Social Enterprise Business Models Which one is best for you? - - PowerPoint PPT Presentation

Social Enterprise Business Models

Which one is best for you?

Presentation Outline

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What is a business model?

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What is the purpose of a business model?

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What are the types of business models?

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What are the benefits to Social Enterprise?

What is a business model?

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A one page document

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The structure of the business (sole-proprietorship, co-op, etc.)

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How does the business generate revenue?

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What value does a business offer and to whom?

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Who are the customers?

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Helps us to understand how and why our business works?

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Most lenders or partners will read this section

Osterwalder and Pigneur 2009; p.14 P . 2, https://www.marsdd.com/mars-library/social-enterprise-business-models/

Business Model Purpose

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Helps stakeholders understand and articulate how a business is set up to create, deliver and capture value

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Social Enterprise Business Models:

u How you will generate both financial and social value and what the relationship is

between the two

u A clear business model will help alleviate challenges by making them more easily

identifiable

What’s special about social enterprise?

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Balancing a social mission WITH an intention to trade and manage a business requires a special set of skills

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Addressing a social impact inside a business operation can also be costly

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Designing a viable and sustainable business model is integral

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Social enterprise business models are different from ordinary business models

Ingrid Burkett, “Using the Business Model Canvas for Social Enterprise Design” Knode; p.6-7

Keeping your mission clear

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How does the social mission interact with the business aspect?

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Important that the business makes money, but don’t lose sight of the social/environmental/cultural mission

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Map out both the commercial part and the impact part of your business

Benefits to Social Enterprise

Helps us understand, design, articulate and discuss the ‘nuts and bolts’ of our business concept Helps us test and develop prototypes to see if our impact and our business actually ‘stacks up’.

For Profit

Advantages

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Flexibility

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Any type of revenue stream

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Can attract investors with shares

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Easily convert to different model with shareholder approval

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Familiar structure

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Many experts in this field

Disadvantages

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Subject to taxes and no tax receipt

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Cannot get funding from charity

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Responsible to shareholders

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No formal social purpose

Example

Gore Street Café

Registered Charity

Advantages

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Can accept donations and issue donation receipts

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Can receive funding from other charities or grants from other charities

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Limited ability to incur debt

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Generally exempt from property tax

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No investors with conflicting priorities

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Usually requires volunteers

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Must have revenue generating activities to be sustainable

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Fundraising must be conducted within legal parameters

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Limited in funding sources

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Regulations on what charities can purchase as assets

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Subject to an annual spending requirement

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Additional reporting required

Example

Hope House - Club 84

Non-profit

Advantages

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Tax exemptions from income tax, possible property tax and HST

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Legally enforceable non-profit purpose

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Flexibility in purpose/activity

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Grant-making flexibility

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No investors with conflicting priorities

Disadvantages

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Donations are not tax deductible

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Limits on ability to raise capital (cannot issues shares)

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Regulatory uncertainty (if social enterprise raises too much money could risk tax-exempt status)

Example

Co-operative

Advantages

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Legally enforced requirement to

• perate on a cost-recovery basis,

reinvesting surplus into community

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Ability to attract outside capital

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Flexibility in activities

Dis-advantages

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No preferential tax treatment

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No ability to issue donation receipts

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Reduced control for founding member

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Challenges in maintaining participation

Example

Cloverbelt Agricultural Co-operative

Key Business Model Question

When you consider the package of services/products on offer by your team, how does it generate net cash / income / profits?

Impact vs. Commerce

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The impact system needs to be understood in terms of the social value it is generating:

u Assess whether social value is

‘saleable’

u Whether commercial or impact

customers will pay for this social value

u Will it generate revenue u Potential for independent revenue

streams to flow into the enterprise around the impact value proposition

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The commercial business around which a SE is structured needs to

• perate as such:

u Needs to be viable u Sustainable u Generate sufficient revenue u Cover operating costs u Generate profit

It is important that an SE focus on RIGHT REVENUE = a mix of revenue that is appropriate for the particular impact being delivered and where there is a real probability that the business of the enterprise will generate profits and become commercially viable

Ingrid Burkett, “Using the Business Model Canvas for Social Enterprise Design” Knode; p. 22

Business Model Canvas

Let’s work!

Cost Structure

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Takes account of both the commercial operating and production costs and the costs involved in impact delivery

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Understands some costs are involved in keeping the business going and some extra costs are needed to actually deliver impact

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Understanding and articulating impact is critical to evaluating cost structure

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Important to articulate what activities are undertaken and what resources are needed to deliver impact

Ingrid Burkett, “Using the Business Model Canvas for Social Enterprise Design” Knode; p.28

What’s the real cost?

u Typical Business Operation

Costs

u Inventory u Premises u Wage/salaries u Equipment, machinery and

tools

u Utilities u Communication and postage u Insurances u Impact Costs u Support and participation

costs (extra staff costs for people to support workers)

u Work readiness costs

(licenses, permits, uniforms

• etc. for disadvantaged

workers)

u Provision costs (for non-

attendance, extra sick leave etc.)

u Impact training (e.g.

Training for support staff)

Ingrid Burkett, “Using the Business Model Canvas for Social Enterprise Design” Knode; p.29

What is a Value Proposition?

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What value are we Creating?

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Keep in mind our 2 customer groups

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Social value: Social outcomes and benefits which are generated through SE

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Commercial value: the goods or services you want to sell in the marketplace

Creating Our Value Proposition

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In early stages, it can help to separate social and commercial

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Social/Impact Value: The social value you are seeking to deliver, and what makes it attractive to customers

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Commercial Value: The goods and services you are producing and selling, and what makes it attractive to customers

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Keep in mind, commercial customers may not be interested in your social/impact value

Value Proposition Examples

Commercial Value Proposition (CVP) Great coffee, fresh food, personal service

Impact Value Proposition (IVP) Sustainable employment for people who have been unemployed long-term

SEE JEOPARDY!

Social Enterprise 101 Business Planning Business Models

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Thank you, Miigwetch