Students will be exposed to methods for evaluating the “business potential” of their entrepreneurial idea, and evaluate some of the challenges associated with synthesizing market data and applying this data to business decisions

1. APS 1015: Social Entrepreneurship
Class 4: Business Model Validation
Saturday, October 13, 2012
Instructors:
Norm Tasevski (norm@socialentrepreneurship.ca)
Karim Harji (karim@socialentrepreneurship.ca)
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2. © Norm Tasevski

3. © Norm Tasevski
Agenda
• B Corporation
• How do we assess the business potential for social
enterprise?
• How do we assess the “impact” potential for social
enterprise?
• Next Week
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4. Assessing Social Enterprise Business
Potential…
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5. © Norm Tasevski
Our Approach
• Assess Business Potential 1st
• Assess Impact Potential 2nd
Why?
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6. © Norm Tasevski
It Answers the Key Question…
Will you still be competitive in
the marketplace after infusing
social mission?

7. © Norm Tasevski
Remember This?
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8. © Norm Tasevski
Step 1:
Identify Cost Drivers and Revenue Sources!
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9. How would you assess the business
potential of a…
Product-based Social Business…!
Tethered Social Enterprise…!
Employment-Based Social Business…!
Accessibility-Based Platform…!
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10. 1. Product-Based
© Norm Tasevski
A business/business model that provides
products or services with social benefit.

11. 2. Employment-Based
© Norm Tasevski
A business that hires marginalized people
in good employment opportunities.

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

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

14. © Norm Tasevski
Value Proposition
-Procurement!
-Receiving!
-Warehousing!
-Inventory control!
-Product/service design!
-Licensing fees!
-Product/service
-Donated products/
manufacture/development!
services!
-Product packaging!
-Technology support!
-etc.!
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15. © Norm Tasevski
Customer Segments
-Research costs
(surveying, interviewing,
etc)!
!
-Payments!
-(Viral marketing of
products)!
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Channels
-Warehousing!
-Product packaging (in
delivery boxes, etc)!
-Product/service delivery
(transportation, etc)!
-Co-branding!
!
-Rental fees!
-”Concession stand”
type contracts!
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17. © Norm Tasevski
Relationships
-Hard marketing costs
(billboard advertising,
etc)!
-Soft marketing costs
(website, etc)!
-3rd Party advertisers!
-Customer service!
-Co-branding!
-Relationship
-Referral fees!
management personnel!
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18. © Norm Tasevski
Key Resources
-Employees (management,
staff)!
-Brand!
-Other assets
(buildings, IP, software,
-Licensing fees!
etc)!
!
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Key Activities
-Service activities!
-Sales activities!
-Client engagement
activities!
-Events !
-Fees (e.g. ticket sales
!
at events!
!
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20. © Norm Tasevski
Key Partnerships
-Partnership management
costs (relationship
building, contract
management, etc)!
-Investment!
-Loans!
-Grants/donations!
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21. Break
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Step 2:
Calculate your margin!
-???!
-???!
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What Do You Need To Calculate Your
Margin?
Data!!!!
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24. © Norm Tasevski
Data Sources
Call key industry players
(suppliers, competitors, etc)
Search databases
(industry, scholastic, etc)
Ask people!!! Conduct web search
(friends, potential customers, etc) 24
(Google, etc)

25. Assessing the “Impact” Potential of
Social Enterprise…
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26. © Norm Tasevski
Exercise: From Intentions to Impact
When
did
you
volunteer?
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Exercise: From Intentions to Impact
How do you know you made an impact?
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Impact vs Net Impact
Is your effort better than what would have happened
anyways?
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Impact vs Net Impact
Is your effort better than what would have happened
anyways?
NET IMPACT is what matters
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30. © Norm Tasevski
Achieving Social Goals!
1. Identify your social goals
– Theory of Change (defining your social value)
– Embed them within/across your operations
2. Measure the social value created
– How do you measure your goals?
– Address the common challenges in measurement
3. Communicate your impact
– Know what to say and who your audience is
– Be creative around your message
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31. © Norm Tasevski
Step 1: ID Your Social Goals!
• What Social Benefit are you creating?
• How do you decide?
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Embedding “Social” across the Business
Model
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Cautionary Tale
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Exercise:
Balancing social & financial value
$
+
+
-­‐
-­‐
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36. © Norm Tasevski
Step 2: Measure the Social Value
Created!
Why Measure, and for Whom?
• Management
– Performance management (meeting needs/
objectives)
– Organizational sustainability, attract new investment
– Demonstrate the value created by organization
• Social Investors (inc. funders)
– Impact of grants, mission alignment
– Accountability measures
– Assess organization value, relate to risk/return (of
investment)
• Government Programs/Policy
– Make the case for investment in organization/
approach
– Accountability measures 36

37. © Norm Tasevski
Why is Measurement Important?!
“Not everything that can be counted
counts, and not everything that counts
can be counted”
“You can’t manage what you can’t
measure”
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38. © Norm Tasevski
Challenges in Measurement!
• Outputs vs. Outcomes
• Attribution vs. Contribution
• Qualitative vs. Quantitative
• Prove vs. Improve
• Rigour vs. feasibility
“Metrics and evaluation are to development
programs as autopsies are to health care: too late
to help, intrusive, and often inconclusive.” (Trelsad)
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39. © Norm Tasevski
A Note on SROI!
• Discounted, monetized value of the
social value that has been created,
relative to the value of the investment.
• Pioneered by Roberts Enterprise
Development Fund (REDF) and Jed
Emerson
• Various uses for, and approaches to, SROI
• Despite “hype” around SROI, it can be
resource-intensive, and issues around
feasibility, replication, reporting still
remain.
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40. © Norm Tasevski
SROI Snapshot:
TurnAround Couriers!
Overview
of
Target
Popula;on
(sample)
Avg
Change
in
Societal
Contribu3on
• 38%
recruited
directly
from
shelters
(Target
Employees):
$9,391
• 23%
female
Average
Number
of
Target
Employees: 10
• Average
age:
21
Current
Year
Cost
Savings
to
Society:
$93,910
• 100%
unemployed
at
3me
of
hire
• 54%
receiving
social
assistance
at
hire
Cumula3ve
Cost
Savings
(prior
to
Y5): $191,170
• 54%
been
involved
with
jus3ce
system
Total
Cost
Savings
to
Date: $285,080
• 54%
did
not
complete
high
school
Cumula3ve
Societal
Payback
Period: 1.8
years
Cumula3ve
SROI: 285%
Sustainable
Livelihood
Outcomes
(sample)
Note:
ini3al
SCP
investment
=
$100,000
• 89
youth
in
total
have
been
hired
over
5
years
Employment
Outcomes
(sample)
• 100%
target
popula3on
recruited
from
shelters
able
to
get
out
of
shelter
system
• Increased
target/non-­‐target
staff
ra3o
to
83%
and
secure
independent
housing
within
6
• 69%
con3nue
to
work
at
TAC
(9)
months
of
employment
at
TAC
• 15%
moved
onto
mainstream
employment
in
• 85%
who
relied
on
income
support
through
window
cleaning
industry
(2)
social
assistance
at
3me
of
hire
able
to
get
off
and
stay
off
• 8%
went
on
to
post
secondary
educa3on
(1)
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41. © Norm Tasevski
Acumen Fund: social performance
measurement in the investment process!
• Due Diligence
– Literature review: state of practice
– Estimate # of people served over the life of the investment
– Assess how delivery of those “outputs” compare (more or less
favorably) to the “best alternative charitable option”
• During Deal Structuring
– Conversations on how to think about performance management
over the life of the investment, not just “mandatory reports”
• Post-Investment
– Quarterly reporting – performance, capacity, strengths/weaknesses
– Semi-annual “forced ranking” across portfolio against investment
criteria - financial sustainability, social impact at scale, breakthrough
insights, and high-quality leadership - as well as actual performance
to date and the investment’s potential for impact in the future
• Closed Investments
– Short “exit memo” looking at results generated, financial return, and
lessons learned
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42. © Norm Tasevski
Simple Measures for Social Enterprise:
Lessons from the Acumen Fund!
• Culture matters far more than systems
– Tolerance for / learning from failure
• If you build systems, start with a pencil and paper
– Start simple; technology is an enabler not the solution
• Think on the margin
– Performance is always relative to what you had been doing
before (past), to what your competition did over the same
time period (peers), and to what you should have done
(projections)
• Count outputs and then worry about outcomes
– “the conclusions you can draw from these outputs may not be
made with scientific rigor, but they can inform businesslike
decisions and raise important policy questions”
• Don’t confuse information with judgment
– Balance qualitative and quantitative
– Use informed judgment, hold oneself accountable (to them) 42

43. © Norm Tasevski
Step 3: Communicating Your
Social Impact!
How?
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44. © Norm Tasevski
What did we learn?
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