The Sector

Social Enterprise Business Planning

A social enterprise is an activity of a nonprofit that employs entrepreneurial, market-driven strategies for earned income in support of its mission. This outline for a social enterprise business plan is a guide for research, planning, and writing a business plan for nonprofit social enterprises.

A social enterprise is an activity of a nonprofit that employs entrepreneurial, market-driven strategies for earned income in support of their mission. Business plans are a common tool for entrepreneurs when starting or growing a business enterprise. For nonprofits that are starting or growing a social enterprise as a part of their program activities, developing a business plan is an essential step. While social enterprise business plans address all of the questions needed for any business, nonprofits also need to consider the alignment with mission, organizational background and structure, and evaluation of both financial and social impact.

This outline for a business plan is a guide for research, planning, and writing a business plan for nonprofit social enterprises. The sections below are provided as a roadmap for the plan. Most business plans include each of these sections, though the length and amount of detail will vary depending on the nature of the enterprise, the complexity of the organization, and the purpose and audience for the plan.

Executive Summary

The Executive Summary provides the most important information for readers that need to understand and support the concept but not necessarily know the detailed plans. This is usually written last.

  • Organizational description
  • Business concept
  • Market description
  • Value proposition, or competitive advantage
  • Key success factors
  • Financial highlights and capital requirements

Mission

A social enterprise of a nonprofit organization may contribute directly to achieving mission; may be complementary or supportive of mission; or may be unrelated to mission (with primarily financial goals). The alignment to mission is a critical question.

  • Organization mission and/or vision statement
  • Relationship of social enterprise to organizational mission, or separate mission for the enterprise

Background and Structure

This section summarizes the organization’s history and programs and how the enterprise will fit in to the larger organization.

Most social enterprises operate as an activity or program within the nonprofit, though some are legally structured as a separate nonprofit, a for-profit subsidiary, or an independent organization.

Form should follow function and the legal structure should support the purpose and activities of the enterprise. Advice from an expert attorney may be needed.

  • Brief description of the nonprofit, including context and programs
  • How the business venture will be structured in the organization
  • Legal structure and governance (Boards, advisory committees, reporting)

Market Analysis

The market analysis is the heart of the business plan and is too often inadequately explored when planning a social enterprise. Solid research is necessary to understand the target customers and how the enterprise will meet a gap and demand in the market. No amount of mission or commitment will overcome a deficiency in market knowledge and a bona fide demand for the product or service.

  • Summary of current market situation
  • Target market and customers
  • Customer characteristics, unmet demands and buying factors

Competitive Analysis

This section describes the competitors, both nonprofit and for-profit, and the value proposition, or market advantage, of the proposed business.

  • Primary competitors
  • Competitive products/services
  • Risks and opportunities in competitive market
  • Recent or emerging changes in the industry
  • Specific description of competitive advantage/value of proposed product or service

Products/Services

This section is a summary of the product or service that will meet the demand in the market. It does not need to include detailed descriptions, price lists or other materials.

  • Product/service description
  • Positioning of products/services
  • Future products/services

Marketing and Sales

This section will describe how the organization will reach the target market and turn those prospects into paying customer.

  • Marketing strategy
  • Sales tactics
  • Advertising, public relation, and promotions
  • Summary of sales forecasts

Operations

This is the “how to” section, describing the creation and delivery of the business’ product or service.

  • Management structure
  • Staffing plan and key personnel – if this includes programmatic elements related to the mission, expand this section
  • Production plan or service delivery, including summary of costs of materials and production
  • Customer service/support strategy and plan
  • Facilities required, including specialized equipment or improvements. If the business is retail, discuss location characteristics

Evaluation and Assessment

Most for-profit businesses measure their success by the financial results. Social enterprises have a double bottom line (or a triple bottom line.) This section describes the factors that will be evaluated to assess the success of each aspect of the enterprise.

  • Quantifiable financial goals
  • Quantifiable mission goals
  • Monitoring and evaluation strategy

Financial Plan and Projections

The financial section includes projections for revenue and expenses for at least three years with a summary narrative of the key assumptions. This section also details the start up costs for capital equipment, inventory, initial marketing and staffing, and subsidy needed to cover losses during the start up period. These capital requirements may be funded from a combination of contribution from the nonprofit, grants for the enterprise, and/or debt financing.

  • Start up costs and investments in equipment, technology, or one time costs
  • Capital requirements and sources
  • Income and expense projection
  • Pro forma balance sheet for start up
  • Cash flow summary or projection
  • Assumptions and comments

Are you interested in planning a social enterprise? Get in touch: info@thesectorinc.ca

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The Sector

Catalyst for Change: A Roadmap to a Stronger Charitable Sector

Why is it so hard to do great works of charity? This was the question the Special Senate

Committee on the Charitable Sector (the committee) set out to answer. Struck in January

2018, the committee was asked to examine and report on Canada’s charitable and nonprofit sector. The task was daunting, but urgent. While the sector is resilient and

innovative, its potential is limited by what are seen by many stakeholders as complex,

outdated rules and a lack of coordinated support within the federal government.

As these organizations seek sustainable funding models, they are expanding to new areas of revenue generation, sometimes pushing the limits permitted under existing legal and regulatory constraints. Finding new forms of operation and drawing on innovative and often young volunteers and staff, these social enterprises are breaking new ground and finding ways to do good while doing well financially.

Earned income, social enterprise and social finance, and procurement

As noted above, a number of reviews of funding relationships between government and voluntary-sector organizations have suggested that contribution agreements and contracts prevent organizations from innovating and responding to new circumstances. Some stakeholders have called for new funding arrangements to address these issues.

Earned income

As described above, charitable and non-profit organizations are relying and are expected to rely even more on earned revenue, i.e. the sale of goods and services.

As described by the Chief Economist for the sector (Imagine Canada),

“With constraints emerging and demand increasing, charities are going to need to be able to explore every funding opportunity available to them. Out of government funding, philanthropy and earned income, only the last one offers any prospect of long-term growth, and it’s a constrained alternative.

These constraints, and others, on charities and non-profit organizations have led many organizations and other individuals and groups interested in providing public benefit to explore new ways of attracting and using other revenue streams. Witnesses told the committee that such organizations, often referred to as social enterprises, provide opportunities that organizations relying on tax exemptions and receipts for donations cannot access capital.

Social enterprise and social finance

Government officials told the committee of several initiatives intended to support the innovative capacity of charitable and non-profit organizations. For example, an official from the Treasury Board of Canada Secretariat described a “a five-year pilot that commenced in 2017-18, called ‘generic terms and conditions’ … [which] … allows departments to use microfunding, prizes and challenges, and incentive-based funding to promote innovation in transfer payments in communities across Canada, including the charitable sector.”

Testimony and briefs received by the committee identified the desire by charitable and non-profit organizations across Canada of various sizes and areas of work to find and implement innovative approaches to the services they provide and to the larger issues that provide the context for their work.

The federal government has been engaging with civil society and the private sector for

several years, investigating whether and how the government could support social finance

initiatives. The Fall Economic Statement in 2018 announced funding for this initiative,

committing more than $750 million over 10 years, to:

  • support innovative solutions on a broad range of social challenges through a competitive, transparent and merit-based process;
  • attract new private sector investment to the social finance sector. It is expected that the Fund would achieve matching funding from other investors;
  • share both risks and rewards with private investors on any investments;
  • only support investments that are not yet viable in the commercial market; and
  • help create a self-sustaining social finance market over time that would not require ongoing government support.

The Investment Readiness Program

We all want communities where everyone can belong and thrive. The Investment Readiness Program (IRP) supports new and innovative ways of getting us there. It is designed to help social purpose organizations explore, grow and flourish across Canada, contributing to solving pressing social, cultural and environmental challenges. Starting January 8-February 10, 2020, organizations can apply for between $10,000-$100,000 in non-repayable capital to help launch, design, measure and scale their social enterprise and prepare to access investment in Canada’s growing social finance marketplace.

If you would like a hand in planning your social enterprise, let us know: info@thesectorinc.ca

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