Social Enterprise 101

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1 Social Enterprise 101 Presenters: Philip Arca, SVdP Cynthia Gair, REDF Lorna Jones, CVE Preparer: Jill Zeldin, Farber Intern, REDF NTJN Conference April 2008

2 Welcome & Introductions What is REDF? Created in 1997 as The Roberts Enterprise Development Fund A high engagement grantmaker that provides guidance, leadership and investment to a portfolio of nonprofit social enterprises, changing the lives of people who face poverty, homelessness, mental illness and other barriers to employment. Our work accomplishes three things We help people move out of poverty; We increase the organizational ability of nonprofit social enterprises to provide sustainable, long-term solutions to chronic poverty and homelessness; and We introduce new ideas and innovative methods that enrich the nonprofit community as a whole. In all areas of our work, we are deeply committed to measuring the results of our efforts REDF 2

3 Welcome & Introductions Our experience with social enterprise We have funded and provided assistance to 35 enterprises that represent the following industries: Professional landscaping Production and assembly Clerical and office services Catering, cafés and restaurants Janitorial / Cleaning services Bicycle shop Apparel screen printing and embroidery Ballpark concessions Bakery Our enterprises have employed over 3,000 individuals since % still employed 2 years after hire REDF 3

4 Social Enterprise 101 Agenda This Session s Plan 1. Welcome and Introductions 2. What is social enterprise? 3. Why are nonprofits considering social enterprise? 4. Developing earned income/social enterprise strategies to fit your organization 5. Applying the lessons REDF has learned 6. Social enterprise planning process 7. Role Play REDF 4

5 Social Enterprise 101 Agenda 1. Welcome and Introductions 2. What is social enterprise? 3. Why are nonprofits considering social enterprise? 4. Developing earned income/social enterprise strategies to fit your organization 5. Applying the lessons REDF has learned 6. Social enterprise planning process 7. Role Play REDF 5

6 What is Social Enterprise?: The question What is social enterprise? REDF 6

7 What is Social Enterprise?: The answer And the answer is REDF 7

8 What is Social Enterprise?: The answer No single definition of social enterprise is uniformly accepted! REDF 8

9 What is Social Enterprise?: Common aspects of definitions Key points of agreement among Social Enterprise definitions: Social Enterprise = Revenuegenerating Socially- Minded + REDF 9

10 What is Social Enterprise?: Distinguishing elements Key points of difference among Social Enterprise definitions: Tax Status Not-for-profit For-profit Objective Mission-motive Profit-motive Purpose As a programmatic tool As a funding approach To supplement profitgenerating activities and to achieve social returns E.g., Provide economic opportunities E.g., Fund social programs E.g., Diversify revenue streams Distribution of Profits Profit not a primary goal Profit cannot be directly distributed to individuals. Instead, profits are reinvested in nonprofit Profit distributed to shareholders Notes: 1) This slide represents the U.S. social enterprise landscape, including U.S. tax status and legalities of return and profit distribution. REDF 10

11 What is Social Enterprise?: Causes of confusion Numerous approaches to combining social mission and revenue generation are not exactly synonymous with social enterprise. Mission-motive Profit-motive Entrepreneurial Nonprofit Nonprofit with Income Generating Activities Nonprofit Venture Nonprofit Enterprise Socially Responsible Business Corporate Social Responsibility (CSR) Terms related to but not synonymous with social enterprise Community Interest Company Social Venture Social Entrepreneurship REDF 11

12 What is Social Enterprise?: Social enterprise definition for today day s s session In order to keep our discussion focused today, we will hone in on one particular definition of social enterprise. Mission-motive Profit-motive Entrepreneurial Nonprofit Nonprofit with Income Generating Activities Nonprofit Venture The social Nonprofit enterprise Enterprise definition we will use today: Socially Responsible Business Businesses owned and operated by nonprofit organizations Corporate Social Responsibility (CSR) Community Interest Company Terms related to but not synonymous with social enterprise Social Venture Social Entrepreneurship REDF 12

13 What is Social Enterprise?: Earned-Income vs. Social Enterprise What distinguishes a social enterprise from other earnedincome activities? Earned-Income Activities Revenue generated through some commercial endeavor Social Enterprise Has a long-term vision and is managed for the indefinite future Growth and revenue targets are set in a business or operational plan Separate and distinct staff manage and oversee the activity Source: Virtue Ventures, Social Enterprise Typology, Kim Alter REDF 13

14 What is Social Enterprise? Summary of What is Social Enterprise? Nonprofits have long used income generation to support their mission activities More recently, nonprofits have adopted business approaches to achieve their missions and achieve sustainability through social enterprise No single definition of social enterprise exists Social enterprise is considered an earned-income activity that is planned as a business, with distinct resources and a longterm vision REDF 14

15 Social Enterprise 101 Agenda 1. Welcome and Introductions 2. What is social enterprise? 3. Why are nonprofits considering social enterprise? 4. Developing earned income/social enterprise strategies to fit your organization 5. Applying the lessons REDF has learned 6. Social enterprise planning process 7. Role Play REDF 15

16 Why do nonprofits consider social enterprise? Summary Why do nonprofits consider social enterprise? REDF 16

17 Why do nonprofits consider social enterprise? Summary Why do nonprofits consider social enterprise? Mission-motive To increase the reach of the mission To create jobs and training opportunities To disseminate information To educate the community To meet needs that the market does not meet on its own To create funding opportunities Profit-motive To generate revenue/profit To diversify revenue streams To create new donor interest (e.g., entrepreneurial community) What risks might an organization operating a mission-motive social enterprise face? What risks might an organization operating a profit-motive social enterprise face? REDF 17

18 Why do nonprofits consider social enterprise?: Program expansion success stories Social Enterprise Success Stories: In Their Own Words They made me more confident about myself. Helped me to keep a job. - CVE Employee I have knowledge of a new field and increased earning potential for when I get another job. The work environment is very supportive. - GGCI Employee This was my first job and it lead me to where I am now. I have the confidence and motivation to go somewhere where I can move up. - Juma Employee This is the first job I ever had, it keeps me out of trouble. Rubicon gave me a chance when no one else would. - Rubicon Employee REDF 18

19 Why do nonprofits consider social enterprise?: Myths Top Ten Myths about Social Enterprise Myth #1 Starting a social enterprise requires minimal investment. Myth #2 There s nothing better than free retail space! Myth #3 Our staff already has all the skills needed to run a social enterprise. Myth #4 People will buy from us because we have such a great cause. Myth #5 If it s not working, we ll know. REDF 19

20 Why do nonprofits consider social enterprise?: Myths Top Ten Myths about Social Enterprise Myth #6 We can scale this puppy, no problem! Myth #7 This will solve our financial crisis and we ll never have to fundraise again. Myth #8 Nonprofits can t make a profit. Myth #9 Our program staff and enterprise staff will get along just fine. Myth #10 Our board chair is totally behind us, that should be enough! REDF 20

21 Why do nonprofits consider social enterprise? Summary of Why do nonprofits consider social enterprise? There are two main reasons an organization might pursue nonprofit enterprise: To further its social mission To create funding opportunities Social enterprises can create successful outcomes, significantly improving the lives of those affected Be aware of the myths of creating a social enterprise. Social enterprises require significant planning and resources REDF 21

22 Social Enterprise 101 Agenda 1. Welcome and Introductions 2. What is social enterprise? 3. Why are nonprofits considering social enterprise? 4. Developing earned income/social enterprise strategies to fit your organization 5. Applying the lessons REDF has learned 6. Social enterprise planning process 7. Role Play REDF 22

23 Developing earned income/social enterprise strategies to fit your r organization Define goals Assess the organization Social Enterprise Strategy Is your primary goal mission or profit? Which current assets and capabilities can you leverage? The answers to these key questions will drive your organization s social enterprise strategy REDF 23

24 Developing earned income/social enterprise strategies to fit your r organization Why is your nonprofit considering social enterprise? Mission-motive Profit-motive Is your primary goal to expand the mission? To increase the reach of the mission? To meet needs that the market does not meet on its own? Is your primary goal to generate income? To generate revenue/profit? To diversify revenue streams? To create new donor interest (e.g., entrepreneurial community)? REDF 24

25 Developing earned income/social enterprise strategies to fit your r organization Assess the Organization: Current assets and capabilities Organization Core mission History and leadership Effectiveness of agency Is your organizational culture entrepreneurial and ready for change? Current assets Clients? Services? Employees? Intellectual capital? Physical assets? Outstanding liabilities? Capabilities Do you already manage earned-income activities? Do leaders possess business experience? What "value" or competitive advantage could you bring to the market place? Do you possess resources that would be relevant to a business venture? Does the organization possess experience that would transfer to managing a business? REDF 25

26 Developing earned income/social enterprise strategies to fit your r organization Define goals Assess the organization Social Enterprise Strategy Is your primary goal mission or profit? Which current assets and capabilities can you leverage? The answers to these key questions will drive your organization s social enterprise strategy Should you engage in social enterprise or other earned income activities? How integrated should your social enterprise be? Which industries may work? Should you expand on your existing operations or start something completely new? REDF 26

27 Developing earned income/social enterprise strategies: Earned Income vs. Social Enterprise Should your organization undertake social enterprise or should it consider other earned income activities instead? Y Are your organization and its key stakeholders risk averse? N N Does your organization have the organizational capacity to start and run an enterprise? Y N Will a separate business provide the best opportunity to meet your goal? (mission or profit) Y Earned-Income Activities Social Enterprise REDF 27

28 Developing earned income/social enterprise strategies: Expand or Start New? Two options exist for nonprofits starting social enterprises or earned income ventures Expand what you already do Start something new Commercialize something your organization already does E.g., Create a fee for service model with your existing programs Create a new commercial product or service for existing customer base E.g., Direct beneficiaries (who can afford to) pay for new product or service Develop a new aspect of something your organization already does Leverage existing assets Cause related marketing Existing service to new population Do something totally new a new product or service for a new customer base! Buy a business Start a new business Source: Kellogg School of Management REDF 28

29 Developing earned income/social enterprise strategies to fit your r organization Summary of Developing earned income/social enterprise strategies to fit your organization Define goals Assess the organization Social Enterprise Strategy Mission or profit? Current assets and capabilities? Should you engage in social enterprise or other earned income activities? How integrated should your social enterprise be? Which industries may work? Should you expand on your existing operations or start something completely new? REDF 29

30 Social Enterprise 101 Agenda 1. Welcome and Introductions 2. What is social enterprise? 3. Why are nonprofits considering social enterprise? 4. Developing earned income/social enterprise strategies to fit your organization 5. Applying the lessons we have learned 6. Social enterprise planning process 7. Role Play REDF 30

31 Applying the lessons REDF has learned: Critical Success Factors Lessons Learned: Critical Social Enterprise Success Factors Strong entrepreneurial team Supportive and engaged board of directors Fit with overall goals and needs Comprehensive planning progress Compelling and genuine market opportunity Unique competitive edge Financial controls and tools for planning Long-term and adequate financing Commitment to sound business practice Metrics to assess economic and social impact REDF 31

32 Applying the lessons REDF has learned: : Unique Challenges (and Rewards!) Lessons Learned: Unique Challenges (and Opportunities!) in Social Enterprise Need to balance dual (social and financial) missions Organizational structure complicates decisionmaking/authority Enterprise management staff need to possess a broader set of skills Importance and scope of training Additional social costs Different funding sources Social mission outcomes tracking and reporting REDF 32

33 Social Enterprise 101 Agenda 1. Welcome and Introductions 2. What is social enterprise? 3. Why are nonprofits considering social enterprise? 4. Developing earned income/social enterprise strategies to fit your organization 5. Applying the lessons REDF has learned 6. Social enterprise planning process 7. Role Play REDF 33

34 Social enterprise planning process Define goals Assess organization Develop venture criteria Prefeasibility study Feasibility study Business plan Execution Why is your agency considering social enterprise? Is your agency ready for social enterprise? How will you screen different social enterprise options? Is your social enterprise feasible from a business standpoint? In depth analysis on social enterprise viability Thorough business planning for developing your social enterprise Make it happen Discussed today 1 month 1 month 1 2 months 2 4 months 2 4 months 3 6 months 3 12 months Source: Center for Community Futures, REDF 34

35 Social enterprise planning process: Plan your next steps So what are your next steps? What is your view of social enterprise? If you are the one spearheading the process, determine your own objectives first, then seek input from other key stakeholders Involve the right people Which key stakeholders should be included? Educate the key stakeholders on social enterprise Determine what stakeholders' goals are and what your organization s capacity is Follow the social enterprise planning process REDF 35

36 Social Enterprise 101 Agenda 1. Welcome and Introductions 2. What is social enterprise? 3. Why are nonprofits considering social enterprise? 4. Developing earned income/social enterprise strategies to fit your organization 5. Applying the lessons REDF has learned 6. Social enterprise planning process 7. Role Play REDF 36

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