Nabad S.E. manual english

Social Entrepreneurship… Personal Readiness and Business Planning

Developed by BRDI Group 2013 1

Participants’ Manual

Social Entrepreneurship… Personal Readiness and Business Planning Training Program



Introduction…

Congratulations! You are shortlisted for Nabad National Competition. Nabad will assist you in the next phase to increase your chances to be one of the 15 winners. The “Social Entrepreneurship: Personal Readiness and Business Planning” training program aims at enabling you to harness your choice as a social entrepreneur and equip you with the tools to enhance your idea and develop your social business plan, based on the concept note you submitted. At the end of the workshop, you will be introduced to a group of coaches who will be ready to accompany you in developing your business plan and enable you to pitch your idea during the National Competition Day. The social entrepreneur is naturally inspired to make ends meet through being passionately driven to innovate and solve social problems. You already have an idea about what you want to do. It is time to structure and decide on a course of action and devise your social business plan. Good luck for the competition… Nabad Team



Objectives…

This training program is designed for applicants being individuals, non-for-profit or business institutions and aims at:

Introducing participants to the mindset and concepts needed for a

successful socially entrepreneurial endeavor.

Making them aware of their inner motivations and existing skills to

succeed in their projects.

Understanding the types of innovation within business models and

explore possibilities to improve their personal and business creativity.

Exploring all components of social business planning and the necessary

conditions to convince stakeholders about it.

Acquiring tools to better assess the idea feasibility, innovation and

impact.

Learning about market research and planning tools.

Learning about operations and production planning tools.

Learning about management planning tools including legal frameworks.

Learning about financial planning including distribution of profit.

Exploring mechanisms for citizens, beneficiaries and stakeholders

participation within a social business and learn about ethical standards.

Introducing social entrepreneurs to the coaches and present

communication mechanisms to benefit from their experience in social

business planning.

“If we want to create a workplace that values idealism, human connection, and real, in depth learning, we will have to create it ourselves.” Peter Block



Outline…

Day -1-

Schedule Session Title

9:00 – 10:00 Introduction and Icebreaker

10:00 – 11:30 Social Entrepreneurship: Principles and Characteristics

11:30 – 11:45 Coffee break

11:45 – 13:00 Social Entrepreneurs’ Personal Requirements

13:00 – 14:00 Lunch break

14:00 – 15:15 Social Innovation


15:30 – 17:00 Introduction to a Feasibility Study

Day -2-


9:00 – 9:30 Wrap-up of the First Day

9:30 – 11:15 Idea Feasibility


11:30 – 13:00 Marketing Planning


14:00 – 15:15 Operations and Production Planning


15:30 – 17:00 Management Planning

Day -3-


9:00 – 9:30 Wrap-up of the Second Day

9:30 – 11:15 Financial Planning


11:30 – 13:00 Community Participation and Ethical Standards


14:00 – 15:15 Matching Social Entrepreneurs with Coaches


15:30 – 17:00 Workshop Evaluation and Next Steps



Module -1- Social Entrepreneurship: Principles and Characteristics

Social Entrepreneurship has become a global phenomenon that impacts the lives of citizens by using innovative approaches to solving social problems. This concept combines the passion of a social mission with an image of business-like discipline, innovation, and determination. The concept of social entrepreneurship is gaining popularity; it means different things to different people. It includes innovative not-for-profit ventures, social purpose business ventures and hybrid organizations mixing not-for-profit and for-profit elements. Beliefs, culture, social class, education, and family background play an important role in shaping social entrepreneurship endeavors.

“When a change in perception takes place, the facts do not change. Their meaning does.” (Peter Drucker, 1985)

Social Entrepreneurship is… … adopting a mission to create and sustain social value (not just private value)… making a profit, creating wealth, or serving the desires of customers … are means to a social end, not the end in itself. (Greg Dees, 2001) …creating and building something of value from practically nothing. Entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled. (Timmons, 1994) … about innovation and impact, not Income. We have seen that the function of entrepreneurs is to reform or revolutionize the pattern of production. (Schumpeter, 1947)



…a multidimensional construct involving the expression of entrepreneurially virtuous behavior to achieve the social mission, a coherent unity of purpose and action in the face of moral complexity, the ability to recognize social value-creating opportunities and key decision-making characteristics of innovativeness, proactiveness and risk-taking. (Mort, Weerawardena, & Carnegie, 2003) Entrepreneurship is a behavior rather than a personality trait… Entrepreneurs view change as the norm and as healthy. Usually, they do not bring about the change themselves. But—and this defines entrepreneur and entrepreneurship—the entrepreneur always searches for change, responds to it, and exploits it as an opportunity. (Drucker, 1985) Success Factors of Social Entrepreneurship Leadership & Personal Qualities What are leadership characteristics of social entrepreneurs? What personal qualities help the entrepreneur succeed in creating value?

_____________________________________________________________________________________________________________________________ Opportunity Identification & Innovation What innovative insight is the entrepreneur bringing to identify an

opportunity to create change? How is s/he create and spread this innovation and change?

_____________________________________________________________________________________________________________________________ Value Creation & Impact What new value is created by the enterprise/ entrepreneur, and how? What can be the conceptual tools to measure/assess the impact and

effectiveness of the social enterprise? _____________________________________________________________________________________________________________________________



Sustainability How is the social entrepreneur making the venture sustainable –

financially, organizationally and ecologically? _____________________________________________________________________________________________________________________________

A Social Enterprise is… …any business venture created for a social purpose – mitigating/reducing a social problem or a market failure – and to generate social value while operating with the financial discipline, innovation and determination of a private sector business”. (Kim Alter founder of Virtue Ventures, 2008) …mobilizes resources, skills and ideas to create a sustainable model. It is a process, which includes products, services or the creation of a new organization to produce a positive social change. Characteristics of a Social Enterprise… An explicit aim to benefit the community One of the principal aims of social enterprises is to serve the community or a specific group of people. In the same perspective, a feature of social enterprises is their desire to promote a sense of social responsibility at local level. An initiative launched by a group of citizens Social enterprises are the result of collective dynamics involving people belonging to a community or to a group that shares a well-defined need or aim; this collective dimension must be maintained over time in one way or another, even though the importance of leadership - often embodied by an individual or a small group of leaders – must not be neglected.



A decision-making power not based on capital ownership This generally means the principle of "one member, one vote" or at least a decision-making process in which voting power is not distributed according to capital shares on the governing body which has the ultimate decision-making rights. Moreover, although the owners of the capital are important, the decision-making rights are generally shared with the other stakeholders. A participatory nature It involves the various parties affected by the activity. Representation and participation of users or customers, stakeholder influence on decision-making and a participative management are often important characteristics of social enterprises. In many cases, one of the aims of social enterprises is to further democracy at local level through economic activity. A limited profit distribution Social enterprises not only include organizations that are characterized by a total non-distribution constraint, but also organizations which - like co-operatives in some countries - may distribute profits, but only to a limited extent, thus avoiding a profit-maximizing behavior.



Typology of Social Enterprises (adapted from Alter, 2007) All hybrid organizations generate both social and economic value and the four types on the spectrum below are organized by degree of activity as it relates to: 1) motive, 2) accountability and 3) use of income.

Hybrid Spectrum Traditional Non-profit

Non-profit with Income Generating Activities

Social Enterprise / Social Business

Socially Responsible Business

Corporation Practicing Social Responsibility

Traditional For-Profit

Primary Purpose: Creating social value

Primary Purpose: Creating economic value

Mission motive Stakeholder Accountability Income reinvested in social programs

Profit making motive Shareholder accountability Profit redistributed to shareholders

“We must create full employment or we must create incomes. People must be made consumers by one method or the other. Once they are placed in this position, we need to be concerned that the potential of the individual is not wasted. New forms of work that enhance the social good will have to be devised for those for whom traditional jobs are not available.” (Martin Luther King, 1967)



Module -2- Social Entrepreneurs: Personal Requirements

The difference between commercial entrepreneurs and social entrepreneurs is in their motivation and purpose. Like other idealists, social entrepreneurs look at the world through rose-colored glasses, but they never forget the green eyeshades of the accountant measuring results and finding new ways to scale up their sustainable social impact. (Jeff Skoll, 2008) An entrepreneur is an entrepreneur only when he or she actually “carries out new combinations” and loses that character as soon as he or she has built up his business, when he or she settles down to running it as other people run their businesses. (Schumpeter, 1939).

“Whatever you can do or dream you can, begin it. Boldness has genius power and magic in it...” Wolfgang Von Goethe

Social Entrepreneurs are… …individual, group, network, organization, or alliance of organizations that seeks sustainable, large-scale change through pattern-breaking ideas” in social problems, where other stakeholders such as governments, nonprofit organizations or even businesses failed. (Light, 2006). …who envisions opportunity where others see obstacles. (Dees D.J., 2003) …are persons who create and manage innovative entrepreneurial organizations or ventures whose primary mission is the social change and development of their client group. (Prabhu & Ganesh, 1999) … are people with new ideas to address major problems who are relentless in the pursuit of their visions, people who simply will not take ‘no’ for an



answer, who will not give up until they have spread their ideas as far as they possibly can. (Bornstein, 2007) …are people with the qualities and behaviors we associate with a business entrepreneur but who operate in the community and are more concerned with caring and helping than with ‘making money’. In many cases, they help change people’s lives because they embrace important social causes. (Thompson, 2002). …everyone who can face up to decision-making can learn to be an entrepreneur and to behave entrepreneurially. (Schumpeter) Entrepreneurial and Social Skills… Social entrepreneurship focuses on the personal qualities of people who start new organizations, and it celebrates traits like boldness, accountability, resourcefulness, ambition, persistence, and unreasonableness. Entrepreneurial Skills Innovation Entrepreneurs have a mission to identify new solutions to meet unmet consumer needs in a new or different manner that creates lasting value. They are creative, willing to think outside the box and ready to apply ideas to new situations. They understand that not every innovation will be a success, and they see failures as learning opportunities even as they strive for success. Opportunity seeking They pursue their goals persistently, seeing every obstacle as an opportunity to develop and fine-tune their business models. Influential The entrepreneur must be able to inspire people with a vision of what the new enterprise will be, inspire investors and stakeholders involved in the creation of this enterprise, and provide the leadership to guide and manage the implementation and execution of the business plan to grow the enterprise. Resourceful Their visions are not limited by the resources that they have. Besides optimizing the use of existing resources, they actively expand their resource pool through collaboration with others.



Passionate They are convinced that their offer is the best solution to the corresponding status. Social Skills

Socially aware Social improvement, as opposed to the creation of profit, should be the ultimate goal of the social entrepreneurs. The success of their endeavors is measured by their social impact, not by the amount of profits generated. Proactive They are visionaries who create deep changes by reforming social systems and creating sustainable improvements; whether that is education, health care, economic development, the environment, the arts, or any other social field. Accountable Social entrepreneurs are accountable to their beneficiaries, and they often ask themselves. This is because social entrepreneurs want to know that they are actually making an impact. Social entrepreneurs see these problems as a call to action rather than a cause for despair. Social Entrepreneurs as Change Agents… Social entrepreneurs play the role of change agents in the social sector, by: Adopting a mission to create and sustain social value (not just private value), Recognizing and relentlessly pursuing new opportunities to serve that

mission, Engaging in a process of continuous innovation, adaptation, and learning, Acting boldly without being limited by resources currently in hand, and Exhibiting heightened accountability to the constituencies served and for the

outcomes created.

Some men see things as they are and say why - I dream things that never were and say why not. by George Bernard Shaw.



My Life Map In the space below, draw your life to reflect your personal strength, weaknesses, opportunities and threats. Look at your past experiences and find important moments that influenced you and taught you life lessons. Also, project yourself in the future and describe how it will look like.



Bringing My Vision to Life In the space below, express in a picture what your vision lived out would look like.



Module -3- Social Innovation

We live in an age in which we have to re-invent many of our social industries like health, education, wellbeing, care and transport. We need different ways of thinking, being and doing if we are to live well, prosper and safeguard the future. Primarily we need to go beyond the concept of consumer needs and a consumer approach, and also encompass social needs and a social approach. By doing so, we can drive a new era of creativity and growth. How we think about the future determines the way we act in the present. If the future is not predictable then it is also about choice and certain choices are just waiting to be made. It’s up to us. The future will be less about predicting it and more about collaboratively designing it.

“A transformation of the way we think and the way we are, a personal transformation, which is often the hardest transformation of all but one that supports all the others. If we don’t change ourselves we can’t change the world.” (Josephine Green, 1997)

Social Innovation… as process and outcome. …is a novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals. …is based on researching social needs and developing social solutions. Such innovation implies new ways of living and new ways of doing. The innovation not only entails the “what to accomplish” but also the “how to do it.



To be considered an innovation, a process or outcome must meet two criteria… Novelty - Innovations must be new to the user, context, or application. Improvement - A process or outcome must be either more effective or more efficient than preexisting alternatives in addition to more sustainable or more just. Elements of Innovation… It is essential to distinguish four distinct elements of innovation: First, the process of innovating, or generating a novel product or solution,

which involves technical, social, and economic factors. Second, the invention itself— being a service or a product that we provide. Third, the diffusion or adoption of the innovation, through which it comes

into broader use. Fourth, the ultimate value created by the innovation. The Opportunity Creation Process… (adapted from Guclu, Dees and Anderson, 2002) The model below breaks the opportunity creation process into two major steps. First, a social entrepreneur generates a promising idea. Second, the social entrepreneur attempts to develop that idea into an attractive opportunity.

Social Needs

Social Assets

Promis-sing Ideas

Social Impact

Resource

Operating Model

Opportunity

Change

Personal Experience

Operating Environment

Social Impact

Step -2- Developing Promising Ideas into Attractive Opportunities

Step 1: Generating Promising Ideas

Business Model



Step -1- Generating Promising Ideas Personal experience, social needs, social assets, and change can stimulate promising ideas, but only if the social entrepreneur also adopts an opportunity-oriented mindset, actively looking for new possibilities to have significant positive social impact. Effective social entrepreneurs carry this orientation into the opportunity development process, engaging in continuous innovation, adaptation, analysis, and learning along the way. Step -2- Developing Promising Ideas into Attractive Opportunities In order to determine whether a promising idea can be transformed into an opportunity worthy of serious pursuit, it is essential for the social entrepreneur to articulate a compelling social impact theory and a plausible business model. Developing a plausible business model requires designing an effective operating model and crafting a viable resource strategy. These pieces must fit together, and the assumptions embedded in them must be credible given the environment in which the social entrepreneur intends to operate. Finally, the requirements of the venture must fit the commitment, qualifications, and life stage of the entrepreneur considering it. Change through the Creative Orientation This tool helps us move from reactive problem solving to co-creating. Simply put, this is about the members deciding what they want to create together, identifying what needs to be done to make the change work, and eventually, committing to do it. The members of the unit or organization have been engaged and have reached this point:

The reason for the change is understood by all. Reservations have been expressed and heard. In spite of those reservations, the need to do something differently is apparent to

all. The business requires it.



Now the important question is: "What do we want to create together?" If we look at it as a problem to solve, the energy is negative. If we look at it as a future to create - a desired result to achieve - the energy is positive. Robert Fritz referred to these orientations as patterns of thinking, feeling and acting. How we view a situation can make a significant difference in how we react and respond. This work has a direct relationship to our desire for implementation through engagement to result in a sustainable change.

Choice 1: A Reactive Orientation

Action Problem (acting) (thinking) Lessens the This is a problem problem's impact that must be and lessens the solved need for continued action

Pressure (feeling) Anxiety, stress, tension = energy or power pushing us to act

PROBLEM IS STATIC AND REACTIVE SOLUTION IS LINEAR



Choice 2: A Creative Orientation

Action Desired Result (acting) (thinking) Moves us closer to This is a future I desired result, want to create driving us to continue to act until vision becomes real

Pressure (feeling) Excitement, desire, passion = energy or power pushing us to act

DESIRED RESULT IS DYNAMIC (DRIVEN BY CURRENT REALITY)

AND ACTION IS SYSTEMIC

“No problem can be solved with the same mindset that has created it…” Albert Einstein



Reactive Orientation versus Creative Orientation Reactive orientation Problem: __________________________________________________________________________________________________________________________________________________________________________________________________________________________ Pressure: __________________________________________________________________________________________________________________________________________________________________________________________________________________________ Action: __________________________________________________________________________________________________________________________________________________________________________________________________________________________ Creative orientation Desired result: __________________________________________________________________________________________________________________________________________________________________________________________________________________________ Pressure: __________________________________________________________________________________________________________________________________________________________________________________________________________________________ Action: __________________________________________________________________________________________________________________________________________________________________________________________________________________________



Module -4- Introduction to a Feasibility Study

As aspiring social entrepreneurs, you may have an idea about the type of problem or issue that you want to work on. This may have come from a personal experience or the shared interest of your group.

However, an idea for a social business is not a sufficient reason to begin production or design straight away, without having thought clearly about the different aspects involved in actually running your social business.

Too often, people invest money in a business only to find out later that there is insufficient demand for the product or service, or that it is not the type that can benefit their social cause. Another reason may be that your clients or investors do not see the value in your approach or solution.

For example in the US, according to a 2012 Research at the University of Tennessee; the percentage of businesses still operating after four years are found in the finance sector at 58% and the lowest in the information sector at 37%.

This means that, on average, 40% - 70% of start-ups will close within three years.

To reduce this risk of losing time, effort and resources, social entrepreneurs should go through the different aspects of running their business in collecting information, discussing with experts, friends and advisers before they commit to a specific plan.



This process is known as doing a feasibility study and when the results are written down in a plan, the document is known as a business plan.

Defining a Feasibility Study…

A Feasibility Study is a tool used by business planners in order to assess whether a business idea is worth pursuing. It generally recommends a course of action and a realistic estimate of the total project end cost and life cycle cost. it serves as an excellent tool for trouble-shooting and long-term planning.

The feasibility study is a technical process that requires focus and expertise, but it can also be fun! Make sure you first understand the full picture and its relevance to your social entrepreneurship journey before you embark on filling the pieces of your study.

The feasibility study can be an opportunity to reach out to your clients and make them feel involved from the beginning. Remember that people will support and participate in your social business to the extent that they feel their participation matters. So make them feel important!

Reach out to different stakeholders locally and nationally and make sure they feel concerned in your work by asking them questions and involving them in decision-making.

Conducting a feasibility study need not be difficult, but should cover the main aspects to ensure that potential risks are understood and addressed.

You can start by considering the following:

1. Is there a demand for the product/service?

Research the characteristics required of the product/service, and the size and value of the market demand.

2. What is the social impact of the product/service?

Research the possible impact of the product/service on the community and how it uses social assets.

3. Who else is producing similar products/services?

Determine the number and type of competitors.

4. What is needed to make the product/service?

Find the availability and cost of staff, equipment, services, raw materials, ingredients production and packaging.

5. What is the cost of producing a product/service?

Calculate the capital costs of getting started and the operating costs of



production. 6. What is the likely profit?

Calculate the difference between the expected income from sales to an estimated share of the market and the costs of production.

7. How will the business be sustainable?

Design your business to ensure economic, social and environmental sustainability.

When all the information has been gathered and analyzed, you can begin to decide on whether your idea is worth investing time, effort and resources to make it happen.

The Importance of a Feasibility Study… A feasibility study looks at the viability of an idea with an emphasis on identifying potential problems and attempts to answer one main question: Will the idea work and should you proceed with it?

Before you begin writing your social business plan you need to identify how, where, and to whom you intend to sell a service or product, and in what way. The result of your feasibility analysis is your social business plan. Your business plan is a “working document” to be used as a framework to guide you through developing your social business. The social business plan, whilst informative, is not carved in stone but rather can be regularly updated in order to respond to new information and changing situations.

Even if you have a great business idea you still have to find a cost-effective way to market and sell your products and services.

The information you gather and present in your feasibility study will help you:



THE BUSINESS DEVELOPMENT PROCESS FOR SOCIAL ENTERPRISE

Learn about the clients you will be serving;

Evaluate the social and economic impact, both intended and unintended on your target community;

List in detail all the things you need to secure to make the social business work;

Identify logistical and risks, problems and solutions;

Develop marketing strategies to convince a bank or investor that your idea is worth considering as an investment; and

Serve as a solid foundation for developing your business plan.



The Components of a Feasibility Study… The feasibility study is normally comprised of:

• Description of the Business: The product or services to be offered and how they will be delivered.

• Market Feasibility: Includes a description of the industry, current market, anticipated future market potential, competition, sales projections, potential buyers, etc.

• Technical Feasibility: Details how you will deliver a product or service

(i.e., materials, labor, transportation, where your business will be located, technology needed, etc.).

• Organizational Feasibility: Defines the legal and corporate structure of the business (may also include professional background information about the founders and what skills they can contribute to the business).

• Financial Feasibility: Projects how much start-up capital is needed, sources of capital, returns on investment, etc.

• Business Sustainability: Determines the economic, social and environmental sustainability of the business.

Questions to be addressed by a feasibility study…

Community Assessment

1. What is the scope and size of the community problem that you are trying to solve?

2. What are local assets that could be invested? 3. What are local resources that create an opportunity for a social

enterprise? 4. What is innovative in your idea to solve the social problem? 5. What are implications of your idea on social, economic and political

conditions within the community?



Industry Analysis – Key Questions

1. What is the scope of the industry in terms of services and goods offered? 2. How essential are its products/services to customers? 3. Is the industry characterized by high profit margins or razor-thin margins? 4. Is the industry growing, maturing, declining or stable? 5. How fast is it growing? 6. What trends are shaping the industry’s future? 7. What threats does the industry face? 8. What opportunities does the industry face? 9. How intense is the level of competition in the industry?

Market Analysis – Key Questions

1. How large is this market segment, and how fast is it growing? 2. Which niche in the market will the product/service occupy? 3. Who are the potential buyers of the product/service? 4. What are their characteristics (age, sex, profession, …)? 5. Why do they buy? 6. When and how do they buy? 7. What is their income? 8. Where are they located? 9. Who are the main suppliers? 10. Where are they? 11. How can they encourage/block the product? 12. Who are potential contractors/suppliers that are involved in the industry?

Competition Analysis – Key Questions

1. Who are the key players in the industry? 2. How long have they been in business? 3. Where are they located? 4. What is their product/service? 5. What are their prices? 6. What is the quality level of their product/service? 7. What are their strengths? 8. What are their weaknesses? 9. What is the added value of the product/service over theirs? 10. Can they reproduce the product/service? 11. What are possible competitive strategies to consider?

Material Analysis – Key Questions

1. What are the materials needed for the product/service? 2. Where can they be found? 3. What is the needed quantity?



Labor Analysis – Key Questions

1. What are key functions in the process? 2. What are qualifications (previous experience, education level…) needed for each? 3. What competencies are needed for each? 4. Is the necessary technical expertise available?

Location Analysis – Key Questions

1. Is there a location that is accessible and affordable? 2. Does it require any reconstruction / decorating / rehabilitation work?? 3. How much time does it need before it is ready?

Transportation Analysis – Key Questions

1. What are transportation scenarios? (e.g.: material from source to production site) 2. How will the transportation take place? 3. How many vehicles are needed?

Technology Analysis – Key Questions

1. Is the appropriate technology available? 2. If not, where can it be acquired? 3. Does it require special expertise?

Financial Analysis – Key Questions

1. What is the start-up cost? Cost of office space, land, plant and equipment Legal costs in setting up a company structure

2. What is the day-to-day operating cost? Wages Rent Utilities

3. What is the social business's projected income? 4. How profit will be distributed? 5. What is your projected social and financial return on investment? 6. What are possible sources of financing?

Bank loans Accounts with suppliers Venture capital



Social Business Plan Outline

I. General Description of the Social Business a. Purpose b. Core Values c. Social needs and assets in the community d. Description of the offer: services and products e. Most important strengths and core competencies of the entrepreneur group f. Significant challenges the enterprise might face g. Social contribution and added-value of the enterprise h. Social business model and community participation in the enterprise

II. Marketing Plan

a. Market research b. SWOT analysis c. External analysis (Political/Economic/Social/Technological – PEST analysis) d. Marketing mix and strategies e. Pricing plan

III. Management plan

a. Organization structure b. Functions description c. Competencies needed d. Local human resources to be recruited e. Skill-development plan f. Remuneration plan

IV. Operations plan

a. Operations / Production b. Location c. Inventory d. Suppliers e. Equipment

V. Financial plan (Appendix 1)

a. Profit & loss statement (income statement) b. Cash flow statement c. Balance sheet d. Financial and social return on investment



Module -5- Idea Feasibility

Before conducting your full feasibility study, you must test the feasibility of your idea, we call this the pre-feasibility phase. To do that, think of and fill the following: Social Value What social or community problem does your idea tackle?

How creative and efficient is your idea in solving this problem?

What is innovative about it?

Who will it target?

How does it affect your target population?

Team’s Readiness Are you convinced you can make this idea come true?

Does the team believe in the impact and possibility of this idea?

Community Involvement How will the idea involve the community?

How will you reach them?

Financial Sustainability How will the idea generate income?

What are your sources of income?



Ethical/Environmental Considerations Are there any ethical considerations you need to think of?

Is there any potential environmental harm that the idea might cause?

The Process of Idea Feasibility… The feasibility is all about collecting and analyzing information about the market, the factors affecting it, the customers, and the competitors. In order for the feasibility to really help clarify, refine and assess your idea make sure to:

1. Prepare questions to be asked to different stakeholders;

2. Develop your research tools;

3. Collect the information accurately;

4. Analyze the information honestly;

5. Use the analysis to inform your next steps.

The last of these is most important: make sure you use the process of the feasibility study to learn and transfer knowledge to others about what works and why, and what does not work and why. Be prepared during the idea feasibility stage to be challenged by your peers, friends, family and experts. The more you speak to people, read and collect information, the more you might want to adjust your plans. This is not only normal but a sign that you are on the right track.



Understand

• During this phase, we are immersed in learning through research, talking to citizens, and listening to experts. The goal is to develop background knowledge through these experiences. The data collected in this phase is the first road map into tackling the challenges.

Observe

• Here close attention will be given to watch how people behave, it is where we need to find the right questions to ask. Here you start to develop the understanding of the needs with an actual sense of reality.

Define

• In this phase, the focus is on becoming aware of peoples’ needs and developing insights. The phrase “How might we....” is often used to define a point of view, which is a statement of the: user + need + insight

Ideate

• Ideating is a critical component of design thinking. Were we are challenged to brainstorm a myriad of ideas and to suspend judgment. No idea is to far-fetched and no one’s ideas are rejected. Ideating is all about creativity and fun. In the ideation phase, quantity is encouraged.

Prototype

• Prototyping is a rough and rapid portion of the design process. A prototype can be a sketch, model, or a cardboard box. It is a way to convey an idea quickly. Prototypes can be a good indication of successes and failures.

Test

• Testing is part of an interactive process that provides us with feedback. The purpose of testing is to learn what works and what doesn’t, and then iterate. This means going back to your prototype and modifying it based on feedback. Testing ensures that we are learning what works and what doesn’t work for our users.

Testing Your Idea… Lastly build on the resources you have in your team and divide the idea feasibility in a way that makes use of your skills, talents, majors and contacts. Use the following steps as a cycle to testing and retesting your idea.



Module -6-

Marketing Planning1

Marketing was defined by experts as per the following:

• “Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.” (Principles of Marketing, Kotler & Armstrong, 2010)

• “Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services to create exchanges that satisfy individual and organizational goals”.(Marketing Management, Kotler, Keller, 2005)

It is fundamental for social entrepreneurs to develop a marketing plan for their newly established businesses in order to:

• Understand the current market dynamics and learn about successes/failures of competitors.

• Benchmark the product/service against those in the market and evaluate the added value in better responding to the market needs.

• Present a comprehensive overview of the product/service to potential investors and highlight the thorough plan intended to be implemented, to secure income and success.

The marketing plan comprises the following components:

1. Market research 2. Market analysis 3. Marketing strategy

1 Idem



Market Research In order for social entrepreneurs to develop their marketing plan, they should start by developing and implementing a thorough market research, the factors affecting it, the customers, and the competitors.

An efficient and effective market research is based on a methodical action plan that would provide answers to the following:

• How will the information be obtained? • Who will implement the research? • What is the cost of a market research? • What is the estimated time frame to complete the research? • What are the market characteristics that will be researched?

The collection of the information can be conducted through:

• Desk research, i.e. searching for data previously collected by another party, also referred to as “secondary data”. Examples of sources for collecting secondary data are: the internet yellow pages statistics by the government or private sector market surveys competitor literature books and publications on similar products/services

• Field research, i.e. conducting field visits and collecting raw data, also referred to as “primary data”. Examples of sources for collecting primary data are: observations of behaviors and attitudes of people to competitors

products and services personal interviews phone interviews surveys / questionnaires focus groups

In addition to the desk and field research, social entrepreneurs can benefit from random and informal opportunities to acquire information, such as chatting with customers, suggesting changes to a product or service and conversations with suppliers.

The research plan can be implemented internally by the social entrepreneur him/herself. At the same time, it is possible for social entrepreneurs to



outsource this task to external experts (individuals or companies), by paying certain fees agreed upon by both parties.

Whether implemented internally or externally, the social entrepreneur should develop a thorough budget of the research activities, along with a specific time frame for each activity.

The analysis of the collected information will provide insights on:

the market status, requirements and factors affecting it (internal and external)

the competitors strengths and weaknesses the customers profiles, needs and preferences the product/service positioning in the market as well as advantages and

disadvantages of using it

SWOT Analysis The following section describes the SWOT Analysis and suggests a framework for using it.

A SWOT Analysis is a way of understanding and analyzing internal and external factors affecting the social enterprise. These factors are: potential resource strengths and competitive capabilities potential resource weaknesses and competitive deficiencies potential market opportunities potential external threats to the enterprise well being

SWOT Matrix Successful enterprises would develop competitive advantage by identifying a fit between their strengths and upcoming opportunities. In order to develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed: the SWOT matrix, as shown in the below figure:

Strengths Weaknesses

Opportunities S-O strategies W-O strategies

Threats S-T strategies W-T strategies



S-O Strategies (Strength-Opportunities Strategies): These strategies should take advantage of opportunities that fit the strengths of the business.

W-O Strategies (Weaknesses-Opportunities strategies): These strategies should enable overcoming the weaknesses of the business while utilizing the opportunities.

S-T Strategies (Strength-Threat Strategies): These strategies should allow using strength sides to eliminating or reducing the threats from the environment.

W-T Strategies (Weaknesses-Threats Strategies): These strategies should allow eliminating weaknesses and preventing external threats to reach the weaknesses of the business.

SWOT Analysis – Key Questions Strengths:

What is your strongest business asset? Sustainable Competitive Advantage? Do you consider your team strong? Why? What do you offer that makes you stand out from the rest? What unique resources do you have? Do you have any specific marketing expertise? Do you have a broad customer base? Additional strengths

Weaknesses:

In what areas do your competitors have the edge? What necessary expertise / manpower do you currently lack? Do you have cash flow problems? Are you relying primarily on just a few customers? Additional weaknesses

Opportunities:

What trends do you see in your industry? What trends do you foresee? What trends might impact your industry? What external changes in other communities or environments present

interesting opportunities? What have you seen in the news recently that you were not aware of and

might present an opportunity? Additional opportunities



Threats:

What obstacles do you face? What is the competition doing that you're not? What challenges can be turned into opportunities? Are external economic forces affecting your bottom line? Additional threats

Strengths Weaknesses

Opportunities Threats

Marketing Strategy The market research and analysis will provide social entrepreneurs with the needed information to start developing their marketing strategy.

In order for social entrepreneurs to have an effective marketing strategy, they should complete the following steps:

• Market segmentation and targeting: identify and evaluate the market(s) / customers you want to serve and decide on the best approaches to attract and retain them.

• Market positioning: identify the position of the product/service vis-a-vis the targeted segment.



Market Segmentation & Targeting A successful marketing plan relies on proper market segmentation and targeting practices. A market segment is a group of customers who share similar characteristics and requirements. Each segment is different and needs special treatment and is reached differently. Social entrepreneurs can segment markets in different ways:

Geography (e.g., nations, states, regions, counties, cities) Demographics (e.g., age, income, gender, marital status, family size,

occupation, education, income, nationality) Psychographics (e.g., customer lifestyles, activities, interests, social class,

personality characteristics, technological resources, political views) Customer behavior (e.g., frequency of purchase, sensitivity toward price,

levels of desired quality)

In order for market segmentation to be effective, it should satisfy the following criteria:

Measurable: is the segment easy to identify and measure? Accessible: can buyers be reached through appropriate promotional

programs and distribution channels? Distinct: is each segment clearly different from other segments? Profitable: is the segment sufficiently large to provide a stream of

constant future revenues and profits?

Following the evaluation of the market segments, one of the following targeting approaches should be adopted:

Undifferentiated approach: mass market approach with no differentiation between market segments. One marketing mix is used for the whole market. This targeting approach is used in markets where there is limited segment differentiation.

Differentiated targeted approach: division of the market into different segments, where there is a marketing mix for each targeted segment. This approach results in the loss of economies of scale due to the allocation of all resources to meet the needs of many market segments.

Niche approach: selection of few market segments and implementation of a concentrated marketing approach, where the marketing mix is tailored to the needs of these few segments. This approach is often adopted by firms that either have limited resources to fund their marketing strategy, or are adopting a very exclusive strategy in the



market. It is also used a lot by small to medium and micro-sized organizations, given their limited resources.

Market Positioning Following the market segmentation and targeting, the social entrepreneur should decide how s/he would like the customers to perceive his /her product/service. It is about the image perceived by the customers.

The positioning of the business, product or service depends on using a combination of several elements to marketing, referred to as 4 Ps, or marketing mix.

1. Product refers to the items you are selling or the service you are providing, and that are tailored to meet the customers’ needs. A product must be tailored to meet the needs of the customer or user.

2. Promotion refers to the way you reach the customers and communicate to them your product/service. Promotion includes personal selling, advertising, sales promotion, public relations, direct marketing and internet (web applications, websites, social media).

3. Price refers to the cost customers are willing to pay to get your product or service.

4. Place refers to the activities that make the product/service available to customers. Place includes distribution channels, geographic coverage, locations, inventory, transportation and logistics. In the case of e-commerce and online businesses the point of sale is considered virtual as clients interact with the business through a website or a webapp.

There are new elements that social entrepreneurs are considering for their marketing mix. However, these are mostly used by well-established and growing businesses:

• People - refers to all the employees/partners in your enterprise. • Process - refers to the procedures which are followed when delivering a

service to a customer. • Physical evidence - refers to the factors that allow the customer to make

judgments on the product/service. For example, when visiting a new restaurant, a customer expects a clean, friendly environment.

The following section will discuss some of the elements’ related decisions and/or strategies that social entrepreneurs should look at when starting up their businesses.



1. Product:

There are several aspects of the product/service that social entrepreneurs should consider, as described below.

• Brand name: choose an attractive name to your product/service that will help customers differentiate you from the competition. The brand name should convey a message of confidence, quality and reliability.

• Functionality: make sure to introduce a product/service that would be practical and useful for the customers.

• Quality: ensure your product/service is of very good quality, which should be also consistent with other elements of the marketing mix, especially the price. In fact, a highly priced product/service should reflect a relatively high quality.

• Packaging: develop functional and attractive packages that are eye catchy, innovative and practical.

• Features: select features that would add value to your customers and give your product/service a competitive advantage.

2. Promotion:

Social entrepreneurs can choose one of the following promotional strategies:

• PUSH Strategy: “A push promotional strategy makes use of a company's sales force and trade promotion activities to create customer demand for a product. The producer promotes the product to wholesalers, the wholesalers promote it to retailers, and the retailers promote it to customers.” 2

• PULL Strategy: “A pull selling strategy is one that requires high spending on advertising and customer promotion to build up customer demand for a product. If the strategy is successful, customers will ask their retailers for the product, the retailers will ask the wholesalers, and the wholesalers will ask the producers.” 3

Whether using a PULL or PUSH strategy, social entrepreneurs can refer to different promotional tools, as explained in the below table:4

2 http://tutor2u.net/business/marketing/promotion_pushpull.asp 3 Idem 4 Adapted from Social Enterprise London. Marketing Your Social Enterprise

http://tutor2u.net/business/marketing/promotion_pushpull.asp



Promotional Tool Description Advantages Disadvantages

Advertising • TV, radio, newspaper, magazines, SMS messaging, online ads, announcements on products/service website, flyers, personalized emails, web apps (mobile) and social media

• Applicable to all ranges of budgets

• Helpful for targeting specific audiences

• Might require some graphic design skills (can be done in-house or can be outsourced)

• Might require follow up with a specialized advertising agency

Sales promotion

• Discounts, free coupons, Buy One Get One Free, Buy One, Get One Half Price, competitions (collect points to win ...)

• Changes short-term behavior in customers, retailers and stockists

• Encourages different and increased usage of your product/service

• Quick and simple to organize

• Inexpensive

• Behavior change is likely to be short-term only

• Can lead to a drop in sales after promotion is over

Personal selling

• Face to face selling at points of sales or customer’s homes, in addition to telephone sales

• Can lead to a long-term relationship with the customers

• Allows the demonstration and explanation of complex products/services

• Expensive • Time consuming

(can be outsourced to promotion agencies)

Public relations

• Relationships with media to increase product/service visibility, through press releases, press conferences,

• A good way to raise company profile

• Can be cost effective • Can achieve multiple

objectives • Writing a personal

blog or having other

• Might require the use of an external agency for large events

• Messages can be interpreted and reported by journalists in a positive or negative



Promotional Tool Description Advantages Disadvantages

publications, events.

• Relationships with bloggers.

bloggers write about the product/business is free and can increase online visibility

way • May not be picked

up by the press, which you have very little control over

• Bloggers might write good as well as bad reviews.

3. Pricing 5

There are a number of different approaches to pricing. Social entrepreneurs can use a mix of these approaches or use a different approach to different customers and at different times.

In all cases, pricing of products/services should take into account the following factors:

• Fixed and variable costs • Competition prices • Company pricing objectives • Other positioning strategies • Customers willingness to pay

Social entrepreneurs, who are starting up a new business, should not be afraid of setting a higher price than competitors if their product or service has competitive advantages. In fact, customers often associate higher prices with higher quality - therefore it may be that a higher price can help the image or reputation of the products and services.

When introducing new product/service, entrepreneurs can choose one of the two following approaches: skimming pricing strategy or penetration pricing strategy, as explained in the below table.

5 Adapted from Pricing Strategy retrieved from http://www.netmba.com/marketing/pricing/



Strategy Best used when... Advantages Disadvantages

Skimming pricing

• An enterprise launches a new product and sets a high price, then reduces it.

• Customers are not high price sensitive, or the company desires quick and large amounts of cash.

• It covers the research and development costs.

• It gives an impression that the product/service is luxurious.

• It helps segmenting the market

• Competitors might introduce same products at lower price.

• Not recommended when there are strict legal and government regulations regarding consumer rights.

Penetration pricing

• An enterprise sets very low prices to secure rapid market penetration and eventual market control and share.

• Customers are highly price sensitive, or the product cost will decrease when selling high quantities.

• The product is suitable for a mass market.

• It discourages the entry of competitors, as low prices act as a barrier to entry.

• It may lead to large sales volumes/market shares and therefore lower costs per unit.

• There are economies of scale that lead to lower production costs.

• It increases the market share

• The customer expects the prices to remain low for a long term and might switch to a competitor's product when the price rises.

• There is a need to secure production and distribution capabilities to meet the anticipated increase in demand.

• A low product price might negatively affect its image.

Personal selling

• Face to face selling at points of sales or customer’s homes, in addition to telephone sales

• Can lead to a long-term relationship with the customers

• Allows the demonstration and explanation of complex products/services

• Expensive • Time consuming (can

be outsourced to promotion agencies)

Public relations

• Relationships with media to increase product/service

• A good way to raise company profile

• Can be cost effective • Can achieve multiple

• Might require the use of an external agency for large events

• Messages can be



Strategy Best used when... Advantages Disadvantages

visibility, through press releases, press conferences, publications, events.

• Relationships with bloggers.

objectives • Writing a personal

blog or having other bloggers write about the product/business is free and can increase online visibility

interpreted and reported by journalists in a positive or negative way

• May not be picked up by the press, which you have very little control over

• Bloggers might write good as well as bad reviews.

As for existing products/services, there are different pricing policies that can be adopted, depending on the pricing objectives. The main ones are:

Strategy Definition Disadvantages

Cost Plus • Charge the basic cost of each item to make/provide, plus the profit margin.

• It ignores the price elasticity concept

• It disregards the importance of cutting costs as the profit margin is high.

Uniform • Charge the same price for all customers no matter who they are or how much they buy.

• No major disadvantages

Differential • Offer a different price to different customers depending on what they expect to pay or get for their money, or their eagerness to buy. The different forms of price variations include: discounts for a particular group of people, coupons or rebates for a purchase.

• There is a fluctuation in the profits level, given that different prices are charged for the same product

• There is a risk of losing existing clients because of continuous price fluctuations for the same product.

Skimming • Sell a product at a high initial price to people who can afford it then drop the price when the market becomes saturated.

• Competitors might introduce same products at lower price

• Not recommended when there are strict legal and government regulations regarding consumer rights.



4. Place

Social entrepreneurs can use two types of distribution channels:

• Direct distribution: from the manufacturer to the customer, with the advantage of giving you, as a manufacturer, complete control over the product.

• Indirect distribution: using an intermediary, such as wholesalers, agents, retailers, the Internet, overseas distributors

The selection of the distribution channel depends on the following factors:

• Type of product/service • The accessibility of the market to the customers • Quantity and frequency of sales, where delivery of product/service should

be cost effective • Geographical Location • Competition’s distribution channels



Market Segmentation & Targeting – Key Questions Geography

What are the geographical variables of the targeted segments?

Demographics

What are the demographic variables of your targeted segments?

Psychographics

What are the psychographic variables of your targeted segments?

Customer behavior

What are the behavioral characteristics of your targeted segments?

The Marketing Mix – Key Questions

Product:

What benefits must the product provide? What features and attributes will you include to deliver those benefits? What type of design and styling will you use? What level of quality is required? What types and levels of service are required? What after-sale services are supplied? ( delivery, warranty, service contracts,

support, follow-up, or refund policy)

Promotion:

Who is your target audience? What response are you seeking from your target audience? What message strategy will you use to reach your target audience? What media strategy will you use? What is your promotional budget? How will you evaluate the effectiveness of your promotional efforts?



Price:

What factors influence the price? What is the total cost of the product? What prices are your competitors charging? What are your customer's perceptions of value? What pricing strategies and tactics will you use?

Place

How will you distribute your product/service? Will you market directly to end-users or will you use intermediaries? If so, what types of intermediaries will you use? What types of outlets will you use? Will you have an online presence? What geographical locations will your product/service cover? How will you store, manage, and/or transport your product/service?



Module -7-

Operations and Production Planning

The operational/production plan provides insights about the facility location, capital equipment, inventory, production capacity and the processes to be implemented. This plan will describe the enterprise when it is up and running. It’s an opportunity to clearly outline how supplies feed into production, who does what, when, and how the back-of-house services link to operations management and sales. Sometimes it’s easier to do this with diagrams and charts as well as with words. Operations / Production – Key Questions what are the key factors involved in creating your product or service? what are the fixed costs associated with the business? what is your capacity – the maximum amount of product or service that can be created,

produced and sold in a given period of time? How does the product get made? How is the service delivered? How and where do you produce your products or services? how do you control and assure quality? how will you ensure customer satosfaction? how will you keep and control your inventory? how will you ensure product development? what are the opratiosn hours? what are the expected production challenges? what is the supply chain management process?

A company's supply chain is the process by which it acquires the goods that it

resells to customers; it starts from the basic raw materials, covers the manufacturing, warehousing and transportation stages, and ends inside the retail store where the product is ultimately sold to the developing a social purpose business plan.

Supply chain management refers to the process of limiting the costs associated with each step in the chain.

Location – Key Questions where is the locations of production, sales, storage areas, and buildings? Does the business need to be located in a specific place to achieve its purpose? Do you lease or own your premises?



Inventory– Key Questions What kind of inventory do you keep: raw materials, supplies, finished goods? what is the average value in stock; that is, what is your inventory investment? what si the rate of turnover and how it compares with industry averages? what is the lead time for ordering? Suppliers – Key Questions what are their names and addresses? what is the type and amount of inventory furnished? what are the credit and delivery policies? Are supply costs steady or fluctuating? If fluctuating, how do you deal with changing

costs? Should you be searching out new sources of supply, or are you satisfied with present

suppliers

Equipment– Key Questions What are the characteristics and equipment of the production facility or workplace? Are there any safety or environmental factors that need to be addressed? Does the equipment need to be modified to meet the social needs of the enterprise? Is there environmentally sensitive equipment that performs the same role? What are the technology needs of your enterprise? Where will you obtain this technology and equipment?



Module -8-

Management Planning6

The management plan enables the start-up to achieve its objectives by taking initiatives and providing guidance and support on all matters relating to its team members.

Social entrepreneurs use the management plan as a tool to ensure the implementation of proper practices with their team members, especially those related to employment, career development and working environment.

The management plan of the start-up comprises the following components:

• Organizational structure • Recruitment process • Compensation and benefits plan • Performance management process • Training and development plan

Introduction to Organizational Structure

An organizational structure refers to the way an organization arranges people and jobs so that it better achieves its goals. Typically, the structure of an organization evolves as the organization grows and changes over time.

Social entrepreneurs are required to distribute roles and responsibilities among their team members. Employees’ responsibilities are typically defined by what they do and whom they report to. However, these responsibilities are assigned to positions and not to individuals. The relationships among these positions are illustrated graphically in an organizational chart.

The best organizational structure for any organization depends on the following factors:

• The start-up work must be divided into specific jobs. This is referred to as the division of labor.

• The jobs must be grouped in some way, which is called departmentalization. The social entrepreneur must group employees per area of specialization or field of work.

• The number of people and jobs that are to be grouped together must be decided. This is related to the number of people that are to be managed by one person, or the span of control-the number of employees reporting to a single manager.

• The way decision-making authority is to be distributed must be determined.

6 Idem



Sample organizational chart for a company

Develop your start-up organizational chart

Organizational Structure Definition: The formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authorities within organizations.

Organizational Chart Definition: A diagram representing the connections between the various departments within an organization: a graphic representation of organizational design.

Hierarchy of Authority: A configuration of the reporting relationships within organizations; that is, who reports to whom.

Division of Labor: The process of dividing the many tasks performed within an organization into specialized jobs.

Span of Control: The number of subordinates in an organization who are supervised by an individual manager.

Owner Managing Partner

Commercial Manager

Sales

Marketing

Customer Care

Operations Manager

Production

Distribution

Administration Manager

Purchasing

Finance / Accounting Manager

Finance

Accounting

Human Reources

Personnel

Training & Development

Recruitment



The following questions will guide you to draw your start up organizational chart.

1. What is the nature of your new product or service? 2. What human resources will your new organization, product or service need? 3. Whom will perform what? 4. What are the functions needed? (Accounting, production, sales, marketing, operations,

trade, communication, legal, transportation, etc….) 5. How many employees will you need to allocate under each function? 6. Do you know how relationships between employees will be shaped: i.e. who will

report to whom and what are the responsibilities of each person?

Helpful site for developing your organization structure:

http://office.microsoft.com/en-us/publisher-help/create-a-simple-organization-chart-HP001154347.aspx

The Compensation & Benefits Process

Developing a compensation and benefits plan is an important step toward ensuring a decent work environment for employees.

A Compensation and Benefit plan is composed of the following:

Basic Salary

• Should be at least equivalent to the minimum wage set by government • Can be based on: the number of the items produced, or the number of hours

spent, or the number of working days. • The salary range is determined by the comparing the suggested salary with

similar ones in the market

Minimum Benefits

• Transportation - Car Allowance • Overtime - Commission on sales/production • Social Security • Paid time off (vacations, holidays, and sick leave) as per law

Regular Benefits

• Performance based Bonus • Children Schooling Allowance • Self-Health and Life Insurance

Additional Benefits

• Training and self-development • Family Health and Life Insurance • Mobile - Laptop • Retirement plan • Social Activity subscriptions





Compensation and Benefits Plan – Key Questions

The following questions will guide you develop a fair compensation and benefits plan for your employees.

1. What would be a fair salary for this position taking into account the amount of work needed to be done and the employee’s qualifications and skills?

2. What are others in the industry paying for the same position? 3. What is the supply and demand for employees in the industry, in particular those with

the specific skills the company needs? 4. What responses or outcomes are being rewarded? What is the employee expected to

achieve for this compensation? 5. What is the company’s cost and profit structure? How much is available for

compensation packages? 6. What type of training can the company provide? 7. What is the potential for growth and promotion within the company’s structure? Are

there opportunities for employees to move up and expand their skill base? 8. What is the value of the pay level to employees? What do employees perceive their

pay should be for a particular position? 9. To what types of rewards do employees in these positions respond? Besides money,

what other types of rewards do employees expect?

Social entrepreneurs should consult with a lawyer while setting such a plan to make sure they abide by the country’s labor laws.



Module -9-

Financial Planning

All entreprises of whatever size will need some money (often called capital) to start up ('start-up capital') and to support the business during the early stages ('working capital'). There are 2 main principles to succeed in financial planning and management. Keeping control It is important to know how much running a social enterprise will cost and whether you can generate enough income to cover these costs. This is done by preparing a budget including wages, material costs, rent, power etc – the business’ overheads. From this a break -even analysis can be worked out. A break-even analysis is an estimate of future income and expenditure which will help you decide if the business will become profitable and when. It is vital in planning, especially deciding if you will need a loan or overdraft. Keeping records Accurate and up-to-date records of sales and spending are necessary to: Show where money comes from and where it goes Help planning and budgeting Foresee problems before they become a danger Draw up reports to members, funders and the bank Make out VAT and tax

Records must be appropriate to the size of the business, the time and skills of members and legal requirements. Some are as simple as a box for receipts but you will probably also need ledgers and cash books. Some social businesses sell goods or services on credit and it is important that they organize records in such a way that they can keep track of customers and what they buy, how long they will have to wait for payment and have some idea of how trustworthy clients are.



Defining Financial Terms… Before we begin, familiarize yourself with:

1. Balance Sheet A balance sheet relies on the following formula: Assets = Liabilities + Shareholders' Equity Balance sheet is the statement of assets and liabilities in any enterprise, Balance sheets are balanced out within their two side’s interpretation; the enterprise will pay for the assets by borrowing money (liabilities) or from shareholders equity.

2. Income Statement An income statement is the one that measures a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

3. Cash Flow Statement It is the financial quarterly statement that includes all data coming from cash inflows, ongoing operations and external investment sources with documentation of all cash outflows for business activities and investments. A financial plan is the projection that includes a forecast of the project’s sales income, sales expenses, operating expenses, and of course expected profit margin. It is a common and well needed practice for all start- up businesses to assess the idea versus the reality of a running and sustainable enterprise. All entreprises of whatever size will need some money (often called capital) to start up ('start-up capital') and to support the business during the early stages ('working capital').



Options for Financing… Social enterprises might opt for obtaining funds to receive assistance in the piloting, start-up or development of projects. In such cases, it will be required to generate financial forecasts. The forecasts demonstrate the need for funds and the future value of equity investment or debt repayments. They will also show the sustainability plan, i.e. how the project will support itself financially after the initial funding period. The sustainability plan has to be measurable and achievable and should ideally link to the business planning process carried out by the organization and any partners in the project. It should include financial forecasts that state assumptions carefully and accurately. The generated forecast should cover a three to five-year period. This is a period in which realistic goals can be established and attained without much speculation. Forecasts should be broken down in monthly increments. The following table shows several funding sources. Each of these different financial options requires a different investment of time, money and expertise. The cost of each option against its anticipated financial returns must be critically analyzed before making a decision. The table also helps to assess the enterprise’s readiness to influence fundraising options. Funding Source Funding Level Percent of Grand Total Government Foundations Corporations Donations / Fund raising events

Memberships Bonds Grants Loans Investments



Methods of Income Generation Method Description

1. Fee for service

Charging constituents or clients for social services in order to recover costs of service provision

2. Products

Earned income through manufacturing and product sales, or through mark-up and resale of products.

3. Services

Commercialization of a skill or expertise to a market willing and able to pay.

4. Membership dues

Fees collected from members of a group, association, or organization in exchange for services such as a newsletter, discounts, conferences, insurance, etc.

5. Tangible assets

Generating income by renting or leasing a tangible asset such as office space, building, land, vehicles, or equipment.

6. Intangible assets

Generating income by leveraging an intangible asset such as proprietary content, methodology, brand, reputation, relationships, goodwill, etc.

7. Investment dividends

Passive income earned from investments.

8. Unrelated business

activities

Revenues from a business unrelated to the organization's mission and created for the purpose of funding specific social activities or the organization at large.

Assessing the Financial Needs Social entrepreneurs who are starting up new businesses need to decide on how much money they need and how to secure financing for their business. One of the most challenging aspects is acquiring the necessary funding to establish the business. The financing needs will vary depending on the size and type of the start-up. Before seeking funding sources, social entrepreneurs need to prepare some financial documents. To begin with, an estimation of the start-up capital costs is required.



How much start-up Capital do I need? Start – up capital is the amount of money needed to pay off initial start – up cost as well as all initial expenses until the business breaks even and starts to generate profits. Start-up capital consists of investment capital as well as working capital: Investment Capital is assets necessary to get a business started. It entails expenses incurred before the actual start of the business, which include furniture, equipment, training of employees, deposits for leases and utilities, etc... Working capital is the amount of capital needed to operate the business up until it starts generating a positive cash flow from the sales of goods and services (Usually from three to six months of operation). It is therefore important for the social entrepreneur to understand the financial investment required for the start-up and operations of the enterprise, allowing him/her to assess the availability and readiness to provide the needed amount.

Financial Plan The financial plan consists of: 1. profit and loss projection 2. cash-flow projection 3. projected balance sheet 4. breakeven calculation Together, these spreadsheets constitute a reasonable estimate of the enterprise financial future. 1. PROFIT & LOSS STATEMENT (INCOME STATEMENT) The Profit And Loss Account is the basic measure of the financial performance of an organisation. It tells: What the value of the work done was What the value of goods, labour and services used to do that work was Whether the value of the work done was more or less than the value of what was put

in to it i.e. whether you made a profit or a loss. The profit and loss account does not tell how much money the organisation received and how much money was spent since at a given point in time money will be owed by the organisation to its creditors and by debtors to the organisation.



2. CASH FLOW STATEMENT Reasons for producing a cash flow statement: It establishes how much money is needed and when it will be needed It helps to ensure that capital expenditure is properly controlled (e.g. the 'what if'

situation) It encourages efficient use of resources through budgeting and the analysis of over

and under spending It helps with facing facts and decision making

The below formula helps producing a cash flow statement: Identify the period for the forecast i.e. month, quarter or year. Record the actual cash on hand at the beginning of the period. Add to that amount, the forecast of cash to be received during that period. Subtract from that total, the forecast of cash to be spent during that period. The result is the cash flow statement at the end of the period, with the following

headings: Total inflow i.e. the sum of all the income received for each month Total outflow i.e. the sum of all expenditure incurred for each month The net cash flow i.e. the difference between your total income and total

expenditure The opening balance each month, i.e. how much should be in your business bank

account at the start of the month. The closing balance each month, i.e. the remaining amount at the end of the

month. The closing bank balance becomes the opening bank balance automatically at the start of the next month.

Poor cash flow management is one of the most common reasons for business failure.

You should try to be as realistic as possible and build in some contingencies for unforeseen costs or emergencies.

The cumulative figure tells you whether your bank balance gets bigger or smaller over a period of time and highlights the duration of any borrowing requirements.

3. BALANCE SHEET A balance sheet shows: The financial situation of the organisation at a particular time The change from one period (usually a year) to the next How much money is in the business The balance of assets Vs liabilities and fixed assets Vs liquid assets



A balance sheet is concerned with 3 things: Assets Liabilities Capital

4. BREAKEVEN ANALYSIS The Break-Even Analysis - is based on the income statement and cash flow. It shows the volume of revenue from sales that are needed to balance the fixed and variable expenses. The breakeven point can be determined by applying the below formula: Fixed costs Unit Selling Variable Cost Frequently Used Financial Calculations Costs Costs in a business are either fixed or variable. Fixed costs : These are things that are always there, such as plant, heating, lighting, production overhead, marketing items, administartion, Variable costs : These are things that vary from one period to another, such as raw materials, direct labor, etc… Cost of sales for retail social entreprises: Cost of sales for manufacturing social entreprises:

Value of stock at start of time period

+

Value of stock bought in this period

=

Total stock available to be sold

-

Value of stock left at end of period

=

Cost of sales for the time period



Cost of Sales

Opening stock + Purchases - Closing stock Gross profit:

Sales – Cost of Sales Gross profit margin:

Gross profit / Sales x 100 = Gross profit margin (%) There are three types of costs you need to account for: Fixed Assets - one

off purchases that can be used, and retain financial value, for more than one year, fixed assest may include the following or more:

• Equipment • Vehicle • Computers • Office furniture • Fixture and • fittings • Building • Land

Variable Costs – the costs of directly producing the product/service, it may include the following or more:

• Raw materials • Fuel • Packaging • Part time labour • Advertising • Others…

Fixed Costs – on-going costs regardless of the sales or other activities going on, fixed costs are as per the following:

• Rent of the space • government taxes • Electricity and

internet • Phone bills • Insurance • Salaries • Hire purchase

Value of stock (raw materials) +

Materials bought in this time -

Value of stock at end of time +

Direct costs related to production (wages, power etc) +

Work in progress +

Value of products at start of period -

Value of products at end of period =

Costs of production/cost of sales for period



A sample start-up capital cost sheet is described in the below table.

START-UPCAPITAL COST SHEET FOR COMAPNY “X” Quantity Unit cost

($) Total item Cost

($)

INITIAL START-UP COST Identifying the short-term assets and long-term assets as well as the expenses, including fixed costs necessary to get the business started. Equipment and machinery (Machine, Computers, Printers, scanners, Telephones, Papers, Etc...)

Furniture & Fixtures (Desks, Chairs, Filing Cabinets, Etc...)

Vehicle (Delivery Truck, cars, vans, Etc...) Office Supplies (Stationary, etc.) Remodelling (Painting, Plumbing, Design, Electrical, Decoration, Etc...)

Legal and professional fees (Incorporation fees, setting up accounting system, Etc...)

Other costs and services (any other pre-opening costs needed)

OPERATING COSTS / WORKING CAPITAL The amount of cash required to fund the business on a day-to-day basis. Money needed to live on until the business starts generating a positive cash flow. (Usually between three to six months expenses...) Utilities (Phone, water, electricity, cleaning, etc...) Rent or lease payment Salaries (Owners / employees, etc...) Advertising Operating Inventory Supplies (supplies needed for operation after the business starts)

Loan Payments Other Costs (Any other operating expenses...) TOTAL START-UP CAPITAL Considering Sustainability…

Business sustainability is a common term that applies to a regular and social business, it is the ability for the business to break even, survive and sustain financially for a long period of time and generate profit through its returns and securing funding through diverse activities, in social business there is one more viable element that should be continuously maintained along with financial sustainability and it is Social Impact.



Throughout the financial life of a social enterprise, impact should always be maintained and managed within the financial forecasts, in a manner that financial decisions should not compromise the social impact. How a social enterprise can achieve financial sustainability?

• By attracting income from other sources, not just grants • By making use of qualified and experienced financial staff • By using proper financial controls • By reviewing all financial information properly

Through long term financial sustainability social enterprises are able to invest more in the social aims they have set out to achieve. Profit Distribution in a Social Enterprise… In a social enterprise financial wealth and social wealth cannot be separated, a social business may adopt different profit distribution schemes than other regular businesses due to the comparison:

• Regular business is designed to prioritize profit making. • Social Business is created for a social reason and financial profit is one of

the outcome.

A social enterprise will be putting together a profit distribution forecast at the start-up phase that will include all beneficiaries and stakeholders and state clearly the amount of financial profit on an average of the expected returns to be distributed among shareholders. Some common practices in Social Enterprises profit distribution:

• The majority of the profit generated is invested back in the enterprise or for the direct benefit of beneficiaries.

• Employees who are serving the business are shareholders and directly benefiting from the profit generation.

• Profit is distributed fairly taking into consideration people’s needs, well-being and efforts.



Choosing the issue

•Consult with community on needs and priorities

Idea Development

•Engage community in testing ideas and planning

Implementation

•Have community represented as employees, board, costumers, steering committee

Impact

•Make sure no negative impact is done to the community, environmental impact for example. Also important to evaluate and get back to community

Module -10- Community Participation and Ethical Standards

In order for any social business to succeed it needs to be well aware of it surrounding community, and knowledgeable of its characteristics and resources. This is exceedingly importance in the case of a social business for which solving a community is a primary objective. Community Participation The relationship is continuous between a social enterprise and the community can take various forms depending on the stage of intervention:

Gather information about the community



1. Choosing the issue: Engaging the community starts at an early stage of choosing your idea. You need to consult with the community on their basic needs, what are their priorities, what are the problems they really need to solve and what they are willing to do.

2. Developing the idea: The process continues as the idea develops and

community representatives are consulted for helping in planning and idea development. They might have important views that the team is missing, and might react to certain ideas or approaches differently than expected, engaging them at this stage helps avoid all these traps.

3. Implementing the idea: As the idea is being implemented and the social enterprise is delivering its service, the benefitting community needs to be engaged through one or more different channels (employment, steering committee membership, etc) The biggest engagement at this stage is off course the fact that the community members are usually the costumers\beneficiaries of the social business.

4. Vetting Impact: Finally, it is important to keep in mind the impact caused by the presence in the community and operating in it. Some projects might leave environmental impact, while others might damage the cultural heritage of a community. It is important to make sure that all ethical considerations are in mind and that our social business is ethical.

Values and Ethics… Values are defined as the core set of beliefs and principles deemed to be desirable (by groups) of individuals (Andrews, 1987; Mason, 1992). Values are derived from one’s membership in a culture. With attitudes, beliefs, and behaviors, values combine to form a continuous spiral of community culture (Adler, 1999). Ethics are defined as the conception of what is right and fair conduct or behavior (Carroll,1991; Freeman and Gilbert, 1988). “Ethics is a system of value principles or practices and a definition of right and wrong (Raiborn and Payne, 1990).” The firm’s ethical responsibilities are to meet society’s expectations for conscientious and proper behavior.



Carve the Code of Ethics of Your Social Enterprise

Now, it is important to develop and commit to a list of ethical standards related to social, environmental, cultural and economic issues. Design your Code of Ethics that outlines how you will lice out your personal and organizational values:



Module -11- Matching Social Entrepreneurs with Coaches

You will be moving forward in developing your business plan and pitching it during the National Competition Day, Nabad will provide you with assistance, by trained and experienced coaches, while developing your social business plans. Speed Meeting Meet the coaches… Rotate to get to meet all coaches, spending maximum 5 minutes with each… Choose one coach and exchange contacts to start a conversation…



Workshop Evaluation and Next Steps

Thank you for taking the time to answer the following questions. Your feedback is highly important to us as it allows us to improve our training content and delivery. Workshop title:

Trainer:

Name of participant: (optional)

Duration:

I- Mark your assessment on each of the following statements Strongly

Agree Agree Disagree Strongly

Disagree This workshop was up to my expectations

The workshop objectives were clear

The topics discussed were relevant to my area of work/responsibilities

The material was well structured

Sufficient and adequate time was allocated to each topic

The accompanying manual provided helpful information

The presentation methods used by the trainer were effective

The trainer was able to build a good relationship with the participants

The trainer delivered the different topics in a clear and articulate manner

Participants were able to contribute and engage in discussions and group work

I feel that I have acquired knowledge that I can transfer into practice

Overall, I think this workshop was helpful



II- Which topics did you find the least helpful/interesting? Please explain why. _________________________________________________________________________________________________________________________________________________________________________________________________________________________________ III- Which topics did you find the most helpful/interesting? Please explain why. _________________________________________________________________________________________________________________________________________________________________________________________________________________________________ IV- Which topics do you wish to learn more about, or see emphasized in future learning opportunities? ______________________________________________________________________________________________________________________________________________________ ___________________________________________________________________________ V- Would you recommend this workshop for others? If yes to, whom?

Yes ___________ No ___________ Undecided __________ VII- How do you think this workshop could be improved? ___________________________________________________________________________ ______________________________________________________________________________________________________________________________________________________ VI- Do you have any additional feedback or comments? _________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Nabad might possibly use some of the pictures taken, and information you mentioned in the evaluation for future reports or publications. No information will be shared without your prior consent.

o I agree to give my consent o I agree to give my consent as long as you don’t mention my name o I don’t give my consent

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