Planning for SuccessKey Elements of

Successful CDFI Business Plans

Economic State of US Households• 30% (73 million adults) are finding it difficult to get by• 32% adults say that their income varies to some degree from month to

month• 44% cannot cover an emergency expense costing $400• 26% of all adults and 54% of non-Hispanic black adults are either

unbanked or underbanked.• Over three-fourths of respondents are somewhat or very confident in

their ability to obtain a credit card were they to apply for one. • 7.0% of US households were unbanked (9.0 million households) • 19.9% of U.S. households were underbanked (24.5 million) • Wealth Gap: White household (median) $110,000 vs. Black household

(median) $7,000 and Latino (median)$ 9,000, (Prosperity Now)• $141 billion in fees & interest from financially underserved households

Why CDCUs Matter• Social enterprises with a shared mission• Part of community based solution to financial access gaps• Responsive, innovative, sustainable products and services

CREATE

DELIVERREALIZE

FINANCIALAND

SOCIAL VALUE

Why CDCUs Matter• Social enterprises with a shared mission• Part of community based solution to financial access gaps• Responsive, innovative, and sustainable products and services

CREATE

DELIVERREALIZE

FINANCIALAND

SOCIAL VALUE

HOMEOWNERSHIP & WEALTH CREATION

SAVINGS & ASSET BUILDING

SMALL BUSINESSES & LOCAL JOBS

FAIR & AFFORDABLE ACCESS TO CREDIT

Key Elements of Successful Organizations

https://www.bridgespan.org/insights/library/organizational-effectiveness/key-elements-effective-organizations

Attributes of Successful Business Plans• Alignment • Awareness • A defined and measurable set of goals and objectives• A living roadmap to achievement

CAPITAL

IMPACT

• Financial • Human

Resources• Assets• Marketing

Attributes of Successful Business Plans• Alignment • Awareness • A defined and measurable set of goals and objectives• A living roadmap to achievement

CAPITAL

IMPACT

• Financial • Human

Resources• Assets• Marketing

• Financial• Social

Business Planning…it’s about the PROCESS + PRODUCTfor the PURPOSE of RESULTS AND IMPACT

Business Planning…it’s about the PROCESS and the PRODUCTfor the PURPOSE of RESULTS AND IMPACT

How do you and your team define success?How do you operationalize community development mission and strategies?

Top 5 Business Plan Mistakes1. The plan is incomplete or no plan2. The plan is too vague or too detailed 3. The plan makes unfounded or unrealistic assumptions.4. The plan includes inadequate research.5. No identified risks or competition.

Business and Community Impact Plan Outline

1 Executive Summary, including summary of growth strategy.

2 Credit Union Description. History, Current Field of Membership, Organization and Management

3 Market Analysis

4 Loan Products and Development Services + Growth, Delivery and Outreach Strategies.

5 Community Development Impact Plan

6 Financial Projections.

Market AnalysisKey Questions To Consider:• Industry description + outlook• Information about current and target market• Size of target market• Potential market share• Pricing and gross margin targets• Competitive analysis• Niche market/ product

Market AnalysisResearch and Analysis- Seek first to understand

1. Internal/ Primary- Understand how your current market/ members use your services and potential opportunities within

Sources: Core data, marketing information, credit management reports, and social media analytics, focus groups, team members + experience with members, and surveys

Datapoints: Member engagement, dormant accounts, #/ type of transactions, credit migration, impressions

Market Analysis2. External/ Secondary- Understand industry trends, environmental

changes

Sources: Industry reports, Census information, Unbanked/ Underbanked, Datausa.io, NCUA.gov, FDIC.gov

Datapoints: Regulatory changes, other financial service providers,consumer needs, competition

SWOT ANALYSIS-INTERNAL ATTRIBUTES FINANCIAL RESOURCES

HUMAN RESOURCES

ASSETS(TECHNOLOGY,

BUILDING, OPERATIONS)

MARKETING

STRENGTHS

WEAKNESSES

SWOT ANALYSIS- EXTERNAL FACTORS

COMPETITIVEENVIRONMENT

MARKETENVIRONMENT

ECONOMIC ENVIRONMENT

POLITICAL ENVIRONMENT

TECHNOLOGICAL ENVIRONMENT

OPPORTUNITIES

THREATS

COMPETITIVE ANALYSISFACTOR STRENGTH WEAKNESS COMPETITOR

ACOMPETITOR

BCONSUMER

IMPORTANCE

PRODUCT

PRICE

EXPERTISE

LOCATION

REPUTATION

SERVICE

SALES METHOD

MARKETING

Marketing & Growth PlanFour strategies:1. Market penetration2. Growth strategy (internal,

acquisition)3. Distribution channels

(indirect lending, participations, community partnerships)

4. Communication strategy

Two Elements:1. Salesforce2. Sales activities

Marketing & Growth PlanWhat is your growth strategy?• Expanded membership?• Increase member engagement and lending?• New products and services? Operations and infrastructure?

Targets, goals and benchmarks:• Asset growth, lending, impact, membership

How will you achieve growth?• Advertising• Distribution Channels & Partnerships• Pricing strategy• Location

Community Impact Plan

Organization, Human Capital & Management

• Organization Chart• Experiences and skillsets of current staff• Roles, responsibilities and workflows Operational Plan• Assess for gaps, potential changes and training and development

opportunities • Team member engagement and satisfaction• Diversity and inclusion

• Enterprise Risk Management

Repeat process with Committees and Board

Financial Projections• Past Performance and Trends – growth, consistency• Assumptions• Capital Adequacy • Asset Quality • Earnings, including net operating income ratio• Human Capital Resource Allocation• Capital Projects • Incorporates strategic growth plans and initiatives

Refining Your Business PlanPreparing For Funding Requests and Proposals

1. Know your purpose2. Review and assess application, relationship & performance

expectations3. Review evaluation process and criteria4. Addendum to business plan and update executive summary for

application specifics

CDFI Applications

CDFI Applications-Evaluation Process and Criteria

CDFI Applications-Evaluation Process and Criteria

CDFI Applications-Evaluation Process and Criteria

Earnings Metrics = Earned Income ÷ Total Operating + Financing Expenses

Operating Liquidity = Unrestricted cash & cash equivalents PLUScash & cash equivalents restricted for operations ______________________________________Total Expenses from prior fiscal year MINUS Non-cash expenses

X 12

Capital Liquidity Ratio =Liquid Assets + Specific % of Current Loans Receivable______________________________________________Current Investor Notes Receivable

CDFI Applications-Evaluation Process and Criteria

Thank you!

Questions/ Comments:Cathi Kim

Director, Community Development Investments ProgramNational Federation of Community Development Credit Unions

cmkim@cdcu.coop