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Social ImpactAugust 2007
Business PlanIntroduction
August 2007
Hyderabad, India
Social ImpactAugust 2007
Presentation OutlinePresentation Outline Business plans for Social Entrepreneurs Why? What for? What?
Difference from regular plans SE Business plan components Q & A
Social ImpactAugust 2007
Management tool Links strategies to tactics Grounded in reality Responds to market forces Many uses
Most nonprofits lack knowledge of how to prepare b-plans
Demanded by more donors “Failing to plan is planning to fail”
Why Business Planning?
Social ImpactAugust 2007
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.
Social ImpactAugust 2007
A Road Map
Business plans chartthe course to realize the organization’s vision.
To Vision
2 new senior Staff hired
25Links
betweenbusiness &
citizen’s sector
Social Entrepreneur Acquisition up
20%
Social ImpactAugust 2007 6
Why do you Need a Business Plan?
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
For the social entrepreneur: A planning framework
A management tool for resource allocation and decision-making
Use – Management and implementation plan
Social ImpactAugust 2007
Purposes 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 decision-making
Social ImpactAugust 2007
Business Plans vs. Proposals
Business plans are: Flexible documents
that change in accordance to market forces
Results-oriented Market-driven Project blueprint Open - treats
project as going concern
Proposals are: 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 time-limited
Social ImpactAugust 2007
Anatomy of a Business Plan
Vision
Mission
Marketing Plan
Operations Plan
Human Resource
Plan
FinancialPlan
Concept & ObjectivesMarket Research
Social ImpactAugust 2007
InterrelationInterrelationship ship
Mission
Objectives
Market Research:Target Market
Competitors/external factorsBusiness Assessment
MarketingPlan
OperationsPlan
FinancialPlan
HumanResource
Plan
Vision
FinancialPlan
FinancialPlan
ContingencyPlan
Social ImpactAugust 2007
Strategies and Tactics
Strategic Goals
Objectives Objectives Objectives
visionStrategies
tactics tactics tactics tactics tactics tactics
tacticstactics
Social ImpactAugust 2007
Social Entrepreneur's Market
Social Market “Beneficiaries” of impact
Client Community Environment Public Government
Competitors Role of subsidies in the market
Collaborators Strategic alliances and partners
“Business” Market Demand Competitors Industry Dynamics Trends Barriers Opportunities Market Segments & Size
Social ImpactAugust 2007
Who’s your “customer” 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.
Social ImpactAugust 2007
What’s your context?
Opportunities
Threats
Strengths
Competition
WeaknessesCollaboration
Social ImpactAugust 2007
How attractive is your industry?
Power ofSuppliers
Power ofBuyers
Substitutes
Barriers to Entry
Rivals
Social ImpactAugust 2007
The Five Plans for All B-Plans
Marketing Getting products and services to your target market
Operations Day-to-day functions of running your organization
Human Resources The people you need to execute your scaling plan
Finance Capital required to finance scaling activities
Contingency Plans What could go wrong and what will you do about it if it does?
Social ImpactAugust 2007
Marketing Plan
Target Market Beneficiary/client needs/wants
Marketing mix: 4 Ps Product Promotion Price Place
On going market research
Social ImpactAugust 2007
SE Marketing Considerations
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?
Social ImpactAugust 2007
Operations Managing service delivery while scaling
Quality Assurance Including managing and measuring time
Monitoring and measuring hard and soft deliverables
Designing systems with capacity to grow transparency
Social Impact and Monitoring Systems Systems that collect and measure social impact
Customer and client satisfaction
Social ImpactAugust 2007
Human Resource Plan Management team
Roles & responsibilities of various actors Staffing and recruitment plan
Incentives and reward systems Governance Capacity building plan
Staff, institution, target group Considerations for SE staffing duality (for enterprises)
Program and business
Social ImpactAugust 2007
Capacity Investment ChoicesProductivity
Return on Investment?
$Job hard skills soft skills credit/savings education
$$$$
Social ImpactAugust 2007
Capacity Building PlanCapacity
Building Method Benefit to Enterprise/organization Mission
On-the-job training
Provide a job Skilled labor
Processing skills
Training/TA Improves productivity, product quality
Inventory tracking
Training/TA Improves inventory management
Soft skills Training/practice
Stabilizes work force
Leadership development
Training/practice
Higher self-esteem, morale, productivity, self- management
Savings program
Savings service
Reduces risk aversion through financial security
Health services
Health program linkage
Improved health = higher productivity No
Social ImpactAugust 2007
Financial Plan Social Enterprise B-Plan
Financial objectives Budget Resource Acquisition Plan
Includes grants and gifts Cash flow Income Statement Balance sheet
Social ImpactAugust 2007
Role of Income and Subsidy
Years Enterprise Revenue Social Expense Business Expense
Breakeven AFTERSocial Costs
Breakeven Before Social Costs
Social Subsidy
Investment
EnterpriseRevenue Subsidizes Social costs
Social ImpactAugust 2007
Financing & resource acquisition
Year 1 Prospect
Year 2
Prospect
Earned income (sales)
Interest income
Parent organization
Grants
Gifts/contributions
Soft Loans
Commercial loans
Social ImpactAugust 2007
Risk Analysis & Contingency Planning
Build capacity to make accurate projections
Add in buffer for expenses Use “what if…” scenarios Sensitivity analysis for major decisions Major expense categories
Test business plan assumptions Objectivity
Social ImpactAugust 2007
Planning the Plan: Recommendations
Social ImpactAugust 2007
B-Plan Essentials Consensus and ownership Appropriate participants Adequate preparation time Financial considerations Relevant flexibility Solid market research Participatory methods (within limits)
Realistic (achievable) targets
Social ImpactAugust 2007
Planning 1-2-3 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.
Social ImpactAugust 2007
Appropriate Participation 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
Social ImpactAugust 2007
Set Realistic Planning Targets
Business planning takes weeks or months and requires ample resources. Develop the Business Plan work plan, including:
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
Social ImpactAugust 2007
Dynamic Process within Limits
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.
Social ImpactAugust 2007 33
Business Plan Components• 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
Social ImpactAugust 2007
Social Targets Require Brutal Reality
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.
Social ImpactAugust 2007
Social Return and Impact
“ Social Bottom Line” for social enterprises.
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 Most nonprofits are accustomed to using
this type of measurement.
Social ImpactAugust 2007
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
Social ImpactAugust 2007
Monetizing SE Value 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
Social ImpactAugust 2007
Financial Projections
SE Revenue SE Expense Business Expense Business revenue
$$$
Years
Social EnterpriseBreakeven Point
Private Business Breakeven Point
Social ImpactAugust 2007
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
Social ImpactAugust 2007
Subsidy in Income Statement
Income StatementGross 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