Archive for year: 2020

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 term “social enterprise” can mean a lot of different things. Where on the spectrum does your favorite one fall?

“What exactly is a social enterprise?” It’s a question that comes up a lot, probably because there isn’t a consensus. Generally speaking, “social enterprise” means using business tools to address a social need. This concept may or may not overlap with “social innovation” which means addressing a social need in a new, groundbreaking way. While it’s possible to use business tools without using them innovatively, and it’s possible to innovate without using business tools, the posterchild for this sector works at the intersection of these two concepts.

Yet for most people, “social enterprise” winds up being the broad, default phrase used to cover both concepts. For better or worse, that expansiveness has snowballed the term’s popularity (the bigger the bucket, the more stuff you can throw in there), but has also led to trouble agreeing on a definition. The various “social enterprise” definitions can include some or all of a number of models: small nonprofits using entrepreneurial practices on one end of the spectrum; big, mainstream companies using environmentally sound practices, treating their employees particularly well, and/or donating a portion of their proceeds to pre-existing charities on the other. In the middle you’ll find other definitions, with plenty of debate over what belongs, including the degree to which an entity’s primary activities must tie to its a social mission, the necessity of including social commitment in an entity’s formational documents, and whether a side-project of an existing organization should count as a “social enterprise.” Meanwhile, some definitions provide for overlap. Bottom line: it’s confusing.

As a social enterprise consultant and lawyer, I’ve spent a lot of time trying to think about how to make sense of the various organizations we sometimes call “social enterprises.” Here’s how I categorize the spectrum.

1. Entrepreneurial Nonprofit

These are tax-exempt entities supported, at least in part, by earned income (although I’ve seen it argued once or twice that an innovative nonprofit idea, even without earned income, makes the cut). To reach entrepreneurial nonprofit status, these organizations can either (a) implement a revenue-generating program, or (b) adopt an overall entrepreneurial business model.

Funding

Their main funding source is typically grants from foundations and donations from the general public (the cornerstone of the tax-exempt nonprofit model), although in some circumstances loans from banks, or from foundations in the form of program-related investments, are also possible.

Examples

(a) Girl Scouts of America, with their much-loved cookie sale program; (b) Daily Table and With Love L.A., retail grocers bringing healthy, affordable food options to neighborhoods that don’t otherwise have access.

2. Non-nonprofit

Never heard of this one? I’m not surprised — I made it up, for the sake of clarifying often-overlooked yet meaningful distinctions. These organizations start with social mission, much like a nonprofit, and then figure out a way to make it work outside the restrictions of a tax-exempt model — in other words, they’re a for-profit business. They exist primarily to address a social issue (“mission-first” or “mission-centric”), with revenue-generating activities intertwined with change-making activities.

They don’t form as for-profits because they are in business “for profit”; rather, it’s a decision that allows for higher-capacity growth, sustainability, innovation, and risk-taking — all components of highly successful entities in other sectors — than is generally permitted under the regulations that come with tax-exemption.

Funding

The ideal funding source here is program-related investments from foundations, which provide low-cost capital at a critical early stage and prevent compromising the fullest expression of mission for financial returns down the road. In some cases, grants from foundations or investments from traditional angel investors or venture capital firms may also be possible.

Examples

Everytable, seeking to eliminate food deserts through affordable grab-and-go meals with a first-of-its-kind sliding scale model; and InvestED, opening access to capital to low-income entrepreneurs globally with a creative combination of edtech and fintech. Others that fall in this category include Generation Genius, Amplio Recruiting, Nightingale Apps, Tickleberry Place, Mini City, Neopenda, and Drinkably.

3. Socially Responsible Business

This is the biggest bucket of them all, and includes benefit corporations, B Corps, and all things double- and triple-bottom-line. While these types of entities can be created primarily to address a social issue, it’s more common that this categorical distinction is based on the adoption of practices benefiting community, employees, or environment (generally more aligned with the idea of doing business better than solving social problems). In the case of benefit corporations and B Corps, this distinction is included in the company’s formational documents, along with a provision stating that they are legally permitted to honor this distinction (whether that be company culture, responsible sourcing, etc.), even at the expense of shareholder profit maximization.

Worth noting here is that benefit corporations are a legal entity formed at the state level, whereas B Corp is a certification available to other for-profit entities (such as corporations and LLCs). Double-bottom-line denotes a focus on social returns alongside financial ones, while triple-bottom-line denotes a focus on environmental, social, and financial returns.

Funding

Primary funding options here include traditional angel investments and venture capital, as well as program-related investments in some circumstances.

Examples

THRIVE Farmers Coffee, on the more mission-centric side; Ben & Jerry’s and Patagonia, on the more build-a-better-business side.

4. Give One, Get One / Donate Portion of Proceeds model

These are companies that direct some portion of their business toward charitable work, and are almost always layered into the preceding and subsequent categories (falling on either side of it in the diagram above). Revenue-generating activities are generally wholly separate from change-making activities and, in many cases, the social component is an add-on to the company’s core business. Because these models generally feed back into traditional nonprofit system, I break it out as a separate subcategory.

Funding

Same as above

Examples

TOMS, Warby Parker, Good Spread, Newman’s Own.

5. Awareness Brand

While some will expand these terms to include virtually everything in the previous two categories, we think they also capture a different type of company not yet mentioned — those that sell products designed to engage community and bring awareness to a social issue, but whose primary activities don’t necessarily address the root cause of the social problem they’re bringing awareness to.

Funding

Same as above

Examples

Beautiful in Every Shade, So Worth Loving.

6. Everything else

There is no one size fits all, and not every entity will fit neatly in these categories (particularly given the constantly evolving nature of this sector). The social enterprise employment model, which uses the business to provide meaningful work and empowerment to a disadvantaged population (like Bitty and Beau’s Coffee), is a component that can be layered into any of the categories discussed above

Then there’s outliers like Fruitcraft (formerly the California Fruit Wine Company),  which is pioneering an entirely new model they call social value enterprise (SVE). While an untrained eye might classify this as a socially responsible business (group 3 above), the folks behind Fruitcraft are very clear about striving for more — namely using market forces to incentivize and reward thinking about the whole — with three defining aspects they claim put SVE in a category of its own:

1. democratic ownership by employees, (including accountability and decision making within the company)
2. no possibility of sale (keeping the company permanently stewarded by the workforce for the benefit of society)
3. unleashing 100% of profits for social good

Don’t get caught up in the labels

While there are a lot of options out there, at the end of the day, the label doesn’t really matter, except for those that have tax and legal considerations (talk to a professional about those). What matters is that you’re creating something meaningful — whatever model or business idea you’re considering, whether it’s one on this list, or something else altogether. The moral of the story: If you feel a tug from deep inside to do something good, just do. I bet you’ll wind up creating something beautiful and adding social value in a way that only you can.

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