Business Plan Introduction

1. Business PlanIntroduction

2. Presentation Outline • Business plans for Social Entrepreneurs • Why? • What for? • What? • Difference from regular plans • SE Business plan components • Q & A

3. Why Business Planning? • 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”

4. 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.

5. A Road Map To Vision 2 new senior Staff hired Social Entrepreneur Acquisition up 20% 25 Links between business & citizen’s sector Business plans chart the course to realize the organization’s vision.

6. 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 Why do you Need a Business Plan?

7. 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

8. 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 Business Plans vs. Proposals

9. Anatomy of a Business Plan Concept & Objectives Market Research Vision Human Resource Plan Mission Operations Plan Financial Plan Marketing Plan

10. Interrelationship Vision Mission Objectives MarketResearch: Target Market Competitors/external factors Business Assessment Operations Marketing Plan Plan Human Resource Plan Financial Plan Financial Plan Contingency Plan Financial Plan

11. Strategies and Tactics vision Strategies Strategic Goals Objectives Objectives Objectives tactics tactics tactics tactics tactics tactics tactics tactics

12. 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

13. Donors are stakeholders to whom social entrepreneur is accountable for results Clientsare “beneficiaries” of social services or social impact. Customers are those buying social enterprise products and services. Who’s your “customer” client Community Donor Consumer Customer

14. What’s your context? Competition Opportunities Threats Weaknesses Collaboration Strengths

15. How attractive is your industry? Barriers to Entry Power of Suppliers Rivals Power of Buyers Substitutes

16. 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?

17. Marketing Plan • Target Market • Beneficiary/client needs/wants • Marketing mix: 4 Ps • Product • Promotion • Price • Place • On going market research

18. 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?

19. 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

20. 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

21. Capacity Investment Choices Which capacity investment improve enterprise productivity? Productivity Return on Investment? $$$$ $ Job hard skills soft skills credit/savings education

22. Capacity Building Method Benefit to Enterprise/organization Mission Capacity Building Plan 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

23. Financial Plan • Social Enterprise B-Plan • Financial objectives • Budget • Resource Acquisition Plan • Includes grants and gifts • Cash flow • Income Statement • Balance sheet

24. Role of Income and Subsidy Social Subsidy Enterprise Revenue Subsidizes Social costs BreakevenAFTER Social Costs Breakeven Before Social Costs Investment Years Enterprise Revenue Social Expense Business Expense

25. Financing & resource acquisition

26. 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

27. Planning the Plan: Recommendations

28. 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

29. 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.

30. 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

31. 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

32. 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.

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

34. 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.

35. 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.

36. E.g. social impact measures

37. 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

38. Financial Projections $$$ Social Enterprise BreakevenPoint Private Business Breakeven Point Years SE Revenue SE Expense Business Expense Business revenue

39. Double Bottom Line

40. Subsidy in Income Statement