Business Model Primer

Social Impact, October 2007

Business Model Primer

Kim AlterVirtue Ventures LLC

Social Impact October 2007

What is a business model? A conceptual tool that describes the value

an organization/enterprise offers to its customers/clients and that expresses the architecture of the firm/organization and logic for creating, marketing, and delivering this value and relationship to capital, and how together to generate sustainable revenue streams.


Planning Process

Strategic Strategic ObjectivesObjectives

StrateStrategic gic

GoalsGoals

BusinessBusinessModelModel

BusinessBusinessPlanPlan


Business Model Building BlocksProduct Value Proposition What value do the products create for the customer/client?

ClientCustomer Interface

Target Market Distribution Channels RelationshipDynamics

Who is customer / client? How can they be divided? How can we deliver value at appropriate cost?

Special needs or considerations to deliver products and services client/customer segments?

Infrastructure Management

Value Configuration Capacity

Partnerships

How is value delivered? What is the structure of the value chain?What are the organization strongest capabilities and strategic assets?Who are the partners/alliances? How are these relationships structured?

Financial and Impact Aspects

Cost structure

Returns

Revenue Model

How much will it cost? How will costs be broken down?

Benefits/returns to stakeholders? How quantified?How do we cover our costs/meet financial objectives to do this business?


Model Building Blocks Informs:

Value proposition Product and services features/design

Target customer Market opportunity

Distribution channel Marketing/outreach and sales model

Customer Relationships Brand and Reputation

Value configuration Operating model

Core competencies and capabilities Organizational culture & management model

Partnership Partners and partnership model

Revenue model Financial sources and flows

Returns Social impact model and metrics

Cost structure Capital requirements and uses


Target Market: Refugees Demographics

Economically active Weak social ties Vulnerable

Few assets Inability to repay

Psychographics Transient Risk adverse Extra burdens

Geographic Refugee camps Poor or degraded market & infrastructure


Value PropositionEnable economic

security and create a sense of community, trust, and physical and emotional safety throughout transition

Financial Services Features Grants and training before

loans Monitoring Mentoring Certificates – credit rating Support to start up micro-

businesses Transparent processes Continue service Branding

Product Value Proposition


Customer/Client Interface

Social Enterprise

Client Worker

MarketClient Producer

ClientBeneficiary

Client Consumer

Client Community Environment

Public


Client/Customer Interface:Relationship Dynamics

Business Venture Idea Evaluation Form

Venture Idea(Rate according to ability to fulfill criteria)

(Definitely will not meet criteria) (Definitely will meet criteria)

CriteriaJanitorialServices

AssemblyBusiness

LaundryServices

Restaurant CommercialCopy

CommercialBakery

Range of skill requirements –mostly low skill jobs

+2 +1 +2 +1 +2 0

Range of full time and parttime jobs – mostly part time

+2 +2 +2 +2 +2 0

Variety of tasks +2 0 +1 +2 +1 +2

High proportion of repetitive,predictable tasks

+2 +2 +2 -1 +2 +1

Environment that managementcan control

+2 +2 +2 -1 +2 +1

Daylight-hours jobs +1 +2 +2 0 +1 0

Monday through Saturday +1 +2 +1 0 +1 +1

Organized as supervisedteam/crew work

+2 +2 +2 0 +2 0

Room for quality checks andcontrols – time to correct formistakes

+2 +1 +1 -2 +1 0

Minimal deadline stress +2 0 +1 -2 0 0

Minimal seasonal layoffs +2 0 +1 0 +1 -1

Leads to living wage work +2 0 +1 0 +1 +2

Total Score: +22 +14 +18 -1 +16 +6

-2 -1 +10 +2


Management InfrastructureValue chain structure and Opportunity

ProcurinProcuring g

SuppliesSupplies

EmployinEmploying g

WorkersWorkers

DesigninDesigning g

Product Product or or

ServiceService

ProduciProducing ng

Product Product or or

ServiceService

MarketiMarketing to ng to TargetTarget

Fair Fair TradeTrade

Dis-Dis-enfranchiseenfranchised Groupsd Groups

DeliveriDelivering ng

EducatioEducationn

Green Green TechniqueTechnique

ss

Micro-Micro-financefinance

Adapted from Dees (2002)


Management Infrastructure Value Configuration

CCC CCHN

CouncilConnections

• 20 Clinic Members• Established 25 Years Ago (Non–Profit)

• 13 Clinic Members• Established 5 Years Ago (Non–Profit)

• 420 Clinic Members

• Established 18 Years Ago

(For–Profit)

Practice Management

Managed Care Contracting

Quality Management

Technical Services Organization

Pharmacy Lab Services

Med/Surg Supplies

Office Supplies

Service Lines

Target PopulationCustomer * Social Impact

FinancialViability


Financial Aspects

Years Enterprise Revenue Social Expense Business Expense

Breakeven AFTERSocial CostsBreakeven Before

Social Costs

Social Costs

Business Expenses

EnterpriseRevenue Subsidizes Social costs

ProfitFor biz & programinvestment


Financial Aspects Cost Structure:subsidies

Volunteer time/expertise Infrastructure Overhead and back office Professional fees Staff time spent on enterprise and allocated to

other budgets Grants that cover social service costs or

subsidize service prices R&D


Employment Model

MarketOrganization Clients

Social Impact Financial

Sustainability

ProductProduct


Entrepreneur Model

Market

Social Impact

Client Organization

FinancialSustainabil

ity

ProductProductLoansLoans


Fee-For-Service Model

Services

Organization

Sustainability

Clients

Social Impact


Market Intermediary Model

Financial

Sustainability

Social Impact

ClientsOrganization

Market


Service Subsidization Model

Social ImpactFinancial Sustainability

OrganizationClients

Market

Services

Social ImpactClients


Organizational Support Model

Social Impact

Organization

Clients

Subsidiary

Foundation


ity


ity


Cooperative

Organization

Sustainability

Internal Clients Market Social

Impact

ExternalMarket

Social Impact, October 2007

Social Value Added

In the business model


Somers, Shaping the Balanced Scorecard for use in UK Social Enterprises, “Social Enterprise Journal”


Somers, Shaping the Balanced Scorecard for use in UK Social Enterprises, “Social Enterprise Journal”


Business Model FRAMEWORKProduct Value Proposition What value do the products create for the customer/client?

ClientCustomer Interface

Target Market Distribution Channels RelationshipDynamics

Who is customer / client? How can they be divided? How can we deliver value at appropriate cost?

Special needs or considerations to deliver products and services client/customer segments?

Infrastructure Management

Value Configuration Capacity

Partnerships

How is value delivered? What is the structure of the value chain?What are the organization strongest capabilities and strategic assets?Who are the partners/alliances? How are these relationships structured?

Financial and Impact Aspects

Cost structure

Returns

Revenue Model

How much will it cost? How will costs be broken down?

Benefits/returns to stakeholders? How quantified?How do we cover our costs/meet financial objectives to do this business?

Documents

Business Model Primer