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Social Enterprise: What is it and how can my organization consider it?
Break for Lunch, December 3, 2009
Debbie McKeon, Executive Director NorthSky Nonprofit Network© Copyright 2009, NorthSky Nonprofit Network. All rights reserved.
Acknowledgements
Social Enterprise AllianceFieldstone AllianceLaPiana & AssociatesCenter for Nonprofit ExcellenceNational Center for Nonprofit Enterprise
Workshop Objectives• Define social enterprise and how nonprofits can use it• Identify organizational capacities that enhance success• Review tools to develop social enterprise options
– Revenue diversification matrix– Business plan– Expert advice – Strategic structuring or restructuring
• Describe how to launch a social enterprise • Define potential risks to your nonprofit
What is social enterprise?An organization or venture within an organization
that advances a social mission through entrepreneurial, earned income strategies (Social
Enterprise Alliance)• For purposes of today’s discussion, we will focus
on a nonprofit organization considering social enterprise
• It begins as a way of thinking. . . . .
Examples of Social Enterprises
Chicago Children’s Choir Ben & Jerry’s Franchise
Good Grief Center: Good Grief Care Package
Central Dallas Ministries-Dallas Housing AuthorityCurriculum Sales, Education & Training, Publishing
Org. Capacities that enhance successLeadership: focused, positive, strong, excellent communicator, ability to evaluate objectively
Adaptive Ability: innovative, inspire creative thinking, measured risk-taking
Management: good systems, processes, lines of communication- organization is functioning well
Technical: Program/service expertise, execute well
Tools to Develop Social EnterpriseProcess ToolsBrainstorm possibilities, evaluate org. assets, develop criteria for successful social enterprise, rate options
Revenue Diversification Process developed by Fieldstone Alliance, NorthSky approved administrator
Develop business model for each social enterprise option
CFNE/NECE Business Planning Tools-in NS Resource Center
Determine legal and tax implications-strategic structuring or restructuring
Lawyer, CPA-bring outline of business plan
Better the information-more tailored the advice
Launch social enterprise: anticipate start up characteristics
Utilize internal systems and tools and templates in NS Resource Center to minimize start up needs
Operate-evaluate-modify Evaluation tools, strategic initiatives process
Brainstorm optionsConsider organization’s assets
• Intellectual property-license curriculums• Systems expertise-TREAT• Management expertise-manage another entity• Facilitates & equipment-wind generator/cell tower• Brand/ reputation-social marketing• Human assets: staff, board, volunteers, supporters,
clients-market access• Mission assets-healthy snack kiosk in patient waiting
area
Evaluate SE options
Determine criteria to compare options
• Mission alignment• Reliability of revenue stream• Existing talent and availability• Cost to launch• Risk assessment• Impact on existing organization• Control• Real Demand• A Market
Revenue Diversification MatrixRevenue Source 1 2 3 4 5 6 7 Avg Rank
Earned Income
Michigan XXX sales 2 0 -1 2 2 1 -1 1.1
National XXX sales 2 2 -2 1 2 2 2 1.7
Sales of other curricula to schools2 0.0
Online educational programs3 2 1 0 2 2 2 0 2.0
Pre-school program 0.0
Evaluation & Assessment (includes scantron)4 0.0
Membership Revenues
Core member dues (incl. PE teachers) 2 1 0 -1 1 1 0 0.9
Affiliate member dues 0.0
Contributed Income
Corporate/Commodity contributions & sponsorships 1 2 0 0 2 1 1 1.4
Foundation grants for specific programs 0.0
Public Sources
Federal or state earmarks 0.0
Dedicated tax source revenues 0.0
Misc Revenues
Debt (incl. PRIs) 0.0
Leases/subleases 0.0
Quasi-equity (tax credits, EQ2s, etc) 0.0
Develop the business modelBusiness planning tools: Business Plan
• is a comprehensive financial document that justifies the proposed venture by introducing its economic impact on the organization
• Has a narrower, more specific, focus than strategic plan-analyzes financial viability
Why do Business Planning?Creating a business plan• helps to clarify whether the proposed
venture makes sense before risking financial and/or people resources
• can serve many functions, from providing a comprehensive outline on implementing a new service to utilizing the plan to obtain funding for a social enterprise
Business Planning Tools
• www.northskynonprofitnetwork
Resource Center
Sustainability and Planning
Business Planning Tools
Venture Plan Template
Seek Legal & Tax Advice• Explain intended business model-share your preliminary venture
business plan• Discuss
– Mission compatibility– Start up capital and anticipated revenue model– Likelihood of net revenues– Risk management needs– The motive/s for initiating the venture-diversify existing
charitable organization’s revenues, fulfill community need, leverage expertise of existing organization
Strategic Structuring/RestructuringTypes of Structures• Contractual Relationship
LeaseManagement AgreementCorporate SponsorshipCommercial Co-Venture
• Active Partnership or Co-Venture, L3C• Passive Investment in LLC, L3C or
Partnership• Nonprofit forms a subsidiaryNote: NorthSky does not provide legal advice. Seek legal and tax counsel to determine the appropriate structure.
Launching a Social Enterprise •Recognize and accommodate characteristics of start up in life cycle stage•Leverage existing resources to bridge work during start up: systems, processes, human capital•Recognize the amount of work it will take to launch a new initiative•Work the business plan—critical to have well defined plan•Prior to the launch, commit to periodic evaluation and process for appropriate modification
Launching a Social Enterprise •Utilize tools and templates that represent best practices and successful strategies•Visit the NorthSky Resource Center to find them
www.northskynonprofitnetwork.org•Meet with NorthSky counselors to get connected to resources specific to your needs•Engage in strategic planning to achieve the business plan goals
Operate, Evaluate, Modify •Start up is challenging for all businesses•Increase potential for success by properly capitalizing the venture•Very unlikely all aspects of business plan will perform as intended-key is to recognize when change is needed and to act strategically•The pace you can adapt influences success: recover from failure=adapt to succeed•Business planning is continuous process
Some lessons learned•Just because it is a good business opportunity doesn’t mean your organization should be doing it•Plan for impact the new venture will have on the existing organization•Assure the appropriate expertise exists within the team launching the SE•Be prepared to work very hard
What are some of the risks?• Unrelated Business Income Tax
• Risk management exposure• Partnership Taxation/controlled corporation
• Negative affiliation- - - brand/reputation
• Risk to charitable status
• Actually drains capacity of existing org. instead of enhancing
• Mission drift
Shared experiences, Questions
•Your experiences
•Questions
Thank You
Contact NorthSky at:www.northskynonprofitnetwork.org231.929.3934
Debbie McKeon Extension: [email protected]
NorthSky Nonprofit Network,
a program of:
Special Thank you to: