Transcript HUD Social Enterprise Pilot

Business Plan
Introduction
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Presentation Outline
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Business plans for Social Entrepreneurs
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Why?
What for?
What?
Difference from regular plans
SE Business plan components
Q&A
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Why Business Planning?
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Management tool
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Links strategies to tactics
Grounded in reality
Responds to market forces
Many uses
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Most nonprofits lack knowledge of how
to prepare b-plans
Demanded by more donors
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“Failing to plan is planning to fail”
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What is a Business Plan?
A detailed presentation about your
organization’s (scaling) plans that
demonstrates how it will succeed in
financial terms AND the social impact
that it will create.
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A Road Map
To
Vision
Business plans chart
the course to realize
the organization’s
Social
Entrepreneur
vision.
Acquisition up
20%
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2 new senior
Staff hired
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Links
between
business &
citizen’s sector
Why do you Need a Business Plan?
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For the
investor/donor:
 Evidence of the
nonprofit’s ability
to conceive and
execute scale
 Articulates
financial needs and
uses of funds
Use – sales document
Communications tool
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For the social
entrepreneur:
 A planning
framework
 A management
tool for resource
allocation and
decision-making
Use – Management
and implementation
plan
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6
Purposes
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Planning Framework
Articulates vision and mission
Sets goals and objectives
Defines strategies and specific actions to
achieve objectives
Measures results
Communicates ideas, plans & social value
Projects necessary resources, expenses, &
revenues
Provides a basis for SOUND decisionmaking
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Business Plans vs. Proposals
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Business plans are:
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Flexible documents that
change in accordance
to market forces
Results-oriented
Market-driven
Project blueprint
Open - treats project as
going concern
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Proposals are:
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Fixed for the life of
the project or funding
period
Process-oriented
Donor-driven
Not usually used as
management plan for
project
Closed – treat
projects as timelimited
Anatomy of a Business Plan
Market
Research
Concept & Objectives
Vision
Human
Resource
Plan
Marketing
Plan
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Mission
Operations
Plan
Financial
Plan
Vision
Interrelationship
Mission
Objectives
Market Research:
Target Market
Competitors/external factors
Business Assessment
Operations
Plan
Marketing
Plan
Human
Resource
Plan
Financial
Financial
Plan
Plan
Financial
Contingency
Plan
Plan
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Strategies and Tactics
S
t
r
a
t
e
g
i
e
vision
Strategic Goals
s
tactics
tactics
Objectives
tactics
Objectives
tactics
Objectives
tactics
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tactics
tactics
tactics
Social Entrepreneur's Market
Social Market
 “Beneficiaries” of impact
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Competitors
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Client
Community
Environment
Public
Government
Role of subsidies in the
market
“Business” Market
 Demand
 Competitors
 Industry Dynamics
 Trends
 Barriers
 Opportunities
 Market Segments & Size
Collaborators
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Strategic alliances and
partners
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Who’s your “customer”
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Donors are
stakeholders to whom
social entrepreneur is
accountable for results
Clients are
“beneficiaries” of social
services or social
impact.
Customers are those
buying social enterprise
products and services.
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What’s your context?
Competition
Opportunities
Threats
Weaknesses
Collaboration
Strengths
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How attractive is your industry?
Barriers to Entry
Power of
Suppliers
Rivals
Substitutes
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Power of
Buyers
The Five Plans for All B-Plans
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Marketing
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Operations
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The people you need to execute your scaling plan
Finance
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Day-to-day functions of running your organization
Human Resources
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Getting products and services to your target market
Capital required to finance scaling activities
Contingency Plans
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What could go wrong and what will you do about it
if it does?
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Marketing Plan
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Target Market
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Marketing mix: 4 Ps
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Beneficiary/client needs/wants
Product
Promotion
Price
Place
On going market research
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SE Marketing Considerations
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What are you selling?
To whom are you “selling” your value
proposition?
Outreach component for the target population
and community?
Obligations to stakeholders—i.e. donors and
government? Partners or networks?
Pricing considerations for target group?
PR component to protect organization’s
reputation?
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Operations
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Managing service delivery while scaling
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Monitoring and measuring hard and soft
deliverables
Designing systems with capacity to grow
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transparency
Social Impact and Monitoring Systems
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Quality Assurance
Including managing and measuring time
Systems that collect and measure social impact
Customer and client satisfaction
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Human Resource Plan
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Management team
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Staffing and recruitment plan
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Incentives and reward systems
Governance
Capacity building plan
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Roles & responsibilities of various actors
Staff, institution, target group
Considerations for SE staffing duality (for
enterprises)
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Program and business
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Capacity Investment Choices
Which capacity investment improve enterprise productivity?
Productivity
Return on Investment?
$$$$
$
Job
hard skills soft skills credit/savings
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education
Capacity Building Plan
Capacity
Building
Method
Benefit to Enterprise/organization
Mission
On-the-job
training
Provide a job
Skilled labor
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Processing
skills
Training/TA
Improves productivity, product quality
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Inventory
tracking
Training/TA
Improves inventory management
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Soft skills
Training/
practice
Stabilizes work force
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Leadership
development
Training/
practice
Higher self-esteem, morale, productivity,
self- management
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Savings
program
Savings
service
Reduces risk aversion through financial
security
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Health
services
Health
program
linkage
Improved health = higher productivity
No
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Financial Plan
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Social Enterprise B-Plan
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Financial objectives
Budget
Resource Acquisition Plan
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Includes grants and gifts
Cash flow
Income Statement
Balance sheet
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Role of Income and Subsidy
Social Subsidy
Enterprise
Revenue
Subsidizes
Social costs
Breakeven AFTER
Social Costs
Investment
Enterprise Revenue
Breakeven Before
Social Costs
Social Expense
Business Expense
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Years
Financing & resource acquisition
Year 1
Prospect
Earned income
(sales)
Interest income
Parent organization
Grants
Gifts/contributions
Soft Loans
Commercial loans
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Year 2
Prospect
Risk Analysis & Contingency Planning
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Build capacity to make accurate
projections
Add in buffer for expenses
Use “what if…” scenarios
Sensitivity analysis for major decisions
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Major expense categories
Test business plan assumptions
Objectivity
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Planning the Plan:
Recommendations
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B-Plan Essentials
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Consensus and ownership
Appropriate participants
Adequate preparation time
Financial considerations
Relevant flexibility
Solid market research
Participatory methods (within limits)
Realistic (achievable) targets
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Planning 1-2-3
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Time spent convincing nonprofits merits of
B-Plans, is time well spent!
Include appropriate stakeholders.
Link human resource incentives to
achievement of B-Plan goals.
Make it official: celebrate the completion of
the Business Plan or important sections.
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Appropriate Participation
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Identify for which Business Plan
elements consensus must be reached
For each section clarify individual and
small group roles for output.
Set strict deadlines
Devise incentives to
meet deadlines
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Set Realistic Planning Targets
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Business planning takes weeks or
months and requires ample resources.
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Develop the Business Plan work plan,
including:
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deadlines, key people, financial resource
Plan on ample time and money for
research
Conservatism is the rule of thumb
- do not be overly optimistic with targets
Be flexible to changes
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Dynamic Process within Limits
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Business plan changes must be based on
sound business decisions.
Agree on Bplan elements that are
nonnegotiable.
Educate on the conditions that warrant
Bplan changes (market,
environmental/industry changes).
Schedule business plan reviews to discuss.
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Business Plan Components
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Executive Summary
Vision & mission statement
Organizational and Environmental Assessment
Market Competitive Analysis
Marketing Plan
Human Resources Plan
Operations Plan
Financial Plan
Risk Assessment and Contingency Plan
Supporting Documents
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33
Social Targets Require Brutal Reality
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Select impact measurements early and do
a baseline study
Build information system to collect and
measure impact.
Collect anecdotes evidencing social
impact.
Budget for social impact monitoring.
Timing and manner of social impact
dependant on vision and mission.
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Social Return and Impact
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“ Social Bottom Line” for social
enterprises.
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Social Return on Investment (SROI)
measures the social value the social
enterprise creates in financial terms as a
ratio of the investment.
Social impact measures qualitative and
quantitative social impact based on social
objective and type of organization
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Most nonprofits are accustomed to using this
type of measurement.
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E.g. social impact measures
Impact from livelihoods Org
Impact social service org
Asset accumulation
Improved education
Scale
Improved housing
Client income
Quality of diet
Job Creation
Access to health care
Skills acquisition
Increased autonomy
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Monetizing SE Value
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Enterprise Value = economic value of
the enterprise. Cash flow analysis of
business performance.
Social Value = direct demonstrable
cost saving and revenue contributions
Blended Value = enterprise value +
social value – debt
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Financial Projections
$$$
Social Enterprise
Breakeven Point
Private Business
Breakeven Point
SE Revenue
SE Expense
Business Expense
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Business revenue
Years
Double Bottom Line
Income Statement
Total Operating Expenses
Total Gross Revenue
NET PROFIT/LOSS BEFORE
SOCIAL COSTS
= Financial Bottom Line
Less Social Costs
= Social Bottom Line
NET PROFIT/LOSS AFTER
SOCIAL COSTS
= Double Bottom Lines
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Subsidy in Income Statement
Income Statement
Gross Profit
Income earned through
enterprise
Operating Expenses (before taxes)
Costs related to operating
enterprise
NET PROFIT/LOSS (before taxes)
Income less expenses
Subsidy
Less Grants, donations,
gifts
NET PROFIT/LOSS AFTER SUBSIDY
Total lost or gained after
subsidy
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