APS 1015 Class 7 - SE Considerations

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This class will cover some of the key considerations social entrepreneurs face when launching and growing their social enterprise. Emphasis will be placed on marketing social enterprises where students will be provided an overview of theories around cause marketing and sustainable marketing. Operational, human and legal considerations are also reviewed which include understanding various legal forms applicable to social businesses. Students will also engage in basic financial analysis for their enterprise to determine the financial feasibility of their proposed solution.

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  • http://www.youtube.com/watch?v=wyrFWbGiGOc
  • Social media – social means interacting with others
    Social enterprise – social means providing a benefit to others
  • http://foundationcenter.org/getstarted/faqs/html/cause_marketing.html
  • A 1983 promotion advertised that for each purchase made with an American Express Card, American Express would contribute one penny to the renovation of the Statue of Liberty. The campaign generated contributions of $1.7 million to the Statue of Liberty restoration project. What would soon capture the attention of marketing departments of major corporations was that the promotion generated approximately a 28% increase in American Express card usage by consumers.

  • www.thefuntheory.com
  • Traditional 4 P’s – Product, Placement, Price, Profit

    Social 3 P’s – People, Planet, Profits
  • http://www.stumbleupon.com/stumbler/JSDavis82/tag/green-washing/
    http://www.youtube.com/watch?v=p6aSlb_lies

    ISO 14001 Green Certification – online certification
  • Why?
  • What do you need?
    Skills/competencies required to action the value proposition
    Acquiring skills vs. outsourcing
    How do you find the right people?
    Hire the right people aligned with your business model
    Comfortable balancing financial and social considerations
    How do you define what they do?
    Job descriptions, performance measurement, etc.
    How you pay for staff?
    Using volunteers, and for how long?
    How long can you live without making money?
  • Activity: brainstorm how they will operationalized for their own business models – 3 of us would provide feedback on each group’s idea and connecting to their idea
  • Key questions:
    What is the underlying nature and intent of the profit-making activities of your operation?
    What will your operation’s profit be used for?
    What kind(s) of financing/investment will be required?
  • Key questions:
    What is the underlying nature and intent of the profit-making activities of your operation?
    What will your operation’s profit be used for?
    What kind(s) of financing/investment will be required?
  • Permit charities to carry on (and generate profit from) business or commercial activities that directly accomplish or advance the charitable mission
    “Related businesses” are defined as activities related to or ancillary to the charitable objects but can also be unrelated activities, as long as substantially all (more than 90%) of the persons employed in the profitable activity are volunteers and not remunerated.
  • Owned by members that use its services
    Generally raise funds through loans from members and/or fees charged for their services.
    Members share (equally) in the governance
    Generally six types of Co-ops operating in Canada: financial; consumer; service; producer; worker; and multi-stakeholder.
  • Focus on the distinction between entrepreneur and enterprise
  • APS 1015 Class 7 - SE Considerations

    1. 1. APS 1015: Social Entrepreneurship Class 7: Considerations for Social Enterprise Wednesday, May 28, 2014 1 Instructor: Norm Tasevski (norm@socialentrepreneurship.ca) Alex Kjorven (alex@socialentrepreneurship.ca)
    2. 2. © Norm Tasevski Agenda • Marketing for social enterprise • Break • Operational considerations • Legal Considerations 2
    3. 3. A note on your business cases… 3
    4. 4. © Norm Tasevski Presentation guidelines • Due Dates – Presentations: 5pm on Thursday, May 29th • Format – PowerPoint deck • Time Allotment – 12 min presentation (strict) – will give you 5 and 2 minute warnings – 6 min Q&A • Grading – To be done by Alex and Norm – The entrepreneurs will inform us, but not assign your grades • Feedback from Judges – Alex will email feedback shortly after the class 4
    5. 5. © Norm Tasevski Pitching to the Social Entrepreneur 1. Vision/Mission of the enterprise 2. Your understanding of the social system they operate in 3. Problem/Pain being experienced (and by whom) 4. Current solution (today’s business model) 5. What you heard from the social entrepreneur 6. Your suggested adjustments to the business model (i.e. tomorrow’s model) 7. “Here’s how it works…” 8. Why should they adopt your model? 9. Business Considerations (financial, legal, operational) 5
    6. 6. © Norm Tasevski Advice for your pitches • Focus on the key components of the business model, and highlight the key financial #s – Can you clearly explain how the business works? How it makes money? How it generates social/environmental change? • Comfortably stick to the time allotment – In your practice, aim to deliver your presentation in 10-11 minutes • Anticipate the entrepreneur’s questions – If you were running this business, what would you care to know about the business model? 6
    7. 7. © Norm Tasevski An Example… 7
    8. 8. A note on Part 3 (tomorrow)… 8
    9. 9. © Norm Tasevski The Business Case (the APS 1015 version) • The Business Model (10%) – Describe the 7 elements of the model (1 slide per element), excluding costs and revenues – Highlight the elements in the model you are suggesting the entrepreneur make revisions to (i.e. your recommendations for adjustment) • The Financial Model (5%) – Highlight the key financial considerations the entrepreneur will need to keep in mind given your recommended adjustments – Highlight the assumptions you are making to both the revenue model and cost model • Business Targets (3%) – List both the financial and social targets you suggest the entrepreneurs adopt – Focus on the appropriateness of the targets i.e. SMART) • Overall grade: 20% (remaining 2%: overall level of clarity and succinctness) 9
    10. 10. © Norm Tasevski The Business Case (the APS 1015 version) • The form: – PowerPoint (or Keynote, or Prezi) – Up to 10 slides (with notes) • Tips: – Make it visual! – Use the “notes” section to explain the content of each slide • Timing: – Complete first draft by 9am tomorrow! – During class, you will have opportunity to improve/refine – final submission therefore due by end of class 10
    11. 11. Marketing for Social Enterprises… 11
    12. 12. © Norm Tasevski A caveat… 12 “Social Media” “Social Enterprise”
    13. 13. © Norm Tasevski A Second Caveat… Marketing 13 Sales≠
    14. 14. © Norm Tasevski Where does Marketing Fit? 1414
    15. 15. © Norm Tasevski Some 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. Ivan Storck (founder, SustainableWebsites.com) 15
    16. 16. © Norm Tasevski Social Marketing 16 Deliver Satisfaction Realize Aspiration Practice Compassion ProfitAbility ReturnAbility SustainAbility Be Better Differentiate Make a Difference Individual SocialEnterprise Mind Heart Spirit Mission (why) Vision (what) Values (How)
    17. 17. © Norm Tasevski Examples of Social Marketing… 17
    18. 18. © Norm Tasevski 18 Examples of Cause Marketing… One of the first… 1983 – American Express & the Statue of Liberty Restoration Project 2006 – Bono & Product (Red) Another… 2010 – Pepsi & the Refresh Project Most Recently…
    19. 19. © Norm Tasevski Another Example of Cause Marketing… 19
    20. 20. © Norm Tasevski Sustainable Marketing…
    21. 21. © Norm Tasevski Sustainable Marketing…is tricky…
    22. 22. © Norm Tasevski Sustainable Marketing Toolkit Checklist 1
    23. 23. © Norm Tasevski Sustainable Marketing Toolkit Checklist 2
    24. 24. © Norm Tasevski Sustainable Marketing Toolkit Checklist 3
    25. 25. Break 25
    26. 26. HR Considerations… 26
    27. 27. © Norm Tasevski Where does HR Fit? 2727
    28. 28. © Norm Tasevski A Caveat… Think of your HR from the perspective of “running a business”, not “running a charity” 28
    29. 29. © Norm Tasevski A Second Caveat… Your HR Strategy must align with your business model and align with organizational values 29
    30. 30. What if you were a… 30 Product-based Social Business… Tethered Social Enterprise… Employment-Based Social Business… Accessibility-Based Platform…
    31. 31. © Norm Tasevski A business/business model that provides products or services with social benefit. 1. Product-Based
    32. 32. © Norm Tasevski 2. Employment-Based A business that hires marginalized people in good employment opportunities.
    33. 33. © Norm Tasevski 3. Tethered An enterprise started by a charity or non-profit that generates revenue for the organization.
    34. 34. © Norm Tasevski A business that maintains a purposely low profit margin to make their products accessible. 4. Accessibility-Based
    35. 35. © Norm Tasevski Other 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? 35
    36. 36. Operational Considerations… 36
    37. 37. © Norm Tasevski DAY 1 37 What do you do first?
    38. 38. © Norm Tasevski DAY 180 What does your average week look like? 38
    39. 39. Legal Forms Applicable to Social Enterprise… 39
    40. 40. © Norm Tasevski A Caveat… There is no defined (national or provincial) legal form for social enterprise in Canada 40
    41. 41. © Norm Tasevski A Second Caveat… Form follows function 41
    42. 42. For-Profit Corporation 42 Non-Profit Corporation CharityPartnership Sole Proprietorship Co-Operative Corporation
    43. 43. © Norm Tasevski For-Profit Corporation • Incorporated under the Business Corporations Act (Ontario) (the “OBCA”) or the Canada Business Corporations Act (federal) (the “CBCA”) • With share capital 43 • Most flex in terms of profit-making activities • Can access all forms of investment (debt, equity, etc) • Provides clarity of purpose (i.e. the financial bottom line) • Limited personal liability • Pay corporate tax • Cannot access grants • Cultural/psychological barriers with operating a “for-profit social business”
    44. 44. © Norm Tasevski Charity • Incorporated via Letters Patent under the Corporations Act (Ontario) or Canada Corporations Act (federal) • Without share capital 44 • Don’t pay corporate tax on earnings • Can issue tax receipts • Can access many government/foundatio n/corporate grants • Least flex in terms of profit-making activities • Limited in the types of investments you can access (e.g. equity) • Time-consuming! • Psychological barriers with operating a “social business” • An aversion to “risk taking” • Can lose status if “too successful”
    45. 45. © Norm Tasevski Sole Proprietorship • Registered via Business Names Act (Ontario) or Canada Corporations Act (federal) • Without share capital 45 • The simplest (and quickest) legal form • You have full control of business decisions • Flexibility to make business decisions quickly • No separate filing for income tax • Unlimited liability!! • The business is the entrepreneur • Hard to find investors • Limited creative input (i.e. you’re the only one with ideas!) • Less “professional” than other forms
    46. 46. © Norm Tasevski Non-Profit Corporation • Incorporated via Letters Patent under Corporations Act (Ontario) or Canada Corporations Act (Federal) • Generally without share capital 46 • Can access grants • Can access debt financing • Tax exempt as long as organized and operated for defined social/community benefit • Some NPs are more open to (limited) risk- taking • Can’t issue tax receipts • Limited in the types of investments you can access (e.g. equity) • Psychological barriers with operating a “social business” • Can lose status if “too successful”
    47. 47. © Norm Tasevski Partnership • Registered under the Partnerships Act (Ontario) • With or without share capital • Usually organized using a Partnership Agreement 47 • Similar benefits to sole proprietorship • Combines skills/competencies of two people • Can sign contracts and borrow money in its own right • For most partnerships, unlimited liability! (at least in Canada…) • Acrimony between partners is common • Difficult to find investors
    48. 48. © Norm Tasevski Co-Operative Corporation • Incorporated under the Co-Operative Corporations Act (Ontario) or Canada Cooperatives Act (Federal) • Wither with or without share capital 48 • Well-established structures • Integrates the concept of “community benefit” already • Cannot issue tax receipts • Generally not exempt from paying tax • Psychological barriers with operating a “social business” • Difficulty making decisions (too many people at the table)
    49. 49. © Norm Tasevski Talk to a Lawyer! 49
    50. 50. Legal Innovations… 50
    51. 51. © Norm Tasevski Legal 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 51
    52. 52. © Norm Tasevski Legal 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 52
    53. 53. © Norm Tasevski Legal 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 company's 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. 53
    54. 54. © Norm Tasevski 54
    55. 55. © Norm Tasevski What did we learn? 55

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