Social Impact August 2007 Business Plan Introduction August 2007 Hyderabad, India

Social Impact August 2007 Presentation Outline Business plans for Social Entrepreneurs Why? What for? What? Difference from regular plans SE Business plan components Q & A

Social Impact August 2007 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?

Social Impact August 2007 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.

Social Impact August 2007 A Road Map Business plans chart the course to realize the organization’s vision. To Vision 2 new senior Staff hired 25 Links between business & citizen’s sector Social Entrepreneur Acquisition up 20%

Social Impact August 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

Social Impact August 2007 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

Social Impact August 2007 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

Social Impact August 2007 Anatomy of a Business Plan Vision Mission Marketing Plan Operations Plan Human Resource Plan Financial Plan Concept & Objectives Market Research

Social Impact August 2007 Interrelationship Mission Objectives Market Research: Target Market Competitors/external factors Business Assessment Marketing Plan Operations Plan Financial Plan Human Resource Plan Vision Financial Plan Financial Plan Contingency Plan

Social Impact August 2007 Strategies and Tactics Strategic Goals Objectives vision StrategiesStrategies tactics

Social Impact August 2007 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

Social Impact August 2007 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.

Social Impact August 2007 What’s your context? Opportunities Threats Strengths Competition Weaknesses Collaboration

Social Impact August 2007 How attractive is your industry? Power of Suppliers Power of Buyers Substitutes Barriers to Entry Rivals

Social Impact August 2007 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?

Social Impact August 2007 Marketing Plan Target Market Beneficiary/client needs/wants Marketing mix: 4 Ps Product Promotion Price Place On going market research

Social Impact August 2007 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?

Social Impact August 2007 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

Social Impact August 2007 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

Social Impact August 2007 Capacity Investment Choices Productivity Return on Investment? $ Jobhard skillssoft skillscredit/savingseducation $$$$

Social Impact August 2007 Capacity Building Plan Capacity Building MethodBenefit to Enterprise/organization Mission On-the-job training Provide a jobSkilled labor Processing skills Training/TAImproves productivity, product quality Inventory tracking Training/TAImproves inventory management Soft skillsTraining/ 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 productivityNo

Social Impact August 2007 Financial Plan Social Enterprise B-Plan Financial objectives Budget Resource Acquisition Plan Includes grants and gifts Cash flow Income Statement Balance sheet

Social Impact August 2007 Role of Income and Subsidy Years Enterprise RevenueSocial Expense Business Expense Breakeven AFTER Social Costs Breakeven Before Social Costs Social Subsidy Investment Enterprise Revenue Subsidizes Social costs

Social Impact August 2007 Financing & resource acquisition Year 1Prospect Year 2Prospect Earned income (sales) Interest income Parent organization Grants Gifts/contributions Soft Loans Commercial loans

Social Impact August 2007 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

Social Impact August 2007 Planning the Plan: Recommendations

Social Impact August 2007 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

Social Impact August 2007 Planning 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.

Social Impact August 2007 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

Social Impact August 2007 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

Social Impact August 2007 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.

Social Impact August 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

Social Impact August 2007 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.

Social Impact August 2007 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.

Social Impact August 2007 E.g. social impact measures Impact from livelihoods OrgImpact social service org Asset accumulationImproved education ScaleImproved housing Client incomeQuality of diet Job CreationAccess to health care Skills acquisitionIncreased autonomy

Social Impact August 2007 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

Social Impact August 2007 Financial Projections SE RevenueSE ExpenseBusiness ExpenseBusiness revenue $$$ Years Social Enterprise Breakeven Point Private Business Breakeven Point

Social Impact August 2007 Double Bottom Line Income Statement Total 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

Social Impact August 2007 Subsidy in Income Statement Income Statement Gross ProfitIncome earned through enterprise Operating Expenses (before taxes)Costs related to operating enterprise NET PROFIT/LOSS (before taxes)Income less expenses SubsidyLess Grants, donations, gifts NET PROFIT/LOSS AFTER SUBSIDYTotal lost or gained after subsidy