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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
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APS 1015: Social Entrepreneurship
Class 4: Business Model Validation
Saturday, October 13, 2012
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Instructors: Norm Tasevski ([email protected]) Karim Harji ([email protected])
© Norm Tasevski
© 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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Assessing Social Enterprise Business Potential…
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© Norm Tasevski
Our Approach
• Assess Business Potential 1st
• Assess Impact Potential 2nd
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Why?
© Norm Tasevski
It Answers the Key Question…
Will you still be competitive in the marketplace after infusing
social mission?
© Norm Tasevski
Remember This?
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© Norm Tasevski
Step 1: Identify Cost Drivers and Revenue Sources!
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How would you assess the business potential of a…
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Product-based Social Business…!
Tethered Social Enterprise…!
Employment-Based Social Business…!
Accessibility-Based Platform…!
© Norm Tasevski
A business/business model that provides products or services with social benefit.
1. Product-Based
© Norm Tasevski
2. Employment-Based
A business that hires marginalized people in good employment opportunities.
© Norm Tasevski
3. Tethered An enterprise started by a charity or non-profit that
generates revenue for the organization.
© Norm Tasevski
A business that maintains a purposely low profit margin to make their products accessible.
4. Accessibility-Based
© Norm Tasevski
Value Proposition
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-Procurement!-Receiving!-Warehousing!-Inventory control!-Product/service design!-Product/service manufacture/development!-Product packaging!-Technology support!-etc.!
-Licensing fees!-Donated products/services!
© Norm Tasevski
Customer Segments
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-Research costs (surveying, interviewing, etc)!!
-Payments!-(Viral marketing of products)!
© Norm Tasevski
Channels
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-Warehousing!-Product packaging (in delivery boxes, etc)!-Product/service delivery (transportation, etc)!! -Co-branding!
-Rental fees!-”Concession stand” type contracts!
© Norm Tasevski
Relationships
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-Hard marketing costs (billboard advertising, etc)!-Soft marketing costs (website, etc)!-Customer service!-Relationship management personnel!
-3rd Party advertisers!-Co-branding!-Referral fees!
© Norm Tasevski
Key Resources
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-Employees (management, staff)!-Brand!-Other assets (buildings, IP, software, etc)! !
-Licensing fees!
© Norm Tasevski
Key Activities
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-Service activities!-Sales activities!-Client engagement activities!-Events !!!
-Fees (e.g. ticket sales at events!
© Norm Tasevski
Key Partnerships
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-Partnership management costs (relationship building, contract management, etc)!
-Investment!-Loans!-Grants/donations!
Break
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© Norm Tasevski
Step 2: Calculate your margin!
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-???!-???!
© Norm Tasevski
What Do You Need To Calculate Your Margin?
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Data!!!!
© Norm Tasevski
Data Sources
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Call key industry players (suppliers, competitors, etc)
Search databases (industry, scholastic, etc)
Conduct web search (Google, etc)
Ask people!!! (friends, potential customers, etc)
Assessing the “Impact” Potential of Social Enterprise…
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© Norm Tasevski
Exercise: From Intentions to Impact
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When did you volunteer?
© Norm Tasevski
Exercise: From Intentions to Impact
How do you know you made an impact?
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© Norm Tasevski
Impact vs Net Impact
Is your effort better than what would have happened anyways?
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© Norm Tasevski
Impact vs Net Impact
Is your effort better than what would have happened anyways?
NET IMPACT is what matters
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© Norm Tasevski
Achieving Social Goals !
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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
© Norm Tasevski
Step 1: ID Your Social Goals !
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• What Social Benefit are you creating?
• How do you decide?
© Norm Tasevski
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© Norm Tasevski
Embedding “Social” across the Business Model
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© Norm Tasevski
Cautionary Tale
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© Norm Tasevski
Exercise: Balancing social & financial value
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+
+
-‐
-‐
$
© Norm Tasevski
Step 2: Measure the Social Value Created !
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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
© Norm Tasevski
Why is Measurement Important? !
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“Not everything that can be counted counts, and not everything that counts can be counted”
“You can’t manage what you can’t measure”
© Norm Tasevski
Challenges in Measurement !
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• 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)
© Norm Tasevski
A Note on SROI!
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• 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.
© Norm Tasevski
SROI Snapshot: TurnAround Couriers!
Avg Change in Societal Contribu3on (Target Employees): $9,391
Average Number of Target Employees: 10
Current Year Cost Savings to Society: $93,910
Cumula3ve Cost Savings (prior to Y5): $191,170
Total Cost Savings to Date: $285,080 Cumula3ve Societal Payback Period: 1.8 years
Cumula3ve SROI: 285% Note: ini3al SCP investment = $100,000
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Overview of Target Popula;on (sample) • 38% recruited directly from shelters • 23% female • Average age: 21 • 100% unemployed at 3me of hire • 54% receiving social assistance at hire • 54% been involved with jus3ce system • 54% did not complete high school
Employment Outcomes (sample) • Increased target/non-‐target staff ra3o to 83% • 69% con3nue to work at TAC (9) • 15% moved onto mainstream employment in window cleaning industry (2)
• 8% went on to post secondary educa3on (1)
Sustainable Livelihood Outcomes (sample) • 89 youth in total have been hired over 5 years
• 100% target popula3on recruited from shelters able to get out of shelter system and secure independent housing within 6 months of employment at TAC
• 85% who relied on income support through social assistance at 3me of hire able to get off and stay off
© 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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© Norm Tasevski
Simple Measures for Social Enterprise: Lessons from the Acumen Fund!
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• 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)
© Norm Tasevski
Step 3: Communicating Your Social Impact!
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How?
© Norm Tasevski
What did we learn?
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