APS1015 Class 7: Considerations for Social Enterprise

APS 1015: Social Entrepreneurship
Class 7: Considerations for Social
Enterprise
Wednesday, June 19, 2013
1
Instructor:
Norm Tasevski (norm@socialentrepreneurship.ca)
Karim Harji (karim@socialentrepreneurship.ca)

© Norm Tasevski & Karim Harji
Agenda
•  Building a Business Model for Social Enterprise
•  Intro to Storyboarding
•  Break
•  Marketing for social enterprise
•  Operational considerations
•  Legal Considerations
•  What did we learn – today?
2

Business Modelling for Social
Enterprise…
3

A Caveat…
4
When we business model for social enterprise, we
focus on the “business”, not the “social”…
But don’t worry, we will come back to the “social”
later…

5
A Second Caveat…
“Business
Model”
“Business
Form/Legal
Structure”

6
A Third Caveat…
“Business
Model”
“Business
Plan”
Business Model 1st!!!
(Business Plan 2nd)

Why business model 1st and plan 2nd?
7

8
Because…
It is a cure for “We Need a Plan-itis”

9
And…
It is a Quick way to assess Profitability/Sustainability
–  Why spend months building a plan if you don’t have a real
sense of profitability/sustainability?
–  If your model doesn’t make money, even with the most
ideal conditions…
…STOP!(…and rethink your business model)

10
One More…
It breaks down highly complex business ideas into
easily digestible (and visual) chunks
–  Gets to the heart of what you need to know to:
Set Strategy
Make a Go No-
Go Decision
Make Potential
Investors/funders
(and business
partners) Happy :)

11

Some Definitions
•  “A business model describes the rationale of how an organization
creates, delivers and captures value – economic, social, or other
forms of value”
Wikipedia
•  “A description of the means and methods a firm employs to earn the
revenue projected in its plans. It views the business as a system and
answers the question, “How are we going to make money to survive
and grow?”
BusinessDictionary.com
•  “A business model describes the specific way the business expects to
make money. While a business plan is on paper (lots of paper!) a
business model should be small enough to stay in the heads of the
owner and staff. If a business model is on paper, it should be one
page, and it would be more clearly shown as a diagram than as
words.”
AudienceDialogue.net
12

13

14
Customer Segments
What you need to care about is…
–  Customer “Pain”
–  Difference between a “customer” and a “client”

Empathy Mapping

16
Value Proposition (the “Offer”)
–  The “value” you are creating for customers (in terms
of products/services), and the “pain” you are
alleviating
–  An exchange of value

17
Customer Utility

18
Channels
–  How the customer receives the offer/value prop
–  The physical “movement” of the offer into the hands
of the customer

19
Relationships
–  Personal and impersonal interaction with the
customer
–  The “movement” of information (e.g. marketing,
communication)

20
Revenue Streams
–  Cash!!! (specifically, how cash flows into the
enterprise) – “Money In”
–  Pricing models

21
Key Resources
–  Assets…
–  …and how these assets create value
–  Includes human, physical, intellectual, and financial
resources

22
Key Activities
–  Actions (specifically, the actions you plan to take to
generate value)
–  Both “direct” and “indirect”

23
Key Partners
–  People/organizations that are integral to enabling
you to do business
–  How you partner, and what you partner on

24
Cost Structure
–  Fixed costs, variable costs, economies of
scale…“money out”
–  At this stage, focus on your cost assumptions! (don’t
worry about actual $$)

25
So…what
does a
completed
Business
Model
Look
Like???

26
-Access to
space
-Coffee shops
-Personal
(Baristas)
-Store front sign
-Wireless
-35 yr old Young
professional that
wants a place to
relax and work
quietly

-Locations
-Coffee making
equipment
-Furniture
-Internet
-Baristas
-Hire staff
-Long hours
-Maintain space
-Coffee
roasting/brewing
-Interior design
-Coffee
suppliers
-Staff training
-Asset
acquisition
-Marketing
-Rent
-In-store
Purchases
(multiple per
visit)

Tip…
•  Be a Business Model “Alchemist” – You need to go
through the business model process many times in
order to figure out which model best fits
27

An Introduction to Storyboarding
28

What is Storyboarding?
A set of images/graphics displayed in sequence as a
means of pre-visualizing a process or sequence of
events
29

The Importance of Storyboarding
•  From a business perspective, it provides clarity on
how the business will work (e.g. how value is
created, how revenue is generated)
•  It helps identify gaps/flaws in the business model
•  If can provide a foundation for a communications/
sales campaign to customers, investors, etc.
30

An Example – “Here’s How it Works”
31
ID office building
to serve as a
“Delivery Hub”
ID merchants within
the “Delivery Zone”
Merchants market
the service to
customers
1st
2nd 3rd
Professionals in Sick
Kids will have access
to the delivery service
Professionals at Sick Kids can receive
deliveries from the hot dog vendor, Subway
and Starbucks, but not Freshii or Tim Hortons
We

Deliver!

An SSO delivery
person picks up
and delivers
the food to the
professional

A 2nd Example – “Here’s How it Works”
32
First time youth drug
offenders referred to
Peacebuilders
Youth participate in
Restorative Circles &
Business Training
Youth placed in
kiosks/venues to sell
products
1st
2nd 3rd
Peacebuilders work with
established relationships
with the federal youth
prosecutor at the youth court
at 311 Jarvis
Through this process, we build a trust
relationship and empower youth to
genuinely change their lives and break the
cycle of violence and poverty
Youth sell in controlled
environments, with
Peacebuilders/Venture
Deli staff support

Marketing for Social Enterprises…
34

A caveat…
35
“Social
Media”
“Social
Enterprise”

A Second Caveat…
Marketing!
36
Sales!≠!

Where does Marketing Fit?
3737

Some Definitions
•  Social Marketing is the systematic application of marketing, along with other concepts
and techniques, to achieve specific behavioral goals for a social good.
–  The primary aim of social marketing is "social good", while in "commercial marketing" the aim is
primarily "financial". This does not mean that commercial marketers can not contribute to
achievement of social good.
Wikipedia
•  Cause Marketing (or cause-related marketing) is a mutually beneficial collaboration
between a corporation and a nonprofit in which their respective assets are combined to
(1) create shareholder and social value, (2) connect with a range of constituents (be
they consumers, employees, or suppliers), and (3) communicate the shared values of
both organizations.
Jocelyn Daw (Marketing Consultant)
–  Cause marketing differs from corporate giving (philanthropy) as the latter generally involves a
specific donation that is tax deductable, while cause marketing is a marketing relationship
generally not based on a donation.
Wikipedia
•  Sustainable Marketing is the process of planning, implementing and controlling the
development, pricing, promotion and distribution of products in a manner that satisfies
the following three criteria: (1) customer needs are met (2) organizational goals are
attained, and (3) the process is compatible with ecosystems.
Donald Fuller (Sustainable Marketing Consultant)
–  Sustainable Marketing encourages the process of innovation by turning the marketing process into
an experimental, iterative process that has close ties to the customer. Individuals and interactions
on a daily basis are important. Customer Collaboration over customer transactions. Responding to
change over blindly following a plan.
Ivan Storck (founder, SustainableWebsites.com)
38

Social Marketing
39
Deliver
Satisfaction
Realize Aspiration
Practice
Compassion
ProfitAbility ReturnAbility SustainAbility
Be Better Differentiate Make a Difference
Individual
SocialEnterprise
Mind Heart Spirit
Mission
(why)
Vision
(what)
Values
(How)

Examples of Social Marketing…
40

41
Examples of Cause Marketing…
One of the first…
1983 – American
Express & the Statue
of Liberty
Restoration Project
2006 – Bono &
Product (Red)
Another…
2010 – Pepsi & the
Refresh Project
Most Recently…

Another Example of Cause Marketing…
42

Sustainable
Marketing…

Sustainable Marketing…is tricky…
h"p://
www.youtu
be.com/
watch?
v=p6aSlb_li
es

Sustainable Marketing Toolkit
Checklist 1!

Checklist 2!

Checklist 3!

Where does HR Fit?
4949

A Caveat…
Think of your HR from the perspective of “running a
business”, not “running a charity”
50

A Second Caveat…
Your HR Strategy must align with your business model
and align with organizational values
51

What if you were a…
52
Product-based Social Business…!
Tethered Social Enterprise…!
Employment-Based Social Business…!
Accessibility-Based Platform…!

A business/business model that provides
products or services with social benefit.
1. Product-Based

2. Employment-Based

A business that hires marginalized people
in good employment opportunities.

3. Tethered
An enterprise started by a charity or non-profit that
generates revenue for the organization.


A business that maintains a purposely low profit margin
to make their products accessible.
4. Accessibility-Based

Other HR Considerations…
•  Who/what do you need?
•  How do you find the right people?
•  How do you define what they do?
•  How (and from where) do you pay them?
57

Operational Considerations…
58

DAY 1!
59
What do you do first?

DAY 180
What does your average week look like?
60

Legal Forms Applicable to Social
Enterprise…
61

A Caveat…
There is no defined (national or provincial) legal form
for social enterprise in Canada
62

A Second Caveat…
Form follows function
63

For-Profit
Corporation!
64
Non-Profit
Corporation!
Charity!Partnership!
Sole
Proprietorship!
Co-Operative
Corporation!

For-Profit Corporation!
•  Incorporated under the Business Corporations Act (Ontario) (the “OBCA”)
or the Canada Business Corporations Act (federal) (the “CBCA”)!
•  With share capital!
65
•  Most flex in terms
of profit-making
activities!
•  Can access all
forms of investment
(debt, equity, etc)!
•  Provides clarity of
purpose (i.e. the
financial bottom
line)!
•  Limited personal
liability!
•  Pay corporate tax!
•  Cannot access grants!
•  Cultural/
psychological barriers
with operating a “for-
profit social
business”!

Charity!
•  Incorporated via Letters Patent under the Corporations Act (Ontario) or
Canada Corporations Act (federal)!
•  Without share capital!
66
•  Don’t pay corporate
tax on earnings!
•  Can issue tax
receipts!
•  Can access many
government/
foundation/
corporate grants!
•  Least flex in terms of
profit-making activities!
•  Limited in the types of
investments you can
access (e.g. equity)!
•  Time-consuming!!
•  Psychological barriers
with operating a “social
business”!
•  An aversion to “risk
taking”!
•  Can lose status if “too
successful”!

Sole Proprietorship!
•  Registered via Business Names Act (Ontario) or Canada Corporations Act
(federal)!
•  Without share capital!
67
•  The simplest (and
quickest) legal form!
•  You have full
control of business
decisions!
•  Flexibility to make
business decisions
quickly!
•  No separate filing
for income tax!
•  Unlimited liability!!!
•  The business is the
entrepreneur!
•  Hard to find investors!
•  Limited creative input
(i.e. you’re the only
one with ideas!)!
•  Less “professional”
than other forms!

Non-Profit Corporation!
•  Incorporated via Letters Patent under Corporations Act (Ontario) or Canada
Corporations Act (Federal)!
•  Generally without share capital!
68
•  Can access grants!
•  Can access debt
financing!
•  Tax exempt as long
as organized and
operated for defined
social/community
benefit!
•  Some NPs are more
open to (limited)
risk-taking!
•  Can’t issue tax
receipts!
•  Limited in the types of
investments you can
access (e.g. equity)!
with operating a
“social business” !
•  Can lose status if
“too successful”!

Partnership!
•  Registered under the Partnerships Act (Ontario)!
•  With or without share capital!
•  Usually organized using a Partnership Agreement!
69
•  Similar benefits to
sole proprietorship!
•  Combines skills/
competencies of
two people!
•  Can sign contracts
and borrow money in
its own right!
•  For most
partnerships, unlimited
liability! (at least in
Canada…)!
•  Acrimony between
partners is common!
•  Difficult to find
investors!

Co-Operative Corporation!
•  Incorporated under the Co-Operative Corporations Act (Ontario) or Canada
Cooperatives Act (Federal)!
•  Wither with or without share capital!
70
•  Well-established
structures!
•  Integrates the
concept of
“community benefit”
already!
•  Cannot issue tax
receipts!
•  Generally not exempt
from paying tax!
with operating a
“social business”!
•  Difficulty making
decisions (too many
people at the table)!

Talk to a Lawyer!
71

Legal Innovation: CIC (UK)
•  Established to trade (goods or services) for the
community good
•  Requires “community interest statement” application to
the CIC Regulator. Publically-available annual reports
required to confirm (adherence to) community interest
requirement
•  May issue shares in order to raise capital
•  Cap on returns (dividends paid) set by the Regulator
•  Subject to an “asset lock”
–  Assets and profits must be permanently retained by the CICs
for community benefit, or transferred to another CIC subject
to an asset lock, or to a charity
•  Taxed in the same manner as other businesses
73

Legal Innovation: L3C (US)
•  Variation on American Limited Liability Companies (LLCs)
•  LLC investors are members rather than shareholders
•  Terms of the operating agreement guarantee the public
benefit nature of the entity’s work
•  Like LLCs, L3Cs are not subject to federal income tax
themselves, but the income they pay to members is
taxable according to the rates applicable to each
member
•  Able to attract private capital through the sale of shares
and other securities, various forms of loans, or other
commercial financial arrangements.
•  Ability to receive Program Related Investments from
foundations
•  No asset lock and no dividend cap
74

Legal Innovation: B Corp (US)
•  To be certified as a B
corporation under the B Lab
system, the corporation
must:
–  Achieve a minimum score of
80 (out of 200) on the B
Ratings System, a tool to
assess a company's social
and environmental
performance.
–  Agree to make legal
changes to its articles of
incorporation to expand the
responsibilities of the
company to include
consideration of stakeholder
interests.
–  Pay B Lab an annual
licensing fee.
–  Recertification is required
every two years.
75

76

What did we learn?
77

APS1015 Class 7: Considerations for Social Enterprise

Recommended

Recommended

More Related Content

What's hot

What's hot (15)

Viewers also liked

Viewers also liked (7)

Similar to APS1015 Class 7: Considerations for Social Enterprise

Similar to APS1015 Class 7: Considerations for Social Enterprise (20)

More from Social Entrepreneurship

More from Social Entrepreneurship (20)

Recently uploaded

Recently uploaded (20)

APS1015 Class 7: Considerations for Social Enterprise