Post on 06-Aug-2015
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Dr Anis Amira Ab Rahman 2015
SOCIAL ENTREPRENEURSHIP
ACS 3063
SOCIAL ENTREPRENEURSHIP MANAGEMENT:
Financial management
Dr Anis Amira Ab Rahman 2015
Earned income strategies
~ Earned income refers to revenue generated by commercial exchange of a product or service between a buyer and seller (Dess et al., 2002)
~ Earned income is distinct from grants and other charitable donations.
~ An earned income strategy is any coherent plan of action that generates earned income, even if that income does not cover all the costs associated with producing it (Dess et al., 2002).
Dr Anis Amira Ab Rahman 2015
Principles of earned income
Not an additional revenues to improve the financial health of the social organisation. Earned income strategies require financial stability for successful execution
It is not inherently stable. Your commercial activities will not be immune to market forces just because you are a non-profit
(Dess et al., 2002)
Dr Anis Amira Ab Rahman 2015
It can help to diversify your funding base. Not diverse sources of income but different sources of income – not costly
Build on some strength or assets of your organisation
Market discipline is healthy for your organisation only when the market is well aligned with your social mission
(Dess et al., 2002)
Dr Anis Amira Ab Rahman 2015
Earned income strategies
Getting paid for what you already do
Launching a new business venture
Building revenue relationship
Dr Anis Amira Ab Rahman 2015
Getting paid for what you already do
o Find people who will pay you for it (common in health care, education and art sectors)
o 3 options of charging fees:
Charging their primary beneficiaries-eye
care
Charging an interested third party-clinic
Creating a hybrid pricing structure that
collects fees from both primary
beneficiaries and third parties- Green saver
(Dess et al., 2002)
Dr Anis Amira Ab Rahman 2015
Launching a new business venture
Factors influence the non-profit business venture:
Organisation’s competencies –
competencies-based ventures
Assets- asset-based ventures
Relationships - relationship-based
ventures
Mission – mission-based ventures(DESS ET AL., 2002)
Dr Anis Amira Ab Rahman 2015
Building revenue relationship
Non-profit/for-profit revenue relationships categories:
Cause-related marketing – sales trigger a
payment to the non-profit for seller
Joint ventures-collaboration to produce product
by capitalising on the strengths, assets and
capabilities of each
Licensing- a partnership-sell right (logo) to
corporation to promote product (Dess et al., 2002)
Dr Anis Amira Ab Rahman 2015
Earned income tactics (EIT)
Case: running a homeless shelter for teens and have decided to provide job training to your residents.
EIT: Charge fees to the corporate employers who benefit from your training, placement, and retention services
Dr Anis Amira Ab Rahman 2015
Earned income tactics (EIT)
Seek a government contract to provide training for teens who have been in court system
Start your own business that will serve as a training ground and as an income generator at the same time
Partner with establish brand to open a franchise that would provide training and employment opportunities for your clients and income to your agency
Cut a deal with a credit card company that wants to use your organisation’s good name and reputation to market its cards to socially conscious people
(Dess et al., 2002)
Dr Anis Amira Ab Rahman 2015
Founder, Family and Friends
Use of saving, redundancy package, mortgage the family home, continue in employment, personal network of friends
Adv: security unlikely to be required
Disadv: can strain family relationships if repayments are not made as expected
Dr Anis Amira Ab Rahman 2015
Bootstrapping
~ Strapped for cash, look to other ways of acquiring the necessary resources
~ Harrison et al. (2004:308) define bootstrapping as involving, “imaginative and parsimonious strategies for marshalling and gaining control of resources”
~ Two strategies: using creative ways of acquiring finance without recourse to banks or raising equity from traditional sources
Minimising or eliminating the need for finance by securing resources at little or no cost
Dr Anis Amira Ab Rahman 2015
Bootstrapping
Adv: spend wisely and learn to manage money efficiently
Disadv: typically takes a much longer time to grow a company without an investment, which
could mean that you will not be earning any money for quite a while
Dr Anis Amira Ab Rahman 2015
Foundation/Trust
A foundation is a legal categorization of non-
profit organisation that will typically either
donate funds and support to other organisation
or provide source of funding for its own
charitable purpose
Adv: donors are able to make tax deductible
donations
Disadv: ongoing effort
Dr Anis Amira Ab Rahman 2015
Grants
A grants is an amount of money given to an
individual or business for a specific project or
purpose
Grants are non-repayable funds disbursed by
one party
Get the grants funding through grant writing
Adv: do not have to pay back the grant or
interest
Disadv: lot of competition
Dr Anis Amira Ab Rahman 2015
Social Angles Investment (individual venture capital)
Business angels are high net-worth
individuals seeking capital and social gains over
the life of their investment in a company
Adv: investment based on business plan
rather than security
Disadv: Hands-on expertise may be seen as
interference in the business
Dr Anis Amira Ab Rahman 2015
Social venture capital funds
Form of venture capital investing that
provides capital to business deemed socially
and environmentally responsible
Investor and social return
Adv: not normally involved in day to day running of business
Disad: investors will want to sell on their stake in the business at some point in the future to realise their profit
Dr Anis Amira Ab Rahman 2015
What do social investors care about?
Ability to tell your stories in clear, simple and compelling fashion
The ability of the individuals undertaking project
Who is giving your guidance, what resources and experience you are drawing on
Dr Anis Amira Ab Rahman 2015
What do social investors care about?
Whether you can present a sound, realistic, understandable business case
That you have considered ways to mitigate risk to investor
That you have multiple and sufficient sources of capital
That you have mapped out all aspects of the business/ operations, and that they are getting the attention that they need.
Dr Anis Amira Ab Rahman 2015
REFERENCEShttp
://www.slideshare.net/soaim/resource-based-view-of-firm?qid=65dd6d92-6ba4-4ff5-817d-4b17b0db423e&v=default&b=&from_search=2
http://www.slideshare.net/socialentrepreneurship/entr4800-class-9-managing-for-social-impact?qid=407f9705-6939-4a42-82a1-ecaacfe4cd50&v=default&b=&from_search=2
http://www.slideshare.net/socialentrepreneurship/07-entr-aps-1015-h-class-7-business-model-considerations-for-social-enterprise?qid=ad96cbb9-33e3-4b75-a965-6f23d22dbbdc&v=qf1&b=&from_search=4