Business Planning for Social Enterprise

At the July meeting of the Social Enterprise Network, the group was hosted by WomenVenture and discussed business planning for social enterprise, including a panel discussion with two our own social enterprise practitioners, Mary Serie of Cornerstone and it's subsidiary Day One and Jeff Tollefson of Genesys Works.

Notes from Business Planning for Social Enterprise

Why Business Planning Matters 

This part of the network was led by Diane Paterson of WomenVenture.

Business planning is essential.  Traditionally the primary reason for crafting a business plan is to help secure financing.  However, careful planning and analysis of every facet of your business is smart management.  A business plan is an opportunity to think through possible obstacles and how to address them, such as:

  • Structure
  • Pricing
  • Zoning
  • Regulators
  • Marketing

Reasons businesses fail:

  1. Insufficient capital
  2. Lack of experience
  3. Lack of proper planning
  4. Ignoring competition
  5. Poor inventory management
    • Cash Flow issue if you overbuy
    • Customer Service issue if you don't have enough supplies
  6. Uncontrolled growth
  7. Poor location
  8. Poor sales
  9. Credit
    • How will you use your funds?
    • How much revenue do you need to generate to break even? How much to make a profit?
      • How many hours do you think you'll need to meet these goals? Remember, you are limited by your own capacity.
        • Consider things like holidays, sick time, etc
  10. Pricing structure
    • What are the true costs involved in delivering your product/service?

By thinking through these questions on the front end, you can identify skill gaps and potential obstacles.

Other Considerations

  • Evaluate both direct and indirect competition
  • Know your target customer:
    • What is the demand?
    • What is your value proposition?
      • Customers buy benefits (not services or products)
  • Ask "Would a banker loan money for this business?"
    • Even if you are self-financing, it's still valuable to consider how you would pitch this business and it's profitability to a banker or investors
  • Planning tools, such as a business plan, can have more than one audience
    • Lender
    • Leasing agent
    • Funder
    • Vendor - they might be inclined to extend credit to a viable business
    • B2B
  • If you remove the specific financial information, you have an executive summary, management team profiles, measures of success, market research/analysis, etc
    • A business plan with enough detail, passion, and persuasion will help you get buy-in about the project from potential investors and other stakeholders.
  • A business plan is not a stagnant document.  Businesses (and their needs) grow and change, let the plan change and grow as well. A plan can help you expand and grow in an intentional way.
    • Balance being nimble enough to respond to trends/take advantage of opportunities while also being true to mission/vision/goals.
  • Strategic planning at a nonprofit tends to look at the big picture - mission, goals, etc - and then budgets, workplans and other tools help make the strategic plan actionable. A business plan is more like an implementation plan than a visioning document.

Business Planning Case Studies

  • Cornerstone created an online database to help connect victims of domestic violence with available shelter beds. They would like to make this tool available nationwide through the Day One subsidiary.  It is already successfully operating in Seattle and three counties in Washington State.
  • Genesys Works Twin Cities is a nonprofit that is affiliated with the original Genesys Works in Houston and is replicating their job training program. 

What went well 

  • Having an attorney (in this case pro-bono) to think through questions of structure
  • Business planning for expansion
    • Minnesota Day One funded by the state, what does the funding structure look like in Seattle and elsewhere?
  • Even if you don't engage in "business planning" it's important to think through:
    • What you want to accomplish
    • How you intend to achieve your goals - action steps, to-do list, implementation plan, etc
    • Ask questions:
      • What are the risks of this venture?
      • Who is your competition?
      • Who is your customer?
  • Have a level of precision - who is responsible, clarify who does what
    • When you start moving forward things will get very busy, it's better to have clearly defined roles and responsibilities on the front end
  • Business planning is one way to tell your organization's story (like grant proposal - differentiate self and provide social return)
    • Plan - implementation - how to do
    • Goals - how to achieve?
    • Mini plans - tactics
  • Having a "sales person" and a "finance person" is helpful when crafting a plan
    • Bring different skill sets and perspectives
  • Planning is as much a process as a product, things constantly change, so have "big goals, small plans"
    • Especially right now, have a realistic "backup" plan in case things do not roll out as smoothly as you had hoped

Working with the Board

  • Because they are bought into the big picture concept, sometimes it is possible to assume they understand more of the details and implications than they do
    • Many nonprofit social enterprises are launched to generate revenue for an existing organzation.  Whether or not the board opts to establish a seperate entity (and the structure of that entity) or house it within the orginial nonprofit are important and complicated questions you have to address on the front end of any venture.  Considering these questions and weighing your options can be part of the business planning process.
    • Consider:
      • Structure
        • How will the social enterprise be
      • How to safeguarding the original nonprofit's assets
      • Adequate insurance
      • Legal documents
      • Governance
      • Benchmarks for success

Goal Setting

Genesys Works doesn't have an official "business plan," but they have objectives they want to accomplish, based on their strategic plan. 

  • They break their strategic plan down into goals and tactics in four main areas
    1. Students/schools
    2. Corporate clients - where people work
    3. Funding
    4. General info
  • 5-10 goals each section
    • Tactics you will use to make happen
    • Who is responsible?
    • Date
  • Planning for next year will be offsite retreat and include SWAT analysis
  • Thinking about how to replicate the plan/process moving forwards
    • Have the Texas program as model
      • Use aspects as business plan
      • St Paul is now the model for four additional sites - scary and fun to be the pilot for program expansion

Office of Social Innovation

  • Office wanted to highlight  three results driven social enterprises, and used Genesys Works as an example
    • With a focus on the earned income model
  • One of Genesys Works' students, Vanessa Nunez, spoke in front of President
  • Wonderful exposure and experience, but also increases the pressure

Marketing

  • Even when you have a great product that works well and solves a problem, there can be questions around how to market it.  Where can you go for marketing advice/assistance?
    • Day One is looking to work with coalitions, networks, units of government - that is a hard market
    • Requires intentional networking
  • What is adequate market research?
    • How to sell product
    • Competitive analysis? Know our competition
      • Nonprofit social enterprises can have many competitors - using Genesys Works as an example:
        • Schools - they have many different program options
        • Funding - there are other college access programs, including other nonprofits
        • For-profit - other IT temp staffing firms
      • Ultimately, clients care about the product/service/value for their dollar - not whether or not you are a nonprofit.

Employees - Full time vs Contract?

  • With a related business entity, deciding how to staff the social enterprise can be complicated
    • Full time employees
    • Employees from the nonprofit who provide contract services
  • Often start by contracting out, and as the venture grows build up to full time employee(s)
    • Top priority is always to ensure the original nonprofit is stable
    • For example, CornerStone originally planned to have full time staff for Day One this year, but given the current economy they slowed down their growth projections
  • How do you find the money for staffing?
    • Look at different funding streams
    • Wait until the business generates enough to revenue to sustain staffing

Expansion

  • Social Enterprise funders are interested in scale
  • How do you maintain core focus and balance while expanding?
  • Do you eventually saturate the market - what is the magic number?
  • How do you find the fight market? How do you gauge the pulse of audience in other markets - states, cities, etc?
  • Strategies:
    • Successful pilot - then reproduce
    • Connect with clients, funders - build relationships, identify gaps in that market
    • Instead of expanding to different markets, do you consider different business lines?
      • Example: Houston Genesys Works branched out 2 other areas
        • Started with IT, then expanded to finance/accounting and engineering
        • Also expanded to the Twin Cities
        • MN corporate clients like narrow focus, so there is a cost-benefit analysis
      • Example: Day One
        • Twist/tweak model to scale up - look at serving homeless shelters or nursing homes (versus domestic violence)
  • Assess impact on business model - what is best for your organization:
    • Maintain excellence at a set point
    • Look to branch off to other cities
    • Expand to other lines of business
    • Long process - not happening overnight
    • Goal is to reach maximum revenue to sustain your social enterprise and/or related nonprofit

Additional Resources

About the Host

WomenVenture provides career planning, business development, and financial literacy training and support to women and men in the Twin Cities, with a focus on assisting women in securing their own economic success and prosperity.