1. Developing and Organizing a Viable Business Model Session 2 Levitt Social Entrepreneurship Program January 25, 2014 Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

2. Flow of This Morning’s Session Introductory Dialogue and Activity Business Models and Their Value Stages of Social Venture Development What Is Your Venture or Initiative? The Two Pillars of a Viable Social Venture Business Model Strategic Development Core Business Model Elements : Market Money Management Next Steps in Our Program and Process Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

3. --I Ching “NO GOOD ENDING CAN BE EXPECTED IN THE ABSENCE OF THE RIGHT BEGINNING.” Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

5. Let’s Talk… What is a “Business Model?” What is a “Viable Business Model?” Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

6. Stages of Development Opportunity Identification, Clarification, and Assessment Leads to Viability Assessment (or Feasibility Assessment) Leads to Business Plan Development But not in a single cycle linear process: a strong venture development process will involve multiple iterations, gaining refinement from each cycle. Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

7. Opportunity Identification/ Clarification and Assessment Growing Out of Exploration of Session 1 Asset Identification and Evaluation Asset Valuation Opportunity Identification and/or Clarification Opportunity Evaluation Opportunity Valuation Risk Assessment Result: Overall Assessment of Opportunity Worth Further Exploration and Development Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

8. Managing Risk? Traditional Insurable Personal Liability Property Financial Investments Debt Returns Uncertainty USASBE Social Entrepreneurship Certificate Module 6

9. Decision Model USASBE Social Entrepreneurship Certificate Module 6

10. Some Risks to Assess (from Dees et al 2001) Management Capacity Workforce Capacity Organizational Culture Organizational Infrastructure Enterprise Concept Level of Required Capitalization Prospects for Long-Term Funding Prospects for Changes in Marketplace Changes in Knowledge and Technology Stakeholder Backlash Competitor Response Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

11. A Sound Business Model Integrates Viable and Relevant Mission and Vision (the social purpose) Real Value Proposition Social Value Creation Cycle (in the form of a logic model or theory of change) Resources to Finance and Fund It Capacity to Implement It Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

12. Daivd Renz: Midwest Center for Nonprofit Leadership at UMKC Value Creation Cycle (from The Nonprofit Strategy Revolution. David LaPiana 2008)

13. Workshop 2: Aaron Levitt Social Entrepreneurship Challenge Market: -Clients - Donors & Funders Organization Capacity Mission, Vision & Values Strategic Fit Strategic FIT

14. Viability Assessment Three Basic Elements: Market Assessment Money Assessment Management Assessment Leads to Overall Assessment of Venture Feasibility and Viability Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

15. Payor Customers: -Donors & Funders Beneficiary Customers (Clients) The Market (Customer) Question

16. Market Viability Assessment Builds on Assessment of Porter’s Five Forces Focus on: Demand Competitive Advantage Differentiator(s) Price and Cost Structure Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

17. This is the ability to produce social value by: Using a unique asset and/or Delivering outstanding execution We employ the perspective of Porter’s Five Forces Model to examine and understand where and how we fit Daivd Renz: Midwest Center for Nonprofit Leadership at UMKC Competitive Advantage (The Nonprofit Version)

18. Daivd Renz: Midwest Center for Nonprofit Leadership at UMKC Strategy vs. Reality

19. Let’s Talk… Share with your colleagues… In two minutes or less (your elevator speech): What is your venture or venture concept? What is the social venture or program initiative that you have determined has great potential for creating social value? What is the “social value proposition” and how do you expect to deliver on it? (or your best case scenario) Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

20. Key Components of A Well-Developed Program Design (The Social Value Proposition) Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

21. Mission & Vision Mission, Vision, Values The mission: Continuing philosophical perspective Makes explicit reason for the agencies existence The Vision: Is what can be accomplished by providing mission services An end state

22. Strategy and the 5 “Ps” Strategy as a Plan Strategy as a Ploy Strategy as a Pattern Strategy as a Position Strategy as a Perspective

24. Objectives Provide short-term and long-term outlook Intermediate results: Immediate impact or change Final results: The long-term impact or ultimate change Should be stated in measurable terms Time frame Target of change Results

25. Program/Product/Services What services will you provide? This is an obvious question, but one that requires detail and specificity. In addition to describing the services, you must also outline the service delivery pattern. At what times of the day will you provide the services? Will the services be provided on site or at a remote location? USASBE Social Entrepreneurship Certificate Module 6

26. Market Who will you sell this to? Who is the target market for the program? Understanding the demographics of the target market will inform marketing strategies, pricing, and service delivery. For example if you will be providing clinical services, your price will be influenced by reimbursement schedules of third-party payers. Additionally, it is important to clarify if the target market demands the services, or are you providing services that will require you to create awareness. The two scenarios will require differing marketing approaches. USASBE Social Entrepreneurship Certificate Module 6

27. Implementation How will these services be delivered and sold? Is this place-based, or Internet-based, or some combination? Where will the actual business be located and what kinds of facilities will be needed? USASBE Social Entrepreneurship Certificate Module 6

28. Capacity/HR Who will manage and who will staff the enterprise? This decision is grounded in the internal assessment. How many people will you need, and will you hire new staff or use (or redeploy) existing staff? Implicit in this discussion is the issue of capacity. If you use existing staff, what additional capacities will you need to develop? If you hire new staff, what will you pay them (e.g., comparable to nonprofit salaries or to for-profit market rates)? USASBE Social Entrepreneurship Certificate Module 6

29. Program Design Inputs Client Staff Material resources Facilities Equipment

30. Program Design Throughput Service Definition Service Task Method of Intervention Outputs Unit of service Service completion Quality

31. Outcomes Numeric Counts Standardized Measures Level of functioning scales Client satisfaction

32. These Add Up to Become a “Logic Model” A very useful device to plan and explain: Your assumptions and expectations for how you expect to link: Inputs, which will support Activities, which will lead to Outputs, which will add up to Outcomes, which will result in Long-term Outcomes and Community Impact Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

33. Return to Viability Assessment Three Basic Elements: Market Assessment Money Assessment Management Assessment Leads to Overall Assessment of Venture Feasibility and Viability Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

34. Money Viability Assessment Initial Consideration of Revenue Potential Investor Potential Available Capital Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

35. To Integrate These: Compass Point’s “Dual Bottom Line Matrix” Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

36. Management Viability Assessment Mission Compatibility Core Competencies Venture Capacity (including complexity) Core Constituents or Stakeholders Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

37. Structure How will the program be structured? Will the venture be a program of the existing organization or will the venture be a separate subsidiary? USASBE Social Entrepreneurship Certificate Module 6

38. Structural Options Social enterprises typically take one of three general forms (Alter, 2009): the social enterprise is constituted as a discrete organization, the social enterprise is part of the organization, or the social enterprise is a subsidiary or affiliate of the organization. Consider legal implications USASBE Social Entrepreneurship Certificate Module 6

39. Social Venture Planning In other words, social venture planning is the process by which we plan and articulate how we will integrate Money Market Management o successfully deliver social value Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

40. Alter’s “Hybrid Practitioners” Nonprofit with Income-Generating Activities Cost Recovery Earned Income Social Enterprise Socially-Responsible Business Corporation Practicing Social Responsibility

41. Purely Philanthropic to Purely Commercial Traditional Nonprofit Nonprofit with Income- Generating Activities Social Enterprise Socially Responsible Business Corporation Practicing Social Responsibility Traditional For-Profit  Mission Motive  Stakeholders Accountability  Income Reinvested in Social Programs or Operational Costs  Profit-Making Motive  Shareholder Accountability  Profit Redistributed to Shareholders

42. The Summary: Key Elements of Feasibility or Viability Assessment 1. Explain the Venture 2. Market research on potential customers 3. Desire and Need for Product or Service 4. Assets and Capacity (including management, personnel, facilities, & competence) 5. General Business/Revenue Model and Pricing Strategy 6. Preliminary Financial Information: a)Start-Up Costs and Time needed to begin to generate revenue b)Start-up capital needs and availability c)Pro Forma/ Financial Projections (including estimates of revenues needed to break- even and timing to break even) 7. Discussion of feasibility: a.Mission relevance b.Risk acceptability c.Competitive capacity d.Quality & quality assurance e.Feasible for your organization now? Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

43. Move to a Business Plan? If the venture is deemed feasible… Build on all of the information of the feasibility assessment. Add depth to each of the elements of the feasibility assessment to create a business plan. Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

44. Wrap-Up: For the February Workshop Develop and Clarify Your Logic Model (complete the form) Read the materials on financial viability assessment in preparation for next workshop, which will focus on “Funding and Financing Your Social Venture” Contact your Levitt Program facilitators and advisors (Laufer, Helm, and Renz) as needed to help Workshop 2: Aaron Levitt Social Entrepreneurship Challenge

45. Questions? Comments? Clarifications? Workshop 2: Aaron Levitt Social Entrepreneurship Challenge