Funding Outside the Box with Charlotte Keany of CNM

Copyright © 2009 — Community Wealth Ventures, Inc. — 1

Funding Outside the Box: Earning Revenue through Social Enterprise

Presented by:Charlotte Keany, Director of Consulting

Center for Nonprofit ManagementDallas, Texas

September 8, 2011


Welcome and Introductions

Partnership


About The Center for Nonprofit Management (CNM)

Founded in 1980Leading Management Support Organization Every year we serve:

– 650 members– 1,300 agencies per year– 100 consultations – 4,000 participants at our Education Seminars– 1,250 Job placement ads


About Community Wealth Ventures (CWV)

Wholly owned, for-profit subsidiary of Share Our Strength, the nation's leading anti-hunger and anti-poverty organizations

12+ years experience in nonprofit sustainability, with core expertise in social enterprise and social franchising

Consulting services to 200+ nonprofit organizations and 50+ foundations


Looking for Something Different?


Objectives

Learn why and how organizations pursue community wealth (aka social enterprise)

Increase knowledge of the benefits and risks of social ventures

Provide examples of what other organizations are doing

Explore your organization’s assets

Generate a list of community wealth opportunities for your organization


Social Enterprise Process

Today Post-workshop

1.

Asset

Identification

2.

Assets into

Opportunities

3. Opportunity Screening

4. Feasibility

Assessment

5. Select

One Opportunity

6. Business Planning

Implementation


What is Community Wealth?

Revenues generated by profitable or self-sustaining enterprises to promote social change


What is Different About Community Wealth?

Community Wealth is Not… Community Wealth is…

■ Traditional fundraising

■ Grant money

■ Gifts/donations

■ A “quick fix” out of a crisis

■ For everyone

■ Generating sustainable new resources to support mission

■ Engaging market forces to work for the nonprofit sector

■ Devising new ways to leverage existing assets

■ Allowing for greater flexibility by bringing in unrestricted revenue

■ Decreasing dependence on the external funding community


Community Wealth Examples


What Factors are Necessary to Launch a Successful Community Wealth Enterprise?


Examples of Community Wealth Enterprises Based in North Texas Christian Community Action

• Venture: Expansion of ReSale Thrift Shop

Translation & Interpretation Network (A business of Catholic charities Diocese of Fort Worth, Inc.)

• Venture: Interpretation services, translation services, qualify and train professionals in interpretation services

Autism Treatment Center• Venture: Autism Diagnostic &

Therapy Rehabilitation Agency

http://www.ccahelps.org/index.php


Field Study of Social Enterprise

Source: Community Wealth Ventures Field Study of Social Enterprise, 2008. Survey sent to 5,965 nonprofits, 1,008 responded and 740 completed survey.

1. Workforce Development

2. Housing

3. Community & Economic Development

4. Education

5. Health

1. Education & Training

2. Retail/Thrift Shop

3. Consulting Services

4. Food Services/Catering

5. Art Venture

Top 5 Mission Areas of Nonprofits Operating a Social Enterprise

Top 5 Social Enterprise Venture Types

The Center for the Advancement of Social Entrepreneurship at Duke University, Community Wealth Ventures, and the Social Enterprise Alliance, with support from REDF, conducted the largest national survey to date about Social Enterprise with a diverse set of nonprofit organizations.


Clarity of Social Enterprise Focus

Mission Profit

A B C

Mission Focus – A venture that will

need ongoing philanthropic support

but meets key mission objectives.

Self-Sustainable Focus – A venture that generates enough

income to make it self-sustaining.

Profit Focus – A venture that

generates profits which can be re-invested in the

venture or provide unrestricted funding to

the parent organization.


Field Study Findings: Mission/Revenue Relationship

For existing social enterprises, they are equally motivated by mission and revenue. Interestingly, for those considering social enterprises, they are slightly more motivated by revenue.

Solely to generate new sources of revenue

Primarily to generate new source of revenue

Balance of Revenue/Mission

Primarily to achieve greater mission

Solely to achieve greater mission impact

0%

10%

20%

30%

40%

50%

60%

Operating Considering


Field Study Findings: Number of Social Enterprises per Organization

Almost half of organizations that operate a social enterprise have two or more social enterprises.

54%

21%

11%

5%8%

1 2 3 4 5+

Source: Community Wealth Ventures Field Study of Social Enterprise,, 2008.


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What Are The Potential Risks?


Stakeholder Engagement & Managing Risks

The Chorus of Nay-Sayers

“It’s selling out.”

“Nonprofits are charities and should only focus on charitable work.”

“We’ll loose foundation/donor support.”

“It will put the organization’s tax-exempt status at risk.”

“You don’t know anything about how to run a business.”

“It’s wrong for nonprofits to compete against businesses.”


Is Community Wealth Legal?

Nonprofits can launch community wealth enterprises and maintain 501c3 tax status

Income Related to Exempt Purposes– No limit on amount of revenue

Income from Unrelated Activities– Taxable as “unrelated business taxable income” (UBTI)

There is no standard legal structure

Consult an attorney to understand the most appropriate legal structure and definition of UBTI for your organization


Field Study Findings: Common Legal Structures

Most organizations operate social enterprises as a division of the parent organization.

Division or De-partment of Orga-

nization60%

Nonprofit subsidiary

8%

For-profit subsidiary

14%

Joint venture5%

Franchise1%

Other11%



Field Study Findings: Sources of Starting Capital for Social Enterprises

For existing social enterprises, a foundation grant is the most commonly used source of capital for starting ventures.

Donati

on: In

dividu

al

Donati

on: C

orpora

teEqu

ity

Grant: F

ound

ation

Grant: G

overn

ment

Loan

: Com

mercial/

Bank

Loan

: Fou

ndati

on

Loan

: Gov

ernmen

t

Organiz

ation

al Res

erves

Genera

l Ope

rating

Funds

Othe

r

No Cap

ital S

ecure

d0%

10%

20%

30%

40%

50%

60%



Step 1 – Identifying Assets

1. Asset

Identification

2. Assets into

Opportunities


4. Feasibility Assessment

5. Select One

Opportunity

6. Business Planning Implementation


ASSETS

Things You HAVE:

Physical assets Location/space Distribution/sales

network Brand/reputation Patent Access to desired

resource Relationships

(membership, suppliers, etc.)

Things You DO:

Continuously innovate

Manage information Produce low cost

goods Sustain privileged

assets

Things You KNOW:

Understanding of specific issue

Process expertise Market expertise People/key

decision makers

Assets Can Be Things You Have, Do or Know


A Wide Range of Assets Can Be Leveraged In Community Wealth Ventures

Chapel and Gardens

Attendant Care Child Abuse Prevention

HAVE DO KNOW

http://www.achservices.org/index.php


Asset Identification Can Be a Matter of Perspective

Consider this example. . .


How: Individually and In PairsTime: 20 minutes

Identify your organization’s keyassets that could be leveraged into potential opportunities

Assets can be things you have, do, or know, and are often a matter of perspective…so get creative

Once you’ve brainstormed your own assets, share them with a partner to gather more ideas

Greyston BakeryA venture of

Greyston Foundation

Exercise #1: Asset Identification


PeopleWhat people are particularly valuable to the organization? (name recognition, skill sets, etc)

1.

2.

3.

4.

1.

2.

3.

4.

Audience/Special RelationshipsWhat are the key strengths of the organization’s audience (e.g.., size, demographics, psychographics, loyalty, etc). What other key relationships does it have?

1.

2.

3.

4.

Programs/Proprietary Content/EventsWhat are the key programs or content that the organization has at its disposal?

Skills/ExpertiseWhat kinds of skills and expertise does the organization’s staff have? What about the Advisory Board? Volunteers?

Tangible Assets/FacilitiesWhat does the organization own or have the right to use? Real estate? Program related equipment? Collections, stock, materials?

ReputationWhat does the organization’s name mean in the community? To whom?

1.

2.

3.

4.

1.

2.

3.

4.

1.

2.

3.

4.

Asset Identification Debrief


Step 2 – Turning Assets into Opportunities

1. Asset

Identification

2. Assets into

Opportunities


4. Feasibility Assessment

5. Select One

Opportunity


Implementation


Evaluating Your Assets

Is the asset unique?

Who would value the asset?

How valuable is the asset?

What is the customer’s willingness to pay?

Is the asset sustainable over time?


How: Individually and in PairsTime: 20 minutes

1. Review lists of assets and brainstorm potential opportunities. List each opportunity and its corresponding asset (10 minutes)

- Is the asset unique?- Who would value the asset?- How valuable is the asset?- What is the customer’s willingness to pay?- Is the asset sustainable over time?

2. Share ideas and brainstorm new ones (10 minutes per person/organization)

Exercise #2: Leveraging Assets Into Opportunities


Potential Opportunities - Debrief

10

11

12

13

14

15

16

17

18

1

2

3

4

5

6

7

8

9


Today Post-workshop

1.

Asset

Identification

2.

Assets into

Opportunities


4. Feasibility

Assessment

5. Select

One Opportunity


Implementation

Next Steps


Ease of Implementation

Expected complexity of the project

Availability and skills of current staff to manage the new opportunity

Ability to recruit other staff quickly

Access to necessary capital

Financial / Market Potential

Market demand and estimated size of the market

Start-up costs

Level of competition

Expected profit margin

Expected growth rate

Opportunity Screening Goal: To Choose The Top Three Ideas For Further Analysis


Ease of Implementation

Financial/Market Potential

Easy

HighLow

Hard

Case Study – CCDoFWExample: Opportunity Screening


A high-level assessment of the market opportunity, profitability, and fit with the organization for a potential business venture

Informs a “Go or No Go” decision on a business opportunity using impartial market research and internal assessments

What is a Feasibility Assessment?


Feasibility: External & Internal Factors

Internal Factors

External Factors


External and Internal Factors

• Market Size – How big is the current market? Is it growing or contracting?

• Customers – Who are the key customers? What are they willing to pay?

• Competitors – Who are the key competitors? How do they differentiate themselves?

• Margins – What are current vendor’s margins in the market? What is their profit?

• Barriers to Entry – How difficult will it be to enter this market? What are the barriers?

External Factors


External and Internal Factors

• Internal Support – Will your organization enthusiastically support this opportunity?

• Buy-In – Can you secure board and staff buy-in?• Fit – How well does the opportunity fit with your organization’s skills

and expertise? Will you need to obtain outside expertise? • Competitive Advantage – Do you have a potential competitive

advantage in the market?• Initial Investment – What investment is needed to launch and grow

the opportunity?• Risks – What are the risk factors? What are ways to mitigate these

risks?• Timing – How long will it take to make the opportunity a reality? Will

you have sufficient financial resources to support the opportunity until then?

Internal Factors


Each opportunity is ranked by the following criteria…

CriteriaOpportunity

A B C

Market Size: How large is the potential customer base?

Market Outlook: How favorable are the trends that are affecting the marketplace?Favorable Competitive Factors: How competitive is the market?

Ease of Entry: How easy will it be to launch a venture?

Likely Competitive Advantage: How easy will it be to differentiate your services?Market Profitability: What are the costs and potential revenues?

Fit with Mission: How closely does the venture align with your mission?

Fit with Skills/Expertise: How closely does the venture align with staff capabilities?Fit with Material Resources: How closely does the venture align with facilities and financial resources?Ability to Manage Risk: How easy will it be to protect against unnecessary risk?OVERALL ATTRACTIVENESS

Internal Factors

Internal/ External

External Factors


Business Plan Goal: To Prove That Your Venture Will Be Successful

Risk Analysis

Marketing Plan Operational Plan Management &

Personnel Plan Financial Plan

BusinessPlan

Industry Analysis Competitive Analysis

Executive Summary

Intro &Summary Market

Contingency Strategy


Implementation: Keys to Success

A Strategic Direction Sufficient planning behind it Clearly defined goals Mission alignment with the

parent organization

For more information download :

Powering Social Change: Lessons on Community Wealth Generation for Nonprofit Sustainability

at www.communitywealth.com/resources_tools.htm

Human & Financial Capital A champion or leader that passes the

“shower test” Support from the entire staff and board Appropriate staffing Autonomy for quick decision making Adequate capitalization

The venture should have:


Social Enterprise Alliance North Texas Chapter

What is the Social Enterprise Alliance?The Social Enterprise Alliance is the only member organization in North America to bring together the diverse field of social enterprise. It serves as advocate for the field, hub of information and education, and builder of a vibrant and growing community of social enterprises.


Opportunities to Learn MoreResources

For more information on Social Enterprise download :

Powering Social Change: Lessons on Community Wealth Generation for Nonprofit

Sustainability at www.communitywealth.com/resources_tools.htm

To Learn More about Social Innovation Programs offered by the Center for Nonprofit Management and Community Wealth Ventures visit: http://www.communitywealth.com/CWC_North_Texas.html

Charlotte Keany

Determine resources - sea and check antohy's email


Questions?Charlotte Keany

214-826-3470 ext. [email protected]

www.cnmdallas.org