APS 1015 Class 8 - Social Enterprise Considerations

1. APS 1015: Social Entrepreneurship Class 8: Considerations for Social Enterprise Monday, October 28, 2013 Instructor: Norm Tasevski (norm@socialentrepreneurship.ca) Assaf Weisz (assaf@socialentrepreneurship.ca) 1

2. © Norm Tasevski & Assaf Weisz Agenda • • • • • • Storyboarding - Recap Marketing for social enterprise Break Operational considerations Legal Considerations What did we learn – today? 2

3. Storyboarding Recap 3

4. © Norm Tasevski & Assaf Weisz What is Storyboarding? A set of images/graphics displayed in sequence as a means of pre-visualizing a process or sequence of events 4

5. © Norm Tasevski & Assaf Weisz The Importance of Storyboarding • From a business perspective, it provides clarity on how the business will work (e.g. how value is created, how revenue is generated) • It helps identify gaps/flaws in the business model • If can provide a foundation for a communications/sales campaign to customers, investors, etc. 5

6. © Norm Tasevski & Assaf Weisz An Example – “Here’s How it Works” 1st ID office building to serve as a “Delivery Hub” 2nd 3rd ID merchants within the “Delivery Zone” Merchants market the service to customers We Deliver! Professionals in Sick Kids will have access to the delivery service Professionals at Sick Kids can receive deliveries from the hot dog vendor, Subway and Starbucks, but not Freshii or Tim Hortons An SSO delivery person picks up and delivers the food to the professional 6

7. © Norm Tasevski & Assaf Weisz A 2nd Example – “Here’s How it Works” 1st First time youth drug offenders referred to Peacebuilders 2nd Youth participate in Restorative Circles & Business Training Peacebuilders work with established relationships with the federal youth prosecutor at the youth court at 311 Jarvis Through this process, we build a trust relationship and empower youth to genuinely change their lives and break the cycle of violence and poverty 3rd Youth placed in kiosks/venues to sell products Youth sell in controlled environments, with Peacebuilders/Venture Deli staff support 7

8. Marketing for Social Enterprises… 8

9. © Norm Tasevski & Assaf Weisz A caveat… “Social Media” “Social Enterprise” 9

10. © Norm Tasevski & Assaf Weisz A Second Caveat… Marketing ≠ Sales 10

11. © Norm Tasevski & Assaf Weisz Where does Marketing Fit? 11

12. © Norm Tasevski & Assaf Weisz 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. – • 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. – • 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 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. 12 Ivan Storck (founder, SustainableWebsites.com)

13. © Norm Tasevski & Assaf Weisz Social Marketing Individual Social Enterprise Mind Mission (why) Vision (what) Values (How) Heart Deliver Satisfaction Realize Aspiration Practice Compassion ProfitAbility ReturnAbility SustainAbility Be Better Differentiate Make a Difference Spirit 13

14. © Norm Tasevski & Assaf Weisz Examples of Social Marketing… 14

15. © Norm Tasevski & Assaf Weisz Examples of Cause Marketing… One of the first… Another… Most Recently… 1983 – American Express & the Statue of Liberty Restoration Project 2006 – Bono & Product (Red) 2010 – Pepsi & the Refresh Project 15

16. © Norm Tasevski & Assaf Weisz Another Example of Cause Marketing… 16

17. © Norm Tasevski & Assaf Weisz Sustainable Marketing…

18. © Norm Tasevski & Assaf Weisz Sustainable Marketing…is tricky… http://ww w.youtube. com/watch ?v=p6aSlb_ lies

19. © Norm Tasevski & Assaf Weisz Sustainable Marketing Toolkit Checklist 1

22. Break 22

23. HR Considerations… 23

24. © Norm Tasevski & Assaf Weisz Where does HR Fit? 24

25. © Norm Tasevski & Assaf Weisz A Caveat… Think of your HR from the perspective of “running a business”, not “running a charity” 25

26. © Norm Tasevski & Assaf Weisz A Second Caveat… Your HR Strategy must align with your business model and align with organizational values 26

27. What if you were a… Product-based Social Business… Tethered Social Enterprise… Employment-Based Social Business… Accessibility-Based Platform… 27

28. 1. Product-Based © Norm Tasevski & Assaf Weisz A business/business model that provides products or services with social benefit.

29. 2. Employment-Based A business that hires marginalized people in good employment opportunities. © Norm Tasevski & Assaf Weisz

30. 3. Tethered © Norm Tasevski & Assaf Weisz An enterprise started by a charity or non-profit that generates revenue for the organization.

31. 4. Accessibility-Based © Norm Tasevski & Assaf Weisz A business that maintains a purposely low profit margin to make their products accessible.

32. © Norm Tasevski & Assaf Weisz 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? 32

33. Operational Considerations… 33

34. © Norm Tasevski & Assaf Weisz DAY 1 What do you do first? 34

35. © Norm Tasevski & Assaf Weisz DAY 180 What does your average week look like? 35

36. Legal Forms Applicable to Social Enterprise… 36

37. © Norm Tasevski & Assaf Weisz A Caveat… There is no defined (national or provincial) legal form for social enterprise in Canada 37

39. For-Profit Corporation Non-Profit Corporation Partnership Charity Sole Proprietorship Co-Operative Corporation 39

40. © Norm Tasevski & Assaf Weisz 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 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” 40

41. © Norm Tasevski & Assaf Weisz Charity • • Incorporated via Letters Patent under the Corporations Act (Ontario) or Canada Corporations Act (federal) Without share capital • 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” 41

42. © Norm Tasevski & Assaf Weisz Sole Proprietorship • • Registered via Business Names Act (Ontario) or Canada Corporations Act (federal) Without share capital • 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 42

43. © Norm Tasevski & Assaf Weisz Non-Profit Corporation • • Incorporated via Letters Patent under Corporations Act (Ontario) or Canada Corporations Act (Federal) Generally without share capital • 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) risktaking • 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” 43

44. © Norm Tasevski & Assaf Weisz Partnership • • • Registered under the Partnerships Act (Ontario) With or without share capital Usually organized using a Partnership Agreement • 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 44

45. © Norm Tasevski & Assaf Weisz Co-Operative Corporation • • Incorporated under the Co-Operative Corporations Act (Ontario) or Canada Cooperatives Act (Federal) Wither with or without share capital • 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) 45

47. Legal Innovations… 47

48. © Norm Tasevski & Assaf Weisz 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 48

49. © Norm Tasevski & Assaf Weisz 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 49

50. © Norm Tasevski & Assaf Weisz 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. 50

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