Ashoka - School For International Training February 2007 Social Enterprise Ashoka School For International Training

Ashoka - School For International Training February 2007 Two Doors into Social Enterprise Program Strategy Financial Strategy

Ashoka - School For International Training February 2007 Motivations for Starting an SE Massarsky, Cynthia and Samantha Beinhacker, 217 social enterprises, Partnership on Nonprofit Ventures, 2003

Ashoka - School For International Training February 2007 Some Facts

Ashoka - School For International Training February 2007 Mission Correlation 3% of SE don’t relate to mission 19% SEs relate to mission 78% SEs central to mission Based on survey results: WB&A Market Research of 105 social enterprises, Community Wealth Ventures, 2003; Massarsky, Cynthia and Samantha Beinhacker, 217 social enterprises, Partnership on Nonprofit Ventures, 2003

Ashoka - School For International Training February 2007 SE Impact on Organizations Source: Powering Social Change: Lessons for Community Wealth Generation for Nonprofit Sustainability, Community Wealth Ventures, 2003 Source: “Enterprising Nonprofits”, Yale School of Management – Goldman Sachs Foundation on Nonprofit Ventures

Ashoka - School For International Training February 2007 Profitability Inconclusive Surveys Pew Charitable Trust CWV Bridgespan Based on survey results: WB&A Market Research of 105 social enterprises, Community Wealth Ventures, 2003; Massarsky, Cynthia and Samantha Beinhacker, 519 nonprofits with 217 social enterprises, Pew Charitable Trusts, 2000 Bridgespan survey 2004, unpublished

Ashoka - School For International Training February 2007 Social Enterprise is a Hybrid Purely PhilanthropicHybridPurely commercial Type of Organization Traditional NGO Social Enterprise Traditional for-profit MotivesAppeal to goodwill Mixed motives Appeal to self-interest MethodsMission-driven Balance of mission and market Market-driven GoalsSocial value creationSocial and economic value creation Economic value creation Destination of Income/Profit Directed toward mission activities of NGO (required by law or organizational policy) Reinvested in mission activities or operational expenses, and/or retained for business growth and development Distributed to shareholders and owners Adapted from Gregory Dees; and Lee Davis and Nicole Etchart.

Ashoka - School For International Training February 2007 Embedded Enterprise created to accomplish mission Social Programs + Enterprise Activities Enterprise and social program are one and the same

Ashoka - School For International Training February 2007 Integrated Enterprise created as a funding mechanism and to expand mission Social Programs Enterprise Activities Business activities overlap with social programs; synergies, shared costs and assets

Ashoka - School For International Training February 2007 Complimentary Social Programs Enterprise Activities $ Enterprise created as a funding mechanism to support mission activities Social and business activities separate and may or may not be related to mission

Ashoka - School For International Training February 2007 Unrelated Mission Relevance Mission Centric Mission Related Unrelated Embedded Integrated Complimentary

Ashoka - School For International Training February 2007 Social Enterprise Operational Models

Ashoka - School For International Training February 2007 Employment Model Market Social Enterprise Clients Social Impact Financial Sustainability Product Embedded

Ashoka - School For International Training February 2007 Entrepreneur Model Market Social Impact ClientSocial Enterprise Financial Sustainability Product Loans Embedded

Ashoka - School For International Training February 2007 Organizational Support Model Financial Sustainability Social Impact Clients Subsidiary Complimentary

Ashoka - School For International Training February 2007 Market Intermediary Model Financial Sustainability Social Impact Clients Social Enterprise Market Embedded

Ashoka - School For International Training February 2007 Service Subsidization Model Social Impact Financial Sustainability Social Enterprise Clients Market Services Social Impact Integrated

Ashoka - School For International Training February 2007 Fee-For-Service Model Services Social Enterprise Sustainability Clients Social Impact Embedded

Ashoka - School For International Training February 2007 Social Enterprise Design

Ashoka - School For International Training February 2007 Social Enterprise: the Vehicle A social enterprise is any business venture (nonprofit/for-profit) created for a social purpose—mitigating/reducing a social problem or social market failure— while operating with reference to the financial bottom line and with the discipline, innovation and determination of a for-profit business. - Virtue Ventures 2006

Ashoka - School For International Training February 2007 Social Enterprise Design is Driven by Social Concern Rather than Financial or Market Opportunities The social problem IS the business opportunity

Ashoka - School For International Training February 2007 Reduce social problems w/enterprise Social Problem 1. Food insecurity 2. Deforestation 3. Subsistence farming 4. Limited economic opportunities 5. Hunger 6. Barriers to employment Social Enterprise 1. Agricultural products store & bakery 2. Ecotourism 3. Natural products 4. Tool Library & School 5. Restaurant 6. Landry, housecleaning, thrift, etc.

Ashoka - School For International Training February 2007 What is the problem???? Social problem or social market failure enterprise is trying to mitigate

Ashoka - School For International Training February 2007 The Mission is the Anchor To Vision Unrelated Opportunity

Ashoka - School For International Training February 2007 Social Market “Beneficiaries” of impact Client Community Environment Public Competitors Role of subsidies in the market Collaborators Strategic alliances and partners

Ashoka - School For International Training February 2007 Role of Client Social Enterprise Client #1 Market Product $$ Client #2 Client #3 $ Product Client #4

Ashoka - School For International Training February 2007 Social Criteria

Ashoka - School For International Training February 2007 Profile Demographics Economically active Weak social ties Vulnerable Few assets Inability to repay Psychographics Transient Risk adverse Extra burdens Geographic Refugee camps Poor or degraded market & infrastructure Financial Services Grants and training before loans Mobile lending Monitoring Mentoring Certificates – credit rating Support to start up micro-businesses Transparent processes Continue service Branding Social Criteria: Products

Ashoka - School For International Training February 2007 Somers, Shaping the Balanced Scorecard for use in UK Social Enterprises, “Social Enterprise Journal”

Ashoka - School For International Training February 2007 Somers, Shaping the Balanced Scorecard for use in UK Social Enterprises, “Social Enterprise Journal”

Ashoka - School For International Training February 2007 Leverageble Assets Tangible People Land Money Intangible Reputation / Brand Methodologies Content Relationships Skills and expertise

Ashoka - School For International Training February 2007 Surprising Examples of Leveraged Assets PRODUCT  Zookeepers in Thailand turned their Elephant dung into lucrative handmade paper products AN ASSEMBLED MARKET A national youth organization discovered that its target group was valuable to large advertisers and assembled focus groups and market research studies for major companies. SPECIALIZED EXPERTISE Following 911 a grief and loss organization experienced high demand for its specialized grief counseling services and won contracts with NY and DC local gov’t and the US military.

Ashoka - School For International Training February 2007 Organizational Factors Core competencies Capacity Human Resources Financial Stakeholder buy-in Risk Profile Preferences Competitive advantages Culture

Ashoka - School For International Training February 2007 Market Forces Market: size, growth and trends Demand Income potential Industry dynamics Competitive environment Ease of entry (regulatory, legal, etc.)

Ashoka - School For International Training February 2007 Financial Criteria Start up costs Amount organization can invest Financial need to start up Operational funding Maximum $$ org can subsidize venture Duration can subsidize Breakeven a requirement Financial Objectives $$ financial contribution to social/program costs % of shared fixed costs covered Diversified sources/unrestricted

Ashoka - School For International Training February 2007 Role of Revenue and Profit Years Enterprise RevenueSocial Expense Business Expense Breakeven AFTER Social Costs Breakeven Before Social Costs Social Subsidy Investment Enterprise Revenue Subsidizes Social costs Profit For biz & program investment

Ashoka - School For International Training February 2007 IncomeIn 000s Sales$565 Socio-economic expenses Wage premium to clients$40 Soft skill training$30 Job coaches$60 Shared expenses (SE-Parent) 25% ED$20 Rent + utilities$60 Back office expense$40 Pure Business expenses Business manager$80 Hard skill training$30 Marketing$20 Wages$160 Supplies$10 Total Expenses$550 Profit (loss)$15 Social program costs Counseling & Health services$120 Social costs$120 Required Subsidy$95 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

Ashoka - School For International Training February 2007 Social Subsidies and ROI Job Hard Skills Soft Skills Insurance Heath Care Literacy $$ Mission Accomplishment Business Performance

Ashoka - School For International Training February 2007 Prioritize Screens Prioritizing screens depends on: What are you trying to achieve? What you have? What you don’t have? Organizational culture/priorities? Market conditions? Costs and cash flow?

Ashoka - School For International Training February 2007 Scoring Opportunities Opportunity/ Business idea Fit with Mission Fit with Social Criteria Fit with Strengths Fit with Assets Fit with financial criteria Market Potential