APS1015H Class 4 - Business Model Validation


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Students will be exposed to methods for evaluating the “business potential” of their entrepreneurial idea, and evaluate some of the challenges associated with synthesizing market data and applying this data to business decisions

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APS1015H Class 4 - Business Model Validation

  1. 1. APS 1015: Social Entrepreneurship Class 4: Business Model Validation Saturday, October 13, 2012Instructors:Norm Tasevski (norm@socialentrepreneurship.ca)Karim Harji (karim@socialentrepreneurship.ca) 1
  2. 2. © Norm Tasevski
  3. 3. © Norm TasevskiAgenda•  B Corporation•  How do we assess the business potential for social enterprise?•  How do we assess the “impact” potential for social enterprise?•  Next Week 3
  4. 4. Assessing Social Enterprise BusinessPotential… 4
  5. 5. © Norm TasevskiOur Approach•  Assess Business Potential 1st•  Assess Impact Potential 2nd Why? 5
  6. 6. © Norm TasevskiIt Answers the Key Question…Will you still be competitive in the marketplace after infusing social mission?
  7. 7. © Norm TasevskiRemember This? 7
  8. 8. © Norm TasevskiStep 1:Identify Cost Drivers and Revenue Sources! 8
  9. 9. How would you assess the businesspotential of a…Product-based Social Business…! Tethered Social Enterprise…!Employment-Based Social Business…! Accessibility-Based Platform…! 9
  10. 10. 1. Product-Based © Norm Tasevski A business/business model that provides products or services with social benefit.
  11. 11. 2. Employment-Based © Norm Tasevski   A business that hires marginalized people in good employment opportunities.
  12. 12. 3. Tethered © Norm TasevskiAn enterprise started by a charity or non-profit thatgenerates revenue for the organization.
  13. 13. 4. Accessibility-Based © Norm Tasevski   A business that maintains a purposely low profit margin to make their products accessible.
  14. 14. © Norm TasevskiValue Proposition -Procurement! -Receiving! -Warehousing! -Inventory control! -Product/service design! -Licensing fees! -Product/service -Donated products/ manufacture/development! services! -Product packaging! -Technology support! -etc.! 14
  15. 15. © Norm TasevskiCustomer Segments -Research costs (surveying, interviewing, etc)! ! -Payments! -(Viral marketing of products)! 15
  16. 16. © Norm TasevskiChannels -Warehousing! -Product packaging (in delivery boxes, etc)! -Product/service delivery (transportation, etc)! -Co-branding! ! -Rental fees! -”Concession stand” type contracts! 16
  17. 17. © Norm TasevskiRelationships -Hard marketing costs (billboard advertising, etc)! -Soft marketing costs (website, etc)! -3rd Party advertisers! -Customer service! -Co-branding! -Relationship -Referral fees! management personnel! 17
  18. 18. © Norm TasevskiKey Resources -Employees (management, staff)! -Brand! -Other assets (buildings, IP, software, -Licensing fees! etc)! ! 18
  19. 19. © Norm TasevskiKey Activities -Service activities! -Sales activities! -Client engagement activities! -Events ! -Fees (e.g. ticket sales ! at events! ! 19
  20. 20. © Norm TasevskiKey Partnerships -Partnership management costs (relationship building, contract management, etc)! -Investment! -Loans! -Grants/donations! 20
  21. 21. Break 21
  22. 22. © Norm TasevskiStep 2:Calculate your margin! -???! -???! 22
  23. 23. © Norm TasevskiWhat Do You Need To Calculate YourMargin? Data!!!! 23
  24. 24. © Norm TasevskiData Sources Call key industry players (suppliers, competitors, etc) Search databases (industry, scholastic, etc) Ask people!!! Conduct web search (friends, potential customers, etc) 24 (Google, etc)
  25. 25. Assessing the “Impact” Potential ofSocial Enterprise… 25
  26. 26. © Norm TasevskiExercise: From Intentions to Impact When  did  you   volunteer?   26
  27. 27. © Norm TasevskiExercise: From Intentions to ImpactHow do you know you made an impact? 27
  28. 28. © Norm TasevskiImpact vs Net ImpactIs your effort better than what would have happenedanyways? 28
  29. 29. © Norm TasevskiImpact vs Net ImpactIs your effort better than what would have happenedanyways? NET IMPACT is what matters 29
  30. 30. © Norm TasevskiAchieving Social Goals!1.  Identify your social goals –  Theory of Change (defining your social value) –  Embed them within/across your operations2.  Measure the social value created –  How do you measure your goals? –  Address the common challenges in measurement3.  Communicate your impact –  Know what to say and who your audience is –  Be creative around your message 30
  31. 31. © Norm TasevskiStep 1: ID Your Social Goals!•  What Social Benefit are you creating?•  How do you decide? 31
  32. 32. © Norm Tasevski 32
  33. 33. © Norm TasevskiEmbedding “Social” across the BusinessModel 33
  34. 34. © Norm TasevskiCautionary Tale 34
  35. 35. © Norm TasevskiExercise:Balancing social & financial value $   +   +   -­‐   -­‐   35
  36. 36. © Norm TasevskiStep 2: Measure the Social ValueCreated!Why Measure, and for Whom?•  Management –  Performance management (meeting needs/ objectives) –  Organizational sustainability, attract new investment –  Demonstrate the value created by organization•  Social Investors (inc. funders) –  Impact of grants, mission alignment –  Accountability measures –  Assess organization value, relate to risk/return (of investment)•  Government Programs/Policy –  Make the case for investment in organization/ approach –  Accountability measures 36
  37. 37. © Norm TasevskiWhy is Measurement Important?!“Not everything that can be countedcounts, and not everything that countscan be counted” “You can’t manage what you can’t measure” 37
  38. 38. © Norm TasevskiChallenges in Measurement!•  Outputs vs. Outcomes•  Attribution vs. Contribution•  Qualitative vs. Quantitative•  Prove vs. Improve•  Rigour vs. feasibility “Metrics and evaluation are to development programs as autopsies are to health care: too late to help, intrusive, and often inconclusive.” (Trelsad) 38
  39. 39. © Norm TasevskiA Note on SROI!•  Discounted, monetized value of the social value that has been created, relative to the value of the investment.•  Pioneered by Roberts Enterprise Development Fund (REDF) and Jed Emerson•  Various uses for, and approaches to, SROI•  Despite “hype” around SROI, it can be resource-intensive, and issues around feasibility, replication, reporting still remain. 39
  40. 40. © Norm Tasevski SROI Snapshot: TurnAround Couriers!Overview  of  Target  Popula;on  (sample)   Avg  Change  in  Societal  Contribu3on    • 38%  recruited  directly  from  shelters   (Target  Employees):   $9,391• 23%  female   Average  Number  of  Target  Employees: 10• Average  age:  21   Current  Year  Cost  Savings  to  Society:   $93,910• 100%  unemployed  at  3me  of  hire  • 54%  receiving  social  assistance  at  hire   Cumula3ve  Cost  Savings  (prior  to  Y5): $191,170• 54%  been  involved  with  jus3ce  system   Total  Cost  Savings  to  Date: $285,080• 54%  did  not  complete  high  school   Cumula3ve  Societal  Payback  Period: 1.8    years   Cumula3ve  SROI: 285%        Sustainable  Livelihood  Outcomes  (sample)   Note:  ini3al  SCP  investment  =  $100,000  • 89    youth  in  total  have  been  hired  over  5   years   Employment  Outcomes  (sample)  • 100%  target  popula3on  recruited  from   shelters  able  to  get  out  of  shelter  system   • Increased  target/non-­‐target  staff  ra3o  to  83%     and  secure  independent  housing  within  6   • 69%  con3nue  to  work  at  TAC  (9)   months  of  employment  at  TAC   • 15%  moved  onto  mainstream  employment  in  • 85%  who  relied  on  income  support  through   window  cleaning  industry  (2)   social  assistance  at  3me  of  hire  able  to  get   off  and  stay  off     • 8%  went  on  to  post  secondary  educa3on  (1)   40
  41. 41. © Norm TasevskiAcumen Fund: social performancemeasurement in the investment process!•  Due Diligence –  Literature review: state of practice –  Estimate # of people served over the life of the investment –  Assess how delivery of those “outputs” compare (more or less favorably) to the “best alternative charitable option”•  During Deal Structuring –  Conversations on how to think about performance management over the life of the investment, not just “mandatory reports”•  Post-Investment –  Quarterly reporting – performance, capacity, strengths/weaknesses –  Semi-annual “forced ranking” across portfolio against investment criteria - financial sustainability, social impact at scale, breakthrough insights, and high-quality leadership - as well as actual performance to date and the investment’s potential for impact in the future•  Closed Investments –  Short “exit memo” looking at results generated, financial return, and lessons learned 41
  42. 42. © Norm TasevskiSimple Measures for Social Enterprise:Lessons from the Acumen Fund!•  Culture matters far more than systems –  Tolerance for / learning from failure•  If you build systems, start with a pencil and paper –  Start simple; technology is an enabler not the solution•  Think on the margin –  Performance is always relative to what you had been doing before (past), to what your competition did over the same time period (peers), and to what you should have done (projections)•  Count outputs and then worry about outcomes –  “the conclusions you can draw from these outputs may not be made with scientific rigor, but they can inform businesslike decisions and raise important policy questions”•  Don’t confuse information with judgment –  Balance qualitative and quantitative –  Use informed judgment, hold oneself accountable (to them) 42
  43. 43. © Norm TasevskiStep 3: Communicating YourSocial Impact! How? 43
  44. 44. © Norm TasevskiWhat did we learn? 44