SESSION 3: VENTURE CRITERIA AND FEASIBILITY ANALYSIS. Dec 12 th, 2016

Transcription

1 SESSION 3: VENTURE CRITERIA AND FEASIBILITY ANALYSIS Dec 12 th,

2 COURSE SCHEDULE Wed, Dec 14 th Employee Supports* Mon, Dec 19 th Business and Social Costs Wed, Dec 21 st Social Enterprise Case Studies* Mon, Jan 9 th Financing social enterprises* Wed, Jan 11 th Marketing social enterprises Tue, Jan 17 th Partnering with social enterprises* Wed, Jan 18 th Course wrap-up *Guest lecturer 2

3 OFFICE HOURS Office hours Fridays 1-2:30p EST? Or by appointment? 3 REDF

4 TODAY S AGENDA Venture Criteria Pre-Feasibility Analysis Feasibility Analysis Business Planning & Launch 4 REDF

5 VENTURE CRITERIA REDF

6 VENTURE CRITERIA 1. Social Criteria 2. Job Design Criteria 3. Financial Criteria 4. Business & Operational Criteria 6 REDF

7 VENTURE CRITERIA: FINANCIAL OBJECTIVES What are your financial expectations of running an employment social enterprise? How much money is your organization able to invest in starting a social enterprise? Is your organization prepared to cover some of the social enterprise's annual operating costs? 7

8 VENTURE CRITERIA: FINANCIAL OBJECTIVES If your organization expects to cover some costs, how much can it cover annually? If your organization expects to cover some costs, how many years will it plan to cover these costs? Does your organization expect the social enterprise to eventually contribute excess annual revenue back to the nonprofit organization? If your organization expects the social enterprise to contribute revenue, how much do you expect to receive annually? 8

9 VENTURE CRITERIA: BUSINESS & OPERATIONAL OBJECTIVES Must have / nice to have / not important The social enterprise is in a market that is not cost or price competitive. The social enterprise is in a market that has low barriers to entry. The social enterprise does not involve regular deadlines or high - pressure service delivery. The social enterprise adheres to reasonable and legal safety standards for employees. The social enterprise demonstrates potential for market growth. The social enterprise generates consistent sales year-round (vs seasonal or inconsistent sales patterns). The social enterprise does NOT require strict permitting, environmental, or other regulatory compliance. 9

10 WHERE ARE THE ANSWERS? Research Labor Market Data Industry reports Industry experts Discussion and honest assessment

11 VIDEO: SPRINGBACK COLORADO 11 REDF

12 FEASIBILITY ANALYSIS REDF

13 FEASIBILITY ANALYSIS Helps organizations: 1. quickly rule out low-potential ideas 2. identify high-potential ones 3. pilot the latter in a way that reduces risk for the agency and those it employs Critical precursor of any new social enterprise or business line launch Evaluates market forces, operational and organizational challenges, and the financial conditions needing to be met in order to make for a successful launch Can be a particularly time-intensive and resource-draining activity if not done within the confines of a structured process REDF has conducted over 200 distinct feasibility analyses over its history

14 FEASIBILITY ANALYSIS PROCESS Prefeasibility analysis Feasibility analysis Business planning and launch Goal definition Concept refinement Mkt ing & pricing Deal-breaker q s Market analysis Ops & org analysis Financial analysis Staffing & pipeline Program design Legal & other Getting to No Getting to Yes Preparing for Pilot Key decision points REDF

15 PRE-FEASIBILITY ANALYSIS REDF

16 PRE-FEASIBILITY ANALYSIS Prefeasibility analysis Feasibility analysis Business planning and launch Goal definition Deal-breaker q s Concept refinement Market analysis Ops & org analysis Financial analysis Mkt ing & pricing Staffing & pipeline Program design Legal & other Getting to No Getting to Yes Preparing for Pilot

17 DEFINE GOALS What type of goals to consider How to quantify key goals Who to involve in goal setting process Social Job Design Financial Business & Operational Venture Criteria Ask: what would we need to see across your key goals in order to make the new venture worthwhile? Set boundaries to definitively determine whether the idea does or does not meet your pre-defined conditions, e.g.: - <$150,000 startup funds - Breakeven on direct business costs w/in 18 mo s ppl employed per year - >25 hours worked per week on average - <3 weeks training required Social enterprise director Operational/business lead (if different from SED) Program lead / employee supports personnel Crew / target population supervisor ED can be optional depending on level of interest

18 EXAMPLE GOALS Venture Criteria Social Goals Barriers faced by SE employees Min. # of transitional employees Opportunities for career advancement Training opportunity Agency requirements Any population served by agency per year Vocational path with stackable credentials Partnership with external organization for vocational training Financial and Operational Goals Max startup cost $200,000 # of months/years to breakeven ~18 months Others Ability to develop core business expertise Business that benefits from agency s brand name Strong industry growth projections; emerging sector/business Minimal liability/insurance issues (Ideal) ability to leverage packaging business equipment

19 DEAL-BREAKER QUESTIONS For business-related goals For mission-related goals How large does the market appear to be? Is it growing or shrinking? How entrenched are competitors? Are there any known barriers to entry? Is there a clear unmet customer need? Do non-profits stand to gain any competitive advantage through mission (e.g., consumer appeal) or tax status? How healthy are typical industry margins? After layering on social costs, does breakeven seem realistic? How capital-intensive are typical competitors? Are there any restrictive working capital requirements? How labor-intensive are typical firms? How does this scale with revenue? What does a typical staffing structure look like? What s the supervisor-crew ratio? Are there any certifications required for the business or employees? How are individuals typically trained? Who trains them? How much does it cost? Are any related firms hiring entry-level staff? Any known resistance to the target population in this particular industry? Is there typically significant turnover among entrylevel workers?

20 EVALUATE DIFFERENT IDEAS REDF

21 GROUP ACTIVITY: CASE STUDY REDF 21

22 WORKFORCE WorkForce is a non-profit housing provider based in Detroit, MI. The organization provides housing, support services, treatment and training programs to formerly homeless veterans. One of the services WorkForce offers to its tenants is assistance in connecting back into the labor market. The organization built three employment training programs that leverage its core competencies in property management. The programs offer classroom-based instruction in addition to an on -the-job training component. WorkForce is exploring launching a social enterprise that provides outsourced front desk staffing services to other affordable and supportive housing providers. A front desk clerk s job would include controlling access in and out of the building, monitoring other activity in the building, noting and following up on incidents and building issues, and generally ensuring tenant safety and security. Customers would purchase 8-hour blocks of front desk coverage, at different rates depending on type and frequency of coverage. This social enterprise would leverage WorkForce s desk clerk training program by interviewing and placing graduates of the program into part-time and full-time front desk clerk positions at the social enterprise.

23 PRE-FEASIBILITY ANALYSIS FOR WORKFORCE What questions should WorkForce consider before making a decision to launch or not to launch? 1. Social impact 2. Market opportunity 3. Operational feasibility 4. Financials

24 PRE-FEASIBILITY ANALYSIS FOR WORKFORCE What questions should they consider about social impact before making a decision to launch or not to launch?

25 PRE-FEASIBILITY ANALYSIS FOR WORKFORCE What questions should they consider about the market opportunity before making a decision to launch or not to launch?

26 PRE-FEASIBILITY ANALYSIS FOR WORKFORCE What questions should they consider about the operational feasibility before making a decision to launch or not to launch?

27 PRE-FEASIBILITY ANALYSIS FOR WORKFORCE What questions should they consider about financials before making a decision to launch or not to launch?

28 FEASIBILITY ANALYSIS REDF

29 VIDEO: SPRINGBACK COLORADO 29 REDF

30 FEASIBILITY ANALYSIS PROCESS Prefeasibility analysis Feasibility analysis Business planning and launch Goal definition Concept refinement Mkt ing & pricing Deal-breaker q s Market analysis Ops & org analysis Financial analysis Staffing & pipeline Program design Legal & other Getting to No Getting to Yes Preparing for Pilot

31 FEASIBILITY ANALYSIS: BUSINESS CONCEPT REFINEMENT Product/service What exactly are you planning to sell? Feasibility analysis Concept refinement Market analysis Ops & org analysis Financial analysis Value proposition Where s your point of differentiation? Customer Which customer segment will you initially target? Geography How are you defining your target area?

32 FEASIBILITY ANALYSIS: MARKET ANALYSIS Size What is the total addressable market for your target geography? Feasibility analysis Concept refinement Market analysis Ops & org analysis Financial analysis Growth How fast is the industry growing? What drives growth? Competition Who are your main competitors? Barriers to entry What prevents others from entering easily?

33 FEASIBILITY ANALYSIS: OPERATIONAL & ORGANIZATIONAL ANALYSIS Capabilities What internal capabilities lend or detract from competitive advantage? Feasibility analysis Training/skill development How much training is required? Will training translate post-transitional employment? Concept refinement Market analysis Ops & org analysis Financial analysis Pathways Are there progression opportunities within the social enterprise? Where will alumni be placed? Pipeline From where will employees be sourced? Is there a need to hire FTE staff? Labor structure How does this impact supervision?

34 FEASIBILITY ANALYSIS: FINANCIAL ANALYSIS & FORECAST Feasibility analysis Concept refinement Market analysis Ops & org analysis Financial analysis Penetration Given market size, what is a realistic penetration target? What does this imply about job creation, ability to breakeven? Breakeven How many units will you need to sell to breakeven? When do you expect this to happen? Startup costs/cash How much will it cost to pilot and fully launch? What are working capital needs?

35 BUSINESS PLANNING & LAUNCH REDF

36 BUSINESS PLANNING AND LAUNCH Prefeasibility analysis Feasibility analysis Business planning and launch Goal definition Deal-breaker q s Concept refinement Market analysis Ops & org analysis Financial analysis Mkt ing & pricing Staffing & pipeline Program design Legal & other Getting to No Getting to Yes Preparing for Pilot

37 PILOT PROGRAM Key Hypothesis for Testing Develop & launch a prototype Start charging immediately Test key assumptions Business: Car dealerships will pay to detail vehicles at an offsite location The dealerships will have X cars serviced at $Y per car Programmatic: Car dealerships will offer positions to relevant employees from SE Dealers will pay a competitive wage and will retain placed employees Set & track operating metrics

38 PILOT PROGRAM Key Hypothesis for Testing Develop & launch a prototype Start charging immediately Business: Purchase the minimum amount of equipment needed to run a small-scale operation; do not purchase new land/facilities Develop a low-cost solution for transporting cars to the SE site (understand insurance costs / risk) Programmatic: Train several employees from the target population to become master detailers using basic equipment Provide basic transitional coaching and services to assure employees are ready to enter the workforce Set & track operating metrics

39 PILOT PROGRAM Key Hypothesis for Testing Develop & launch a prototype Start charging immediately Set & track operating metrics Business Focus on a very specific subset of potential customers (2-3 dealerships) for the pilot The service should be sold as a finished product (not a pilot) and an initial asking price should be set/negotiated Programmatic Approach 1-2 partners (dealerships, existing detailing shops) to place employees in full-time positions Shadow (or work along side) employees for a day/week to continuity of work experience and likelihood of retention Request feedback from employees and partners on a regular basis to assure quality and mutual satisfaction

40 PILOT PROGRAM Key Hypothesis for Testing Develop & launch a prototype Start charging immediately Business: The number of cars serviced daily/weekly/monthly by each dealership (stability) Costs associated with transportation, supply usage, licensing/insurance Customer satisfaction/comfort (okay with transporting cars? returned clean? etc.) Programmatic: The number of employees placed at each full-time location Satisfaction metrics of both the employee and the employer Retention statistics and reasons for changes in employment Set & track operating metrics

41 NEXT CLASS REDF 41

42 NEXT CLASS Wednesday, Dec 14 th 1-2:30p (EST) Topic will be Employee Supports Guest lecturer Terri Feeley In the meantime, try the Venture Criteria tool on REDFworkshop.org 42