BUSINESS PLAN FOR NGOS AND SOCIAL ENTERPRISE

Transcription

1 UNIT 21 BUSINESS PLAN FOR NGOS AND SOCIAL ENTERPRISE Unit Structure 21.0 Overview 21.1 Learning Outcomes 21.2 Introduction 21.3 Introduction Section Title Page Table of Contents Executive Summary 21.4 Analysis of the Environment SWOT Analysis and the Opportunity The Social Opportunity 21.5 Management Team/Organisational Structure, the Market and the Industry Management Team/Organisational Structure The Team Management Board of Trustees and Members The Market and the Industry 21.6 Marketing and Fundraising Marketing and Fund Raising Plan Marketing Plan 21.7 Financial Plan The Financial Plan Financial Needs Financial Projections Cash Flow Forecast Projected Profit and Loss Statement Balance Sheet 21.8 Goals and Objectives with a Timeline Unit 21 1

2 21.9 Risk Assessment Risk Assessment Plan Risk Assessment Financial Risks Supporting Documents/Appendix Other Factors to Consider Summary 21.0 OVERVIEW Unit 15 earlier described the business plan for a profit oriented organisation. The present Unit details how a social enterprise/an NGO elaborates its business plan. Most concepts will be seen to be similar, but with some variations and different perspectives LEARNING OUTCOMES By the end of this Unit, you should be able do to the following: 1. Describe the steps in building a social enterprise business plan. 2. Appreciate the arrangement of specific sections in the business plan. 3. Explain the difference in approach between for-profits and social enterprises/ngo s. 4. Describe marketing and fund raising for social business. Unit 21 2

3 21.2 INTRODUCTION For most purposes, the business plan for NGO s of social enterprise is similar to that for businesses. However, some fundamental differences exist, for example in identifying a social opportunity instead of a business opportunity. Other differences exist in the funding strategies and the marketing concepts used INTRODUCTION SECTION Cover Page Table of Contents Executive Summary Title Page This page will bear the name of the not-for-profit organisation/social enterprise including a list of the board of trustees or directors and the CEO. The title page should also attempt to provide all contact details that could be available. Such details would include residential address, office address, telephone and fax numbers, or even web site if available Table of Contents The table of content is used as an ease of reference to the various components of the business plan. It includes headings and subtitles with the respective page numbers to facilitate consultation, quick prompting and referencing. Unit 21 3

4 Executive Summary In practice, this is the paragraph that is written last but, however, it should be placed right after the title page. The executive summary as the name suggests, summarises all the salient features of the business plan. The summary will tell the reader how the non profit organisation is organised and elaborates briefly on the functions of the organisation. If the social entrepreneur is looking for financial support from funding institutions or will conduct fund raising activities, the executive summary would summarise the methods and purposes for strategies employed in fundraising and seeking financial support. The Executive summary should also include: a clear identification of the organisation, the opportunity problem that is being addressed, the innovative concept, all in summary form such as total project cost, funds available, funds already obtained. In short, the Executive Summary should be concise and precise. Executive Summary: Brief description of the venture. Explain how the new venture is important. Elaborate on the benefits of the new venture. - who will benefit and how. Explain how the idea/opportunity will be rationalised. Describe the social entrepreneur and the unique/innovative skills, services that this person will bring to the venture. Brief elaboration of support requisites and the extent to which the support will be required. Explain how success will be measured, key performance indicator may be mentioned with a brief explanation. Brief summary of financial projections. - The amount of capital needed and how the capital will be used. Unit 21 4

5 21.4 ANALYSIS OF THE ENVIRONMENT SWOT ANALYSIS AND THE OPPORTUNITY Refer to Unit 20 Internal Environment Analysis. External Environment Analysis. SWOT & TOWS Matrix. Developing Strategies The Social Opportunity A. The opportunity (idea). Provide an elaborated description on how the idea is innovative and what problem/social problem it addresses. B. The Mission Statement. C. Definition of Social value and how it is measured. D. Key Innovations/Adaptations. Explain how the enterprise is innovative. How the innovative idea creates value. E. Competitive Advantage. Competencies available. Location strategy if available. Legal Structure of the Not for Profit. Current Status of the Enterprise: - prevent situation of the Not for Profit. - the way forward. - design trajectory towards the social entrepreneur s goal. This part of the business plan needs to contain the most substantial part about the social entrepreneur s idea. The social entrepreneur has to make a case as to how the bright idea can meet an actual or emerging social need. The promoter should be able to correlate the innovative Unit 21 5

6 idea to the context of the proposed business plan and explain how the concept might bring a competitive edge to the social venture. The promoter would therefore have to explain the genesis of the idea and justify the claim that it represents in terms of social value creation. Explain the vision, mission and goals/objectives clearly. You have to include the type of services that you will provide and the activities and functions in detail. The social entrepreneur will also have to define the concept, list the dimensions of value (financial and non financial) and justify how each is important. Social entrepreneurs compete for funds among peer NGO s in their quest for social venture creation and similarly the promoter has to clearly define how the not for profit business has the competitive edge. Social entrepreneurs rely on donors and fees, as well as grants from sponsoring agents and parastatals. Recently, the CSR fund has been created to assist NGOs in non-for-profit business. The business plan should be objective such that the support it seeks is justified. The social entrepreneur should also make a clear statement with respect to the legal structure of the non-profit business. The promoter should also provide precision as to where the venture has reached in its planned development. It is necessary to show a trajectory towards the social entrepreneur s goals for the venture MANAGEMENT TEAM/ORGANISATIONAL STRUCTURE, THE MARKET AND THE INDUSTRY Management Team/Organisational Structure A. Management Team: Qualifications/Experience of the Social Entrepreneur. Management Team s Qualifications. Work Experience/Life Experience. Technical Expertise. Unit 21 6

7 B. Board Composition: Board of Directors. Number of Directors. Composition of the Board and Responsibilities. C. Advisors. D. Early Donors. Activity 1 On what basis/criteria should the organisation select advisors? Unit 21 7

8 The Team The social entrepreneur has to show that there are competent people who are equally enthusiastic about the venture Management Explain who will direct the day by day operation of the non profit organisation. Describe the management teams qualifications and experience and how they relate to the mission of the nonprofit organisation. Provide details on the standards that will be used to hire and train staff. Provide an outline of the work plan that will be followed by the employees and volunteers to achieve the mission of the organisation. The work plan is important since it shows who will do it and how it will be accomplished. It provides the employee policies that the social entrepreneur will have in place, such as the personnel management manual, anti-sexual harassment policies, equal employment opportunity, etc. It also includes job descriptions and HR needs Board of Trustees and Members It takes a team to raise a non-profit organisation and maintain it as well. The board would require a governing body. In this section, the governing body will have to be described. Describe what role the board members will play, who is on board and who are the officers. Describe how these individual members became board members, justify their significance and importance in the social mission. Describe what experience these board members being to the organisation. A board is something very important for the proper functioning of the non-profit organisation since it brings along respected leaders into the venture. These board members eventually being complementary skills and thereby contribute to the success of the venture. Board members ought to be selected on the basis that they can provide one of the following services; overseeing the enterprise, administrative functions, lending expertise, giving and fundraising, enhancing the enterprise image, Brooks (2008). Unit 21 8

9 Social Enterprises may also require advisors who also contribute towards leading the non-profit organisation in a specific direction. Also, when some people might have already contributed to the venture in this sector, it is worth mentioning the contribution of these people as they help in enhancing the credibility of the proposed venture The Market and the Industry A. Industry Description, e.g. Trends, Size and Attractiveness based on Six Forces Model (see Unit 20). B. Target Market: - Explain who benefits from the services offered. - Summary Data on the target market. C. Expected Position and share in the target market: - Describe how the social opportunity is genuine. - Provide survey data if effected. - Initial Market Position v/s position after 1 yr, 2 yrs, 5 yrs. This section deals with the social enterprise s target market and its expected position in this market. Industry Description Provide a historical background and evolution of the industry in context to provide the reader with a better insight of the opportunity that is being tapped. Target market Explain who exactly benefits from the opportunity. In this section, you may include summary data on the target market. Write about the need for your service and the demand for it; how is it unique? Provide a brief description of competitor profiles and make comparisons if possible. Describe share occupied by competing non-profit organisations or even other parastatals and detail your strategy for gaining a place in the market or in the development of a niche market. Explain the barriers you might experience at the beginning and how you intend to overcome such barriers. You may provide details on others organisations/ institutions that will help you overcome barriers to entry. You can also incorporate demographics about the Unit 21 9

10 need for the services being proposed by the new venture. You are encouraged to put statistical data, information and census data if you deem them as relevant. Expected position and share in the target market. You may elaborate in the success encountered by similar not for profits to justify your case. You can include data on survey conducted to assess market potential. Based on such data, you should be able to forecast the position of the social venture after one year, 2 years and 5 years MARKETING AND FUNDRAISING Marketing and Fund Raising Plan A. Fundraising targets and strategies - outline fundraising activities. B. Fundraising outline - Personal relationships. - Direct Mail. - Media. - Virtual Means. C. Grant Writing Plans - Describe Grant Requests from: Government Agencies. Foundations. D. Pricing Plan - Will the enterprise change fees for its services? - Justify the role of fees. - How will the fees be collected? - Pricing Strategy if any. E. For Profit Activities - Explain how such activities relate with the core mission of the social venture. F. Marketing Strategies. Unit 21 10

11 - Outline of the venture s marketing strategy and how. - Explain how such strategies create awareness. - Channels of Distribution. - Describe how awareness will be created about your services. Activity 2 Applying the Marketing Mix approach as used in Business (4P s for Product, Price, Place, Promotion), propose the Marketing Mix for a Social Enterprise example of your choice. Unit 21 11

12 It is imperative for the entrepreneur to provide a concrete plan with respect to fundraising to cover the major activities as proposed by the venture. A detailed plan is not required with respect to strategies for fundraising. However, an outline for the approach to fundraising is a must. Explain why you need the funds and how you will use or spend the money. Show how you will account for the money and what records you will keep and provide a brief description of the accounting system to be implemented. The outline approach for fundraising needs to include personal relationships and networking that the social entrepreneur will rely on for financial support. The outline might also include methods of communication such as direct mailing, media and other virtual means such as / websites thereby emphasising their significance and role in fundraising activities. The outline should also specify the grants for which the social entrepreneur is applying. These grants can be requests for funding from government agencies and foundations. In the case of Mauritius, NGOs would apply for funding from the CSR fund. The not for profit organisation should also provide details on pricing strategies if applicable. Some organisations may have the idea of embarking in certain activities for the purpose of earning income that will then be redeployed in the social mission. If income raising activities form part of the social enterprise, the entrepreneur must describe this strategy clearly in this section of the business plan. The promoter should be able to correlate this strategy with the core mission of the not-for-profit venture. Marketing: According to Brooks (2008), non-profit marketing firms tell their clients that every fundraising effort is an opportunity to market the enterprise and every marketing effort should help raise funds. Similarly, the business plan should provide a brief on the social enterprise s marketing strategy Marketing Plan Explain the services you will provide and specify who will use them. Elaborate on the distribution plan or advertising plan as well if applicable. The entrepreneur should also provide details on the marketing plan. Details on particular aspects such as methods used, that is, fliers, internet, newspapers, word of mouth, and so on. As it has been the strategy for profitable small Unit 21 12

13 business, the social entrepreneur has to include product positioning in its marketing plan. This can be done by placing the social enterprise and its noble mission on pamphlets and on the products. Other such strategies would be to include contacts such as address, telephone number etc on the product/product line. Otherwise, for many new social entrepreneurs, the common marketing strategy is to develop a website and bring in the expertise of a web designer for its maintenance. However, being present on the web is not the key to success since the social enterprise/ non profit organisation will also have to deal public relations. Some social entrepreneurs may examine the possibility of hiring or recruiting a public relations officer to enhance public visibility. Social entrepreneurs can also decide on the constitution of a board or committee that will deal with public relations/ marketing strategies. If such a committee will be constituted, the role of this committee will have to be outlined. Who will sit on this committee, how many members will sit in that committee? All such details will have to be included in the outline. In case where the non profit organisation has no expertise with respect to marketing, it has to specify how it will address the marketing issue. How will the organisation handle bad publicity and the risks associated with it? 21.7 FINANCIAL PLAN The Financial Plan In this section of the business plan, the social entrepreneurs prepare the financial forecasts for the forthcoming years. The financial plan is that part of the business which is considered the heart of the business plan. The plan should consist of the following: (i) Financial Needs (3-5) years. (ii) Financial Projections. (iii) Income Statements (if applicable). Unit 21 13

14 (iv) (v) Cash Flow projections. Balance Sheets Financial Needs Details with respect to financial needs include personnel fringe benefits, employee salaries, telephones, computers including other accessories, expenditures regarding consumables, space/lease costs, transport costs, training needs, analysis costs among other expenses that may be deemed necessary in launching the new social venture Financial Projections These include the following: Cash Flow Forecast A summary of monthly amount of cash moving in an out of the social enterprise over a span of one year Projected Profit and Loss Statement This will depend on the nature of the non profit organisation as a social enterprise. The profit and loss statement shows generated revenue, expenditures and the net surplus for the forthcoming year. In general, the net surplus is calculated over a span of 3-5 years for ease of justification purposes Balance Sheet It provides details about the assets, that is, resources owned by the organisation, liabilities and the net worth of the business. Unit 21 14

15 As mentioned before, for many social entrepreneurs, this part of the business plan is most important, it determines whether the venture is a worthy opportunity or a waste of time GOALS AND OBJECTIVES WITH A TIMELINE A. Definition of Success - state the enterprise s ultimate goal. B. Intermediate goals and success measurements - can include milestones. C. Evidence that goals are achievable - provide evidence that goals are realistic. D. Timeline - it stretches over 3-5 years or longer. Having defined the venture and the social value that it creates, it is time to tell potential supporters, that is, donors and funders how the success will be measured and outline the roadmap for reaching the goal of the social venture. The social entrepreneur should be able to define success and he or she can do so by stating the non profit organisation s ultimate goal. A goal should act as a source of inspiration and motivate the team. The goal should also be something that is measurable in terms of assessment, that is, it should be something realistic. For instance, if the mission of a non profit organisation is to eradicate poverty or eliminate criminality, such an objective sounds paradoxal by the very nature of the objective. Enterprises can create social benefit by realising intermediate goals which are measurable. These goals pave the way towards the ultimate objective of the non profit organisation. Intermediate goals may be set and presented in the form of milestones or by the way of key performance indicators. Funders/Donors need to have the assurance from the social entrepreneurs that the non-profit organisations goals are achievable and measurable. The social entrepreneur can also Unit 21 15

16 strengthen his case by providing evidence of similar/related ventures effected by the same social entrepreneur in the past. The social venture should give a provisional anticipated achievements/realisation by way of a timeline that stretches over a period of 3-5 years. An example of timeline is given below. (i) Start of the social venture. (ii) Incorporation date if any. (iii) Recruitment, space and equipment acquisition. (iv) Start of service delivery. (v) Beginning of cash flow from fees, grants and donations. (vi) Enterprise growth milestones. (vii) Goal achievement. Adapted from: Social Enterprise Business Plans (Brooks, 2008) RISK ASSESSMENT Risk Assessment Plan A. Financial Risk. B. Legal Risk. C. Talent Risk. D. Environmental Risk. Political and Government Risk. Economic Risk. Demographic Risk. E. Other Risks. Appendix Supporting Documents. CVs of Founders and Key Employees. Data Sources cited in the plan. Unit 21 16

17 References for literature cited in the plan Risk Assessment It is known to everybody that venturing is all about taking risks. Just as profitable businesses are susceptible to various risks, similarly, social ventures are also prone to a multiple of potential risks. This section gives a brief description of the risks that may be encountered by social entrepreneurs Financial Risks This is the most obvious risk for any business. Political risks tend to be minimal, however if they exist. Activity 4 1. Discuss the financial risks associated with social ventures in Mauritius? 2. What are the legal risks involved with Social Enterprising? Unit 21 17

18 For social organisations, there is a great reliance on team spirit where the participation of volunteers contributes a lot. One of the major risks associated with infant social ventures is that the established team gets damaged when people leave and the eventual consequences if the not for profit relied a lot on the individuals who left. These individuals could be major intellectual sources to the organisation or might be assuming key roles. Activity 5 Examine the Environmental Risks associated with the following in the idea/opportunities for an NGO of your choice. 1. Political Risk 2. Economic Risk 3. Demographic Risk 4 Other Risks Unit 21 18

19 Assessment of the mentioned risks should be included in the relevant section. The social entrepreneur may also provide strategies and tactics to counter such risks. Coming forward with strategies to mitigate risks is a difficult process and may require brainstorming and a SWOT analysis exercise thereby developing WO and TO strategies Supporting Documents/Appendix The Business Plan Appendix incorporates a broad range of useful data and information as listed below: CV s of founders and key staffs. Site Plans, Location Plans and Layout Plans. Copies of Contractual Agreement/Lease Agreements. Permits if available or Licences. Data Sources cited in the plan. Survey results if effected (provides evidence of viability). References for literature cited in the plan. Other relevant tables and charts used for justification. Job descriptions/schedule of duties for key staff and volunteers Other factors to Consider Deciding your business name and registering it. How to reserve your business name? Filling Incorporation papers. If you will have employees. - Application for employer identification number. Registering with your state concerning Tax Exemption. Permit and other Regulations. - Contact district council/municipality with regard to regulations applicable. - Check if there are permits required. Unit 21 19

20 Employee related Issues. - Register for employee income tax. - Workers compensation. - Disability insurance. - Immigration concerns. - Employees rights SUMMARY The social enterprises business plan was seen to be similar, but not identical to the for-profit business plan. Unit 21 20