Huamin Research Center, School of Social Work, Rutgers University
China Philanthropy Research Institute, Beijing Normal University
Huamin Philanthropy Brochure Series - 7
January 2013
Exploring the Social Enterprise Business Model: How to Write a
Business Plan
Andrew J. Germak
Introduction
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Managers of human service organizations and programs are finding the need to in-creasingly behave in business-like ways. Governments are significantly cutting back support that has previously been given to human service organizations. Although charitable giving is up slightly, competition between charities and human service organizations for funding has remained strong.
It is clear that a viable option for human service managers to use a more entrepre-neurial orientation in carrying out their missions, and if done appropriately, this could result in enhanced social justice, access to services, and equality across popu-lations of service beneficiaries.
Human service managers must increasingly view their programs as social business-es in order to sustain high-quality services going forward.
A business plan is a tool with which a human service manager can demonstrate to a potential funder their agency’s capacity for sustainable program management.
A business plan can also serve as a roadmap with which the manager can launch a new social program and track its success based on milestones.
Background on Social Enterprise, Entrepreneurial Orientation, and Entrepreneurial Human Service
Management
Social enterprise (or social entrepreneurship) is a practice in which an entrepre-neur sets out to solve some social problem by way of combining business manage-ment skills with social sector acumen to yield a sustainable enterprise that produces both financial and social returns.
The shift toward entrepreneurship over traditional revenue-generation models is the reactionary result of increased competition for funding and the associated budget constraints in the sector
Entrepreneurship in the for-profit sector is a proactive process in which funding of-ten follows it. In contrast, for nonprofit or non-governmental (NGO) human ser-vice organizations, when traditional funding dries up, entrepreneurial activity is utilized as a reactive process in order to find other revenue streams.
Entrepreneurial activity within an organization has been conceptualized as the pro-cess by which an entrepreneur or a team of entrepreneurial leaders implement in-novative ideas for new products or services. The start of this process usually begins with a business plan, which is the foundation for funding and management of the project.
Indeed, certain human service organizations have begun to partake in entrepreneurial activity as a way to cope with the current economy. Thus, marketing plans, out-come milestones, and earned income strategies have become part of eve-ryday business – just as they would be in a for-profit enterprise.
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Components of a
Business Plan Executive Summary The executive summary is an opportunity to make the initial sales pitch for a particu-lar social program idea. It should be no longer than two pages. This may often be the only section that investors or funders will read. If the executive summary sparks some interest, they may read further. It is essential that the executive summary include the following components:
Basic program concept Market size and opportunity Key competition The general plan to make money and achieve impact Brief management biographies
Venture or Program Concept is important to understand the program concept in the context of the entire market – there must be a demonstrated and strong grasp of the industry in which the social program resides as well as knowledge of the history of the particular service and its success or failure and why it did or did not succeed. The following components should be included in this section, which should be between two and four pages in length:
Description of program service, or product in some cases Description of industry Overview and capacity of organization History of program ser-vice or product Description of market opportunity Explanation of mile-stones: How and when will venture achieve financial and social success?
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Market Analysis (Needs Assessment)
This section emphasizes on what a customer wants and is willing to pay for. Very of-ten, this section is based on surveys and primary data collected from the prospective market. The following should be expanded upon in this section: Demonstration of market need Who are the customers (these are the clients in a traditional sense)? Market share, size, and trends Willingness of customers to pay (or investors to fund) Value-added, customer benefits, problems solved Analysis of competition Statement of competitive ad-vantage
Marketing Plan In this section, the business plan must effectively explain how the idea will connect with the market and fill the market demand. To keep things simple, a concise market-ing plan for a social program idea housed within a business plan document should dis-cuss the following frameworks in two to three pages: Segmentation-Targeting-Positioning (STP) Framework - Segmentation – What are the various groups?
- Targeting – Who is the target?
- Positioning – Why is this idea the best?
The 4 P’s Framework - Product (or service) – what is being pitched to the market? - Price – how much will it cost? - Place – where will it be offered? - Promotion – how will customers know about the service?
Operations Plan What are the mechanics of the actual program? How does it work? How does the or-ganization execute the program? These questions should be answered in about two to three pages in length, and should include the following: Description of how venture or program works Operating cycle (timeline and schedule) Logistics (locations, delivery of product or service, manufacturing process, etc.) Human resource strategy and plan for acquiring talent Discussion of regulatory and legal issues as necessary
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Financial Plan The financial plan section of the business plan document is probably the most im-portant section. The financial plan section should be presented with both financial projections in the form of a spreadsheet and with a narrative explaining the numbers in the spreadsheet and how they were derived. For the initial business plan, this sec-tion should encompass two to three pages of the following key elements: Start-up funds required and planned use 5-year summary projections for new venture/program
- Income statement - Statement of cash flows - Balance sheet
Figure 1. Sample spreadsheet with 5-year summary projections:
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Management Team
It is important to investors to understand that the management team is not only en-trepreneurial and innovative, but also capable of managing investments. Therefore, a business plan should include bio sketches of all of the key personnel, including the board of directors and top management team. The following is a list of what should be included in this section, which should not to exceed five pages in length: Biographies of key personnel Board of directors listing/ biographies Management and key personnel compensation (and ownership structure if for-
profit) Organizational chart
Appendices
Some items that may be important to include as appendices are the following as ap-propriate: References/Bibliography CVs of key personnel Media articles Product specifications Geo-spatial mappings Miscellaneous charts and tables
Helpful Online Resources
Ashoka – global organization supporting and promoting the work of social entrepreneurs:
http://www.ashoka.org
Stanford Social Innovation Review – magazine with cutting-edge articles on entrepreneurship
in the social sector: http://www.ssireview.org
Social Enterprise Alliance – membership and networking organization based in the United
States: https://www.se-alliance.org
NJ Social Innovation Institute – training program and symposia sponsored by Rutgers Busi-
ness School-Newark and New Brunswick: http://www.njsesummit.org
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Exploring the Social Enterprise Business Model: How to Write a
Business Plan
Huamin Philanthropy Brochure Series - 7
Huamin Research Center, School of Social Work, Rutgers University
390 George Street, Room 503, New Brunswick, NJ, 08901, USA
China Philanthropy Research Institute, Beijing Normal University
19 XinJie Kou Wai Street, Room 1003A.,Haidian District, Beijing, 100875, China
