_lies    
  16. 16. © Norm Tasevski & Karim HarjiSustainable Marketing ToolkitChecklist 1!
  17. 17. © Norm Tasevski & Karim HarjiSustainable Marketing ToolkitChecklist 2!
  18. 18. © Norm Tasevski & Karim HarjiSustainable Marketing ToolkitChecklist 3!
  19. 19. HR Considerations… 19
  20. 20. © Norm Tasevski & Karim HarjiWhere does HR Fit? 20
  21. 21. © Norm Tasevski & Karim HarjiA Caveat…Think of your HR from the perspective of “running a business”, not “running a charity” 21
  22. 22. © Norm Tasevski & Karim HarjiA Second Caveat…Your HR Strategy must align with your business model and align with organizational values 22
  23. 23. What if you were a…Product-based Social Business…! Tethered Social Enterprise…!Employment-Based Social Business…! Accessibility-Based Platform…! 23
  24. 24. 1. Product-Based © Norm Tasevski & Karim Harji A business/business model that provides products or services with social benefit.
  25. 25. 2. Employment-Based © Norm Tasevski & Karim Harji   A business that hires marginalized people in good employment opportunities.
  26. 26. 3. Tethered © Norm Tasevski & Karim HarjiAn enterprise started by a charity or non-profit thatgenerates revenue for the organization.
  27. 27. 4. Accessibility-Based © Norm Tasevski & Karim Harji   A business that maintains a purposely low profit margin to make their products accessible.
  28. 28. © Norm Tasevski & Karim HarjiOther HR Considerations…•  Who/what do you need?•  How do you find the right people?•  How do you define what they do?•  How (and from where) do you pay them? 28
  29. 29. Operational Considerations… 29
  30. 30. © Norm Tasevski & Karim HarjiDAY 1! What do you do first? 30
  31. 31. © Norm Tasevski & Karim HarjiDAY 180 What does your average week look like? 31
  32. 32. Legal Forms Applicable to SocialEnterprise… 32
  33. 33. © Norm Tasevski & Karim HarjiA Caveat…There is no defined (national or provincial) legal form for social enterprise in Canada 33
  34. 34. © Norm Tasevski & Karim HarjiA Second Caveat… Form follows function 34
  35. 35. For-Profit Non-Profit Corporation! Corporation! Partnership! Charity! Sole Co-OperativeProprietorship! Corporation! 35
  36. 36. © Norm Tasevski & Karim Harji For-Profit Corporation! •  Incorporated under the Business Corporations Act (Ontario) (the “OBCA”) or the Canada Business Corporations Act (federal) (the “CBCA”)! •  With share capital!•  Most flex in terms •  Pay corporate tax! of profit-making •  Cannot access grants! activities! •  Cultural/•  Can access all forms of investment psychological barriers (debt, equity, etc)! with operating a “for-•  Provides clarity of profit social purpose (i.e. the business”! financial bottom line)!•  Limited personal liability! 36
  37. 37. © Norm Tasevski & Karim Harji Charity! •  Incorporated via Letters Patent under the Corporations Act (Ontario) or Canada Corporations Act (federal)! •  Without share capital!•  Don’t pay corporate •  Least flex in terms of tax on earnings! profit-making activities! •  Limited in the types of•  Can issue tax investments you can receipts! access (e.g. equity)!•  Can access many •  Time-consuming!! government/ •  Psychological barriers foundation/ with operating a “social corporate grants! business”! •  An aversion to “risk taking”! •  Can lose status if “too successful”! 37
  38. 38. © Norm Tasevski & Karim Harji Sole Proprietorship! •  Registered via Business Names Act (Ontario) or Canada Corporations Act (federal)! •  Without share capital!•  The simplest (and •  Unlimited liability!!! quickest) legal form! •  The business is the•  You have full entrepreneur! control of business •  Hard to find investors! decisions! •  Limited creative input•  Flexibility to make (i.e. you’re the only business decisions one with ideas!)! quickly! •  Less “professional”•  No separate filing than other forms! for income tax! 38
  39. 39. © Norm Tasevski & Karim Harji Non-Profit Corporation! •  Incorporated via Letters Patent under Corporations Act (Ontario) or Canada Corporations Act (Federal)! •  Generally without share capital!•  Can access grants! •  Can’t issue tax•  Can access debt receipts! financing! •  Limited in the types of•  Tax exempt as long investments you can as organized and access (e.g. equity)! operated for defined •  Psychological barriers social/community with operating a benefit! “social business” !•  Some NPs are more •  Can lose status if open to (limited) “too successful”! risk-taking! 39
  40. 40. © Norm Tasevski & Karim Harji Partnership! •  Registered under the Partnerships Act (Ontario)! •  With or without share capital! •  Usually organized using a Partnership Agreement!•  Similar benefits to •  For most sole proprietorship! partnerships, unlimited•  Combines skills/ liability! (at least in competencies of Canada…)! two people! •  Acrimony between•  Can sign contracts partners is common! and borrow money in •  Difficult to find its own right! investors! 40
  41. 41. © Norm Tasevski & Karim Harji Co-Operative Corporation! •  Incorporated under the Co-Operative Corporations Act (Ontario) or Canada Cooperatives Act (Federal)! •  Wither with or without share capital!•  Well-established •  Cannot issue tax structures! receipts!•  Integrates the •  Generally not exempt concept of from paying tax! “community benefit” •  Psychological barriers already! with operating a “social business”! •  Difficulty making decisions (too many people at the table)! 41
  42. 42. © Norm Tasevski & Karim HarjiTalk to a Lawyer! 42
  43. 43. Legal Innovations… 43
  44. 44. © Norm Tasevski & Karim HarjiLegal Innovation: CIC (UK)•  Established to trade (goods or services) for the community good•  Requires “community interest statement” application to the CIC Regulator. Publically-available annual reports required to confirm (adherence to) community interest requirement•  May issue shares in order to raise capital•  Cap on returns (dividends paid) set by the Regulator•  Subject to an “asset lock” –  Assets and profits must be permanently retained by the CICs for community benefit, or transferred to another CIC subject to an asset lock, or to a charity•  Taxed in the same manner as other businesses 44
  45. 45. © Norm Tasevski & Karim HarjiLegal Innovation: L3C (US)•  Variation on American Limited Liability Companies (LLCs)•  LLC investors are members rather than shareholders•  Terms of the operating agreement guarantee the public benefit nature of the entity’s work•  Like LLCs, L3Cs are not subject to federal income tax themselves, but the income they pay to members is taxable according to the rates applicable to each member•  Able to attract private capital through the sale of shares and other securities, various forms of loans, or other commercial financial arrangements.•  Ability to receive Program Related Investments from foundations•  No asset lock and no dividend cap 45
  46. 46. © Norm Tasevski & Karim HarjiLegal Innovation: B Corp (US)•  To be certified as a B corporation under the B Lab system, the corporation must: –  Achieve a minimum score of 80 (out of 200) on the B Ratings System, a tool to assess a companys social and environmental performance. –  Agree to make legal changes to its articles of incorporation to expand the responsibilities of the company to include consideration of stakeholder interests. –  Pay B Lab an annual licensing fee. –  Recertification is required every two years. 46
  47. 47. © Norm Tasevski & Karim Harji 47
  48. 48. © Norm Tasevski & Karim HarjiWhat did we learn? 48