1

Creating Revenue

Through Social

Enterprise

A Workshop for The Center

for Nonprofit Resources

Presented by Geri Stengel

2

Meeting Rules

• No risk environment

• Confidential

• One person speaks at a time

• Raise your hand if you‟re

concerned that you won‟t get

to make your comment

• Participation

Sharing insights, full input from

everyone

Constructive feedback from

everyone

Critique the idea, not the person

Be open to feedback

• Be creative and have fun

3

Introductions

• What is your name?

• What is the name of your

organization?

• What does the organization

do?

• What do you do within the

organization?

• Does your organization

have a social enterprise?

• Why are you taking the

workshop?

4

Agenda

• Help you determine if social

enterprise is right for your

organization

• Provide a few case histories

• Share lessons learned

• Provide techniques used for

developing and screening

entrepreneurial ideas

• Measuring social impact

• Discuss risks and how to

mitigate them

5

Purpose of the Workshop

• Provide participants with a detailed overview of entrepreneurial techniques for diversifying revenue

• Understand strategic issues, assess your organizational readiness and suitability, and prepare you to move forward

• Focus on generating financial and human resources in support of your nonprofit organization over the long term

• Utilize organizational intellectual capital and experience, leveraging it to create a long-term source of financial sustainability for the organization

6

Social Enterprise: What, Who, Why, How

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Why Social Enterprise?

• Diversifies funding sources

• Funding of overhead / administration

• Can fund innovation

• Can fund unpopular causes

• Creates an entrepreneurial spirit

• Enhances understanding of clients

• A test of social value

• Adds skills and competencies to the organization

• Enhances the profile of the organization

8

Social Enterprise

• Which organizations come

to mind?

• Who comes to mind?

9

Definition of Social Enterprise

• A social entrepreneur is one driven by a social mission, a desire

to find innovative ways to solve social problems that are not

being or cannot be addressed by either the market or the public

sector.

Laura D’ Andrea Tyson, Haas School of Business

• “Social entrepreneurship” rather broadly as innovative and

resourceful approaches to addressing social problems.

Center for the Advancement of Social Entrepreneurship

• Social enterprise describes any nonprofit, for-profit or hybrid

corporate form that utilizes market-based strategies to advance a

social mission.

Social Enterprise Alliance

10

Trends in Social Enterprise

• Innovative approaches

• Private ingenuity

• Use of business methods

• Craft sustainable solutions to

social problems

• Share knowledge

11

Teach a Man to Fish, and You Feed Him for Life

• “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for life.”

• Experimentation with for-profit and hybrid forms of organization to serve social missions or deliver socially important goods and services

• More “strategic,” “engaged,” and “outcomes-based” approaches to social sector funding

• More attention paid to issues of impact, scale, and sustainability with the hopes of increasing SROI

• Growing experimentation with market-based approaches and business-inspired methods

12

Business Models

• Cause marketing

• Licensing

• Government purchasing

• Retail or Thrift Store

• Temp Agency

• Property Management

• Clerical Services

• Consulting Services

• Restaurant or Café

• Packaging and Assembly

• Employee Assistance Program

• Maintenance

• Technology Related

13

Specific Examples

• Ben & Jerry‟s PartnerShop Program

The franchise fee is waived.

– Goodwill Industries of Greater Detroit

– Life‟sWork of Western Pennsylvania

– New Avenues for Youth, Portland, OR

• An education foundation sold the

rights to a textbook it developed -- -

commercialize intellectual property

• a US based non-profit sells licenses to

use its programs in other countries -- -

expand mission

• Girl Scout cookies – although there

are programmatic benefits, there is no

doubt that the cash from the sale of

cookies is critical to the funding

stream - generate funds

14

What Earned Income Ventures Do Have?

15

Questions

16

Is Social Enterprise

for You?

17

Is Social Enterprise Right for Your Organization?

• What‟s the size of your budget?

• How many people work for the organization?

– Which managers and staffers will be dedicated to this initiative?

– Do you have a „business approach‟ to problem solving

• How long have you been in existence?

• Do you have existing policies and procedures?

• Other resources that are critical to success

– Business minded staff and board

– Accounting systems

– Facilities

– Start up capital

18

What Traits Do Entrepreneurs and

Social Entrepreneurs Have In Common?

• Persistence

• Desire for immediate feedback

• Inquisitiveness

• Strong drive to achieve

• High energy level

• Goal oriented behavior

• Independent

• Demanding

• Self-confident

• Calculated risk taker

• Creative

• Innovative

• Vision

• Commitment

• Problem solving skills

• Tolerance for ambiguity

• Strong integrity

• Highly reliable

• Personal initiative

• Ability to consolidate resources

• Strong management and organizational skills

• Competitive

• Change agent

• Tolerance for failure

• Desire to work hard

• Luck

19

How Do Entrepreneurs and

Social Entrepreneurs Differ?

Are there differences between people who solve technical problems and those who solve people problems?

• Idealistic

• Strong ethical fiber

• Altruistic

• Commitment to creating some sort of positive social or environmental change

• Interested in social/environmental outcomes

20

Small Business Failure Rate

• Number of failures after

the 5 year

50%

21

Why Small Businesses Fail

1. Lack of experience

2. Insufficient capital (money)

3. Poor location

4. Poor inventory management

5. Over-investment in fixed assets

6. Poor credit arrangements

7. Personal use of business funds

8. Unexpected growth Gustav Berle adds two more reasons in The Do It Yourself Business Book

9. Competition

10.Low sales Source: Small Business Management, Michael Ames

22

Are Board and Management Ready

• CANDOR: Be honest about your strengths and weaknesses.

• PASSION: Evaluate whether you really want to become more entrepreneurial.

• CLARITY OF PURPOSE: Know your mission, core values and how the social enterprises complements them.

• COURAGE: Are you willing to make tough decisions.

• DECISION MAKING: Can you be decisive, and empower employees to make their decisions?

• MAKING MONEY: Are you comfortable with the idea of making a profit?

• PUTTING THE RIGHT PERSON IN CHARGE: Even if it means going outside.

• PAYING FOR-PROFIT SALARIES: Even if you‟re paying more than what you‟re paying a comparably skilled person on the nonprofit side.

• PLANNING: Be disciplined about your planning not skipping steps.

• PERFORMANCE MEASUREMENT ORIENTATION: Measure, analyze and adjust.

• FLEXIBILITY: Are you agile enough to make course corrections quickly.

23

What Fears Do You Have About Social Enterprise

24

Determine the Type of Additional Support You’ll Need

• Take classes

• Join industry groups

• Join networking groups

• Network

• Join peer-to-peer mastermind or CEO Roundtables

• Read books and magazines on entrepreneurs and entrepreneurial techniques

• Find a mentor or advisor

• Use a coach

25

Questions

26

Case Studies

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$1 Shopper: About the Parent Nonprofit

Rescue Mission of

Syracuse provides a place

to sleep, clothes, guidance

and support to those with

alcohol or drug addictions

or mental disease,

education and job training

to the homeless and poor.

Generates $11 million

annually

28

$1 Shopper: Inspiration for Venture

• Social enterprise director

conceived and did initial

research into the viability

and best approach for

launching a dollar store

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$1 Shopper: The Venture

Sell household necessities

for $1

Kitchen items

Cleaning supplies

Disposable products

Socks

Seasonal items

30

Environmental Organization

Advocates and educates

$100+ million nonprofit

Publication division

3 scientific journals and

book publishing

2005

Revenue: $500,000+

Loss $200,000

31

Environmental Organization

Staff turnover – inconsistent

direction

Decision making not bottom

line driven

Disappointing

business results

Concern about

ongoing losses

Diminished staffing

and budgets

Lack of marketing

32

Environmental Organization

Improved bottom line

Market, market, market, especially on the

website

Move ahead with co-publishing relationships

Keep an eye on the bottom line

33

Minnesota Public Radio

America‟s largest station-

based producer of national

public radio programs

A Prairie Home Companion

Created a catalog business

Developed an excellent

direct marketing system

Evolution from coffee mugs

to customer driven

Sold business to a

department store for large

profit

34

Minnesota Public Radio

• 1981 created a catalog business:

Rivertown Trading Company

• 1986 spins off Rivertown

• 1987 reorganizes: Greenspring

Separate board with stock options

• 1998 generating $200 million

$4 million in annual profit for MPR

17% of operating budget

• Internet changing the catalog

business

• Greenspring evaluates options to

expand by raising capital

• MPR does want Greenspring to

grow, but doesn‟t want to fund

expansion

35

Minnesota Public Radio

• Greenspring sells Rivertown to

Dayton Hudson

$120 million

$110 million to MPR

$20 million to Greenspring

• Several Greenspring employees

earn windfalls from option

President of MPR makes $2.6

million

• Bad publicity over windfall revenues

• Rivertown bused by Dayton Hudson

as infrastructure to launch e-

commerce for Target.

• Rivertown catalogs shut down

• 30 employees laid off

• Rivertown president resigns

36

Questions

37

Lessons Learned

38

Lessons Learned: Starting Up

• Begin with your assets

• Start with quick wins

• Remain consistent with your

values

• Address organizational

barriers to get everyone‟s buy-

in

• Different mission – separate

team

• Understand the marketplace

including the competition

39

Lessons Learned: Addressing Risks

• Avoid airlines – don‟t start

companies that are expensive

to build and make a profit

• Share risk with

distributors/partners

• Measure performance

(financial, social and

operational) and put in place

systems for continually

improvement

• Identify and address risks as

they arise

• Be prepared for it to take

longer than you plan for and

need more money

40

Lessons Learned: Final Lessons

• Network

• Get expert industry advice

• Hire/develop entrepreneurs

• Don‟t rely on your mission to

sell

• Don‟t be afraid to fail

41

Questions

42

Developing and

Screening Ideas

43

Steps in Product Development

1. Fuel for ideas

2. Generating ideas

3. Quick filtering idea stages

4. Evaluating ideas

44

Fuel for Ideas

• Internal capacities*

• Community trends and needs

• Potential market opportunities

• Other related organizations

(Community Wealth Ventures

–

http://208.82.213.185/resource

s_search.asp)

• Unrelated organizations

(Community Wealth Ventures

–

http://208.82.213.185/resource

s_search.asp)

45

Internal Capacities

• Competency-based - What

do we do well that might be

valuable to others?

• Relationship Asset-based -

What relationships do we

have that have business

value?

• Property Asset-based –

what do we own (assets

that are under-utilized or

previously unrecognized)

that have market value to

others

46

Internal Capacities – Maximizing Intellectual Property

• Program related

• Same product – new market

Geographic

Other customer segment

• Staff resources

• Client resources

• Hard and soft property

• Unrelated business

47

Spectrum of Activity

Traditional Affirmative Full-scale

Fee-for-service Business Commercial Activity

Earned income is a

typical component

of nonprofit‟s system

and structure

Earned income is

designed to provide

some revenue and

other benefits such

as job training and

employment

Earned income

is designed to

generate excess

revenue to support

nonprofit‟s mission

48

Venture Idea Ladder

• Find new customers for new

products

• New customers for existing

products

• Develop new products for

existing customers

• Expand sales/improve

profits from existing

customers

Hardest

Easiest

49

Idea Screening

Brainstorming

Screen 1

Screen 2

Feasibility

B-Plan

5 seconds

100 ideas

2 minutes

10 ideas

2-3 hours

2 ideas

2 days

0-3 ideas

6 weeks

0-2 ideas

50

Screen I: Fast Screening

• Criteria

Is it consistent with the

mission?

Does it meet a significant

customer need?

Does it leverage the

strengths and assets of

the organization?

• Guidelines

Go for clear winners

Accept that some good

ideas will not be selected

No more than 2 minutes

per idea

51

What Is a Good Idea?

• Meets a significant customer need – a market

• Fits with mission

• Leverages a strength / asset

• Competitive advantage

– Cost

– Performance

• Return on investment

• Risk managed

• Create your own criteria

52

Screen I: Sample Decision Matrix

Leverage in house

expertise POSSIBLE QUICK WIN HIGH PRIORITY

No in house

expertiseDON’T PURSUE LONG TERM, IF AT ALL

Low Revenue High Revenue

• Use any two criteria that work for you or your organization

• Expertise and revenue potential used here

53

Screen II: Set Up

• 2-3 hours discussion / best

guesses

• Create a concept statement

Describe product

Who will buy?

How frequently will they buy?

Where will they buy?

How will they buy?

• Product attractiveness

Financial results

Marketing issues and competitors

Risk factors

• Does it fit with the Organization?

54

Screen II: Evaluation

• What is the potential for

generating “big” bucks?

• Will we need a “big” investment

to launch? (ie hire new staff

before $ in; $50K technology

investment)

• Is anyone enthusiastic? Who will

champion the idea?

• Do revenue and expense

assumptions make sense and are

they realistic?

• Can risk be managed?

• Can we pilot on a small scale?

55

Sample Decision Matrix

Site Criteria Table

Factors Grade 1-4 Weight 1-4 Points

Mission fit

Significant customer problem

Appropriate solution

Revenue potential

Leverages strengths/assets

of organization

Ease of implementation

Capital investment

Human resources needed

Ability to manage risk

Profit potential.

Total Points

56

Let’s Experiment: Test Subject Please

57

Questions

58

Social Impact

59

Metrics: Understandable, Inexpensive and Useful – Acumen

• What social impacts is your

venture aiming to achieve?

• What is the relationship

between these impacts and

the activities of your venture?

• How well is venture achieving

them? What are you learning

about how to improve this?

• Can you afford to regularly

produce these impacts?

• How much value is being

created for society as a result?

Source: Social Impact Assessment and Building Your

SROI, Cathy Clark Faculty Advisor, GSVC Director,

Research Initiative on Social Entrepreneurship Columbia

Business School

60

GSVC Defines 3 Steps

1. DEFINE social value

proposition:

Theory of Change

2. QUANTIFY how you’ll track

social value:

Impact Value Chain: top three

social output indicators

3. MONETIZE intended social

value:

Social Return on Investment

(SROI)

Source: Social Impact Assessment and Building Your SROI,

Cathy Clark Faculty Advisor, GSVC Director, Research Initiative

on Social Entrepreneurship Columbia Business School

61

Step 1. Define Your Social Value Proposition: Tool 1. Theory of Change

• Focused: concise IF-THEN

statement or statements that define

the intended social impact and how

the operation intends to cause it to

happen

– “If poor women in East Africa have

access to a microbicidal contraceptive,

then AIDS will spread less rapidly in

those countries.”

• Detailed: fine-grained set of cause

and effect assumptions at the core of

a strategy to create social change or

achieve social impact.

Source: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, Research

Initiative on Social Entrepreneurship Columbia Business School

62

Step 2. Quantify Top 3 Social Indicators

Identify your top indicators of

social value

• These are outputs you can

measure directly as part of your

business operations

• They should relate in a compelling

way to the ultimate desired social

outcomes of the venture

• We call them “indicators” or “social

outputs.”

• Competition requires that you

specify the 3 most important.

Source: Social Impact Assessment and Building Your SROI, Cathy

Clark Faculty Advisor, GSVC Director, Research Initiative on Social

Entrepreneurship Columbia Business School

63

Tool: Value Impact Chain

Inputs Activities Outputs Outcomes Goal

Alignment

What is put

into the

venture

Venture‟s

primary

activities to

produce

financial and

social value

Results that

can be

measured by

the venture –

Social

Indicators

Changes

(increases or

decreases) to

the social

system

How well

outcomes

align with

intended

goals; activity

and goal

adjustment

Source: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, Research

Initiative on Social Entrepreneurship Columbia Business School

64

Tool: Value Impact Chain

Inputs Activities Outputs Outcomes Goal

Alignment

What is put

into the

venture

Venture‟s

primary

activities

Results that

can be

measured

Changes to

the social

system

Activity and

goal

adjustment

What would

have

happened

anyway

= Impact

Source: Social Impact Assessment and Building Your SROI, Cathy Clark Faculty Advisor, GSVC Director, Research

Initiative on Social Entrepreneurship Columbia Business School

65

Step 3: Monetize Impact

Identify the dollar value equivalent

of your projected social impact to

create a social return on

investment.

• There is no standard methodology

in current use to monetize social

return and teams are strongly

encouraged to build on existing

work, innovate, and rigorously

defend your decisions.

• That said, we will walk through the

social return on investment (SROI)

model used to date in the GSVC

and by REDF. (www.redf.org)

Source: Social Impact Assessment and Building Your SROI,

Cathy Clark Faculty Advisor, GSVC Director, Research Initiative

on Social Entrepreneurship Columbia Business School

66

Tool 3: SROI Steps in Calculation of SROI

1. Quantify outputs/outcomes where

possible

2. Translate into economic equivalent

where possible using proxies

3. Develop social cash flow projection

4. Subtract outputs/outcomes that

would have happened anyway (refer

to proxy data)

5. Where outcome is qualitative,

discuss what it is and how you will

know it‟s happening

6. Cite your sources and assumptions

clearly

Source: Social Impact Assessment and Building Your SROI,

Cathy Clark Faculty Advisor, GSVC Director, Research Initiative

on Social Entrepreneurship Columbia Business School

67

Risk & Contingency

• Uncontrolled cash flow

• A drop in sales or

insufficient sales

• Higher costs

• New competition

• Business recessions

• Incompetent managers or

employees

• Dishonesty and theft

68

What’s Your Next Move?

69

Questions

70

Resources

• Toward a Better Understanding of Social Entrepreneurship: Some Important

Distinctions. Jerr Boschee and Jim McClurg

https://wiki.brown.edu/confluence/download/attachments/33494/better_understanding.

pdf?version=1&modificationDate=1188407297000

• A Double „Bottom Line‟: Lessons on social-purpose enterprise from the Venture Fund

Initiative http://www.redf.org/download/other/dbl.pdf

• Venture Forth! The Essential Guide to Starting a Moneymaking Business in Your

Nonprofit Organization

http://www.redf.org/download/other/VentureForth-samplechapter.pdf

• The Limits of Social Enterprise: A Field Study & Case Analysis

www.seedco.org/download/?id=10

• Community Wealth Ventures

http://www.communitywealth.com/resources.html#SOCIAL_ENTERPRISE_RESOUR

CES

• Profiting from Purpose: Profiles of Success and Challenge in Eight Social Purpose

Business http://www.seedco.org/press-releases/?id=258

• Social Enterprise Alliance https://se-alliance.org/

71

Resources

• Business Planning for Nonprofits: What It Is and Why It Matters

http://www.bridgespan.org/LearningCenter/ResourceDetail.aspx?id=2382

• Getting Ready to Grow: The Tools You’ll

Need http://ventureneer.com/sites/default/files/ebooks/ventureneer-ebook-getting-

ready-to-grow.pdf

• Get Ready to Grow Your Business webinar http://ventureneer.com/webclass/get-

ready-grow-your-business

• Developing a Growth Business Plan: A series based on the Social Impact Exchange,

which has a business plan competition http://ventureneer.com/special-friday-series-

developing-growth-business-plan-0

• Business Planning (For nonprofits, for-profits and hybrid organizations)

http://managementhelp.org/businessplanning/index.htm

• Nonprofit Sample Business Plans

http://www.bplans.com/nonprofit_business_plan_templates.cfm

• Sample Nonprofit Business Plans http://www.bridgespan.org/sample-nonprofit-

business-plans.aspx?parentid=106&taxid=130

• One Page Solutions for Non-Profits http://www.onepagebusinessplan.com/non-

profits.htm

•

72

Resources

• L3C or a B corporation

– http://nclawlife.com/2011/03/04/l3c-and-b-corps/

– http://www.americansforcommunitydevelopment.org/concept.php

– http://www.nonprofitlawblog.com/home/2011/08/the-l3c-3-years-later.html

– http://www.bcorporation.net/why

– http://www.inc.com/guides/201106/how-to-become-a-benefit-corporation.html

• The Global Social Venture Competition is the largest and oldest student-led business

plan competition providing mentoring, exposure, and prizes for social ventures from

around the world http://www.gsvc.org/about_gsvc/

• Stanford Social Innovation Review http://www.ssireview.org/

• Social Enterprise Alliance, www.se-allliance.org