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© 2007 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License
Business PlanIntroduction
© 2007 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License
Presentation OutlinePresentation Outline Business plans for Social
Entrepreneurs Why? What for? What?
Difference from regular plans SE Business plan components Q & A
© 2007 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License
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?
© 2007 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License
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.
© 2007 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License
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%
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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
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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
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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
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Anatomy of a Business Plan
Vision
Mission
Marketing Plan
Operations Plan
Human Resource
Plan
FinancialPlan
Concept & ObjectivesMarket Research
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InterrelationshiInterrelationship p
Mission
Objectives
Market Research:Target Market
Competitors/external factorsBusiness Assessment
MarketingPlan
OperationsPlan
FinancialPlan
HumanResource
Plan
Vision
FinancialPlan
FinancialPlan
ContingencyPlan
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Strategies and Tactics
Strategic Goals
Objectives Objectives Objectives
visionStrategies
tactics tactics tactics tactics tactics tactics
tacticstactics
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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
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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.
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What’s your context?
Opportunities
Threats
Strengths
Competition
WeaknessesCollaboration
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How attractive is your industry?
Power ofSuppliers
Power ofBuyers
Substitutes
Barriers to Entry
Rivals
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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?
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Marketing Plan
Target Market Beneficiary/client needs/wants
Marketing mix: 4 Ps Product Promotion Price Place
On going market research
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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?
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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
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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
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Capacity Investment Choices
Productivity
Return on Investment?
$Job hard skills soft skills credit/savings education
$$$$
Which capacity investment improve enterprise productivity?
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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
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Financial Plan Social Enterprise B-Plan
Financial objectives Budget Resource Acquisition Plan
Includes grants and gifts Cash flow Income Statement Balance sheet
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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
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Financing & resource acquisition
Year 1 Prospect
Year 2 Prospect
Earned income (sales)
Interest income
Parent organization
Grants
Gifts/contributions
Soft Loans
Commercial loans
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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
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Planning the Plan: Recommendations
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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
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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.
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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
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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
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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.
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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
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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.
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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.
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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
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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
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Financial Projections
SE Revenue SE Expense Business Expense Business revenue
$$$
Years
Social EnterpriseBreakeven Point
Private Business Breakeven Point
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Double Bottom Line
Income StatementTotal 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
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Subsidy in Income Statement
Income Statement
Gross 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