A talk by Jeff Stern for NC Central University’s Community Economic Development Initiative

April 9, 2011

What is

Social Enterprise?

What is Social Enterprise?

A framework to consider, plan and implement your social enterprise

1Definition and Examples

2Determining

Readiness

3Getting

Started

Social Enterprise: an organization or venture that achieves its primary social or environmental mission using business methods.

Definition from the Social Enterprise Alliance

1

Social Enterprise is a subset of social entrepreneurship.

Social Entrepreneurship includes:• Social Innovation• Corporate Social Responsibility (CSR)• Socially Responsible Investing • Triple Bottom Line • Venture Philanthropy • Cause-related Marketing • Direct service and advocacy groups• Blended value organizations in various legal structures

What we talk about when we talk about SE

“We look for organizations or ventures who have a primary orientation or mission of achieving a measurable social benefit and a market-based approach toward generating revenue. Most often these organizations have a nonprofit status, a clear theory of change and a commitment to transparency.”

- Social Enterprise Network of the Triangle more info available at http://www.se-triangle.org

Social Enterprise is not:

Social Enterprise is:• Creating sustainable revenue

streams to support mission• Engaging market forces in

pursuit of social impact• Devising new ways to leverage

existing assets • Decreasing dependence on the

external funding community• Utilization of business

methods, tools and discipline

• Traditional fundraising

• Grant money• Gifts/donations• A “quick fix” in a

time of a crisis • For everyone

Yes, it’s legal, and it can take many forms:

Nonprofits can launch and operate a social enterprise and maintain 501(c)(3) tax status

Income Related to Exempt Purposes• Must be substantially related to exempt purposes• No limit on amount of revenue

Income from Unrelated Activities • Not substantially related to exempt purposes• Produces unrelated business taxable income (UBTI)• If less than 10-15% of budget, okay• If more, consider moving activity outside of nonprofit entity

There is no standard legal structure

Juma Ventures develops and operates concessions at stadiums for the purpose of providing job opportunities to economically disadvantaged teens.

The Women’s Bean Project in Denver employs women from backgrounds of chronic unemployment and poverty to manufacture gourmet foods. The project does not hire women to make and sell bean products. It makes and sells bean products to hire women.

A few examples of successful social enterprise

More examples, closer to home:

• TROSA runs several social enterprises (moving, lawn care, furniture and frame shop, grocery and more) in pursuit of its mission to enable substance abusers to be productive, recovering individuals by providing comprehensive treatment, work-based vocational training, education, and care.

• The Scrap Exchange runs a creative re-use store and education programs in pursuit of its mission to promote creativity, environmental awareness, and community through reuse.

• Extraordinary Ventures employs young men and women with autism and other developmental disabilities. They create jobs through conference center rental and laundry services.

2 Determining Readiness

Is social enterprise is right for your organization? Are you ready to begin?

Developing an enterprise is a process

•Secure interest and commitment from leadership

• Begin to learn about successful social enterprises

Phase 1

•Conduct organizational audit of strengths

•Evaluate the opportunities to determine which have the most potential

Phase 2 • Conduct a feasibility assessment to analyze the viability of the opportunity

Phase 3

• Develop a business plan to turn the opportunity into reality

Phase 4

Exploration Planning

Design & Development Implementation

2 months 4 months 6 months 12 months

Phas

e 1

- Exp

lora

tion

Four Areas for Risk/Reward Analysis

Operational+ Business tools utilized beyond SE + Enhances strategic thinking+ Increases efficiency and agility- Management & staff attention split- Increases organizational complexity- New systems may be required+/- New staff may need to be hired

Cultural+ Fosters innovation and new ideas+ Market orientation improves focus on costs, client needs and results.- Board and staff may be alienated by business culture (may leave) - Resistance to change may kill SE+/- Tension of “old” versus “new”

Mission+ Leverage core strengths in service of both mission and margin+ New programming opportunities- Reputation could be compromised- Risk of mission drift from core social impact activities to enterprise +/- Potential impact on clients

Financial+ Diversifies revenue streams + Leverages existing assets + Creates unrestricted funds - Potential to lose money - Start-up costs often high- Opportunity cost +/- Current funder reactions?

Characteristics of a successful social enterprise:

Source: Community Wealth Ventures - Powering Social Change

Operated independently

Led by a dedicated champion

Supported by the entire

organization and board

Sufficiently capitalized

Staffed appropriately

Defined goals

Phas

e 2

– D

esig

n an

d D

evel

opm

ent

First, Identify Your Assets…

Brainstorm first – feasibility comes later!

People: Who works for the organization? Who volunteers? Who do they know? Who is your audience? Who are your stakeholders? What special relationships to you have that might be valuable?

Skills: What skills/expertise has the organization developed? What reputational assets have you built? Skills of individual people identified above? What programs are in demand? What content have you developed? Events you’ve planned?

Tangible Assets/Facilities: What buildings do you own? Program-related equipment? Real estate? Patents or other intellectual property? Other tangible assets that you have access to?

Remember the old saying:“One man’s trash is another man’s treasure”

Now that you’ve listed assets…which are marketable?

Evaluate the asset• Is it unique? Is it easily copied? • Is it sustainable over time? Evaluate the market• Are there people who would pay for this? • How many people? Is this number growing?• How much would people pay?• Is there competition to consider?

Are we ready to launch a social enterprise?

Organizational commitment and readiness from the Board and the staff

Organizational strengths that translate into opportunities

Sufficiently sized customer base willing and able to pay for your services/goods.

3 Readiness Factors

Getting Started

Moving from idea to implementation

3Getting Started

Phas

e 3

– Fe

asib

ility

Ass

essm

ent From your list of assets, choose the 3 best ideas

Top 3 Opportunities

Feasibility Assessment Business Plan

Determine feasibility before creating a business plan

• Size: How large is the potential customer base? • Outlook: How favorable are the trends impacting the marketplace?• Profitability: What are the costs and potential revenues?

Market

• Favorable Competitive Factors: How competitive is the market? • Ease of Entry into Market: How easy will it be to launch a social enterprise? Is there a

threat of competitive entry?

Competition

• Mission: Is the opportunity aligned with our mission? • Skills/Expertise: Do we have the skills/expertise necessary to succeed? • Resources: Do we have the necessary resources? Can we acquire them?

Fit

Resources and tools for analysis are plentiful

SWOT Analysis and other traditional business toolsIndustry Associations and Reports: First Research, BizMinerFederal government libraries and legislative websitesPhilanthropic news and research organizations: Foundation

Center, Charity Navigator, Chronicle of PhilanthropyFederal government statistics: Census data, SBAChamber of Commerce: Local Academic library or other public information centersCompetitor/collaborators’ websitesSimilar social enterprises/social innovators: Social Enterprise

Alliance, Social Edge

Phas

e 4

– Bu

sine

ss P

lan

The business plan is your roadmap

Executive SummaryBusiness Description Industry & Market AnalysisCompetitive AnalysisMarketing & Sales PlanOperations PlanPersonnel & Management PlanFinancial PlanRisk & Contingency Plan

Be sure to include milestones!

Additional ResourcesSocial Enterprise Database:

http://www.communitywealth.com/Directory%20of%20Social%20Enterprises.htm

CASE (Center for the Advancement of Social Entrepreneurship): www.caseatduke.org

SocialEdge: www.socialedge.orgSocial Enterprise Alliance: www.se-alliance.orgREDF: www.redf.org/learn-from-redfNonprofits Assistance Fund:

www.nonprofitsassistancefund.org (business plan outline and template)

Stanford Social Innovation Review: http://www.ssireview.org/

Thanks for your time today. If you want to get in touch:Jeff Sternjeffrey.m.stern@gmail.com @jeffreymstern on twitter http://www.jeffstern.org for personal infohttp://www.se-triangle.org for SENT info