Sustainability

1. Sustainability Part Five

3. Social Impact Financial Viability Double Bottom Line Social Enterprises must balance their social and financial objectives

4. SE Earned Income Strategies • Fee-for-Service • Fees that paid directly by clients and beneficiaries such as tuition, housing, clinical services, interest on loans (microcredit). • Fees may also come from a third party who is paying for services for the client or beneficiary. The third party may include: a donor, public welfare from the state, or nonprofit insurance fund • Sales • social enterprises may sell products, for example handicrafts made by clients or fresh fruit grown by small holder farmers. Services rendered by clients such as janitorial or landscaping done by mentally disabled people.

5. Program – Related Revenue

6. Revenue model • What is the revenue model of your SE? • What is the social purpose of your enterprise? • What type of impact are you trying to achieve? • Who benefits and how? • What products or services are you selling? • Who are your customers? • How is your social enterprise positioned in the market and community? • Diagram your SE revenue model

7. Financial Management & Accounting What do you think?

8. SE Financial Management Problems • Low financial management acumen • Driven by donors (fund accounting) • Misallocation of expenses • Hidden assets / hidden subsidies • Do not give an accurate picture of financial performance • Overstates financial performance • Understates financial performance • Can drive managers to make the wrong decisions • Growth • Capital needs and requirements • Investment/divestment

9. Subsidies • Volunteer time • In-kind • Infrastructure, professional fees, products • Low performance (to industry standard) • Social program costs • Staff time spent on enterprise and allocated to other budgets • Overhead and back office • Embedded social costs • Grants – reflected in subsidize prices • R&D

10. SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP “True” Cost Accounting Quantifying Social Costs Quantifying subsidies

11. SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP Financial Projections $$$ Social Enterprise BreakevenPoint Private Business Breakeven Point Years SE Revenue SE Expense Business Expense Business revenue

12. Social Enterprise P&L

13. A closer look: • socio-economic costs are social program costs covered by running a social enterprise; objective is NOT to make profit but cover more social costs through biz activities • Share expenses enable parent organization to leverage assets and have unrestricted income • Business expenses pure business cost, but also underwrite social objectives—i.e. wages to client workers • Social costs can be allocated separately and subsidized with grant funding.

14. Results • Share costs converts restricted income into unrestricted income regardless of revenue • Sustainable program strategy • Shifts financial paradigm from 100% deficit to revenue generation/declining deficit • Marketing/grant raising vehicle for supplementary social costs • Increases financial rigor and business acumen • Leverages social programs and assets (trained clients)

15. External $£ Profit used to fund social program activities and/or parent organization $£ Breakeven Point Time

16. Grants Social Venture Capital Funds PRI / Recoverable Grants Forgivable Loans More equity-like Implications for Financial Management Below-Market Debt Venture Capital Market-Rate Debt SRI Funds More debt-like Exit Develop idea & model Early Growth Proof of concept Scale Start-up, capacity building Replication

17. SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP Social Investment Choices Client Productivity Return on Investment? $$$ $ Credit/Insurance Literacy Heath Housing A Job Hard Skills Soft Skills