A Toolkit for Developing a Social Purpose Business Plan - Seedco

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A Toolkit for Developing a Social Purpose Business Plan

SeedcoInnovations in Community Development

Funding provided by Mizuho USA Foundation

Copyright © 2004Structured Employment Economic Development Corporation (Seedco)

All rights reserved.

CONTENTS

Introduction� Acknowledgements� How to Use this Toolkit� Seedco and the Nonprofit

Venture Network

Part I: Getting Started� Key Elements of a Social

Purpose Business� Testing for Mission-fit� Taking Inventory of the

Organization� External Context� Tying it all Together� Building a Business:

Recycle-A-Bicycle� A Framework for Planning:

Introduction to PM&MSM

� Addressing Organizational Change

Part II: The Business Plan� The Executive Summary� Market Opportunity� Business Model� Operations� Management and

Stakeholders� Social Outcomes� Financials

Part III: Resource Guide� Pitching Your Business� Working with Consultants� Understanding Financial

Statements� Glossary

Part IV: Worksheets, Templates and Examples

Part V: Sample Business Plan

SeedcoInnovations in Community Development

ideveloping a social purpose business plan

i n t r o d u c t i o n

A Toolkit for Developing a Social Purpose Business Plan grows out ofSeedco's recognition that many nonprofits are eager to launch businessventures but lack targeted resources to help them through the planningprocess. Over the past three years, the Nonprofit Venture Network (NVN)has provided intensive technical assistance to 21 nonprofit organizationsin New York City and Tampa Bay and has conducted introductoryworkshops with more than 250 nonprofits interested in developing socialpurpose businesses. Based on our experience and expertise, we designedthis step-by-step business planning guide especially for nonprofitorganizations. It is our hope that it becomes a valuable resource toorganizations exploring the possibility of social enterprise and to moreseasoned entrepreneurs.

The Toolkit was created under the supervision of Jaycee Pribulsky, SeniorProgram Manager. Content was developed by a Seedco team includingSarah Eisinger and Rosanna Perry-Stephens, and led by Dawn Techow. Ateam of Seedco staff including Tracey Allard, Khary Cuffe, RachelBluestein and Nikhil Gadkari reviewed the document and providedinsightful feedback. Asif Karmally, an intern from the New YorkUniversity, Stern School of Management also assisted in writing andediting this document. Mimi Grinker and Betty Rauch kindly edited andproduced the document. Giona Maiarelli of Maiarelli Rathkopf Designdesigned the Toolkit with assistance from Josh Reisner at Seedco.

Special thanks to Karen Overton, Executive Director of Recycle-A-Bicycle, for graciously allowing us to pick apart her business plan and useit as an example. She has been a strong supporter of the NonprofitVenture Network and we value her enthusiasm and dedication to socialenterprise.

The development of the Toolkit would not have been possible withoutsupport from the Mizuho USA Foundation. We are especially thankful tothe foundation's Executive Director, Lesley Harris Palmer, for hersupport of the Nonprofit Venture Network since its inception.

NVN has also been supported by the MetLife Foundation, the United Wayof New York City, the Eckerd Family Foundation and the World TradeCenter Small Business Fund.

DIANE BAILLARGEONPresidentSeedco and the Non-Profit Assistance CorporationJanuary 2004

Foreword and Acknowledgements

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Social Purpose Business Development:How to Use this Toolkit

Why a Social Purpose Business Planning Toolkit?

A social purpose business is a business activity started by a nonprofitorganization that applies market-based solutions for the purposes offurthering the mission of the organization, generating income, andaddressing social needs. Over the past five years, the social enterprise fieldhas grown significantly. Nonprofits are seeking innovative methods ofdiversifying their revenues and building more sustainable organizations.As a result, nonprofits are seeking assistance in developing and launchingthese ventures.

While starting a social purpose business shares many characteristics withdeveloping a traditional small business venture, there are markeddifferences. Most importantly, you are not an individual entrepreneur.You have stakeholders and clients, funders and staff who follow a missionto provide a needed service to the community. All of these constituentshave opinions and ideas about how the organization should best use itsresources. In addition, decision-making may happen at multiple levels,the organizational culture may be resistant to becoming more business-like and staff may fear mission creep. On the flip side, as an organizationrather than an individual, you may have access to more resources, be ableto build a planning team consisting of diverse backgrounds and expertise,and have a proven reputation in the community.

This Social Purpose Business Planning Toolkit takes the organization intoconsideration throughout the planning process. In addition, the BusinessPlan you develop with this toolkit will highlight the social components andsocial outcomes of the business. As a communications tool, these sectionsare important to your staff, Board and clients as they show the way that theorganization and clients will benefit. In addition, these sections areimportant to socially conscious funders who are seeking a social return ontheir investments.

Who Should Use this Toolkit?

The Social Purpose Business Planning Toolkit is designed for nonprofitorganizations that are considering starting a revenue-generating activity ora business venture. The toolkit begins with the assessment of an idea in thecontext of your organization, so to begin, you will need to have a few ideaspercolating. In addition, organizations that are currently operating abusiness might use the Toolkit as a guide for developing a plan forexpansion or for revising their business model.

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Developing a Business Plan

Developing a business plan is an exciting, but challenging process.Developing your business and then writing the business plan can takeanywhere from several months to over a year. Staff time, organizationalresources, outside consultants or experts in the field are required for theprocess. In the end, the business plan serves as both a communicationstool and a management tool to evaluate your performance and revise yourassumptions. It will justify the risks and explain the rewards associated withthe business. A good business plan will:

• Illustrate demand for your product• Demonstrate stakeholders' interests and needs• Confirm that the business concept is viable• Post healthy and realistic financial projections• Demonstrate staff and management expertise• Explain your ability to meet the proposed social outcomes

The Case Study

Throughout the Toolkit, we use an organization that Seedco has workedclosely with for the past four years. This organization, Recycle-A-Bicycle,is an established social enterprise that has completed a business plan forexpansion of the business and programmatic activities. We will refer to theRecycle-A-Bicycle business plan and pull examples to illustrate key points.The full text of the plan is available in Section V.

Using the Toolkit

Throughout the Toolkit, you will find a number of icons, illustrated onthe following page, indicating special sections. In addition, a disk isprovided that contains the Financial Projections Workbook. This is anexcel file that is meant to help you build your financial projections. If youhave difficulty using the disk (PC-format), please go to www.seedco.org/nvnto download the files. You will need the user id and password below.

User id: toolkitPassword: business

If you have comments, would like to purchase additional copies of theToolkit or are interested in learning more about Seedco or the NonprofitVenture Network, please email us at [email protected].

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Helpful hints are provided to give you specific informationon a topic.

Actions refer to templates, worksheets and examples whichoffer hands-on opportunities to put the concepts intopractice. We encourage you to stop each time you see theAction symbol and pull out the corresponding worksheetfrom Part IV.

These are actual or “modified” examples of socialpurpose business.

These are questions to help you develop the MarketOpportunity and Business Model Sections of your plan.

This section will assist you in developing your Logic Modelor Action Plan with regard to different sections of thebusiness plan.


viideveloping a social purpose business plan


About Seedco

Founded in 1986, Seedco provides financial and technical assistance, andmanagement support, for the community-building efforts of nonprofitorganizations and small businesses in targeted disadvantaged communitiesthroughout the United States. Working in partnership with localcommunity organizations, universities, and other local and nationalgroups, Seedco develops wide-ranging initiatives that support workingfamilies, promote community economic development, and strengthencommunity-based nonprofits. Seedco's approach focuses on increasing itscommunity partners' capacity to implement high-impact projects thatbuild community and individual assets.

Seedco's programs focus on workforce development, affordablehomeownership, and entrepreneurship to achieve our communityrevitalization goals, including:

• Supporting working families;• Promoting economic development;• Strengthening community organizations; and• Providing creative financing to support program activities.

HOW WE WORK

Seedco is committed to innovative, high-impact program developmentand delivery. We provide intensive financial and technical assistance to ournetworks of neighborhood-based partners, enabling them to launchmodel projects and realize their community-building goals.

We Build Community Networks

Central to Seedco's work is the belief that neighborhood organizations areinvaluable partners in planning and implementing community andeconomic development projects. Community-based organizations havethe cultural competency and understanding of local needs that areessential in creating meaningful community-building initiatives. As partof our programs, Seedco brings our network of partner organizationstogether to foster peer learning and collaboration.

We Create, Develop, and Implement Model Projects

Seedco develops model projects designed to enable community partners todevote their critical resources to program implementation. Model projectsmay include fully developed business plans and financing strategies,program protocols, and web-based information systems that can beadapted to local needs.

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We Provide Technical Assistance and Capacity Building

To help our community partners achieve their goals, Seedco providesintensive technical assistance and capacity-building services, focusing onprogram implementation that leads to measurable outcomes. One toolthat Seedco uses to assist organizations is its Performance Measurement &ManagementSM (PM&MSM) process, a technical assistance process that helpsorganizations plan, measure, improve, and be accountable for programs.PM&M helps managers articulate outcomes, collect data about theseoutcomes, and use that data to make and implement informed decisions.

We Offer Financial Assistance

Seedco's Community Development Loan Fund provides low-costfinancing for community-based organizations undertaking developmentactivities. We also help community groups gain access to pre-operationaland recoverable grants to enable them to absorb some of the early costsassociated with developing business plans and other activities that buildtheir organizations' assets. Seedco creates targeted loan products aroundthree program areas: Affordable Homeownership, WorkforceDevelopment and Community Economic Development. In response tochanging needs in the market, Seedco has launched our WTC SmallBusiness Fund, which includes loan funding for small businesses affectedby the September 11th attacks.

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About Seedco’s Nonprofit Venture Network

The Nonprofit Venture Network (NVN) was established in 2001 withsupport from the MetLife Foundation, United Way of New York andMizuho USA Foundation. NVN offers community-based nonprofitorganizations a comprehensive package of technical assistance andfinancing designed to enhance their capacity to launch social purposebusinesses. While there are several definitions of a social purpose business,we define it as a business activity started by a nonprofit organization thatapplies market-based solutions for the purposes of furthering the missionof the organization, generating income, and addressing social needs. In this context, social purpose businesses serve to:

• Promote innovative programs; • Create job and training opportunities; • Encourage entrepreneurial endeavors; and, • Contribute to the financial viability of the parent nonprofit

organization.

The Challenge

In a demanding operating and funding environment, nonprofitorganizations must look to new models of generating revenue streamswhile also fulfilling their expanding missions. Launching a social purposebusiness is an innovative economic development strategy that has emergedin recent years as a way for community-based nonprofits to do both.Through these ventures, nonprofits can increase their ability to fulfill theorganization's mission while serving their constituents in new ways anddiversify revenue sources.

Starting a social purpose business venture can pose risks for thesponsoring nonprofit. When a nonprofit launches a new business venture,it strives to earn income and achieve tangible social outcomes. Thisundertaking can quickly test an organization's culture and managementpractices. The organization must constantly strive to balance its internalgoals of supporting a social mission and generating revenue. NVN helpsorganizations find that balance through a comprehensive package oftechnical assistance services and low-cost financing.

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The NVN Model

NVN technical assistance and services are delivered in three phases.

Phase I: Learning. This phase provides organizations with assessment andcapacity building tools through the MetLife Introductory Workshop Serieson Social Purpose Businesses.

Phase II: Planning. Organizations that have completed the introductoryworkshop series are eligible to apply for pre-development grants generallyin the range of $5,000 to $10,000 through Seedco's EntrepreneurialAssistance Fund, which begins Phase II of the program. Over the course ofthe year-long grant period, Seedco will work with organizations in groupsettings and one-on-one to develop a business plan.

Phase III: Implementation. Phase III offers grantees access to severalforms of financial assistance to support their efforts in pursuing a socialpurpose business, ranging from grants to below-market loans and near-equity instruments. In order for organizations to move from Phase II toPhase III, eligible organizations must have a business plan and meetSeedco's due diligence requirements.

NVN held its Introductory Workshops Series in New York City and TampaBay in Fall 2003 and will bring on new cohorts in 2004. In addition,NVN plans to expand nationally and is exploring opportunities in severalnew cities.

NVN Grantees

To date, Seedco has provided funding through the EntrepreneurialAssistance Fund and technical assistance to the following organizations:

NVN: New York City

Bedford Stuyvesant Restoration Corporation (BSRC) is developing amulti-purpose technology store, an outgrowth of BSRC's computer accessand training program, to offer employment and training opportunitiesfor local youth.

Brooklyn Children's Museum is creating a museum store to provideemployment and training opportunities for local youth.

Brooklyn Woods, Inc. is creating a woodworking business to provideemployment and training to low-income and unemployed individuals.

Center for Alternative Sentencing and Employment (C.A.S.E.S)explored the creation of a greeting card business targeting the youthmarket that would develop the artistic and business skills of youthoffenders participating in its community alternative sentencing program.

xideveloping a social purpose business plan


The Children's Village is developing an automotive repair and gasolinebusiness to provide employment and training to youth in its residentialtreatment center.

The CityKids Foundation will launch MUSE Productions (MakingUrban Solutions for Education), a youth development and educationalproduct company specializing in issue-based video curricula and music, aswell as youth outcome-measurement solutions.

The Fifth Avenue Committee is creating Brooklyn Moves, atransportation and trucking business to provide employment toparticipants with multiple barriers to employment, including a history ofincarceration.

Gay Men's Health Crisis is developing a food service business that willserve staff, offer catering to groups using GMHC's office for events andmeetings, and provide training and employment to clients who haveexperienced unemployment due to HIV/AIDS.

Groundwork, Inc., a new Brooklyn-based youth leadership developmentprogram, is developing youth-run ventures that will provide communityservices to youth and families in East New York.

Harlem Textile Works, a design and printing business that providesemployment training to youth in the textile and fashion field, is planningto expand its operations through new urban designs and additionalproduct lines.

Managed Work Services of New York, a joint venture between VIPCommunity Services and the National Association on Drug AbuseProblems, Inc., provides employment to individuals with histories ofalcohol/substance abuse through a temporary employment agency.

Neighborhood Coalition for Shelter (NCS), a Manhattan-based housingprovider, is developing an online business to sell donated new and usedgoods including CDs, DVDs, video games and books. NCS will employ andtrain homeless and formerly homeless individuals to operate the business.

New Horizon Courier Service, an outgrowth of Lenox HillNeighborhood House's vocational training program, recently closed itscourier business that provided employment for formerly homelessindividuals.

Pratt Area Community Council is developing a property managementbusiness to provide employment and training to residents of low- andmoderate-income neighborhoods in Brooklyn.

Project Reach Youth in Brooklyn is creating a catering business toprovide training in the culinary arts and employment to local youth.

Recycle-A-Bicycle is expanding its business which teaches low-incomeyouth affiliated with the Henry Street Settlement House to refurbish usedbicycles, which are then sold at two retail outlets in Manhattan andBrooklyn.

TADA!, a youth theater company in Manhattan, is developing a businessto market and provide short-term theater opportunities for New YorkCity youth during holidays and other school breaks.

NVN: Tampa Bay

The Corporation to Develop Communities of Tampa will develop aplan and marketing strategy to increase traffic to an existing cluster ofsocial purpose businesses on 29th Street: a coin laundry, an ice creamshop and an open air market.

Eckerd Youth Alternatives (EYA) plans to develop a copy and computerservices shop to provide training and job opportunities for rural youth inthe Tampa Bay area.

Tampa Bay Academy of Hope publishes the African American Listing, anannual reference manual with information on local minority-ownedbusinesses and services that generates revenue to off-set the Academy'syouth programs. The Academy plans to publish the listing on-line andemploy and train youth in aspects of creating and publishing the Listing.

The YWCA of Tampa Bay runs a successful youth development programfor low-income girls, ages 10-16, which it plans to adapt into a for-profitventure called Y Girls, targeted to more affluent communities in PinellasCounty with an aim to subsidize the Y's other programs.


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I.1developing a social purpose business plan

pa r t i : g e t t i n g s ta r t e d

Part I of theToolkit willprovide you withframeworks tothink aboutbusiness planningin general andyour idea andorganization in particular.

Part IGetting Started



� O V E R V I E WYou probably come to the business planning process with an idea born outof your organization’s need to generate new sources of revenue or addressa new need among the population that it serves. But how do you know ifthe idea is sound? This section helps you evaluate the idea and posesquestions to answer as you look at the organization’s capacity to take on amajor new endeavor. It will cover the following topics:

• Five Key Elements of a Social Purpose Business

• Testing for Mission-fit

• Taking Inventory of the Organization

• Looking at the External Context

• Tying it all Together

• Building a Business: The Example of Recycle-A-Bicycle

• A Framework for Planning: Introduction to Performance Measurement and ManagementSM

• Special Section: Addressing Organizational Change

I Have an Idea!!

Pa r t I Getting Started


pa r t i : Five Key Elements of a Social Purpose Business

Starting a social purpose business is challenging and will require a projectchampion, staff resources, a significant amount of time and financing. Asyou create your business, you will take into account five key elements:mission, the business idea, your organization, relationships and the environment.

Mission. Your mission is central to all the activities that you will pursue informing the business. Seedco defines a social purpose business as a venturethat applies market-based solutions for the purposes of furthering themission of the organization, generating income and addressing socialneeds.

Business Idea. Your idea will evolve into a full-fledged business thatincludes what you are selling, the customers to whom you are selling andyour “market advantage” (i.e. why customers will buy your product/service).

The Organization. Your organization consists of an overlying culture andthe individuals and groups that have a direct stake in the success of thebusiness. These stakeholders include the management, staff, volunteers,target population or clients, board members and funders.

Relationships. Relationships describe the way your business interacts withpeople or other businesses who are not direct stakeholders, but who havean influence on the success of the business. Relationships may includevendors, suppliers and strategic partners.

Environment. The environment consists of the external forces that affectthe business. These are circumstances outside of your control that willinfluence the planning or operations of the business.

A successful business builds strength in all five areas but also understandsthe relationship between these areas. For example, you need the rightpeople to run your business, negotiate effective relationships and maintainfocus on the mission and social outcomes. In addition, your business ideamust provide an opportunity to further the mission of the organizationand also must make sense within the environmental context. Though thisseems very straightforward, continually assessing your business aroundthese five areas will help during both planning and operating stages. Theinter-relationship of the elements is illustrated on the next page.

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Five Key Elements of Your Social Purpose Business

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As you plan, launch and operate your business, revisit these five elementsand evaluate each one in relation to the others. The elements are dynamicand may change over time. These changes may be deliberate or mayhappen outside your control. When one element changes, you may have toadjust other elements to compensate.

Mission

ORGANIZATION RELATIONSHIP

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pa r t i : Testing for Mission-fit

A key step in the development of a social purpose business is determininghow it aligns with your organization’s mission and program activities. It isalso important to think about the needs and interests of the clients youexpect to serve through your social purpose business.1 The mission of yourorganization and your clients are key factors in developing and assessingyour business idea.

One way to ensure that your business idea makes sense to yourstakeholders and clients is to include them in the development process.Ask them for input before starting the social purpose business. Thefollowing Strategic Questions provide a way for you to articulate yourinitial social and financial goals.

What is the mission of your organization?

What is your social purpose business idea? What product or service do youplan to offer and who are your target customers?

What are the demographics and the needs of the clients that you expect tobenefit from this idea?

How will the venture benefit your clients? What needs, interests and skillssets do they bring to the venture?

- What programs do you have that currently serve the needs ofyour clients?

- Have your clients expressed a special interest for new services? What kinds of new services/programs are they interested in?

- What are your client's key skill sets in terms of what is neededfor the business venture? How would you rate their skill level (low, medium, or high)?

What assets will you use to create the business venture, e.g. building,property, equipment, intellectual property, proprietary processes?

What other ways might you use these assets, e.g. sell the building orequipment, use the equipment for a new program?

What are the anticipated benefits or outcomes for your clients and theorganization that will result from starting a social purpose business?

What are the financial goals of the business (break-even, generate profits tobe used for additional training or spin off revenues for other programs)?“Organization” refers to the nonprofit that is developing the business and “client” refers to the target population that isserved by the nonprofit.

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Is there a Fit Between Your Business Idea and Your Organization’s Mission?

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Distribute the Strategic Questions Worksheet, located inPart IV of the Toolkit, to a group of staff, managers andBoard members in order to evaluate the idea frommultiple perspectives within the organization.

Action

After completing the Strategic Questions and reviewing the responsesreceived from other stakeholders, you, your staff and Board membersshould be better able to assess whether the business idea truly does"extend" the mission of the organization.

� Is the business venture consistent with the overall mission of the organization or is it a major shift from the work you do?

� Are the goals and outcomes of the business venture in line with theorganization's mission? Do they make sense?

� Does the business serve the needs, interests and abilities of your clients?

� Will the business meet the needs of other stakeholders in meaningful ways?

An organization working with ex-offenders opened a thriftstore to provide job training and employment to its clients.Despite writing a business plan and successfully capitalizingthe store, the business manager found that the shop had avery low job retention rate. After talking with severalemployees, the manager learned that most employees werenot interested in selling clothing at a thrift shop. For anadult population, and particularly a male population, thework opportunity did not fit their interests and long termgoals. The organization did not close the thrift shop, but ithas modified the training program to meet the needs of thispopulation: now, the men work in the thrift shop for 4-5months. At that time, if they meet performance targets thatfocus on attendance, punctuality and customer service, themen are eligible to move to other job opportunitiesincluding a new landscaping service and a print shop.

Lessons fromthe Field



Now that you have examined the relationship between your business ideaand mission, you are ready to assess the business idea in the context ofyour organization. Social purpose businesses succeed when there is asound opportunity (the right "Business Idea") and an entrepreneurialmanagement team (the right "People") to carry out the task of launching abusiness. Using the Organizational Assessment Survey, you will evaluatewhat your organization already possesses to help you develop the "BusinessIdea", and what "People" are in place to lead the effort. By examining yourorganization's core competencies and the expertise you bring to theprocess you will be able to better determine if this business makes sense foryour organization. The Organizational Assessment includes:

Articulation of the organization's values and strengths.

Assessment of the financial, staff, and physical (equipment, property, etc.)resources that are needed and available for the business planning processand launch.

Identification of advocates, stakeholders and partners that will provideassistance for the planning and launch of the business.

Recognition of the potential challenges and difficulties with planning andlaunching the business.

Definition of roles and responsibilities among current and potential stafffor the business.

Taking Inventory of Your Organization

Use the Organizational Assessment Survey, located in PartIV of the Toolkit, to take stock of the organization, mapyour resources, and evaluate the missing pieces.

Action

pa r t i : Taking Inventory of the Organization

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Organizational Commitment ChecklistReview your Organizational Assessment Survey to evaluate whether yourorganization is able and willing to make a commitment to developing abusiness. It is okay if there are missing pieces and unanswered questionsduring the initial planning phase. However, the organization shouldrecognize that the following are needed:

� Dedicated resources to support the business planning process.

� A strategic plan that includes the development of a social purpose business as a near-term strategy and/or a board resolution that supports the development of a social purpose business.

� A clear vision of the goals of the business.

� A set of core values that can drive the development of the social purpose business.

� A general understanding of the risk factors involved in starting a social purpose business.

� Mitigation strategies to address resistance to change among staff, clients and stakeholders.

Entrepreneurship Team ("People") ChecklistReview your Organizational Assessment Survey to evaluate whether yourorganization has the people in place to support the business planningprocess:

� Project champion to lead the business planning process.

� Management team that understands the risks and is realistic about possible results of the social purpose business.

� Board of Directors that supports the development of the social purpose business.

� Board of Directors and staff who understand that the desired outcome for a social purpose business is a mix of social and financial returns.

The Organizational Assessment Survey is meant to help you understand whatyou have and what you might need. Making the decision to launch a socialpurpose business is a significant one and requires a sound business idea andorganizational readiness. Based on what you've learned thus far, are youready to begin the business planning process?


pa r t i : Looking at the External Context

Beginning the Business Planning Process: An Initial Look at the External Context

Now that you have evaluated your business idea in the context of yourorganization, it is time to take a look at the market opportunity (i.e. thepotential to sell your product or service) and the external environment.When you write your business plan, you will conduct the research intoyour potential market. However, at this time, it is important to take apreliminary look at what's happening outside of your organization thatcan potentially affect business development. The External EnvironmentAssessment will ask you to look at the following:

Who are your potential customers? Describe them demographically.

What similar products do these customers currently buy? What do theylook for when buying similar products/services?

Do you know who else is operating in the same market and targeting thesame customers? Who are your competitors?

How will you compete? How will your business be different?

What is happening with the economy and your industry in particular?

Are there major changes in what customers need and want, how they accessthe product or the price? How might this affect your business?

Complete the External Environment Assessment located inPart IV of the Toolkit. You may not be able to answer all ofthe questions at length, but you should have a general senseof what kind of opportunity exists.

Action

Through the External Environment Assessment you should haveconsidered your potential to sell your product or service in the context ofyour prospective customers and existing competition. Overall, how willthe external environment affect the development of your business? Howcan you mitigate the associated challenges? One solution may be to reviseyour business idea. Perhaps you need to scale back the idea or even changeit if these conditions prove to be too much of a challenge. You can go backto the Strategic Questions Worksheet to think through a new idea. Keep inmind that sharpening your business idea can be, and oftentimes is, aniterative process.

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pa r t i : Tying it all Together

Conclusion: Tying It all Together

Understanding where your strengths lie and where you need assistance willenable you to make smart decisions about the business planning process.In the next section you will begin to develop your social purpose businessplan and learn techniques to communicate your ideas to others.

The worksheets and questions in this section will allow you to examineyour idea and organization. After doing this work, you should be able toanswer the following questions:

• Does the business venture further the mission of your organization?

• Is the business venture an undertaking your organization wants to pursue?

• Does your organization have the capacity to develop a social purpose business?

• Do the organization and Board of Directors understand the risks involved and are they willing to take such risks?

• Is the organization being realistic about possible results?

• Is the timing right to develop a social purpose business?

• Does the organization have the right people with the right skills and is it willing to give them the freedom, responsibility and authority necessary for entrepreneurial success?

• Does the organization have enough staying power in terms of time, energy and money?

• Is the organization willing to make mistakes?



Seedco’s Nonprofit Venture Network (NVN) socialentrepreneurs offer this advice on the planning process:

• Business planning takes a lot of TIME.• A business "champion" or point person is vital to

maintain focus and motivation during the planning process.

• Define the decision-making process early on to avoidgetting mired in the details.

• If your nonprofit clients are going to become employees, start the transition early through training and communications.

• Acknowledge and manage organizational culture changes as they occur.

• Secure executive staff and board buy-in during the pre-development phase.

• A business advisory board may increase the time required for the planning process, but can provide invaluable thoughts and perspective.

• Acknowledge the risks and determine realistic mitigation strategies.

• Make sure you understand the numbers.• Don't be afraid to sell your products and services!

NVN social entrepreneurs identified the following commonstumbling blocks:

• Failure to recognize that the business needs a manager with the experience and skills to operate a business.

• Resistance to change within the organization and to new staff roles and responsibilities.

• Securing the financial resources to move from planning to launch.

• Understanding the targeted business customers and market opportunity.

Lessons fromthe Field


pa r t i : Building a Business: The Example of Recycle-A-Bicycle

Building a Business: The Example of Recycle-A-Bicycle

Recycle-A-Bicycle (RAB) is a successful social enterprise in New York Citythat demonstrates strength in the five key elements and has recognized theimportance of how the elements fit together.

• Mission: Recycle-A-Bicycle provides youth development to at-risk populations through the operation of two successful full-service used bicycle shops that employ youth trained in bike repair and mechanics. Through these shops, RAB also furthers its second mission to promote environmental stewardship by offering affordable and sustainable transportation options.

• Organization: Recycle-A-Bicycle is led by an energetic Executive Director (ED) who is skilled in bicycle repair and maintenance and who is an avid cyclist. Through her networks within the cycling and community development arenas, she has maintained a strong supply of donated bikes and has built a solid customer base at the retail stores. The ED has learned business management skills on the job. In addition, to further strengthen Recycle-A-Bicycle, she actively recruits volunteers, Board members and others to fill additional

Mission

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needs. Shop managers oversee the youth interns and ensure highquality repair services for customers. Finally, the youth involved with the program are vital to the success of Recycle-A-Bicycle as they bring both enthusiasm for the program and a source of labor.

• Business idea: Recycle-A-Bicycle's founder responded to a proposal to create an employment and training program for youth. The program provided valuable hard and soft skills for the youth. At the same time, Recycle-A-Bicycle began to think about its customer base. Residents of New York’s East Village neighborhood,where the program was located, were either young, low- to moderate-income individuals or residents of low-income housing. Most customers could not afford a new bicycle or did not want to pay a high price given the high rate of theft in New York City. Recycle-A-Bicycle established its competitive advantage through its location, pricing and the quality of the refurbished bikes and repairservices.

• Environment: Recycle-A-Bicycle makes sense in New York City. The terrain is relatively flat and the city is extremely dense. In general, it is faster to bike to a destination that is within 5 miles than to walk, drive or take public transportation. Recently, the NewYork City Council began talking about finding better options for those who bike to work to store their bikes during the work day. In addition, subway fare hikes in spring 2003 and the relatively mild New York City weather makes biking an attractive option.

Despite the economic downturn that has plagued other small businesses during the past three years, Recycle-A-Bicycle has thrived because it (1) serves a niche market of delivery and messenger personnel, who rely on bicycles to perform their jobs and (2) provides an inexpensive alternative to a new bike for cash-strapped young New York City cyclists.

• Relationships: Recycle-A-Bicycle partners with the Henry Street Settlement House and Children's Aid Society. These partnerships allow Recycle-A-Bicycle to focus on job training, knowing that its partners will provide other youth development activities such as academic tutoring or personal counseling.

Recycle-A-Bicycle also has relationships with building superintendents and community leaders who donate abandoned bikes. Funders and technical assistance providers offer neededservices and support. Recycle-A-Bicycle also has relationships with several cycling organizations including the Montauk Century and Bike New York who provide opportunities to market the business as well as offer youth additional part-time work.


pa r t i : Building a Business: The Example of Recycle-A-Bicycle

Recycle-A-Bicycle SuccessRecycle-A-Bicycle did not start out with all of these elements in place, butthey have built strength in each area of the business. The key to Recycle-A-Bicycle's success has been the way that the elements fit together.

Several examples of this include:

• Recycle-A-Bicycle's relationships with youth service providers helps them focus on their employment and training mission and their environmental stewardship mission because they do not offer other youth development services. In addition, these service providers aresuccessful in obtaining youth summer employment stipends from the city government, allowing Recycle-A-Bicycle to maintain low labor costs.

• By collecting abandoned and discarded bikes, Recycle-A-Bicycle provides a valuable service for superintendents and others who would have to pay to dispose of these items.

• The business idea of refurbishing and selling used bikes promotes sustainable transportation alternatives for New York City residents.

• The environmental factors such as the subway and bus fare hike in spring 2003 and the economic downturn actually create new opportunities for business with Recycle-A-Bicycle.

• The founder and shop managers are dedicated to the mission and also have the skills to provide quality products and services.


pa r t i : A Framework for Planning: Introduction to PM&MSM

Now that you are ready to begin business plan development, it is essentialthat you begin to think about what needs to take place during the planningprocess, how these activities will be accomplished, who will be responsiblefor completing the work, how results will be measured and the timelinefor completion.

In this section, we introduce Performance Measurement & ManagementSM

(PM&MSM), a process to help you plan, measure, improve and beaccountable for your organization's activities. PM&M is a process thatidentifies how your organization's activities lead to desired outcomes. Inthis Toolkit, you will learn how PM&M can help you to articulate socialoutcomes, collect and measure data about these outcomes, and use thedata to make and implement informed decisions.

Social purpose businesses focus on the double bottom line - the social andfinancial outcomes that are expected from the venture. PM&M is a toolthat will help you to define each of these outcomes and developmechanisms for tracking your results. There are four elements in thePM&M process:

The Logic Model. The Logic Model is a graphic representation of howthe various resources and activities will lead to the benefits created for theorganization, its clients and stakeholders. It can be used to communicatehow the business will work and what outcomes will be achieved to peoplewithin the organization, potential investors and other stakeholders.Examples are provided in Part IV.

The Action Plan. Action Plans guide the business planning process byclarifying and coordinating tasks, assigning responsibilities and specifyingtimeframes and due dates. Action plans are management tools used tohelp in project management, and are most useful during the businessplanning process. Action Plans stem from the Logic Model and the twoelements are used together.

Gathering Evidence and Data Collection. This is the "measurement"component of PM&M. This process involves setting targets and developingindicators that measure your performance, and then establishing systemsfor gathering evidence to track the indicators and determine if you metyour targets.

Management. PM&M provides techniques and tools that can be used forday-to-day and long-term assessment and management of theorganization's activities.

A Framework for Planning: Introduction toPerformance Measurement & ManagementSM

1.

2.

3.

4.



Elements One and Two will be explained in the following pages. ElementsThree and Four will be discussed in Part II of the Toolkit as they relate totracking and measuring the social outcomes of the business and writingthis into your plan.

Laying the Groundwork: Developing the Logic Model

A Logic Model is a way to articulate the theory of change behind yoursocial purpose business. This theory of change is based on the notion thatan activity creates an output that generates an outcome or change. Here isa simple example:

Had the work opportunity not been available, these youth might not havedeveloped the self-esteem and soft skills necessary to go on to highereducation.

The graphic representation of this theory of change is the PM&M LogicModel. The Logic Model demonstrates links between the resources,activities and benefits of the social purpose business, both in terms ofchanges or benefits to your clients and for the organization.

The Logic Model consists of five elements described below. Two examplesand a template for building your own Logic Model are included in Part IVof the Toolkit.

• Inputs. What are the assets that the business possesses today? These are the resources dedicated or consumed by the business. For example: funding, staff, facilities, partners, franchise, consultants, participants/clients, knowledge/expertise.

• Activities. What are the tangible actions that need to take place using the inputs to fulfill business objectives? Think of the activities related to both the business and program side of the venture. Some business activities could include: develop/finalize business plan, pilot the business, make sales calls or conduct advertising. Program activities may include develop/modify thetraining curriculum, and screen and recruit the participants. The best way to express the activities is as action verbs.

Output: Youthgain tangiblework experienceand knowledgeof customerrelations.

Short-termOutcome:Youth gain self-esteem and softskills.

Long-termOutcome:Youth completehigh school and continue to highereducation.

Activity: Youthclients work at acopy shop fillingcustomer orders and performingcustomerservice.



• Outputs. What is produced as a direct result of business activities? Outputs generally depict the completion of an activity or are quantified as the number or percent of units produced as a result of the activity. For example: business plan developed, customer survey completed or 15 participants complete job training program.

• Outcomes. What are the benefits or changes for your clients or participants and for the parent organization as a result of the social purpose business? Think of outcomes as the goals that your business seeks to achieve. Outcomes are expressed as initial (within 0-2 years), intermediate (within 2-3 years) and long-term (within 3-5 years). Examples include: business generates net operating income, participants obtain work experience and organization becomes more entrepreneurial. The Logic Model should capture financial, programmatic and organizational outcomes.

• Arrows. The arrows on the Logic Model are used to show the cause and effect relationships between each of the elements. For example, because you have a set of assets, you can operate an activity. In general, arrows move linearly from input to activity to output to outcomes. However, other cause and effect relationships are possible. For example, an output may become an input such as when the activity involves creating a training curriculum or marketing plan. Arrows which represent causal relationships are the key to showing how your social purpose business will work.

If you refer back to the Strategic Questions, you will notice that you havealready thought through many of these Logic Model elements -particularly the assets, activities and outcomes.

Use the Logic Model Template and examples located in PartIV of the Toolkit to craft a Logic Model for your social purpose business.

Action



Helpful Hints on Building your Logic Model

• Add arrows to show the causal linkages between inputs, activities, outputs and outcomes. Generally, inputs will lead to activities, activities to outputs, and outputs to outcomes.

• Some inputs may lead to more than one activity, some activities may lead to more than one output, and some outputs may have more than one outcome.

• Are the inputs sufficient to support all listed activities? Are outcomes plausibly related to the business and programmatic activities? Do the outcomes genuinely represent a change or benefit for the clients/participants/customers?

• Use if/then statements to check if the Logic Model is "logical". Example: If we have dedicated staff, then we can pilot the business plan. Or, if participants attend training, then they will be placed in a job.

• Add or eliminate boxes on the template - you do not need to fill in every single box!

• In filling in the boxes, if it is easier, you may want to start with the outcomes and work backwards.

• The Logic Model can be used as a planning device, tomanage the development of your business and later when your business is up and running.

ActionHelpful Hints

Putting it Together: Building the Logic ModelDeveloping your Logic Model often takes one of two directions. Yourthought process might be direct - you know what activities you willundertake and these will lead to certain outcomes. On the other hand,you might know what outcomes you want and work backwards to determinethe activities that will lead to such outcomes.

Uses of the Logic ModelThere are many uses of the Logic Model. Most commonly, it is used as aplanning, communications and operations tool. For the purposes of thesocial purpose business, the Logic Model is best used to convey the entirescope of the business and its outcomes to staff, prospective funders andclients/participants.



The Logic Model can be used in communications to staff, potentialfunders and clients/participants to:

• Reach a shared understanding of the business within the organization

• Help staff understand how their work fits into the business and organization

• Explain the business to new staff and the Board of Directors• Clearly describe the business to funders, potential funders and

other stakeholders

The Logic Model can also be used in business planning to: • Structure the business planning process• Guide business implementation• Identify gaps in service production• Show the relationship between social, financial and organizational

outcomes

Finally, the Logic Model helps with operations management to:• Guide measurement efforts and provide a framework for data

analysis• Understand how activities are linked to business and programmatic

outcomes related to clients• Identify hiring and staff training needs• Encourage staff collaboration by illustrating shared purposes and

common outcomes



Status/Notes

Research in progress

Financial statements developed

Organizational chartdeveloped

Questionnaire sent out to current trainees

Training curriculumdeveloped

Task

Business-related Activities

Conduct Market Research

Develop financial plan

Identify staffing needs

Program-related Activities

Recruit participants fortraining program

Adapt current trainingand curriculum

Person Responsible

Marketing Assistant

Business Manager

Business Manager

Program Manager

Program Manager

Due Date

July 2004

September2004

December2004

December2004

October 2003

Making Things Happen: Action Plans

An Action Plan is a planning tool that can organize the key activities forthe business planning process. Overall, the Action Plan delineates:

• What activities/tasks will be done• Who is responsible for doing these activities and tasks• When each activity/task will be completed

The action plan can be used to communicate expectations and accountability.

To create your Action Plan, refer to your Logic Model which shouldorganize the tasks of the business. Also, review your OrganizationalAssessment Survey and identify the tasks that need to be completed as partof the business planning process. Next, examine the resources andexpertise you have in place to outline how the work will be accomplished.In the Action Plan, you need to include the activities, the deadlines andthe responsible individuals.

You will want to return to your Action Plan on a regular basis to assesswhether tasks have been completed.



Use the Action Planning Template located in Part IV of theToolkit to plan the primary activities associated withdeveloping a business plan for your idea.

Action

Reviewing the Action PlanTo complete the action planning process, answer the following questions:

• Are any key activities (or staff) missing from the plan?• Are there potential bottlenecks or delays in any part of the plan that

might cause problems moving forward during implementation?• Which activities have flexible deadlines? Which do not?

Conclusion

Developing a social purpose business is intensive and requires a soundbusiness idea, organizational readiness and a strategy that guides businessdevelopment. The work you have completed in this section has providedyou with an important opportunity to think strategically about yourorganization and the way in which a business venture can strengthen itswork and further its mission. In developing the specific components ofthe business plan, revisit this section and use it as a guide for shaping thestory you want to tell about your social purpose business.

In this section, you have assessed your business idea and how it relates toyour organizational mission. You have also explored the ways in which theexternal environment can impact your business idea.

As a result, you should be able to:

• Articulate the outcomes for your social purpose business• Describe your business idea and its relationship to your mission

and programmatic activities• Describe the potential impact of the external environment on

your business idea• Lay out the business on a Logic Model• Establish an Action Plan for moving forward on the business

planning process

Now it is time to get to the real meat of the business planning process-drafting your business plan. The second part of this Toolkit details thecomponents of the Business Plan and provides a how-to manual toformulate a strong and compelling document.


pa r t i : Special Section: Addressing Organizational Change

Special Section - Addressing OrganizationalChange

Whether this is your first or fifth social purpose business, planning andlaunching a new venture will cause organizational changes. These changesmay lead to tensions and uncertainty among staff, clients and otherstakeholders. The cultural change that accompanies the opening of thenew business can be one of the major challenges you will face.

The best way to address organizational change is through transparency andcommunication. People often resist change when they are unsure how itwill affect them. Your staff and stakeholders may resist change because theydo not understand the goals of the new business venture or because theydo not feel that their ideas or concerns are being heard.

To help staff and stakeholders understand the changes that occur whendeveloping a social purpose business, it is important to clearlycommunicate what is happening through formal mechanisms such asmeetings, reports and memos.

Communicating Organizational Change

Address strategic questions:• Why are we doing this?• Why a business venture? • What does this mean for staff and clients? • What does this mean for the organization?• What are we trying to accomplish?

Address practical questions:• Explain what will happen and when. Show where

change will occur and provide structure with an anticipated timeframe for roll-out.

• Outline the differences between how the program functions now and how the business will operate in the future.

• Explain how staff roles will change and how the role of clients will change.

• Establish who the staff/stakeholders should talk to with questions or concerns.

ActionHelpful Hints

ii.1developing a social purpose business plan

pa r t i i : Th e B u s i n e s s P l a n

Part II of theToolkit willprovide you withstep-by-stepinstructions fordeveloping yourbusiness andcreating a writtenplan.

Part iiThe Business Plan



Pa r t I IThe Business

PlanThe first Part of the Toolkit walked through the process of assessing anidea in the context of the parent organization and introducedPerformance Measurement and ManagementSM (PM&M) a method ofsystematic thinking that will be helpful throughout the planning process.

Part II: The Business Plan introduces the seven sections of a socialpurpose business plan and provides tools and techniques for planning andwriting each section. Portions of the Recycle-A-Bicycle business plan areincluded as an example throughout this section. The full text of thebusiness plan is available in Part V of the Toolkit. Each section alsoincludes information on integrating the tools of PM&M.

The sections of the plan are laid out in the order in which they shouldappear in the final business plan. However, the Executive Summary will bewritten last, incorporating language from other parts of the business plan.In addition, during the planning and writing process, it may be necessaryto jump around between the sections as business development is not alinear process.

The Social Purpose Business Plan includes the following sections:

• The Executive Summary

• Market Opportunity

• Business Model

• Operations

• Management and Stakeholders

• Social Outcomes

• Financials

• Exhibits

Ready, Set, Go.


pa r t i i : The Executive Summary

You never get a second chance to make a first impression.

The Executive Summary of the business plan is often the first and sometimes the only part of the planthat an investor or potential partner will read. You have only a few pages to make a compelling andconcise case for your idea, the funding needs, time frame and your ability to execute the plan.

� O V E R V I E W

The Executive Summary is usually the last section to be written. Return tothe Executive Summary once the other sections of your plan are nearcompletion. After reading the Executive Summary, the reader should havean understanding of the core business and be interested in learning more.

The Executive Summary should be 3-5 pages in length and will summarizekey parts of the business plan.

Overview: The business idea. Explain what are you selling and to whomand include a brief description of the mission and objectives of both thenonprofit and the business. (Business Model Section)

Relationship of the business to the sponsoring nonprofit organization.Describe how the business venture is supported by the parent organizationand the legal structure under which the business will operate. (OperationsSection)

Opportunity: Market summary. Convince the reader that you understandthe marketplace for your product or service by providing highlights of thesize of the market, your target customer base and the competition.(Market Opportunity Section)

1.

2.

3.

The Executive Summary

The Executive Summary

Because it is written last, the Executive Summary can sometimesget short changed in terms of refinement and revision.However, this section should receive significant attention.

• Try to convey your passion for starting this venture.

• Have someone who knows nothing about your business read it to be sure that you are clearly explaining the idea and to give you fresh perspective.

• Use formatting such as bullets, charts and numbered lists to reinforce key points.

Helpful Hints

ii.4 developing a social purpose business plan


Competitive advantages and key partnerships. Explain why your venturewill succeed. What do you bring to this market that others do not? Whatstrategic relationships are already in place to help your business succeed?(Business Model and Operations Sections)

Management team highlights. Who will operate this business and why arethey qualified to do this? (Management and Stakeholders Section)

Expected social impact. Outline your social outcomes and the indicatorsand targets for these outcomes. (Social Outcomes Section)

Goals, timeline and benchmarks. Explain how the business will proceedand the key milestones for success. (Operations Section)

Financial overview. Describe the financial outlook of the businessincluding expected year of break-even, upfront costs and the financialstrengths. How much do you need and when do you need it? What willthese funds support? (Financials Section)

Contact information. Who should the reader contact if they want toknow more about the business? Provide the name, title, address, phone,fax and email information for the key contact at the organization.Including this information is extremely important because the ExecutiveSummary might be separated from the body of the business plan andcirculated.

The following example from the Recycle-A-Bicycle business plan providesa comprehensive view of the business. Projections of social outcomes andfinancial performance are clearly delineated in charts.

Every business opportunity is unique, therefore sections of the Recycle-A-Bicycle Business Plan may not be relevant to your business. For example,because Recycle-A-Bicycle is a social enterprise that is not a subsidiary of alarger, parent organization, the legal structure and information about theparent organization are not included. Instead, Recycle-A-Bicycle focuseson its partnerships with other organizations. If your business is asubsidiary of another nonprofit, a brief description of the parentnonprofit should be included.

4.

5.

6.

7.

8.

9.



Overview

Recycle-A-Bicycle, a thriving 501(c)3 nonprofit, has a dual mission: to provide youth developmentopportunities to at-risk populations in New York City and to promote environmental stewardship. Thenonprofit operates two successful full-service used bicycle shops that employ young people trained in bikerepair and mechanics. Through these bicycle shops, Recycle-A-Bicycle offers affordable and environmentallysustainable transportation options for commuters, recreational bikers and messenger/delivery persons. As asocial enterprise, Recycle-A-Bicycle has a triple bottom line in which the social and environmental missionsare balanced with financial returns. Since 1997, Recycle-A-Bicycle has salvaged bikes from the wastestream and refurbished them to sell to the public. Recycle-A-Bicycle also trains young people to fix bikesand assists them in acquiring the soft skills required in today’s competitive job market.

Working closely with the Henry Street Settlement and Children’s Aid Society, Recycle-A-Bicycle integratesfinancial, social and environmental concerns into a successful business model. Recycle-A-Bicycle currentlyoperates two retail stores, one in the East Village of Manhattan, the other in DUMBO, Brooklyn, New York.

Recycle-A-BicycleE X E C U T I V E S U M M A R Y



Year

1995

1998

2001

Bicycles consumed (Millions)

16.2

15.8

16.7

U.S. ridership (Millions)

56.3

43.5

39.0

Bicycles consumed per rider

0.28

0.36

0.42

Toward these goals, Recycle-A-Bicycle:

1 Collects donated bicycles destined for dumping.2 Trains at-risk youth for positions as bike mechanics and sales people, builds skills in basic business

concepts and computer training, and provides a safe alternative that is a positive influence on their development.

3 Refurbishes used bicycles through a training program.4 Sells the bicycles to the community as an affordable, quality transportation option. 5 Employs graduates of the training program.6 Operates retail stores that also sell accessories and repair services that diversify the revenue stream and

create additional profit.7 Offers classes to adults on bicycle repair.

Recycle-a-Bicycle is at a critical juncture in its growth. While the business is currently profitable, thepotential for further growth is significant. To better serve its mission and to address the demand for usedbikes, Recycle-A-Bicycle plans to create a new production facility, fill key staff positions and enhance itsinfrastructure. By pursuing these strategies, Recycle-A-Bicycle can increase its youth outreach by more than100%1 in the next two years as well as create an organization that is sustained on its operating cash flow,thus reducing dependency on corporate grant funds.

MARKET OPPORTUNITY

The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the UnitedStates. Recent studies show that in the Northeast, 28% of adults participated in biking activities during a one-year period. New York City boasts a healthy cycling community consisting of commuters (over 100,000 peoplecommute by bike each day), bike messengers/delivery persons and professional and recreational riders.

Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in manycyclists wanting to purchase an affordable bike as well as one that is less likely to be stolen. The prohibitivecost of a new bike also generates business at used bike stores. Demand has outpaced Recycle-A-Bicycle’scapacity to deliver for the past three years. Despite the demand, used bike stores are not prevalent in NewYork City. Within Recycle-A-Bicycle’s trade areas, there are few other used bike sellers due to the high costsassociated with used bikes including labor to repair, inventory system requirements and insurance.

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.

Outreach refers to the number of youth involved in any RAB activity, including both youth training andorganized youth bike rides.

1


The supply of used bikes is also strong. National trends in cycling report that the number of bicyclespurchased each year remains relatively constant while the number of people riding is declining. Thisindicates that more bicycles are being consumed per rider.

COMPETITIVE ADVANTAGE OF RECYCLE-A-BICYCLE

Recycle-A-Bicycle offers a unique product and service. Its social and environmental missions make it theonly socially responsible bicycle retailer in New York City.

Recycle-A-Bicycle has built a trusted brand name and its products are well known as quality alternatives totraditional new bicycles. Customers often say these bicycles are better than new, referring to both thequality and the social mission. Many customers are attracted by the low prices but feel even morecompelled to purchase when they learn of the social and environmental stewardship that the organizationembodies.

Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City.Because of low labor and materials costs, Recycle-A-Bicycle is able to offer bicycles at very affordableprices, most at 50% less than a comparable new bicycle.

The youth programs inspire young people to make better life decisions and touch many aspects of theirlives. To the youth participants, Recycle-A-Bicycle offers improved health and well-being, provides a goal-oriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An“I can do it” attitude pervades Recycle-A-Bicycle.

MANAGEMENT TEAM

The management team consists of three highly skilled and dedicated staff with over 10 years of experiencein bicycling retailing, 13 years in transportation advocacy, and over 7 years experience in youth education.The team has proven its ability over the years and is continuing to develop new strengths. The three keystaff members are:

• Karen Overton - Executive DirectorMs. Overton is the founder and leader of Recycle-A-Bicycle. Ms. Overton worked as the Bikes forAfrica Project Director at the Institute for Transportation and Development Policy; a consultant forthe World Bank, in the International Development Bank, African American Institute; and Pedals for Progress.

• Jared Bunde - Manager, DUMBO ShopMr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as amessenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as abike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. Hehas also excelled in his racing career, winning a silver medal for the NY State Track CyclingChampionship in 2000 and 2002.

• Yoandy Ramirez - Manager, East Village StoreMr. Ramirez started his career with Recycle-A-Bicycle as a Summer Youth Employment student in1999. Based on his hard work, Mr. Ramirez was promoted to Assistant Manager in June 2002 andmost recently became the East Village Store Manager. He will graduate from high school this summerand aspires to pursue a degree in computer science.




Members of the Board of Directors complement the skills presented by the management team. The Boardconsists of dedicated individuals from the following professions: education, finance, social work andtransportation advocacy. Each Board member brings enthusiasm, a unique skill perspective and a broadnetwork of contacts to the organization.

SOCIAL AND ENVIRONMENTAL IMPACT

To date, Recycle-A-Bicycle has worked with over 4,500 youth and staffed an average of 15 positions per year.

Recycle-A-Bicycle improves the lives of at-risk youth in the New York City metro area through a hands-on,formal training program in bike repair, small business and environmental education. After completing thetraining program, many youth fill the part- and full-time positions available at the Recycle-A-Bicycle retailstores. In addition, some secure positions in other bike shops across New York City. The organization’sstrategic partners provide qualified youth counselors that recruit and work with young people who needassistance with basic job readiness skills and who can intervene in the case of serious issues regarding thesocial or mental well-being of participants.

In 2002, Recycle-A-Bicycle worked with 772 youth through its training program. Over the next five years,the organization will increase its youth impact by 54%.

In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New York City. In2002, Recycle-A-Bicycle recycled over 14 tons of material destined for New York City’s landfills. Recycle-A-Bicycle expects to increase the amount of materials recycled to over 27 tons in 2007.

2003

780

22

17

2004

850

28

22

2005

950

31

24

2006

1050

34

26

2007

1200

37

27

Youth participants to be trained

Number of positions to be filled

Tonnage of material to be removed from the waste stream



Sales Revenues

Grant Revenues

Net Income

Net Retail Margin

FINANCIAL OVERVIEW

Recycle-A-Bicycle plans to make three key investments over the next three to five years to expand itsprograms and create opportunity for revenue growth:

• Acquire a production and training facility that will provide an expanded and dedicated space fortraining youth as well as refurbishing bikes, therefore meeting more of the demand for used bikes in New York City;

• Acquire a van and hire transportation staff to allow for more strategic and coordinated pick-up ofdonated bikes as well as transfer of inventory between production facility and retail stores; and

• Hire additional staff to enable the organization to raise capital from institutional grantors for businessexpansion as well as for increased training and youth program services.

Recycle-A-Bicycle projects net operating losses in 2003 while development and fundraising efforts areinvigorated, and the marketing, internet sales capacity, retail signage/merchandising, and other criticalcorporate infrastructure projects are further developed. The results of this investment will be greater salesrevenue and significant improvement in net margin.

2003

$167,657

$ 71,091

$ (11,472)2n/a

2004

$232,932

$176,396

$ 47,868

21%

2005

$290,281

$172,049

$ 80,105200628%

2006

$318,775

$188,875

$111,275200735%

2007

$334,446

$198,129

$126,475

38%

SUMMARY OF REVENUE PROJECTIONS AND NET INCOME

Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year StrategicPlan. These grants will be pursued through institutional funders with an interest in environmentalstewardship and/or youth development.

2003Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000 in grant funding will serve asworking capital to support current operations as well as implement new marketing efforts. The additional$100,000 will support hiring a Development Officer, support costs associated with sourcing and obtainingthe new production and training center and provide for other infrastructure improvements.

2004Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds will be used in partfor working capital and in part to support more of the Five-Year Strategic Plan. This includes hiring aProduction Assistant to staff the production and training center, hiring a van driver to facilitate the pick-upof supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition,part of these funds ($38,000) will be used for a down payment on the production and training center.



Recycle-A-Bicycle will raise the additional $106,000 through fundraising efforts spearheaded by the newDevelopment Officer.

2005Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional costs related toexpansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch theTours by Teens program.

Recycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track record ofgrowth and is now looking for capital in order to expand the social and environmental outcomes anddevelop more sustainable systems within the business.

Recycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer and smallbusiness in New York City. The organization serves a triple bottom line, benefiting the at-risk youth and theNew York City environment through a business model that is moving toward sustainability. Recycle-A-Bicycleis seeking to increase its effectiveness in all three areas – social, environmental and financial. As one of theleading organizations combining youth education, recycling and bicycling, Recycle-A-Bicycle has thecapability to expand locally as well as develop a national reach.

For more information on Recycle-A-Bicycle, please contact Karen Overton, Executive Director, [email protected].


pa r t i i : The Market Opportunity

So you think you have a great idea…

The Market Opportunity Section is intended to convince your reader that there is both a need anddemand for your product or service. The Market Opportunity Section should demonstrate anunderstanding of your customers in terms of demographics and the factors that will influence theirdecision to purchase your product or service.

� O V E R V I E W

The viability of your business is based on a variety of factors - the marketopportunity, the business model, the social and financial outcomes andthe management team. In this Section, you will explain in detail therationale for the business venture by describing the opportunity that existsfor your product or service. Why is the business needed and by whom?The key items that you want to convey are demand for your product orservice and the overall characteristics of the market itself. It includes:

External and Industry Context of the business.

Market Description, including size, growth rate and level of demand foryour product offering.

Customers, including target segments, demographics, purchasing powerand decision factors.

Competition at the local, regional and national levels.

Summary of the market opportunity.

This part of the business plan presents an overall picture of where yourbusiness will fit within its industry and market. You should begin with amacro-level look and then narrow the focus down all the way to yourtarget customer. Finally, you will show where your competitors fit withinboth the market and your target customer base.

Market research will provide you with the information needed to craftyour story. At the end of this chapter you will find sources of informationand guidance on how to conduct your research as well as helpful hints forcreating your story. In Part I: Getting Started, you began to think broadlyabout your market opportunity. You may want to review your answers tothe External Environment questions before you begin.

The Market Opportunity

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� I N D U S T R Y A N D E X T E R N A L C O N T E X T

Begin the Market Opportunity Section by discussing the industry ingeneral and analyzing changes or events that are taking place atinternational, national, regional and local levels. You should also describethe technological, economic, regulatory, labor market, political andenvironmental occurrences that could impact your selected industry. Ananalysis of the external environment provides an overview of the arena inwhich your social purpose business will operate. The size and scope ofyour proposed business will dictate the importance of these factors onyour sales and operations.

Industry: Your industry refers to the type of business you are operating. TheDepartment of Labor has created industry divisions from the North AmericanIndustry Classification System (www.census.gov/epcd/www/naics.html):

• Agriculture, Forestry, Fishing andHunting

• Mining

• Utilities

• Construction

• Manufacturing

• Transportation and Warehousing

• Information

• Finance and Insurance

• Real Estate and Rental and Leasing

• Professional, Scientific and Technical Services

• Management of Companies and Enterprises

• Administrative and Support and Waste Management and Remediation Services

• Educational Services

• Health Care and Social Assistance

• Arts, Entertainment, and Recreation

• Accommodation and Food Services

• Other Services (except Public Administration)

• Wholesale Trade

• Retail Trade

• Public Administration

Examples of relevant industry information include:

• A silk screening business discusses that the industry has been shifting from manual screen printing to digital printing, which results in lower quality, but faster production time for printing T-shirts and other items. If the business focuses on manual production, it will need to show that there are customers who are looking for the higher quality printing services.

• A new hardware store examines the trend in retail sales moving from small neighborhood stores to large chain stores such as Wal-Mart, Lowe's or Home Depot. If the business were also a large chain store, this information would be helpful in making the case for the new store. However, as a small community-based store, the business needs to prove that customers will shop there.



• A copy shop outlines how the industry has been affected by new recycling laws or describes the way that technological changes such as the trend to provide Print on Demand services (a new printing technology that allows printers to efficiently produce small quantities of printed material at a time) are requiring businesses tomake new capital investments. If the business wants to offer the most up-to-date services, the industry data will support the need for investment in technology.

The following excerpt from Recycle-A-Bicycle begins with statistics aboutthe bicycling industry in the United States. This information leads thereader through an explanation of the trend in the industry toward greaterconsumption of bikes per rider. It becomes clear that bicycles are viewedas a disposable commodity.

� R E C YC L E - A - B I C YC L E I N D U S T RY A N D E X T E R NA L C O N T E X T

DEMAND FOR BICYCLES CONTINUES TO GROW NATIONALLY

Bicycling has long been a pastime of children and adults alike and are used most often for social andrecreational purposes. In fact, bicycle riding is now the seventh most popular sport in the country (out of62). In July 2001, the Bureau of Transportation Statistics estimated that approximately one in four adults(25%) in the United States had used a bicycle in the last 30 days. An Outdoor Industry Association Reportfound that within the Northeast, over 28% of adults participated in biking activities during 1994-1995.However, cycling is highly seasonal and usage declines to as low as one in ten in the winter months.

Statistics show that the number of bicycles purchased each year remains relatively consistent while thenumber of people riding is declining. This indicates that more bicycles are being consumed per rider.

Year

1992

1995

1998

2001

Bicycles consumed(Millions)

15.4

16.2

15.8

16.7

U.S. ridership (Millions)

54.6

56.3

43.5

39.0

Bicycles consumed per rider

0.28

0.28

0.36

0.42

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.



With fewer people cycling and a constant number of bicycles being consumed, either consumers areaccumulating more bicycles or disposing of more bicycles. RAB's experience points to the latter.

Further evidence of this "disposable" bike culture was indicated in the keynote presentation at the 2002Taipei International Cycle Show, when Yoshizo Shimano, Chairman of Shimano Inc. said: "Americanconsumers buying mass-merchant bikes ride them fewer than 60 miles before hanging them up in theirgarages. In Japan the bicycle is so devalued that consumers dumped them in the streets creating a publicnuisance. They [bicycles] have become a throw-away commodity."

Source: Bicycle Retailer and Industry News, May 1, 2002

Recycle-A-Bicycle provides a unique solution to the commodification of bicycles while offering affordable,environmentally sound transportation and recreation options to residents of New York City.

Developing Your Story is meant to guide both the researchand writing of the Market Opportunity Section. Thesequestions are included after the explanation of each majorpart of the Market Opportunity section. As you are writingyour business plan, only include information that isrelevant in the context of your business. Ask yourself: Why isthis important and what does it mean for the potential ofmy business? Then ask yourself how the information fitsinto your story.

Macro Context: Taking a Look at the Operating Environment

• What is the economic outlook for your industry? How might this affect your proposed business?

• Are there other current or potential events that might affect the industry? What effects do you anticipate?

Industry Context: Exploring Your Industry

• Define the industry that you will operate within.

• Describe what is currently happening within your industry (e.g. trends in employment, consolidation of companies, labor issues, new legal or regulatory issues, etc.) and compare this to past trends. How will these changes affect the industry?

• How is new technology affecting the industry?

Developingyour Story



� M A R K E T D E S C R I P T I O N A N D C U S T O M E R S

Once you have provided a snapshot of the external environment andindustry, you will need to describe the market in which you will operateyour business. The market is defined by the universe of potentialcustomers for your product or service. In this section of the business plan,include the following:

• Description of your market including size and geography of yourtarget customer base.

• Market trends.

• A discussion of your customer segmentation strategy.

• Your expected share of market or the level of demand anticipated.

Some questions to consider as you conduct research are: How large is themarket and how much of the market do you expect to capture? Is themarket growing? Are you entering an emerging market or one that isrelatively well-established? What does this mean for your business?

Customer segmentation is a critical component in demonstrating yourunderstanding of the market. When describing your customers, it isessential that you include data that proves that there is a strong demandfor your product or service. In particular, you want to focus on thefollowing:

• Demographic information: age, gender, ethnicity, socio-economicbackground, educational attainment, employment status and population size.

• Psychographic information: motivation, buying trends, interests, social concerns, political views and values.

Both demographic and psychographic information will allow you to createa detailed profile of your customer base. In gathering this data, you willalso be able to break your target market in various subsets, or segments, ofthe general market. Segmenting the market into specific, smaller groupsallows you to hone in and describe your special niche and the particularneeds and/or wants that the social purpose business will address.

It's important to be realistic about your target market. As you describe themarket and the expected market share (i.e. the number of customers thatwill buy your product/service), keep in mind the capacity of your socialpurpose business. Can the social purpose business effectively support thenumber of customers you expect to serve? Careful consideration of all ofthese questions will allow you to describe the opportunity that exists foryour business in quantifiable terms.



Thinking about Customers

Do not assume that customers will buy your product just because you are selling it. People are creatures of habit andthey tend to purchase what they know. Think about your ownpurchasing behaviors:

• Do you always purchase the same brand of toothpaste? Why or why not?

• What factors might cause you to start shopping at a different grocery store?

• How do you decide whether or not to try a new product?

Chances are that your social purpose business will offer aproduct or service that is already sold by someone else. Inthat case, you will have to convince a customer to stop buyingtheir regular product and switch to something new.

� R E C YC L E - A - B I C YC L E M A R K E T D E S C R I P T I O N

CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG

New York City boasts a healthy cycling community consisting of commuters, bike messengers/deliverypersons, and professional and recreational cyclists. The New York City Department of Transportationestimates that 100,000 people commute by bike daily. In addition, there are several active bike-orientedorganizations and clubs with memberships totaling over 10,000. The Five Borough Bike Tour, the largestcycling event in the U.S., takes place in New York City with a ridership of 30,000. Cyclists flock to New YorkCity parks on the weekends during good weather. There are also New York City industries dependent oncyclists: messenger services, food delivery and pedicabs.

New York City has over 100 miles of bike lanes and an additional 75 miles of Greenways for use by cyclists.For the most part, New York City's terrain is flat, and the high density and mix of land use lend themselvesto cycling. Traffic and parking are constant problems facing drivers and cycling is generally a faster modeof transport for trips within a five-mile range. According to one bike shop manager, cyclists will be active intemperatures of 50 degrees Fahrenheit and above, leaving only the winter season unpopular for biking.

The events of September 11th converted some commuters into cyclists. At this time, many people's accessto public transportation was disrupted or they became anxious about the possibility of biological warfare inthe subways. The East Village shop did a record volume of sales and repairs from September to December.With a bus and subway fare hike scheduled for May 2003, the number of commuters cycling to work isexpected to increase as commuters will choose to cycle rather than pay $4 daily for a round trip.

Helpful Hints



On a more positive note, the government's recent investment in New York City's bicycle infrastructure,perceived to make conditions safer, helps to encourage cycling. These investments include $1.5 million,received in 1994, to plan and implement a comprehensive bicycle network for New York City. Through thiseffort, 500 miles of bicycle routes have been identified and New York City has produced the New York CityBicycle Master Plan as well as the first-ever New York Cycling Map. In 1996, an additional $2.4 million wasinvested in the implementation of the Master Plan.

Both of Recycle-A-Bicycle's shops directly benefit from these improvements. A new bike lane is beingpainted along Avenue C in the East Village, directing cyclists from the Williamsburg Bridge to pass by theshop. More impressively, a dedicated bike/pedestrian path is under construction that will run along the EastRiver on the Brooklyn side. One of the main entrances is located at Washington Street just one block fromone of RAB's shops.

After describing the cycling industry in the U.S., Recycle-A-Bicyclenarrowed its story down to the local level. Recycle-A-Bicycle included dataon bicycle consumption in New York City and Brooklyn as they relate toits retail locations. This data demonstrates the size of the target market. Inaddition, RAB included specific data on New York City's cyclingcommunity as well as information on bike lanes and other roadways usedby cyclists. By including this data, RAB demonstrated that a healthy marketexists for its product.

In the next excerpt, Recycle-A-Bicycle effectively uses demographic andpyschographic data to segment its market and illustrate demand for itsproduct. While the overall target market is the New York City cyclingcommunity, the market has been segmented into specific targets:socially/environmentally conscious cyclists, students, individuals that haveexperienced bike theft and commuters.

� R E C YC L E - A - B I C YC L E TA R G E T C U S TO M E R S

CUSTOMERS SEEK VALUE IN THEIR BICYCLES

A strong market exists for used bikes because many consumers are unwilling or unable to purchase newbikes that typically start at $200 - 250. A typical RAB customer is 20 - 45 years old, will use a bicycle as aprimary means of transportation, and has a median income of at least $20,000. Secondary customers are ina similar age range, but will use the bicycle primarily for recreational purposes. Repair services and partsare sold to a wider variety of cyclists, and Recycle-A-Bicycle is a strong supplier to the messenger anddelivery bicycling communities.

One in three customers shop at Recycle-A-Bicycle because they recently had a bicycle stolen. This wasdetermined during a survey of shoppers conducted over a month in summer 2002. These customersreported that they were interested in purchasing a cheap, beat-up looking bicycle to reduce the likelihood oftheft. Customers in this situation are also happy to learn that Recycle-A-Bicycle tracks every bike - from itssource of donation to its final destination. Business is built on its reputation to avoid dealing in stolen bikes.The majority of customers purchase a bicycle to meet their primary transportation needs.

Parts and repair sales tend to sell to the messenger and commuter communities. The fix-a-flat stations are busyin the summer serving these two communities and the enhanced accessory lines also appeal to these groups.



RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE

EASTVILLAGE

58,595

46,290

35,687

92.6%

$43,767

2.9%

ALL OFMANHATTAN

1,459,596

1,213,652

709,052

80%

$48,281

0.9%

DUMBO

47,746

40,687

23,692

64.8%

$56,293

0.7%

ALL OFBROOKLYN

2,465,326

1,802,827

941,531

72.9%

$31,896

0.5%

ATTRIBUTE

Resident Population

Over Age 18

Ages 20-45

% Renters

Median Earnings

% Bike to Work

As evidenced from the above chart, Recycle-A-Bicycle is located in prime home markets for bicyclecommuters. East Village residents ride their bike to work nearly three times that of other Manhattanresidents. The DUMBO trade area rate of cycling is also higher than the Brooklyn average, and shouldcontinue to grow.

Source: 2000 Census, Census 2000 Summary Files (SF-1, SF-3) by Zip code; Manhattan = 100 3-Digit ZCTA; Brooklyn = 112 3-Digit ZCTA



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Micro Context: Describing the Market and your Customers

• What is your market? Describe the demand, geography or other criteria used to define your marketplace.

• Identify trends taking place in the market. For example, are sales growing, declining or stagnant, and at what rate? Are sales growing because new customers have entered the market (e.g. the cell phone market inthe early 2000s) or have existing customers started to purchase more frequently (e.g. home computer marketin the 1990s)? Have prices been changing? Have products or services changed?

• Who are the customers for your product or service? How many potential customers are there? Describe them in terms of demographics, segmentation and trends, including future projections regarding size, demographics and decision-making to purchase goods/services.

• How does the customer make decisions about what product or service to purchase? What factors are most important in these decisions?

• What price are customers willing to pay? Will customers switch to your product? How much will it cost them to change to your product/service?

• How do customers typically hear about products and services similar to your offering? How will this affect your ability to attract customers?

• How much will it cost to acquire and support a customer?

• How easy is it to retain your customers? Relate your customer retention information to the costs to acquire a new customer as well as the cost to the customer to switch to a new product or service.

• Are there secondary customer segments that you will target? If so, describe them.




� C O M P E T I T I O N

There is always competition for your product or service. The competitionsection of the business plan is meant to demonstrate how the needs of yourpotential customers are currently being met. With this information, you canshow how your product or service is differentiated. The section will tell thereader where your potential customers currently shop and describe theproduct or service offerings that are currently available.

Competition can exist at multiple levels - local, state and national and can beeither direct or indirect. Direct competitors offer similar products orservices. Indirect competitors offer a related product or service that fulfillsthe same need. For example, direct competition for Recycle-A-Bicycleincludes mass merchants and department stores that sell bicycles at affordableprices. Local bike merchants in New York City represent indirectcompetition because they cater to the high end market that is willing to buyexpensive and/or specialized bicycles.

As part of your research, you should conduct a detailed assessment of yourdirect competitors, including strengths, weaknesses and businessperformance. The overall goal in discussing the competition is todifferentiate your business, discuss how it meets gaps in service and justifywhy it can compete effectively against other businesses.

Recycle-A-Bicycle explains how, as a used bike dealer offering qualityrefurbished bikes, the business is highly differentiated from other bike shopsin New York City.

� R E C YC L E - A - B I C YC L E C O M PE T I T I O N

RECYCLE-A-BICYCLE COMPETES WELL AGAINST OTHER BICYCLE STORES

OverviewThe retail bike industry in New York, like most cities in the country is comprised mainly of small,independent bicycle retailers that primarily serve neighborhood clientele. Mass merchants like K-Mart and Toys-R-Us and sporting goods stores like Sports Authority also sell bicycles.

Among sellers of new bikes, mass merchants and department stores are the greatest competitionfor Recycle-A-Bicycle because they offer products at affordable prices. However, these competitorsare not equipped to handle adjustments or repairs and do not employ professional bike mechanicstrained to offer appropriate customer service. In addition, the selection is often limited and thebikes may not be assembled properly.

Recycle-A-Bicycle is not in direct competition with most independent bicycle shops in New York Citybecause the majority of these shops cater to the high-end market. The price of a new bicycle inthese shops typically begins at $200. Recycle-A-Bicycle maintains favorable relationships withmany of these stores and often will receive donations of materials from them. However, bike shopsmake their highest profit margin from the sale of parts and accessories and Recycle-A-Bicyclecompetes with these stores for accessory sales.



Few barriers exist to opening a bicycle retail store, though a capital outlay of approximately to$100,000 is required ($80,000 investment in inventory, $10,000 in tools, and $10,000 in othervarious costs, plus a good credit history). In general, dealer margins have been declining onbicycles and accessories, and more retailers are closing. Recycle-A-Bicycle does not anticipate anynew retailers opening in the East Village or DUMBO trade areas in the immediate future.

New York City Market for the Sale of Refurbished/Used Bikes Most bike shops do not offer used bikes because the cost of labor to repair them is high, andbecause selling used bikes requires an additional inventory system and liability policy (new bikesare insured by the manufacturer). Furthermore, due to the high rate of theft in New York City, manyconsumers want assurance that the bikes are sourced from legitimate places, requiring bike shopsto develop additional inventory and sourcing systems. Used bicycle dealers are the primarycompetition for RAB and will be discussed in detail with regard to the trade area of each of theretail stores.

Thrift stores are another source for used bicycles. These stores offer inexpensive bicycles. However,the supply is not steady and a bike is sold "as is", meaning that it has not been repaired and maynot be safe to ride.

RAB has identified a market niche, used bicycles. Given the additional requirements such as aliability policy and inventory system, the majority of bike shops only sell new bicycles. While RABdirectly competes with these shops for the sale of accessories, its core product of affordable,refurbished bicycles distinguishes it from other bike retailers.

23

Competition

• Who else offers your product/service? Where are they located? What are their strengths?

• Who are the target customers for your competitors? Do your competitors plan to expand?

• How important are your target customers to the competition? What share of your target customer market does each competitor have?

• What are the competitive advantages of your competition (e.g. high quality product/service, customer satisfaction, strong management, brand awareness)?

• What are the barriers to entry for new competitors? How will the barriers to entry change over time?

• Who has the potential to enter this market? When?

• What are the weaknesses of your competitors?




� M A R K E T O P P O R T U N I T Y S U M M A R Y

The Market Opportunity Section can be lengthy and rather detailed.Therefore, it helps to conclude with a short summary that highlights thepoints about the demand for your product or service.

Recycle-A-Bicycle provided a summary of the market opportunity at theend of the section. The following excerpt encapsulates the key pieces ofinformation conveyed.

� R E C YC L E - A - B I C YC L E M A R K E T O P P O RT UN I T Y S U M M A RY

Recycle-A-Bicycle faces a welcome challenge: to recycle the supply and meet the demand for usedbicycles in New York City.

The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in theUnited States and studies show that adults frequently participate in biking activities. New York Cityboasts a healthy cycling community consisting of commuters (over 100,000 people commute bybike each day), bike messengers/delivery persons, and professional and recreational riders.

Used bicycles are in demand in New York City. The high rate of bike theft in New York City resultsin many cyclists wanting to purchase both an affordable bike as well as one that will be less likelyto be stolen in the future. The prohibitive cost of a new bike also generates business at used bikestores. Demand has outpaced Recycle-A-Bicycle's capacity for the past three years.

Despite this demand, used bike stores are not prevalent in New York City. Within Recycle-A-Bicycle's trade areas, there are few other used bike dealers. In addition, most retail bike shops donot carry used bikes due to the high cost of labor that is required to refurbish the bikes.

The supply of used bikes is also strong. National trends in cycling indicate that bicycle consumersare purchasing more bikes, though ridership remains constant. This creates a situation in whichthere are many bikes either sitting idly in storage or being thrown out or abandoned. In New YorkCity, because space is at a premium, the latter situation is more likely. Recycle-A-Bicycle estimatesthat the supply of used bicycles is ten times greater than what the business can currently collect;these unused bicycles currently end up in landfills.



� M A R K E T R E S E A R C H

The information captured in the Developing Your Story questions willshape your Market Section and add depth to your business plan. Byconducting an extensive analysis of the market, you will strengthen thestory you have to tell about your business and fully demonstrate that thereis demand for the product or service that you are offering.

As you delve into the research, you may discover that the market is indecline or that the economy will adversely affect your business.Uncovering this information doesn't mean that you should cancel yourbusiness plans. However, it does mean that you need to be flexible,responsive and thoughtful about your business idea. Identifying themarket conditions, revising your idea and finding a viable opportunity arethe purposes of this section.

The Market Opportunity Section calls for extensive research on theexternal environment, industry, market size, customers and competition.Your story will be more believable if you can prove it with numbers.

You can use a variety of sources to gather data:

• U.S. Census Bureauwww.census.gov At this site, you can access free demographic information about potential customers living in particular areas. In addition, you can access the Economic Census, an area of the website that containsindustry level information that can be sorted to a local level.

• Trade AssociationsTrade Associations are a good source of market research as they are the experts in their field. Trade Associations also have information on industry trends. Some members of the trade association are likely to be your competitors.

• EASI Demographicswww.easidemographics.comEasy Analytic Software, Inc. (EASI) is a New York-based independent developer and marketer of CD ROM and Internet demographic data and software solutions that provide demographic reports with unique search and analysis tools. EASI provides targeted site analysis software and updated demographics and related data for standard and customized geographies (block groups, ZIP codes, cities, counties, etc.).

• Local and State AgenciesGovernment agencies may have information on competitivecompanies, local demographics and data that is specific to your region or locale.



• Public LibrariesLibraries provide access to news services and other databases thatcan provide market information at all levels - from industry-wide to local news.

• Securities FirmsSecurities and/or investment news firms such as Reuters may have reports on your industry that indicate the size of the overall market or information on competitors. In addition, these reports can help you understand how your business should perform relative to similar companies.

• Gallup Pollswww.gallup.comThis site offers timely industry level news and information.

• Colleges and UniversitiesArea colleges and universities may have small business development or entrepreneurship departments that can assist with research. In addition, a college library may have databases and research tools to supplement what you find at the public library.

• Direct Industry ContactsTalking with experts in your field is a strong way to verify or learn the story behind the market trends and statistics that you have found in your market research.

Market research is a business unto itself. There are firms that specialize indifferent markets and are able to conduct in-depth research and analysisinto your market. However, you can do much of this research yourself,especially if your market is easily accessible. You can collect data byholding focus groups, administering surveys, distributing questionnairesand by conducting "grandma research." Examples of "grandma research"include "person on the street" interviews, observing the number of peoplethat frequent the competition's locations and picking up price sheets forthe competition. These are low-cost alternatives that can be accomplishedby your team.

Telling your Story

Once you have completed the research and answered the Developing YourStory questions, you have to put it all together into a compelling case.This is a very individualized process, but the Recycle-A-Bicycle examplelends a few lessons that might get you started.

Recycle-A-Bicycle included headlines to help guide the reader throughthe Market Section. Each subsection begins with a headline that is proventhrough data and conclusions. These headlines set the stage for the sectionand also allow a reader to skim and still get a sense of the story.



The headlines for RAB’s market opportunity story are:

• Demand for bicycles continues to grow nationally.

• Consumption of bicycles in New York City is strong.

• Recycle-A-Bicycle competes well against other bicycle stores.

• Recycle-A-Bicycle has a strong presence in its retail trade areas.

• Customers seek value in their bicycles.

• Residents in our trade areas are more inclined to commute by bicycle.

The other key to writing your story is to use the market trends to proveyour case. Recycle-A-Bicycle describes the New York City cyclingenvironment in a positive light, describing the flat terrain, short distancesand miles of bike lanes as reasons that cycling is popular in the city.However, RAB could also find evidence that many commuters who want tobike to work cannot due to a lack of safe space to park bikes during theday, or they could highlight the dangers of cycling in the city as cars andcabs drive in designated bike lanes. Instead, Recycle-A-Bicycle uses datasuch as the high level of theft as a way to discuss why the refurbished bikesare in demand because they are less expensive and look a bit less shiny andnew, thus they are less attractive to thieves.

Recycle-A-Bicycle has been in operation for six years and therefore has astrong sense of its market. Finding the right statistics and data to tell thestory is more difficult when a business is in the start-up stage. Talking topotential customers and developing an idea of what you think the story willbe are good ways to get started.


pa r t i i : The Business Model

The Business Model

What's for Sale??

The Business Model Section tells the reader what you are selling and why it will be successful inthe context of the market opportunity that you described earlier. The Section describes the socialcomponent of the business, provides a pricing analysis and demonstrates how you will generateincome. After reading the Market Opportunity and Business Model Sections, the reader shouldfeel confident that you have a viable business idea.

� O V E R V I E W

The Business Model Section tells the reader what you are selling and whyit will be successful in the context of that market opportunity.

The Business Model Section should include the following:

Description of the Product or Service - what you are offering and towhom.

Social Component of the business - the social mission/goals that you aretrying to achieve.

Competitive Advantages of both the firm and the product/service,including strategic partnerships and relationships.

Pricing Analysis - what you expect to charge for your product/service,how much it costs to produce it and what your competitors charge.

Revenue Model - the way in which you expect to make money from theproduct/service.

Take a moment to review the Organizational Assessment Survey that youcompleted in Part I: Getting Started. There, you began to describe yourbusiness model and the way it will benefit a targeted group of people. Asyou continue, you will build on this work and more clearly articulate yourproduct or service offering.

1.

2.

3.

4.

5.



� D E S C R I P T I O N O F P R O D U C T O R S E R V I C E

The Business Model Section begins with a straightforward description ofyour product or service and who benefits from it. If you have more thanone line of products or a package of services, you should describe eachone starting with the most important in terms of the amount of salesrevenues you expect to generate. Describe the attributes and benefits thatyour product will provide to customers.

Attributes: The features of your product or service. Attributes are oftentangible aspects of your product or service. For example, the attributes ofa copier might be that it copies twenty-five pages per minute and createsdouble sided copies.

Benefits: What the customer "gets" from using your product or service.Continuing the copier example, the benefits to the customer are that theyreceive fast, reliable copies.

The Recycle-A-Bicycle Business Model Section opens with a synopsis oftheir business model, including strategic highlights about their recentaccomplishments. It then moves into a description of product lines.Because RAB has been in business for several years, these product lines arewell established. If you are a start-up business, you might not have asmuch information. However, try to be as specific as possible whendescribing your product or service.

Business Planning With PM&MSM

Performance Measurement & Management (PM&M) is a tool that can help you inplanning and communicating your business. PM&M utilizes a Logic Model to illustrateyour business concept and desired outcomes. As you work through Part II: The BusinessPlan, we will provide suggestions on how to integrate your planning into your Logic Model.

30

Inputs

Activities

Outputs

Outcomes

The staff and resources that are required for yourbusiness activities (e.g. employees, donated items, thebuilding where the business will be operated).

You should include the main activities associated withyour business idea (e.g. operate ice cream shop,refurbish bikes, print t-shirts).

What will happen as a result of the activities mentionedabove (e.g. revenues generated, products sold)?

What are the changes or benefits associated withconducting your business activities (e.g. financialoutcomes might include breaking even or generatingprofits while social outcomes might include clients buildsoft skills by working at the business)?



� RECYCLE-A-BICYCLE DESCRIPTION OF PRODUCT OR SERVICE

Recycle-A-Bicycle's growing success can be attributed to the fact that it has moved to moreaccessible locations and has built a solid reputation in the community. Repeat customers arecommon, as well as visitors who were referred by word of mouth. A majority of customers choose topatronize the Recycle-A-Bicycle shops because of the social and environmental missions.

Product Line -- BicyclesRecycle-A-Bicycle offers a wide variety of refurbished bicycles. Over 50% of sales are in the roadbike category. This is due to the fact that it is the most common type of donation, and thereforemost available in stock. The shops experience high demand for mountain bikes, hybrids, threespeeds, and cruisers. These types of bikes offer the cyclist an upright position that is consideredmore comfortable for commuting. Recycle-A-Bicycle also sells children's bikes, but has found thatfew parents want to purchase second hand items for their children. Children's bike sales accountfor less than 5% of the bikes sold. All bicycle sales come with a 30-day warrantee.

Product Line -- RepairsRecycle-A-Bicycle offers full bicycle repair services for all models of bicycle. Customers come toRecycle-A-Bicycle because many bicycle shops will not repair older bicycles. The percentage ofrepairs to total income has ranged from 5% to 15%, gradually increasing over the years as staffwith professional experience have been added.

Offering repairs helps to further Recycle-A-Bicycle's environmental impact by reducing the numberof bicycles that become unusable. Furthermore, parts recycled from demanufactured bicycles arenot entering the waste stream and are put to productive use again. The shops are well positionedto specialize in the repair of bicycles manufactured during the 1970's and 1980's. Repair pricing iscompetitive with other bicycle retailers.

Product Line -- Parts and AccessoriesBoth stores sell new and used accessories that make cycling safe and comfortable. The numberand variety of accessories are currently being expanded, but the merchandise mix will remainfocused on the safety, commuting and security categories. The most popular safety and securityitems that are sold include locks, helmets, lights, and bells. Commuting items include pumps,patch kits, racks, baskets, and fenders. The mark up on new items ranges from 50-150%,averaging 100%. Recycle-A-Bicycle offers discounted prices on used accessories acquired fromdonated bicycles. These are priced at wholesale rates because they require no capital outlay. Theability to stock and sell new accessories currently accounts for a little over 17% of total incomeand growth is expected as product offerings increase.

Retail revenues have grown steadily throughout the past five years of operation. The trend inrevenues has been towards increased sales of parts and accessories, driven primarily by customerawareness and loyalty. Recycle-A-Bicycle is also able to more efficiently special order items thatwill further increase sales in this category.

Recycle-A-Bicycle's ability to quickly remanufacture bicycles, therefore meeting more of thedemand for used bicycles, has been impaired by the lack of a focused production facility.Recycle-A-Bicycle expects the proportion of bicycle sales to increase once new inventory iscreated, as selling bicycles is the most effective way to serve both the social and environmentalmissions.



32

Product or Service

• Describe your products and services. What are you selling? What are the attributes and benefits of each?

• What market needs do your products/services fill?

• How does your product/service fill that need?


� T H E S O C I A L C O M P O N E N T

As a social purpose business, you are balancing the "double bottom line,"or both financial and social goals. This Section shows the connectionbetween your business and the social goals you expect to achieve.

A description of the social component should include an explanation ofhow the business furthers your mission and assists your clients. Describethe number of clients you expect to serve through the business and thetypes of training or skills the clients will gain.

Because the social component needs to make sense in the context of thefinancial goals of the business, it is important to justify the costs thatwould not otherwise be incurred in a traditional business. For example, ifyour business offers supportive "first-work" positions, it may incur moreexpenses than a traditional business because it must provide training andsupport to its staff. The increased costs may mean that you will have adifficult time competing on price or you may be quite susceptible tofluctuations in sales volume. Alternately, if your plan is to cycle employeesinto your business for training and then transition those employees intoexternal permanent jobs, you might incur additional human resourcescosts associated with multiple hiring cycles.

On the other hand, your social component may provide an economicbenefit to your business model. For example, if your plan is to cycleemployees into and out of the business each year, your labor costs may belower because you will not need to offer wage increases each year. Or ifemploying youth, you may save on the cost of fringe benefits that areusually offered to adult employees.




This chart is meant to provide suggestions to create or revise your Logic Model.

Inputs

Activities

Outputs

Outcomes

The population you serve or the resources/assets youhave developed through the organization may serve asinputs to the business and program activities.

The social component of your business oftenrepresents the second major activity in which you willbe engaged (e.g. culinary training program, first-work experience including resume and soft skilldevelopment).

If you are operating an employment/trainingbusiness, your programmatic activities might lead toan output of trained clients. If you are utilizingintellectual property, your programmatic activitiesmight lead to the production of a training manual orother product.

What changes or benefits do you expect from theoutputs (e.g. clients who are able to obtainpermanent employment or move into supervisorypositions, more nonprofits are able to implement aprogram using your training manual)?

� RECYCLE-A-BICYCLE SOCIAL COMPONENT

Youth Job TrainingThe youth involved with Recycle-A-Bicycle are recruited through the organization's strategicpartnerships with Henry Street Settlement and Children's Aid Society. These youth come from low-income families and receive a wealth of services through the partner organizations. Recycle-A-Bicycle provides meaningful training and employment opportunities for these young people who inturn provide a low cost labor input for the business.

Recycle-A-Bicycle works with over 750 students annually through a classroom training programfocused on the following areas:

• Bike repair / mechanical overview;• Small business / setting goals;• Environmental education / recycling / stewardship; and• Safe cycling / road awareness.



Recycle-A-Bicycle also delivers innovative on-the job training programs in the following areas:

• Basic mechanics training / advanced mechanics training;• Customer service and communications;• Introduction to business management /entrepreneurship;• Accounting, marketing and business operations;• How cycling can create a healthy lifestyle and a social structure; and• Recycling and environmental stewardship.

The Social Component

• Briefly discuss the mission of your organization and how the business will further this mission.

• Describe the social goals for the business (e.g. clients trained and employed, intellectual property distributed and utilized by others).

• What positions will your clients fill in the business, what skills do they have and what will they need to succeed in the business?


� C O M P E T I T I V E A D VA N T A G E S

Your competitive advantages are the reasons that your business will succeedwithin the marketplace. Generally, your competitive advantages are a set ofcharacteristics unique to your business and its product or service. Inaddition, these characteristics should be meaningful to your customers.The most common examples of competitive advantage include:

• Highest quality provider (e.g. Sony, Mercedes, Ritz Carlton)

• Low-cost leader (e.g. Southwest Airlines)

• First mover advantage - being the first and most established player in your market (e.g. Microsoft, Starbucks)

• Strategic relationships - the way your business is able to leverage other parts of the supply chain to your advantage (e.g. distribution of Coca-Cola products or Wal-Mart's just-in-time inventory system)

• Patented technology (e.g. pharmaceutical products, biomedical products)

Competitive advantages also include more subtle differences and can bebased on the perceptions of your target customers. Examples of suchadvantages include location, customer service and management. Though



less obvious, these advantages can differentiate your business from thecompetition. For example, a neighborhood small business may have aprime location on a busy corner. If the business owns or holds a longterm lease on the space, this may be a competitive advantage.

The other competitive advantage to consider is your social mission. Thismay or may not be a strong advantage for your business. For Recycle-A-Bicycle, the social mission is a vital part of the competitive advantage. Theyouth and environmental components attract customers, the youthprovide a low-cost supply of labor and the donated bicycles provide a low-cost supply of bikes and parts. The economic advantages are a result of thesocial mission. A traditional used bicycle business would not be able toproduce the refurbished bicycles at such a low cost.

Many social purpose businesses assume that their competitive advantagewill be as the "low cost leader." They believe that they can undercut thecompetition and therefore generate sales. Before you decide that this willbe your competitive advantage, it is important to consider how you willprice your product and also to consider what price says about the product.Generally, people perceive higher priced products as higher quality whilelower priced items are considered lower quality. In addition, competingon price can be a dangerous business. It is much easier to lower pricesthan to raise them.

Finally, review your Organizational Assessment Survey results from Part I:Getting Started. Here, you described your core competencies and therelationships that your organization has in place. Are there otherrelationships with partner agencies, suppliers or distributors that couldenhance your ability to sell your product or service? These relationshipsare also a competitive advantage.

An ice cream shop opened in a low-income community. They priced the ice cream at a low cost believing that the lowincome market would not support a high-end ice creamstore. However, the product was actually premium ice cream.The result was that customers did not patronize the storebecause they thought the ice cream was an inferior product.In addition, the ice cream store was not making a highenough margin on its sales to support the business. After re-evaluating the business model, the ice cream storeincreased its prices and ended up attracting more customers.



� RECYCLE-A-BICYCLE COMPETITIVE ADVANTAGE

COMPETITIVE ADVANTAGESRecycle-A-Bicycle offers a unique product and service. Our social andenvironmental missions differentiate us from other bicycle retailers in New YorkCity.

On a product basis, Recycle-A-Bicycle bicycles are one of the most affordable modes oftransportation in New York City. Because of low labor and materials costs, a Recycle-A-Bicycle bikeis priced at least 50% lower than a comparable new bicycle from an independent bicycle retailer.Recycle-A-Bicycle prices are also competitive against other used bicycle dealers. Additionally, the30-day guarantee is unique in the used bicycle marketplace and because Recycle-A-Bicycle tracksall inventory from its source, consumers are assured that they are not buying a product that wasstolen or illegally obtained.

The youth programs inspire young people to make better life decisions. Recycle-A-Bicycle touchesmany aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health andwell-being, provides a goal-oriented social structure (earning their own bike by helping fix others),and helps improve self-esteem. An "I can do it" attitude pervades Recycle-A-Bicycle.

Consumers feel good about making their purchases with Recycle-A-Bicycle. Many customers reportthat they are drawn to Recycle-A-Bicycle because of the low prices, but feel much more compelledto purchase when they learn of the social and environmental stewardship.

Recycle-A-Bicycle enjoys the following advantages in relationship to second hand dealers, chainstores, and bike stores:

• A legal operation that does not deal in stolen bikes;• An indoor, year round, predictable space;• Competitive prices; • Higher quality bikes than the competition;• A 30-day warranty;• A selection of accessories and the ability to custom order special accessories and parts; • A full line repair services; and• A social mission in which all proceeds are applied to the social and environmental programs.



Competitive Advantage

• What distinguishes your product or service? Do you have:- Superior product/service- Production/service delivery efficiencies - Experienced personnel- Strategic location- Brand awareness- Knowledge/ intellectual property

• Is your social mission a competitive advantage for your business? If so, how will you use this advantage?

• If your venture is successful, what will it look like? Is there an analogy with a commonly known business?


� P R I C I N G A N A LY S I S

This component explains your pricing strategy. Pricing is one of the facetsof marketing and represents the value of your product or service. Theprice you set is driven by your customer's perception of the value of yourgoods or services and their willingness to purchase your product. Thisinformation will form the basis for analyzing the price people are willingto pay, and ultimately, the price that you will charge.

Determining the optimal price for your product entails three steps.Analyze your pricing opportunity using each method and then use theresults from all three to determine your final pricing structure.

Step 1: How much does it cost you to produce the product or service?Step 2: What do your competitors charge?Step 3: How much are customers willing to spend?

Step 1. How much does it cost you to produce the product or service?At this point in the planning process you can no longer avoid thenumbers. In order to determine how much to charge, you have to knowhow much it costs to produce and sell your product or services. Thinkthrough all of the costs involved even if you do not think that you are ableto quantify them at this time. Later you may be able to estimate these costsor determine that they are negligible.

The charts on the next pages illustrate examples of two businesses costingout the main product that they sell.1

These are examples and the costs listed were created solely for the purpose of illustration.1



Used bike shop (like Recycle-A-Bicycle):

Costs to produce and sell one bike

Cost to pick up donated bike frame

Cost to store donated bike for 2 weeks(average time before bikes are refurbished)

Labor time to refurbish the bike (youthemployees)

Cost of parts used in refurbishing bike(including units of grease, newhandlebars)

Marketing costs (determined per bike basedon total marketing cost for generating bothsupply of used bikes and demand forrefurbished ones)

Labor time to sell the bike to customerincluding adjustments

Space and utilities used in 6-hours ofrefurbishing plus one week on display inretail store

Total:

$2 for van rental

$4 (0.1% of storage space used for 2 weeks)

6 hours @ $6 per hour

Average cost of $20 per bike

Average cost of $5 per bike based on prior year

marketing/sales analysis

1 hour @ $6 per hour

$1.50

$$7744..5500



Social purpose bakery:

Costs to produce and sell one cake

Cost of ingredients including staplesalready on hand such as butter, oil,vanilla, baking powder, etc.

Cost of utilities used in refrigeration,mixing and baking

Labor cost for professional pastry chef

Labor cost for assistant chefs (clients fromnonprofit who have attended trainingprogram)

Cost of storing the cake in refrigerated case(portion of cost of case, electricity used)

Portion of cost of delivery van plus fuel andmaintenance

Delivery van driver

Marketing costs determined on a revenuebasis (i.e. $2000 in marketing is expected toresult in $6000 of new sales)

Total:

$3

$0.25

0.5 hours @$30/hour

2 hours @ $8/hour

$3 (estimated)

$2

0.25 hours @ $8/hour

$3

$$4444..7755

After calculating the cost of the product, you may use cost-plus pricing toeffectively increase the price by a certain percentage. This percentage maybe based on industry standards or may be determined after assessingcompetitive prices (see Step 2, below). A second method of pricing basedon cost is to use a standard mark-up rate. Mark-ups are common in retailbusinesses that purchase inventory at wholesale rates. Cost-plus and mark-ups allow you to set a base price that you can assess after completing Steps2 and 3.

Step 2. What do your competitors charge?Assessing what competitors charge allows you to benchmark your price andgives you a sense of the "market price." This analysis will show the generalconsumer's willingness to pay. Start by determining the prices of similarproducts. Then place the products along a range based on your perceptionof the quality of the product. For example, a range of toothbrush priceswould include the 99 cent version at the low end of the quality scale and asonic toothbrush at the high end of the quality scale with a number of



other toothbrushes in the middle. Place your own product along the rangegiven your perception of its quality and other attributes to get a sense ofhow you fit into the pricing landscape. This process should give you anidea of the price range for your product.

(You might end your pricing analysis after completing Steps 1 and 2. Afteryou decide where your product fits in its landscape, make sure that theprice covers your costs and then price accordingly. In some cases, this isadequate. However, a more sophisticated analysis will provide a greaterunderstanding of how your customers perceive the value of your product.For this reason, you should work through Step 3.)

Step 3. How much are customers willing to spend?Determining the price that customers are willing to pay requires testingthe different customer decision factors. For some products or somepeople, the decision may be based solely on price. However, most peopleweigh a number of factors to determine what to buy.

Conjoint Analysis is a process that helps you predict the price customersmight be willing to pay, based on the weight that customers place ondifferent decision factors associated with the product. To use this method,follow these steps:

1. Choose 6 - 8 competitive products that you think are most like your product.

2. List attributes that you think are important to the customer when purchasing or using this type of product.

3. Ask some potential customers to rate the products on these attributes and to rank the attributes in terms of importance in the decision to purchase.

4. Use a weighted average calculation to determine the price customers are willing to pay.

Review the example of Conjoint Analysis in Part IV of theToolkit.



So what price should you charge?If you have worked through all three steps, you should have a good senseof the price that you should charge based on your costs, the competitionand what customers are willing to pay. If you tested one specific product,you can use the customer knowledge to extrapolate pricing for otherproducts.

Ideally, your customers will be willing to pay more than the cost of yourproduct. If they are not willing to pay more than your cost, then you needto rethink your product.

• Is there a way to produce the product more efficiently?

• Is there a way to increase the value of the product in a customer'smind through marketing efforts?

� T H E R E V E N U E M O D E L

The market opportunity and the pricing analysis provide the backgroundand basis for the assumptions you make about the financial performanceof the business. The revenue model shows what you expect to makethrough the sales of your product or service.

It is hard to predict the future. As your business builds historical data anda deeper understanding of customer behavior, sales projections shouldbecome more accurate. It will always be difficult to estimate your salesvolume for years into the future. The point of projecting your sales is toshow how you intend to grow the business - at what rate and through whatmeans (increasing prices, increasing volume, increasing your margins,etc.). The reader will judge whether your projections are reasonable andrealistic for your particular business based on information providedthroughout the business plan. The reader will expect your estimates to beoptimistic rather than pessimistic.

To construct the revenue model, you will look at each product/service lineon a per unit basis. The three assumptions that you will begin with are:

Price - What will you charge for the product or service? What are the"units" associated with this price (e.g. single product, package of servicesor average product sales)?

Sales Volume - How many will you sell at that price?

Cost of Goods Sold - What is the unit cost for the business to provide thisproduct/service?

With these assumptions, you will calculate your revenues (price times salesvolume), gross profit (revenue minus cost of goods sold) and gross margin(gross profit divided by revenue).

1.

2.

3.



PriceThe rationale for the price you plan to charge should be developed in thepricing analysis section. This section explains why you will charge below,on par or above the prevailing market rates. This section should alsooutline what the prevailing market rates are and the trends/changes inrates over time (including forecast of prices if available). In developing thepricing assumptions, you will determine what you will charge for eachproduct line both in the present and over the next five years. You willneed to estimate the price increases that will be implemented over time.Information to assist you with estimating price increases might come fromtalking to your suppliers and vendors about their own estimates andassessing how prices have changed over the past few years.

� UNDERSTANDING RECYCLE-A-BICYCLE PRICING

Refurbished bikes are sold at approximately 50% of the market value of a similar, new bike.Because this is an on-going concern, they know that the average revenue from a bike sale is $125.In addition, Recycle-A-Bicycle assumes the same average price per bike over the next five years.The rationale for the constant price comes from both the market and the cost of goods. First, themarket for new bikes has generally flat pricing, therefore if Recycle-A-Bicycle maintains its pricingstrategy of charging approximately 50% of the market value of a new, comparable bike, it will notbe able to raise prices significantly. More important is that the cost of goods will not increasesignificantly and therefore Recycle-A-Bicycle does not need to raise prices to maintain its currentgross margins. The cost of goods will not rise because most of the parts used to refurbish the bikesare sourced from donated bikes, and labor to repair the bikes is generated through youthemployment, which tends to remain a steady wage over time.

Sales VolumeYour market analysis will be the main guide as you estimate the volume ofsales. It is best to break down sales volume to the smallest time unit that isfeasible to estimate. Very few businesses experience the same level of salesvolume from day to day or month to month. For example, many retailbusinesses experience most of their weekly sales on the weekends. Salesvolume is also often seasonal. For example, many retail stores experiencethe majority of their sales during the months leading up to Christmas. Onthe other hand, ice cream shop sales bottom out during the cold wintermonths.

The more detailed you are at tracking your sales, the better yourprojections will be in the future. Some retail operations will track salesvolume and projection by the hour. As a start-up, with no historical dataon which to base your projections, you might want to start at a moremacro level with monthly projections that estimate volume over the first 12months. Think about all of the factors that are likely to affect sales volumeeach month and estimate your volume with those factors in mind.

For Years 2 - 5, it is acceptable to determine a growth factor to apply toeach product line. You can base this factor on the level of marketing andbrand awareness that you will generate, predicted increases in market



demand, your competitive advantage and general industry growth trends.You may also calculate growth in reverse by determining the level of salesneeded to meet your financial goals and then determining if this isreasonable given your market opportunity.

� UNDERSTANDING RECYCLE-A-BICYCLE SALES VOLUME

Recycle-A-Bicycle projects its sales volume by the day of the week and the month of the year. On aweekly basis, bike sales tend to take place on the weekends. On a yearly basis, Recycle-A-Bicycledoes most of its business in the spring and summer. To account for the monthly seasonality,Recycle-A-Bicycle estimated the number of bikes sold each day in the highest volume months andthen applied a "seasonality factor" to other months of the year based on historical data. Forexample, Recycle-A-Bicycle estimates that in January, it will sell half as many (Seasonality factor of0.5) bikes as during a prime month such as April (Seasonality factor of 1.0).

M

1

1

2

$250

T

1

1

2

$250

W

1

1

2

$250

Th

2

1

3

$375

F

2

2

4

$500

Sa

3

2

5

$625

Su

-

-

-

-

Total

10

8

18

$2,250

WEEKLY BIKE SALES

Bike Sales - East Village

Bike Sales - DUMBO

Bike Sales - Total

Daily Bike Sales Revenue

JAN

0.5

20

16

36

FEB

0.4

16

13

29

MAR

0.5

20

16

36

APR

1.0

40

32

72

MAY

0.8

32

26

58

JUN

0.8

32

26

58

JUL

1.0

40

32

72

AUG

1.0

40

32

72

SEP

0.8

32

26

58

OCT

0.7

28

22

50

NOV

0.7

28

22

50

DEC

0.5

20

16

36

Total

0.7

348

278

626

ANNUAL BIKE SALES

Seasonality Factor

Expected Sales - EV

Expected Sales - DUMBO

Expected Sales - Total

Accessories ‘02 Sales

Parts ‘02 Sales

Service ‘02 Sales



Recycle-A-Bicycle has three other product lines: Parts, Service and Accessories. For projections ofAccessories, Recycle-A-Bicycle did not create a formal estimate for the volume of sales of each unitstocked, but rather assumes that accessories are generally sold at the time a bike is purchasedand therefore revenues from accessories are estimated as a percent (30%) of the total revenues ofbike sales.

Parts are pegged to Accessories, based on historical evidence of a correlation between sales of thetwo product lines. Finally, Service is pegged to Parts based on the idea that most customerslooking for parts will also purchase Repair Services to have the parts installed on the bikes.

JAN

1,350

2,363

1,231

FEB

1,080

1,890

985

MAR

1,350

2,363

1,231

APR

2,700

4,725

2,462

MAY

2,160

3,780

1,970

JUN

2,160

3,780

1,970

JUL

2,700

4,725

2,462

AUG

2,700

4,725

2,462

SEP

2,160

3,780

1,970

OCT

1,890

3,308

1,724

NOV

1,890

3,308

1,724

DEC

1,350

2,363

1,231

Total

23,490

41,108

21,421

OTHER PRODUCTS

Cost of Goods SoldThe Cost of Goods Sold (COGS) also known as the Cost of Goods,reflects the direct costs to the business to produce the amount ofproduct/service that you are selling. COGS is a specific accountingconvention that should reflect the costs that are directly associated with theitems that are projected to be sold. Other costs associated with thebusiness will be included in Fixed Costs. These include Selling, Generaland Administrative (SG&A) expenses. These Fixed Costs will includeitems such as salaried staff that work on the business, rent, utilities andmarketing activities. The Cost of Goods Sold is an expense related directlyto the revenues that you have earned during a particular time period.

There are two components to Cost of Goods: Direct Materials cost andDirect Labor cost.

Direct Materials:For retail businesses, direct materials cost is the cost of purchasing theinventory. For example, a museum store will source its products from anumber of vendors in order to fill the store with merchandise that isrelevant to the museum experience. The cost of purchasing each productfrom the vendor is the cost of the good.

For manufacturing businesses, direct materials refers to all materials thatcan be traced directly to a unit of output. For example, the directmaterials for a catering business include the cost of the food used to fulfillan order. The units of spices and other staple goods like butter, oil, etc.are also included in the cost.

$

$

$



Direct Labor:Direct labor is the time spent working specifically on the production ofthe product or service. For a retail business, labor costs are usuallyincluded as a fixed cost (unless the employee works on commission). For amanufacturing business, direct labor refers to the wages paid to lineworkers who are involved in the production. For a service business, directlabor usually refers to the wages paid to staff providing the service.

To estimate changes in the cost of goods sold over time, think aboutfactors affecting the cost of purchasing inventory and raw materials as wellas increases in wages that you will pay to direct laborers. Discussions withyour vendors and suppliers are a good way to get a sense of potentialincreases in direct materials.

� UNDERSTANDING RECYCLE-A-BICYCLE COST OF GOODS

The Recycle-A-Bicycle business model is set up to minimize the cost of goods sold. For bike sales,the direct materials cost is estimated to be 14% of the average price. This represents $15 - 20 forsupplies needed to refurbish the bikes (or $17.50 for an average bike price of $125).

All accessories are sold at a 100% mark-up on the direct materials cost except locks, which have a50% mark-up. Based on the historical ratio of sales of locks and other accessories, the averagemark-up for accessories is 60%.

Parts are gleaned from donated bikes and are removed by youth during the training program andtherefore do not have any direct materials costs associated with them.

Direct labor consists of the youth, mechanics and retail managers associated with the two shops. Aportion of the direct labor is subsidized through summer youth employment contracts with the cityand through free labor generated by the youth training program. One way that Recycle-A-Bicycleentices youth to volunteer their time is through the Earn-A-Bike program in which labor hourstranslate into credits toward a bicycle.



JAN

648

540

870

-

432

6,240

-

8,730

FEB

518

432

870

-

432

6,240

-

8,493

MAR

648

540

1,088

-

432

7,800

-

10,508

APR

1,296

1,080

1,088

-

432

7,800

-

11,696

MAY

1,037

864

1,088

-

432

7,800

-

11,221

JUN

1,037

864

1,088

-

432

7,800

-

11,221

JUL

1,296

1,080

1,088

-

432

7,800

-

11,696

AUG

1,296

1,080

1,088

-

432

7,800

-

11,696

SEP

1,037

864

1,088

-

432

7,800

-

11,221

OCT

907

756

1,088

-

432

7,800

-

10,983

NOV

907

756

870

-

432

6,240

-

9,206

DEC

648

540

870

T

-

432

6,240

-

8,730

COST OF SALES 2003

Repair Supplies

Accessories

PT Retail Mechanics

FT Storage Facility Mechanic

PS 218 Mechanic

Retail Mgr/Asst Mgr Labor

PT Van Driver

TOTAL

Use the Revenue Assumptions Template in the FinancialProjections Workbook to determine the revenue potential ofyour business based on your projections of price, salesvolume and cost of goods sold. Instructions for using theTemplate are provided in Part IV of the Toolkit.

$

$

$

$

$

$

$

$


pa r t i i : Operations

How does this thing work??

The Operations Section explains how you will make the business idea a reality and proves that youunderstand how the business will work from the inside (as compared to the market section whichshows how the business will work from the outside).

� O V E R V I E W

For a start-up business, this Section will demonstrate what you have inplace and how you will continue to build up the operations. For anexpanding business, this Section will show a plan for growth and stability.The Recycle-A-Bicycle example is a business in a growth and expansionmode. The following subsections should be included:

Legal structure/relationship of parent to businessThis can be brief or extensive depending on the complexity of therelationship and legal structure.

Description of operations and/or production processThis subsection shows what actually happens internally in order for thebusiness to operate. It also details the fixed costs associated with yourbusiness.

StaffingThe staffing subsection lays out your staffing plan and gives a rationale forhow these staff will be used. To make your staffing plan, you will need toassess the capacity of your operations and determine the number of staffneeded to meet your revenue projections. A staffing plan template isprovided to help you determine your staffing costs.

Marketing planThe Marketing plan describes the promotional strategies to be used tolaunch or grow the business. This is a particularly important section ofyour business plan.

Implementation plan and timelineThis subsection shows the reality of putting your plan in motion andincludes a budget for start-up costs.

Operations

1.

2.

3.

4.

5.



� R E L A T I O N S H I P T O P A R E N T O R G A N I Z A T I O N

Here, you need to explain the legal structure of the business and why this structure is appropriatefor your business.

Please consult a legal advisor to determine the best legal structure for yourparticular business. In New York City, the Lawyer's Alliance for New Yorkoffers a workshop entitled "Business Ventures for Nonprofits" thatprovides introductory information on the ways to structure your business.Other nonprofit lawyer groups in other cities may offer similar services.

There are three basic structures for your business:

1. Operate as a program of the parent nonprofit

2. Establish a subsidiary nonprofit entity

3. Establish a separate for-profit entity (LLC or corporation)

Additional structures that you might consider are joint ventures and or acombination of nonprofit and for-profit entities. There are advantagesand disadvantages to each structure and your legal advisor will guide you.Think through the following issues as a starting point in determining whatis best for your business:

• Control: Who will have day-to-day control of the business?

• Is the parent organization comfortable with establishing a separateentity, especially a for-profit entity?

• Liability: Does the parent nonprofit need to be shielded frompotential debt or lawsuits that may result from the business activities?

• Will the business generate substantial income and potentially jeopardize the parent's nonprofit status?

• How will the legal structure affect your brand image?

• What is your timeline for establishing the business?

• Where do you plan to look for start-up and on-going capital?



� RECYCLE-A-BICYCLE RELATIONSHIP TO PARENT

Recycle-A-Bicycle is an example of an organization in which the business operations are seamlesslyintegrated into the parent nonprofit. Recycle-A-Bicycle began in 1994 as a project ofTransportation Alternatives and grew through partnerships with the Children's Aid Society and theHenry Street Settlement. Through support from Henry Street, Recycle-A-Bicycle created a retailbusiness that soon became an integral part of the program. In 2002, Recycle-A-Bicycle received itsown nonprofit status. Recycle-A-Bicycle continues to thrive due to its strong partnerships. Becausethere is not a formal parent-business relationship, Recycle-A-Bicycle included the details of itsorganizational history in an appendix, under the title: History and Milestones.

� O P E R AT I O N S A N D / O R P R O D U C T I O N P R O C E S S

This subsection outlines the key factors involved in creating your productor service. It should include an overview showing how the business worksand the key success factors. In addition, this subsection should introducethe Fixed Costs associated with the business.

Operations Processes

You will describe how your business works from an internal perspective.In planning your operations, you need to determine your capacity -- themaximum amount of product or service that can be created, produced andsold in a given period of time. After you know your capacity, you canconduct a reality check on your sales forecasts to be sure that you are ableto make, produce or service the sales volume predicted. If you do not havethe capacity, you will need to determine how to meet your demand. Onecommon technique is outsourcing.

Manufacturing/Production CompaniesIf you are producing or manufacturing a product, describe the processthat turns raw materials into the final products including the equipmentand labor that are needed. Discuss the challenges you face and the capacityof your production facility. For manufacturing and productionbusinesses, capacity is the number of widgets that can be produced eachday (or week). For example, Recycle-A-Bicycle refurbishes 15 - 20 bikesper week. Their capacity is set by the number of work stations in the twostores, the number of youth involved in the program, the hours that thestores are open, availability of used parts, the storage space for bikesbefore being refurbished and the retail sales space. You may also want toinclude a description of a system for quality control. Consider this Lessonfrom the Field.



The Food Project, a youth-serving organization that grows itsown organic vegetables and then sells them at a farmer'smarket decided to expand its business by offering a line of“Fresh Salsa.” The youth are involved in every aspect of thisbusiness venture - they developed the recipe for the salsa anddid initial market research. The salsa is a seasonal productand is marketed toward higher end grocery stores andgourmet shops. While marketing and distribution seem to bea major component of their success, business operations haveactually proven to be the critical success factor for theventure.

The salsa operations begin with the production of the organictomatoes. As the product became popular, the organizationcould not grow enough tomatoes to meet the demand and hadto purchase from tomato suppliers to supplement their owncrops. This meant that the cost to make the salsa was higherthan projected.

In terms of labor, the youth worked in a small kitchen andoriginally followed a recipe that was time and laborintensive. Again, as the salsa became popular, the youth hada difficult time meeting the demand due to the timerequired for each batch. By analyzing their process, theydeveloped a streamlined production schedule where theycould make 18 units per hour.

The “Fresh Salsa” venture is at a crossroads: the organizationmay consider outsourcing production to a nearby plant tohave the salsa bottled. Quality of product and involvement ofthe youth may be compromised, however. Through theseexperiences, the organization now plans to have a morethoughtful Operations Plan in place to meet demand in thesecond season.

Retail BusinessesIf you are opening a retail outlet, you should outline the hours ofoperation, the inventory system and merchandising plan as well as thelayout of the store. Detail the furniture and fixtures that you have in placeand explain what you still need. Describe your retail strategy with regard toinventory rotation and markdowns, if this was not included in thebusiness model/pricing sections.

A critical factor in effectively managing a retail business is supply chainmanagement. A company's supply chain is the process by which it acquiresthe goods that it resells to customers; it starts from the basic raw materials,covers the manufacturing, warehousing and transportation stages, andends inside the retail store where the product is ultimately sold to the



consumer. Supply chain management refers to the process of limiting thecosts associated with each step in the chain. These costs can be controlledby strategies such as bulk purchasing, developing strong supplierrelationships, as well as minimizing the time that inventory sits on theshelves (or maximizing inventory turn). These initiatives help lower bothyour costs and your funding needs, and therefore increase profitabilityand financial independence.

Service BusinessesIf you are operating a service business, describe the people, materials andprocesses involved in delivering the service. Outline the steps involved inthe service process and your systems for customer service, managementand quality control. These should include specific measurable targets sothat management can track them. An example would be: 98% of allcustomers should be served within 10 minutes of calling us and with noerrors in processing their requests.

A key factor to control in a service business is capacity. If you have excesscapacity (too many people providing services), you will erode your profitmargins because your employees are not generating adequate revenue. Ifyou have too little capacity, you risk losing customers due to long waitingtimes or a decline in the quality of services provided. Therefore, capacityplanning involves a delicate balance between having too many or notenough employees. One way to approach this problem would be to buildcapacity slightly higher than a conservative sales estimate, thereby leavingsome cushion for excess demand during peak periods.

Supplier and Vendor RelationshipsIn addition to explaining the processes involved in your business, you alsoshould describe your relationships with suppliers and vendors. Havingstrong relationships with suppliers or vendors can mitigate some of thebusiness risks and create economic benefits to your business. In addition,your ability to operate the business is dependent on your ability to sourcematerials you need, when you need them and at affordable prices. Forexample, a strong supplier relationship will allow you to negotiate thepayment terms that work with your cash flow needs. Other benefits mightinclude guaranteed delivery or the ability to return damaged merchandiseor materials that you do not need.

Fixed Cost Assumptions

Thinking through the operations of your business will lead you to examinethe Fixed Costs. In the upcoming subsection of your Operations Plan, youwill develop projections for staffing expenses and marketing costs. At thistime, you should begin to think about all other costs such as facilitiesexpenses (rent, utilities, equipment), administrative expenses (insurance,payroll, office supplies), travel/conference expenses, training or otherprogram-related expenses.



Facilities

Rent/Mortgage

Utilities

Furniture/Fixtures

Equipment repair

Administrative

Personnel

Insurance

Overhead chargefrom parent

Office supplies

Legal fees

Program-Related

Program-Related Training curriculum

Job development orcoaching

Training stipends

Complete the Fixed Costs Template in the FinancialProjections Workbook. A list of possible expenses is includedin the template, but this list should be modified to fit yourbusiness.


This chart is meant to provide suggestions to create or revise your LogicModel and Action Plan.

52

Inputs

Activities

Suppliers and vendors might be key inputs foryour social purpose business.

The processes that your business goes through tocreate or add value to merchandise might beimportant activities to include. This might leadto another activity such as sales.

As a start-up or growth business, you may find it useful touse an Action Plan to lay out the activities of the day-to-day operations.

Examples of Fixed Costs include:



The Recycle-A-Bicycle Operation Section describes the process of "re-manufacturing" a bike. This explains the current operation and describesthe way that the business sources the used bicycles. The remaining part ofthe production section describes the process for expanding and improvingproduction in order to meet greater supply and demand. An excerpt fromthe re-manufacturing explanation follows:

� RECYCLE-A-BICYCLE OPERATIONS AND PRODUCTION

"RE-MANUFACTURING" THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE

Materials DonationRAB promotes reuse and recycling of bicycles. Over 1,000 used bicycles are collected annually.Eighty percent (80%) of donations come from bike shops and apartment building superintendents,with the remainder collected from individuals and corporate donors. Bike shops and apartmentbuildings are the most prevalent source because bikes are often abandoned at these locations.Donation saves the cost of disposal and provides a tax deduction. Additionally, individuals who wantto support Recycle-A-Bicycle's mission bring in bikes, parts and accessories. There are also severalreputable volunteers who collect bikes in their neighborhood on garbage night and deliver them toRAB's facilities. Finally, corporations organize employee collections and one bike manufacturer,Fuji, donates surplus inventory to the project. The organization will collect twice the number ofbicycles when greater storage, production and transportation capacities are available.

De-manufacturing process/re-manufacturing processThe Youth Classroom Training Program curriculum was developed to teach bicycle mechanics skillsthrough the disassembly and reassembly of key mechanical components. The first stage of theyouth training program involves de-manufacturing damaged bicycles. Upon arrival, bicycles areassigned a number in chronological order of receipt and then logged into the inventory. All framedamaged bikes and very rusty bikes are slated for immediate de-manufacturing. The componentparts are cleaned and inventoried for use in repairing other bicycles or for sale to consumers.Approximately 20% of the bicycles are de-manufactured.

The remaining bikes are assessed for type, quality and amount of repair time necessary torefurbish. Bikes that have the highest market value, that are in high demand (3 speeds andmountain bikes), and that are quickest to repair are worked on first. In addition, some customersput a down payment on a recent arrival and return to buy it fully repaired. These "pre-ordered"bikes also receive priority in terms of the order in which bikes are refurbished. On average, arefurbished bike requires six hours of labor.



� S T A F F I N G

This is a critical element of a successful business and should demonstrate the "people power"required for your venture. The staffing template provided will assist you in determining thestaffing costs associated with the business.

Staffing Plan

When planning your business, remember that you cannot do everythingyourself. You will need staff to operate, serve, produce or sell productsand services. Staffing costs are one of the largest expenses for businesses.Developing a staffing plan requires an honest and thorough appraisal ofwhat skills and experience are needed, when they are needed, and howmuch you are willing or required to pay to acquire staff with the rightskills and experience. In addition, you need to assess how you will use yourclients, the skills that they bring and any additional staffing needed fortraining and supervision.

Your staffing plan should outline the various job positions and include adescription of the roles and responsibilities for each position. It shouldalso explain what staff are currently employed and what positions will beadded in the future. In addition, the staffing plan should show how youplan to increase staff as your business grows over the next five years.Include an organizational chart to show the relationships between all thestaff members.

When developing your staffing plan, consider the following:

• Do you have a balance of skills to complement both the financial and social goals of the business?

• Do you have enough staff to meet the revenue projections that you have developed (e.g. are there enough staff to keep your retail store open 60 - 70 hours each week)?

• Does the staffing plan match your operational needs?

• What skills are needed for each position?

• Can your client population fill these staffing needs?

• Are some positions meant to provide transitional employment to your client population? If so, what level of turnover do you anticipate and how will this affect your staffing, management and training expenses?

• How flexible is your staffing plan if the business takes off either more quickly or more slowly than projected?



Complete the Staffing Plan Template in the FinancialProjection Workbook. Instructions for completing theTemplate can be found in Part IV of the Toolkit.


This chart is meant to provide suggestions to create or revise your Logic Model.

Inputs

Activities

Your staff are valuable inputs for the business.

Similar to the Social Component part of theBusiness Model Section, your activities mightinclude training or providing supportive servicesto staff. Or, if you need to hire a significantnumber of workers, then recruiting and hiringstaff may even be an activity.

� RECYCLE-A-BICYCLE HUMAN RESOURCES PLAN

Human ResourcesRecycle-A-Bicycle currently supports eight staff positions. Five positions are filled by bicyclemechanics who hold positions of store managers and head mechanics at its two retail stores. Thebusiness manager is the executive director, Karen Overton, who manages the triple bottom line.Adding staff to the team to diversify the skill sets and reduce the burden on the business manageris a strategic goal for the organization.

The store managers understand and are able to deliver on the retail aspects of Recycle-A-Bicycleoperations. Though the managers have been working as a team for only a short time, they havedemonstrated strong potential. Because of their trade and industry expertise, the teamunderstands the social mission and how to integrate youth and learning into their operations. Retailand program management are adequately served by the team.

Recycle-A-Bicycle relies heavily on volunteer labor to achieve several aspects of its corporateactivities such as tutoring youth, website development and maintenance, and fundraising. Thoughthere are a handful of motivated, talented individuals who donate their time, this labor pool isunpredictable and does not provide a stable source of labor.



� M A R K E T I N G P L A N

Creating your product and identifying that a market exists are only halfthe battle. Now you must convince customers to purchase your product.To do this, you will need a marketing plan.

What is Marketing?

"Marketing means solving customers' problems profitably." Marketing is aprocess of determining what those problems (needs) are and thendesigning your product, price, distribution and promotions to solve thoseproblems.

What Does Effective Marketing Accomplish?

It is important to begin thinking about marketing at an early stage in thebusiness planning process. Effective marketing will help your businessachieve its objectives because it:

• Generates sales, utilization and public support for an organization.

• Represents the organization to its various publics - consumers, government agencies and the press.

Formulating Your Marketing Plan

You will need to consider the following elements in developing yourmarketing plan. They will also enable you to estimate marketing costs foryour start-up budget. Much of the information needed to develop thisplan is contained in other parts of the business plan.

Situation AnalysisThis will include a summary of the internal strengths and weaknesses ofyour social purpose business and the external factors that may affect it.Also include the results of any research you have done.

The Marketing MixThese are commonly referred to as the "Four P's": Product, Price,Promotion and Place. The Four P's are dynamic and interconnected andwill change throughout the life of your business to meet the changingneeds of your customers.

Product: This is the product or service that you are selling. You havealready described the characteristics in the Business Model Section. Now,you need to think about what is unique or different about the benefits thatyour product or service provides. This niche or uniqueness willdistinguish you from your competitors and will help sell yourproduct/service. Over the life of your business, you may need to rethinkyour product or service so that it better fulfills the specific needs of targetcustomers.

1.

2.



Price: Price is based on your costs, the demand for your product orservice and what the competition charges for similar products or services.Again, refer back to the Business Model Section for an in-depthdescription of how to price your product. It is important to rememberthat price is adjustable.

Place (of distribution): Place refers to where you are going to sell orprovide your product or service, how you are going to get it there and howmuch it will cost for this distribution. Place can also refer to where andhow your product or service is accessed by your target customers. Is yourlocation convenient, safe and easy to reach? Do your hours of operationfit the times that your target customers are available? Place may have beenincluded in your Business Model and Operations Sections.

Promotion: Promotion involves developing communications to convincepotential customers to buy the product or use the service.

Use the P-Flow Worksheet in Part IV of the Toolkit to thinkthrough and refine your "Four P's." As you fill in the chart,consider the extent to which one element makes sense interms of the others.

TargetingIn order to make decisions about what combination of product, price,place and promotion to employ, you will need to have a thoroughunderstanding of:

• The characteristics of your potential customers

• The specific needs the potential user of your product or service

• The ways they access information

• How they decide which product or service to use

PositioningPositioning begins with determining what you want your target customersto think about you. (A positioning statement is not a mission or visionstatement - which is what you want your business to achieve or become.)

3.

4.



A Positioning Statement has a formal structure:

[Product] is the brand of [Category] which to [Target] delivers [Unique Product Benefit]

Product = what you are selling

Category = the business you are in

Target = your target customer

Unique Product Benefit = why your target market will want your product

Positioning Statements

To determine your category, think about what business youare in. You may need to "unpack" your business model andconsider the purpose of your business and the type ofproduct or service that you offer.

Determining your unique benefit comes fromunderstanding your customers and what they are looking forin your product/service. For social purpose businesses, thismay or may not involve including the emotional value ofyour social mission.

Helpful Hints

Positioning Statement Examples:Recycle-A-Bicycle is the brand of Used Bicycle Retail Stores, which toNew York City cyclists delivers bikes that help create a better world.

Victim Service Hotline is the brand of telephone consultation, which tovictims of violent crime provides immediate, concrete, confidentialsupport from professional counselors.

Complete the Positioning Statement Worksheet in Part IV ofthe Toolkit. Play around with the target customer, categoryand unique product benefit to find the statement that trulycaptures what you want your customers to think about you.



Setting your Marketing GoalsYou are now in a position to set your marketing goals/objectives. Thesewill be the highest-level statement of your goals. Be sure to consider thesales and revenue targets you projected. Marketing goals should havequantifiable results that can be used to determine the success of themarketing campaign.

Determining your Marketing StrategyOnce your marketing goals are set, you will need to determine yourmarketing strategies - or the broad logic of actions you will take to achieveyour goals. Basically, there are four kinds of strategies you will want toconsider. Do you want to:

• Create Awareness - or educate your customers about the attributes and benefits of your product or service? Think about how you might use Promotion and Place to create awareness.

• Generate Trial - or convince new customers to try your product or service? Think about how Promotion, Place and Price all have a role in generating trial.

• Build Preference - or convince customers that your product or service is better than the competition? Think about how you might need to utilize all 4 Ps - Product, Promotion, Place and Price - to build preference.

• Generate Repeat - or retain existing customers? Think about why Promotion and Price might be the best tactics to use for generating repeat sales or usage.

Deciding on the Tactics You Will UseTactics are the specific activities that you will use to achieve your marketingstrategy/ies. Although you may decide to manipulate any one of the four"P’s" in a tactical way, generally most of your activities will be focused onPromotion. In selecting promotional tactics, think about the following:

Advertising: Specific tactics include newspapers, magazines, TV, radio andoutdoor signage.

• Benefits: Reaches large groups.• Drawbacks: Expensive. You may reach a far broader audience than

your specific target.

Personal selling: Specific tactics include face-to-face meetings withindividual customers in a personalized setting.

• Benefits: Most powerful promotion technique --it is much harder to dismiss a sales rep than it is to ignore a newspaper ad.

• Drawbacks: Expensive and time consuming.

5.

6.

7.



Publicity: Specific tactics include news releases and feature stories.• Benefits: Credible and free.• Drawbacks: You can lose control of the message and it is very labor

intensive.

Public Relations: Specific tactics include lobbying, parades, pressconferences.

• Benefits: Reaches large groups of people.• Drawbacks: Does not usually generate sales.

Sales Promotions: Specific tactics include trial packages and premiums. • Benefits: It is non-recurring. Supplements both advertising and

personal selling.• Drawbacks: Ineffective on its own.

The Marketing Plan

Now that you have formulated the elements, you are ready to write yourMarketing Plan. The Marketing Plan lays out your marketing goals andexplains how you will meet these goals. The sections of a Marketing Plan are:

1. Situation Analysis - Brief analysis of the External Environment and your internal strengths and weaknesses.

2. Description of the Target Market.

3. Positioning Statement.

4. Marketing Goals/Objectives - should be consistent with your business goals.

5. The Strategies you will use to achieve those goals.

6. Implementation.• Tactics• Action Plan• Budget

Marketing Plan Outline for Recycle-A-BicycleObjectives: Highest-level statement of company goals.

• Example: Sell 50 bikes per week from April to September out of two retail stores.

Strategies: Broad logic of actions taken to achieve objectives.• Example 1: Increase awareness of RAB among college students by

50%.• Example 2: Increase flow of used bikes for repair by 4 units per

week.



Tactics: How will the strategies be executed? (Related to example 1)• Example: Set up tables to distribute literature on-campus (6

tables).• Example: Place advertisements in student publications (10

ads).• Example: Create links to RAB website (100 new links).• Example: Utilize current volunteers to increase word-of-

mouth.

Budget: How much will it cost to implement these strategies?• Example: On-campus tables: $200 per table• Example: Advertisements: $50 per ad• Example: Links to website: $1000 to hire sales intern


This chart is meant to provide suggestions to create or revise your Logic Model andAction Plan.

Inputs

Activities

Outputs

Outcomes

If your business is armed with a Marketing Plan, thismight be included as an input.

If you are in the process of developing that plan, thenthe development is an activity that will lead to theoutput of a Marketing Plan that will later become aninput for the business. Implementation of theMarketing Plan is another activity that might besignificant to include.

If the activity is developing a plan, then you will havea plan as an output. However, if your plan is toimplement, you will have ads placed or presentationsmade or other outputs related to your tactics.

The marketing outcomes are the goals you haveoutlined in your plan (e.g. raise brand awareness orincrease sales)

Implementation of a Marketing Plan requires coordination of bothtime and resources for creating materials and making sales calls.Action Planning can help you organize who is responsible for eachitem on the plan and allow you to track the success of your efforts.



� RECYCLE-A-BICYCLE MARKETING PLAN

When the production and training facility is in operation, additional marketing will be needed toincrease the supply of donated bikes and create demand among customers. New staff andvolunteers will be recruited with this task in mind, so that a concerted effort can be placed inmarketing the organization and merchandising and sales within the stores. While the productioncenter is in development, a formal sales and marketing plan will also be developed. Within thisplan, new product offerings will be considered that will increase the stores' revenues andprofitability.

Recycle-A-Bicycle can market its social and environmental missions much more aggressively withinthe stores and their trade areas. A campaign will be developed that highlights these two areas. Thiswill include print media, an enhanced website, and a video that can be played in each store toassist consumers in immediately understanding why Recycle-A-Bicycle is the best place topurchase a used bicycle. In addition, Recycle-A-Bicycle will create and install much needed signageat the DUMBO store.

Recycle-A-Bicycle will also investigate selling used parts on the internet. Two strategies will beexplored: using E-Bay as a mechanism for sales or tapping into the Bicycle Trader website thatspecializes in the sale of second-hand bicycles, parts and accessories.

Strategy: Recycle-A-Bicycle will create an aggressive marketing campaign, makeimprovements to point-of-sale merchandising in the stores, develop and implementa customer service training program, add new accessory lines to both operationsand improve the website to better facilitate e-business.


pa r t i i : Management and Stakeholders

The Buck Stops Here.

The Management and Stakeholders Section should explain who will lead the business venture andensure its success. The Section highlights the management strengths and shows that you recognizewhere gaps exist and how to fill them. As you are writing this section, ask yourself "If I was aninvestor, would I trust this team with my money?"

� O V E R V I E W

Your management team is one of the most important elements of yourbusiness. Your team will be the force behind both selling the business ideato other stakeholders and executing the plan. For-profit and nonprofitinvestors will look at this team for proof of experience, leadership andvision. If the business idea needs to be revised or even completelychanged, investors and stakeholders want to know that there is a team thatis experienced and capable of "making things happen."

The Management Section should include:

Introduction to the team including description of relevant experiencesand explanation of team's experience working together

Explanation of key management team positions and bios for positionsthat are filled

Description of positions to be filled and skill sets sought for each position

� I N T R O D U C T I O N T O T H E T E A M

In constructing this section of the plan, it is useful to describe the years ofrelevant experience across management team members. For example,Recycle-A-Bicycle opens this section with:

In addition, include brief information about your Board of Directors,Advisory Board or others who will have a direct influence on the success ofthe business. These groups often provide significant business experiencethat may be lacking in your management team. Recycle-A-Bicycle relieson their Board of Directors for assistance in business developmentactivities. Recycle-A-Bicycle writes:

Management and Stakeholders

1.

2.

3.

Recycle-A-Bicycle's management has over 10 years of experience in bicycling retailing, 13years in transportation advocacy, and over 7 years experience in youth education. The teamhas proven its ability over the years and is continuing to develop new strengths.



� M A N A G E M E N T T E A M B I O S

The social purpose business will need a manager who has the skills topursue both the social and financial goals. To do this, your businessmanager will need to have a unique set of skills, including:

• Industry expertise

• Entrepreneurial experience

• Enthusiasm and understanding of the social component

• Financial management capabilities

• Understanding of or interest in the nonprofit sector

• Knowledge of or familiarity with managing the double bottom line

• Sales and marketing background

• Operational experience

An optional way to structure the business management is to have twomanagers with different responsibilities. One business manager could beresponsible for meeting the financial goals of the business and handlingthe day-to-day operations. The other could be a social manager whoensures that the business maintains its focus on mission.

The heart of the Management Section includes brief bios on the key teammembers. These bios highlight the work experience that is most relevantto the business activities. Taken together, the team should showcompetence in the skills required to operate your particular business. Inaddition, as a social purpose business, it is important to highlightexperience working with the target population and in the nonprofitservices field. Finally, this section should prove the commitment of teammembers to this enterprise.

Recycle-A-Bicycle has a somewhat flat organizational structure andtherefore included a large number of staff members who may not betypical "management team" level. However, by including these staffmembers, Recycle-A-Bicycle was able to tell the story of how manyprogram participants have become full-time employees while alsopursuing other interests or additional education.

Board of Directors membership complements the skills presented by the management team. Nearly allDirectors volunteer in capacities beyond their Board role. The Board consists of dedicated individuals withexperience in: education, financial management and analysis, social work and transportation advocacy.Each Member brings enthusiasm, their unique skill perspectives, as well as a broad network of contacts tothe Board and the entire organization.


pa r t i i : Management and Stakeholders

� RECYCLE-A-BICYCLE MANAGEMENT BIOS

Karen Overton Executive Director, Recycle-A-Bicycle, Inc.Ms. Overton was the founder of Recycle-A-Bicycle when it began as the environmental educationinitiative for Transportation Alternatives in 1994. Prior to that, Ms. Overton worked as Bikes forAfrica Director for the Institute for Transportation and Development Policy and as a consultant forthe World Bank, in the International Development Bank, African American Institute, and Pedals forProgress. In 1998, Ms. Overton incorporated Recycle-A-Bicycle.

Through her various positions, Ms. Overton has developed skills in the areas of projectmanagement (design, implementation and evaluation); research (data collection, analysis andpublication); writing (Ms. Overton has authored several cycling manuals, magazine articles, andpublicity pieces); training (design and implementation of training programs for youth and transportplanners/economists); and public speaking at several alternative transportation symposia. Ms.Overton cycles year round.

Ms. Overton has a Masters Degree in Urban and Regional Planning from the State University of NewYork-Albany, and is recognized as an expert in the field of alternative transportation planning.

Jared Bunde Manager, DUMBO Shop Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as amessenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as abike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. Hisracing career has excelled, winning silver medals for the NY State Track Cycling Championship in2000 and 2002.

Mr. Bunde brings with him an interest in the arts and the environment. He has taken photographycourses, permaculture and ecological design courses, and completed the Foundation Program atthe Parsons School of Design.

During his tenure with Recycle-A-Bicycle, Mr. Bunde has increased the shop's productivity andprofitability. Through his efforts, the shop experienced an overall increase of $20,000 in revenue in2002.



� M A NAG E M E N T T E A M P O S I T I O N S TO B E F I L L E D

As the management team is assembled, you should note areas where skillsare still lacking. For example, your business manager may possess a wealthof industry knowledge and operational capacity but be lacking in financialmanagement skills. In this case, you will want to be sure to hire a strong,experienced financial officer or to identify a Board Member or volunteerwho has the time and dedication to fill this need.

As a start-up or growing business, you may not have all of your keymanagement positions filled. It is important to show what types ofindividuals you are looking for and how those people will be integratedinto the organization. This is not a flaw in your business planning, butrather demonstrates that you have planned for the appropriatemanagement.


This chart is meant to provide suggestions to create or revise your Logic Model andAction Plan.

66

Inputs

Activities

Management and stakeholders are a critical inputfor your business and programmatic activities.

Recruiting Board or key team managementmembers may be an activity.

If skills or training is needed for managers, you shouldinclude these activities in your Action Plan to show theimportance of professional development for your managers.


pa r t i i : Social Outcomes

The Business of Achieving Your Mission.

The Social Outcomes Section details how the business will help the organization meet its mission andprojects the extent of that impact. The Section will describe what you want to achieve and why youbelieve these outcomes will be achieved. The Social Outcomes Section complements the FinancialSection, where you will project the financial outlook. At this point, you should pull out your LogicModel and Action Plan to use as you think through your social outcomes.

� O V E R V I E W

Social outcomes are the change or benefit to society achieved from thesocial purpose business. Generally in the outcomes-measurement field,outcomes are client focused. However, in the context of a social purposebusiness, the concept of outcomes measurement has been expanded toinclude programmatic or organizational outcomes. Social outcomesshould be quantifiable, and are measured against a target, and thenevaluated over time to determine if the goal was met.

Nonprofit organizations are often asked by funders, boards and otherstakeholders to quantify their achievements. The same holds true forsocial purpose businesses. Investors are interested in the double bottomline. Thus, performance is not solely evaluated on financial performancebut also on the social outcomes that have been achieved. The SocialOutcomes Section describes your social outcomes goals and your system toevaluate performance.

Outcomes Measurement and the Social Purpose Business Plan

Nonprofits are generally skilled in setting goals, usually articulated in amission statement. Think of your own organization's mission - it is likelyto be representative of the philosophy that guides your organization'swork. Your organization may be skilled in measuring staff performance;for instance, your fundraising department is likely evaluated on numberof dollars raised. However, assessing the performance of your programsusually proves to be more vexing.

Does your organization currently track and measure the outcomes of itsprograms? Do these outcomes inform management decisions in terms ofevaluation of staff and program performance? Even if you have systems inplace, as many nonprofits do, translating them to the social purposebusiness arena is an added challenge. This is where Seedco's PerformanceMeasurement & ManagementSM (PM&MSM) comes in.

The Social Outcomes Section of the business plan uses PM&M to explainthe outcomes of the business and then helps business managers achieve

Social Outcomes



those outcomes by developing measurements and indicators to assessprogress. This methodical approach to management can have a profoundimpact not only on achieving the goals of the social purpose business, butalso throughout the parent nonprofit organization.

The social outcomes section should include:

Background Information• Origin of the social purpose business project and organizational

information.

• Description of relevant programs and services such as training programs and job coaching that will be will utilized by or provide support for the business.

• Explanation of how the business furthers the mission of the organization.

Implementation and Evaluation Strategy • PM&M Logic Model (introduced in Part I: Getting Started).

• Narrative description of outcomes.

• 5-year projection of targets for achieving outcomes.

• Management reports/charts.

• Mitigation strategies if targets are not met.

� IMPLEMENTATION AND EVALUATION STRATEGY

The implementation and evaluation strategy is the more difficult piece ofthe Social Outcomes Section. We suggest utilizing PM&M as a frameworkfor this part of the section. The remainder of this chapter of the Toolkitwill walk you through this framework.

As described in Part 1: Getting Started, PM&M is designed to helporganizations plan, measure, improve, and be accountable for theoperational activities of the business and particularly for the socialoutcomes that the business seeks to achieve. For a social purpose business,PM&M helps managers articulate outcomes, collect data about theseoutcomes, and then use the data to make and implement informeddecisions.

1.

2.



PM&M can help you create management reports that can be used for avariety of purposes:

• Monitor progress toward achieving desired social outcomes.

• Guide planning for new or expanded programs or ventures.

• Improve performance by identifying challenges.

• Create and implement incentive systems based on performance indicators.

• Evaluate "return on investment" in terms of social goals.

In Part 1: Getting Started, you were introduced to two essentialcomponents of PM&M - the Logic Model and the Action Plan. Using theLogic Model as a starting point, this Section will assist users in articulatingsocial outcomes in the context of the social purpose business plan. It willprovide examples of how to quantify social outcomes and will includeworksheets on developing indicators and creating a data collection systemfor measuring the achievement of those outcomes. Specifically, thissection will delve more deeply into PM&M to focus on the following:

• Gathering Evidence and Data Collection. This is the "measurement" piece of PM&M and involves developing indicators, setting targets and then gathering evidence to track the indicators.

• Outcome-Driven Management. Using PM&M to manage the business is the most complex aspect of the process. Here, severaltechniques and tools are presented to ensure that outcomes trackingis an integral part of the day-to-day operations of the social purpose business.

Gathering Evidence and Data Collection: Measurement

While many organizations already conduct outcomes measurement,PM&M's 5-step approach is a proven roadmap for how to incorporatemeasurement into the management of the business. It is one approach,and should be viewed in light of what is already taking place at yourorganization.

Steps for Measuring Social Outcomes:

1. Review Outcomes to be Measured2. Describe the Outcomes 3. Develop Indicators to Measure Outcomes4. Set Targets and Establish Assumptions to Quantify Outcomes5. Collect Data



Step One: Review Outcomes to Be MeasuredOn your Logic Model, you identified the initial, intermediate and long-term outcomes that you hoped to achieve. Review your Logic Model anddetermine if there are any outcomes that have not been captured. Add orremove outcomes to create an accurate representation of the scope of thebusiness.

Once all of your outcomes are captured, you will work through the nextfour steps to create a plan for collecting data and track your progress onthese outcomes. Theoretically, you should track all of your outcomes -initial, interim and long term. However, it is sometimes not possible tocollect data on certain outcomes because the process of collection becomestoo costly. For example, data collection may require surveying largepopulations or an investment in infrastructure. At this point, plan totrack all of your outcomes. In Step Three, you will develop and test"indicators" to determine if data collection is feasible.

Step Two: Describe the OutcomesIn this step, you will describe the outcomes that you seek to achieve. Thisforces you to think how you would observe the achievement of eachoutcome. In other words, what happens if the outcome is achieved? Anoutcome such as "youth possess soft skills" may mean to one organizationthat youth show up for work on time and are able to interact withsupervisors and co-workers. However, to another organization, "youthpossess soft skills" may mean that the youth have developed anappreciation for customer service. In fact, describing the outcome canalso help to clarify its meaning among your own staff.

Example Outcome Description

Outcome: Students gain skills in bicycle repair and customer service

Descriptions: For Recycle-a-Bicycle, this may mean the following: • Youth know how to assess and execute basic bike repair.

• Youth have increased comfort level with customer interaction related to bike repair.

Step Three: Develop IndicatorsDeveloping indicators, or measures, is key to the entire process ofoutcomes measurement. Indicators are how you will determine whetherthe outcomes have been achieved. Use the descriptions of your outcomesfrom Step Two, to help develop your indicators. Start by brainstorming allpossible indicators for an outcome. You will then assess the indicatorsusing the "quick test" to see if they are both useful and practical.



Assessing Indicators: Quick TestSome of the indicators that you develop may ultimately prove to be toodifficult to measure or not particularly relevant to the outcome you wantto measure. You may need to be creative to come up with ways to measureyour outcomes. It is up to you and your organization to determine if thecost of collecting the data is worth the benefit of being able to track thatparticular outcome. To help determine if the indicator is feasible, askyourself the following:

• Is it useful? Does it act as a marker for progress? Does it contribute information for decision-making? Does it truly measure the outcome you want to achieve?

• Is it practical? Is the cost of collecting data for this indicator justified by the benefit of having and using the data?

OUTCOME

Youth gain skills inbicycle repair andcustomer service.

Youth transitionsuccessfully topermanentemployment.

OUTCOME

DESCRIPTION INWORDS

Youth are able tomake basic bikerepairs and youthare comfortablewith sales andother interactionswith customers.

Youth stay in anew job for a givenperiod of time andearn a living wage.

INDICATOR

Number/percent ofstudents leavingthe Recycle-A-Bicycle trainingprogram for full-time employment.

Retention rateafter one year ofemployment in anew job.

USEFUL?

Yes. This indicatorshows the successof the trainingprogram in helpingyouth develop softskills and gainvaluable workexperience towardlong-term success.

Yes. This indicatorbuilds credibilityfor the program.

PRACTICAL?

Yes. This indicatorbuilds credibilityfor the program.

Maybe. Dependingon the number ofyouth transitioningout of the trainingprogram, it may bedifficult to trackwhat happens toeach one of thestudents.



Developing Indicators

• Some indicators may be qualitative. You need to make these observations and judgments credible by providing a description of how you arrived at that judgment. For example, if RAB was going to determine the improvement in customer service, it might develop a survey or interview customers whose answers can then be quantified through a rating system.

• Create multiple measures. For outcomes that are more difficult to measure, such as developing interpersonal skills, you may need to identify several different measures to cover each element of the outcome.

• Measurements need to be adaptable. Don't get stuck measuring the same things - be open to new, more important concepts that may emerge and need to be measured instead of, or in addition to, what you are already measuring.

Helpful Hints

Complete the Developing Indicators and Quick Testworksheet in Part IV of the Toolkit. Indicators should becreated before moving to Step Four.

Step Four: Develop Performance Based TargetsOnce you have the indicators developed, the next step in the process is toset targets. Begin by establishing a baseline performance for eachindicator. The baseline may be based on past experience, the success of asimilar program or simply your best guess. Then project targets for theindicators over the next five years. Make assumptions on how outcomeswill grow based on a combination of what you want to achieve and whatyou believe is realistic. For example, will you be satisfied if 50% of theclient population served in your business move on to college or additionaltraining? Would you be more satisfied with 75%? Is 75% realistic? Couldyou reach 90% by year five? You will have to establish these targets beforedeveloping the collection strategy.



Setting Targets

• Base social purpose business targets on current program and evaluation strategies.

• If there is no current program that matches the work and mission of the social purpose business, look to other programs within the parent organization or to similar social purpose businesses.

• Remember to be realistic and ambitious. It is better to risk not reaching your targets than to leave clients or your mission underserved.

Helpful Hints

Mitigating RisksThe social purpose business may not be able to meet the targets you haveset. As we have discussed, you will need to be realistic in establishingtargets, but also embrace risk taking. But what if you can't meet thetargets? What if the population does not succeed in the first employmentexperience, or they cannot find jobs? Much like you develop mitigationstrategies in case the business is not able to meet its financial projections,you will need to establish mitigation strategies for the social purposebusiness. This may include adapting the training program, cutting backon the number of employees or phasing in social purpose goals over time.

Step Five: Collect DataIn this step, you will develop a data collection strategy. This strategy willbecome part of your on-going outcomes assessment. In addition, datacollection sets the stage for developing management reports that can beused to demonstrate your progress to Board Members, supervisors,employees and other stakeholders.

Data Collection Strategy

• Where will the data come from and what methods will you use to collect this data? What are the sources? Sources include: libraries, internet, government, census information and customer feedback. And what are the methods? Methods include surveys, interviews, focus groups and performance evaluations.

• Who will collect the data? Who will be responsible? Will it be the business manager or someone from the parent organization? It is important to clearly establish the party responsible for the collection.

• When will the data be collected? How frequently will you collect data? Will it be monthly, quarterly or twice a year? The frequency depends on the program element that is attached to the business.



• How will the data be stored? Will you use spreadsheets or software to track outcomes? If you come from a larger parent organization, it is likely that you already have evaluation strategies in place. Is it possible to adopt those systems for use in tracking the social outcomes of the business?

Outcome-Driven Management

So now what? You have concluded the steps for Gathering Evidence andData Collection. Developing the system of tracking indicators is only halfthe battle. Using the information to inform the operations of the socialpurpose business is the real challenge. Like many other managementstrategies, assigning responsibility and communicating the process andrationale will help speed the adoption of the data collection andmanagement system. The data on indicators helps managers to:

• Assess performance targets

• Make informed decisions

• Track and review progress for performance improvement

• Accelerate the learning process, promote accountability, and identify and solve problems

A key part of integrating data collection into the social purpose business is todevelop a reporting mechanism that allows you to document and highlightprogress. As part of this process, you will need to determine how often toreport on your outcomes, what information to provide and who will receivethese reports. Management reports can be used for several purposes:

• Monitor Progress

• Guide Planning

• Improve Performance

• Manage Programs

• Evaluate Investment (funders/investors)

Create a Data Collection Strategy for your social purposebusiness using the Data Collection Worksheet in Part IV ofthe Toolkit.



Review the PM&M Management Worksheets in Part IV ofthe Toolkit. These worksheets are tools to help you and yourorganization remain committed to tracking outcomes. Asample management reporting document is included as anexample of a tracking form that you can incorporate intothe ongoing management of the social purpose businessand the parent organization to inform managementdecisions going forward.

Outcome-Driven Management

• Hold annual staff retreats and regular staff meetings devoted to the Social Purpose Business - devote as much time to thinking through the social outcomes as you do in thinking through the financial goals.

• Set targets. Institutionalize an annual memo requiring staff to look back and look forward - this requires staff to plan for outcomes and review outcomes achieved.

• Evaluate performance reviews based on outcomes achieved.

• Determine the frequency of distributing management reports-monthly, quarterly, semi-annually.

Helpful Hints

TechnologyPM&M is based on systematic thinking and is built around basic conceptsthat express complex ideas. The worksheets will assist you to create youraction plans, logic models, indicators and tracking tools. While you willwant to fill out the worksheets to master the concepts, you will eventuallywant to manage the system in a more sophisticated manner. Usingspreadsheet software is a good place to start. Or you may choose to adaptcurrent outcomes measurement tools, such as a databases, to the newneeds of the social purpose business. PM&M does not require fancytechnology in order to make the process work, but investing in technologywill help facilitate the use and adoption of PM&M.


pa r t i i : Financials

Show Me the Money!

The Financial Section tells the story of the sustainability and viability of the business based on all ofthe revenues and expenses that you will incur to accomplish the goals of your plan. It alsodemonstrates that you have thought through the major risk factors and that you understand howthey will affect the bottom line. As you prepare this Section, ask yourself: "Would I invest my ownmoney in this venture? Why or why not? What do I need to know to make an informed decision?"

� O V E R V I E W

In developing your financials and implementing your plan, you willanalyze the financial potential of the business. Evaluation tools, whichform the basis of this Section, include pro-formas or projections, break-even analysis and sources and uses statements. These tools use assumptionsto forecast the financial outlook of the business.

When you are actually running your business, you will also utilize anumber of management tools to help you understand what is happeningwith the business and compare your success to previous years, competitorsand your projections. Management tools include the balance sheet,income statement and cash flow statement. A description of thesestatements and information on using them is included in Part III:Resource Guide.

The Financial Section of your plan should include the following information:

Introduction

Cost and revenue assumptions

Financial projections (3 to 5 years) and sensibility analysis

Sources and uses statement (current funding sources and commitments)

Capital needs by stage of development

Risks and strategies for mitigation

Summary/conclusion

If this is your first time working with or creating financial statements, itwould be wise to seek assistance from a business consultant with skills inboth modeling and analyzing projections. You may be able to access theseresources inexpensively through a local business school or throughbusiness counselors.

Financials

1.

2.

3.

4.

5.

6.

7.



� I N T R O D U C T I O N

Begin the Financial Section by providing context and highlighting themajor points of this section. Recap the major factors affecting yourfinancial situation from the market opportunity, business model,management or operations section of the plan. State your financial goalsfor the business in the short and long term including when you expect tobreak even and the projected net income over the next 3 to 5 years. Yourfinancial goals might also address your plans for reinvesting profits in thebusiness or passing them to the nonprofit parent organization.

In the example below, Recycle-A-Bicycle provided background on twomajor events that affected their financial performance in the recent past.

� RECYCLE-A-BICYCLE FINANCIAL SECTION INTRODUCTION

Recycle-A-Bicycle has successfully grown and expanded through a self-financing approach. Thisapproach was required due to the fact that Recycle-A-Bicycle did not obtain 501©3 status untilJuly 2002. Without formal nonprofit credentials, the organization had limited access to grants ordonations that would have provided the capital needed to grow more rapidly. Therefore, Recycle-A-Bicycle functioned much like a start-up small business, utilizing dedicated staff and growing onlywhen net profits or donated funds were available to reinvest in the business.

After five years of operations in the East Village, Recycle-A-Bicycle recognized the strongopportunity to grow its operations and training program through the creation of the DUMBO store.The diversification, additional space, and new market opportunity will assist in the growth ofRecycle-A-Bicycle. But the addition of the new DUMBO store has put demands on Recycle-A-Bicycle's cash flow, as the store has not yet built up a sustainable level of sales. This has created aneed for additional financing for working capital. As consumers become more aware of the store,the sales volume from retailing is expected to sustain operations.

Recycle-A-Bicycle has reached a critical juncture in its lifecycle in which further expansion isrequired in order to meet demand and scale its youth development efforts. Affordable financing isrequired to support the Five-Year Strategic Plan. Financing will be pursued through philanthropicgrants, debt financing and other socially supportive funders. This section reviews the near-termcapital needs of the organization.

Recycle-A-Bicycle has developed a five-year financial outlook to accompany this business plan.Please refer to Appendix E and Appendix F for details. Projections are based on historicalperformance and are realistic but conservative estimates. Recycle-A-Bicycle believes it has thecapacity to outperform the projections, given stability in staffing and few negative external factors.Significant assumptions to the plan are in shown in Appendix G.



� C O S T A N D R E V E N U E A S S U M P T I O N S A N DF I N A N C I A L P R O J E C T I O N S

All of the projections that you create for the business require that youbegin with assumptions about the revenues you will generate and the costsyou will incur in operating the business. These assumptions are your bestguess on what will happen in your business. You have detailed theseassumptions in two earlier sections of the plan:

• Business Model: Sales revenues and cost of goods (based on market opportunity section). These are reflected on the Sales Assumptions Worksheet within the Financial Projections Workbook.

• Operations: Staffing costs, fixed costs, marketing plan and start-up budget. The Financial Projections Workbook includes worksheets for staffing, fixed costs (including marketing) and your start-up budget.

Revenue assumptions will be based on two main factors: Price and SalesVolume. In addition, you will make assumptions on the Cost of GoodsSold for the product or service that you hope to sell. You must also makeassumptions about the rates of growth in each of these factors.

Expense assumptions are based on your best guess as to the cost ofrunning the business. These costs will include staffing, utilities,insurance, marketing, etc. Growth in expenses should be projected usinginformation on historical growth rates, discussions and contracts withvendors and suppliers as well as the current rate of inflation.

If you have been using the Financial Projections Workbook provided inthe Toolkit, your five-year projections should now be complete.



START UP

$58,200

$(58,200)

no

$50,000

$(8,200)

$(8,200)

no

YEAR 1

$60,795

$177,870

$3,080

$241,745

$34,740

$29,400

$1,540

$176,065

73%

$158,663

$28,700

$(11,298)

no

0

$(11,298)

$(19,498)

no

YEAR 2

$75,994

$204,551

$3,422

$283,966

$48,859

$34,486

$1,711

$203,910

72%

$184,188

$28,700

$(9,840)

no

0

$(9,840)

$(29,338)

no

YEAR 3

$88,267

$227,256

$3,733

$319,255

$51,447

$38,694

$3,733

$227,248

71%

$194,361

$30,448

$2,440

yes

0

$2,440

$(26,898)

no

YEAR 4

$99,035

$250,345

$3,996

$353,376

$57,158

$42,645

$1,998

$251,596

71%

$207,624

$31,361

$12,610

yes

0

$12,610

$(14,288)

no

YEAR 5

$106,067

$256,566

$4,138

$375,830

$61,216

$45,216

$2,099

$267,299

71%

$221,275

$32,302

$13,722

yes

0

$13,722

$(566)

no

5 YEAR PLAN

Annual Revenues

Product A

Product B

Product C

Total Revenues

Cost of Goods

Product A

Product B

Product C

Gross Profit

Gross Margin

Staffing Costs

Fixed Costs

Profit from Business Operations

Breakeven?

Grant Subsidies

Net Profit (not including taxes,depreciation)

Cumulative Cast Flow

Cash Flow Positive?

SAMPLE 5 YEAR PROJECTION CREATED FROM FINANCIAL TEMPLATE WORKBOOK



In the write-up for the plan, outline your assumptions. The rationalebehind these assumptions should have been given in other places in theplan, so this section will just provide highlights and then detail thenumbers. Use graphs and charts to visually represent your analysis wherepossible and use volume-adjusted measurements such as income as apercent of sales or inventory days on hand to add perspective.

In your analysis of the projections, you may want to discuss the following:

• Break-even: The break-even point shows the level of sales needed to cover all of your expenses, and in how much time you think this level will be achieved. When you determine the break-even point, ask yourself if this is reasonable given your market opportunity, staff, marketing plan and operational capacity. (A break-even calculation is provided in the Financial Projections Workbook.)

• Seasonality: Is your business seasonal? How does this affect your projections?

• Economies of scale: In what areas are you able to take advantage of economies of scale as you grow the business?

In the following example, Recycle-A-Bicycle is able to make assumptionsbased on past performance because it is an established business. Thebusiness plan explains the projected sales volume increases over the nextfive years. The average price is assumed to remain constant.

� RECYCLE-A-BICYCLE ASSUMPTIONS

REVENUE ASSUMPTIONS

The bicycle industry is seasonal in nature. The most lucrative season runs from April throughAugust. The less lucrative season runs from December through March due to cold weather. Unlikeother retailers, Recycle-A-Bicycle does not benefit from holiday consumption patterns as mostcustomers prefer to give new rather than used items as gifts.

The East Village store will outperform the newer DUMBO shop over the next few years because ithas enjoyed a six-year presence in the neighborhood. Over the next five years as Brooklynitesbecome more aware of the DUMBO shop, sales will increase to 80 - 90% of the East Village storesales.

Recycle-A-Bicycle expects to grow revenue 100% in 2003 due to several factors:

• Full-year results of new DUMBO store (opened October, 2002);

• Subway fare hike will prompt people to evaluate their commutes with some spillover effect on

• Recycle-A-Bicycle sales; and



• Addition of new development officer mid-year (although greatest benefit will likely be realized in 2004).

Recycle-A-Bicycle's sales revenue increases, although large in percentage terms, represents aconservative expectation. Despite doubling the retail capacity through the DUMBO store, bike salesare expected to increase by only 84% (from 339 in 2002 to 626 in 2003).

2002A 2003EEast Village shop 294 348DUMBO shop 45 278TOTAL 339 626

Beyond 2003, Recycle-A-Bicycle expects revenue growth to accrue from its investment inmarketing, as well as the full impact of the development officer. Recycle-A-Bicycle expects 71%top-line growth in 2004 through 40% increase in bike sales and 148% increase in grant fundingincluding down-payment capital grant for new facility. In 2005 - 2007, revenue growth will slow to12%, 10% and 5% respectively. After 2007, revenue growth is expected to level out at 3 - 5%annually.

EXPENSE ASSUMPTIONS

The major expense for Recycle-A-Bicycle is labor. Recycle-A-Bicycle will create a succession planthat increases the professional staffing in order to strengthen the organization. Recycle-A-Bicyclewill also invest in training, so that staff may be prepared to fill in any gaps that might occur.Mechanics will undergo sales and advanced mechanics training as this is a proven method forcreating higher productivity.

The organization will take advantage of its strategic partnership with Henry Street Settlement tosecure an Administrative Assistant through Henry Street's job-training program, at no cost toRecycle-A-Bicycle. The following chart examines the effect of the new strategies on net income overthe five-year projections. Though net income will be negative in 2003, the organization will returnto positive net income in 2004 and beyond.



2003

3,900720

71,091-

78,30023,49041,10821,421(1,282)

238,74851.5%

11,2759,396

12,186-

5,18487,360

-

125,401113,347

25.2%

131,944

(18,597)(1,691)

774493

(19,021)

2004

3,9001,080

138,39638,000

109,62032,88657,55129,989(2,093)

409,32871.4%

15,78513,15417,57215,8215,340

89,9813,955

161,608247,721

40.4%

213,785

33,936(20,339)

1,311690

15,598

2005

3,9001,440

172,049-

137,02541,10871,93837,487(2,617)

462,32912.9%

19,73216,44322,62316,2955,500

92,6804,074

177,347284,982

38.9%

220,289

64,693(19,585)

716863

46,687

2006

3,9001,440

188,875-

150,72845,21879,13241,235(2,878)

507,6499.8%

21,70518,08725,63216,7845,665

95,4614,196

187,530320,119

41.2%

226,662

93,457(17,105)

968949

78,269

2007

3,9001,440

198,129-

158,26447,47983,08943,297(3,022)

532,5764.9%

22,79018,99227,72117,2885,835

98,3244,322

195,272337,304

41.6%

231,380

105,923(14,623)

1,555996

93,851

RECYCLE-A-BICYCLE PROFITAND LOSS STATEMENT

SALES

ClassesSwift FolderGrantsCapital GrantBikesAccessoriesPartsServiceCredit Card Fees

Total Net SalesGrowth

COST OF SALES

Repair SuppliesAccessoriesPT Retail MechanicsFT Storage Facility MechanicPS 218 MechanicRetail Mgr / Asst MgrPT Van Driver

Total Cost of SalesGross ProfitGross Margin

TOTAL EXPENSES

OPERATING INCOMEInterest ExpenseInterest IncomeOther Income

NET OPERATING INCOME

$$$$$$$$$

$

$$$$$$$

$$

$

$$$$

$



Sensitivity of AssumptionsOnce you are done with your projections, you should estimate thesensitivity of your results to the assumptions you have made. Ask yourselfthe following questions: How would my breakeven analysis be impacted ifrevenues are 5% lower than I though? What if I have to hire an additionalworker to meet my projected demand? How would I change my plans if Iwas only able to get funding for half the amount that I need?

No projections are ever exactly correct - they simply represent your bestguess of the amounts of expenses and revenues that will be realized in thefuture. Therefore, it is prudent to leave yourself some flexibility whenmaking your financial forecasts. The answers to the above questions willhelp you build in some margin for error in your financial projections.

� S O U R C E S A N D U S E S S T A T E M E N T

This section shows what the business needs in terms of capital andinvestments. Your capital need is the amount of cash required to meet thebusiness expenses. The Sources and Uses statement demonstrates howmuch it will cost to implement your plan and where the money is going tocome from. The Statement lays out the expenses and costs of operatingthe business ("uses") and then shows the revenues and cash investmentsthat are expected to flow in ("sources"). The difference is your financingneed.



SOURCES

Cash deficit from 2003ClassesSwift Folder SalesBike SalesAccessories SalesParts SalesService RevenuesCredit Card FeesCapital Grant

Total SourcesExcess (Deficit)

$(19,021)$3,900$1,080

$109,620$32,886$57,551$29,989$(2,093)$38,000

$251,911$(105,143)

USES

Repair SuppliesAccessoriesPT Retail MechanicsFT Storage Facility MechanicPS 218 MechanicRetail Mgr/Asst Mgr LaborPT Van DriverSalaried WagesPayroll TaxesWorkers Comp & DisabilityHealthcare BenefitsAccountingAdvertisingAutomobileBad DebtRepair & MaintenanceCommunicationsStore ExpensesPostage & DeliveryPrinting & ReproEducational MaterialsTravel & EntertainmentRide LeaderBank FeesRentStorage MortgageInsuranceUtilitiesExpensed InvestmentsInterest ExpenseInterest IncomeOther Income

Total Uses

$15,785$13,154$17,572$15,821$5,340

$89,981$3,955

$87,550$19,264$3,379$6,650$3,090$2,060$5,000

$125$515

$4,597$206$515

$1,751$206

$1,030$3,600

$206$29,664$39,568$2,100

$709$2,000

$(20,339)$1,311

$690

$357,055

Recycle-A-Bicycle Sources and Uses Statement 2004

In addition, in this section it is useful to demonstrate fundingcommitments to the parent or related programs to show a history ofsupport for the work of the parent organization and to show where youmight receive grants or other philanthropic investments.



� RECYCLE-A-BICYCLE FUNDING COMMITMENTS

SOURCE

Sales RevenueFundraising

2002 PERCENTAGE

69%31%

2003 PERCENTAGE

65%35%

Recycle-A-Bicycle raised $50,000 in grant funding in 2002. Major support was provided by BikeNew York. Grant funding in 2003 has been secured or is expected from Bike New York, The CitizensCommittee for NYC, Travelers Foundation, Monterey Foundation and Silverman Foundation.

� C A P I TA L N E E D S BY S TA G E O F D EV E L O P M E N T

In this final part of the Financial Section, you will use your financialprojections and Sources and Uses Statement to explain the total amountof funding needed for start-up, new investment, growth or expansion ofthe business. Discuss the amount of capital needed and the timing inorder for the business to meet its projections.

� RECYCLE-A-BICYCLE CAPITAL NEEDS

CAPITAL NEEDS

The projections indicate that grant funding of approximately $520,000 is needed over the next 3years to cover costs associated with expansion of the business and training program. This fundingamount includes a capital grant of $38,000 that will be used as a down-payment on the productionand training facility. In three years (2005), Recycle-A-Bicycle will generate approximately $60,000in net operating profit.

Capital needs are greatest in 2003 and 2004 when new staff is hired and infrastructure related tothe new production facility is added since these additional expenses are not be matchedimmediately with increased revenues. However, these investments will quickly produce positivereturns for the organization as net income grows steadily from 2004 to 2007.

In 2004, financing of approximately $300,000 is needed to purchase the training and productionfacility. This financing has been modeled as a 10-year mortgage at 6% annual interest. In addition,the following debt service chart includes a $100,000 loan beginning in 2003 to finance thebeginning of the Five-Year Strategic Plan (assuming grant funds are not available).



� R I S K S A N D M I T I G A T I N G S T R A T E G I E S

In this Section, describe the major risks associated with implementingyour plan and fulfilling your projections. The purpose of this section is toshow that you understand the weaknesses in your assumptions and that youhave thought through what you will do if your assumptions are wrong orsomething unpredicted happens to the business. Risks may involve factorsthat are outside your control. The risks that you include should berealistic. To develop your risks, ask "What if" questions about yourassumptions (see the RAB example that follows for some examples). Foreach risk, discuss its potential affect on your business and suggest strategiesto either thwart or deal with the issue should it arise.

Developing Mitigation Strategies

The following are mitigation strategies to consider as youdevelop this section of your plan.

• Have a strong management team in place, especially an industry expert who can anticipate problems before they occur and who has experience trouble shooting.

• Establish contingency plans before problems arise so that both management and staff know what to do "in case."

• Develop a system to monitor cash flows into and out of the business in order to assess your liquidity.

• Diversify your business revenues by building several product or service lines that appeal to different target customer segments.

• Use Management Reporting tools to assess what is happening in the business and compare results to projections.

• Create an exit strategy for your nonprofit. How will the nonprofit know if the business is not successful? When will the nonprofit review the results of the operations and what are the decision factors for closing the business. On the other hand, what will the nonprofit do if the business is highly successful or begins to cause mission drift?

Helpful Hints



� RECYCLE-A-BICYCLE RISKS AND STRATEGIES FOR MITIGATION

RISKS AND STRATEGIES FOR MITIGATIONRecycle-A-Bicycle has identified several risks associated with implementing its strategic initiativesas well as strategies to mitigate these risks. These are briefly described below.

1. Store revenues lag behind plan: demand is lowStrategy for mitigation: We would reduce operating costs by reducing labor and curtailing storehours during exceptionally slow periods (e.g. during a heavy snowstorm). We will simultaneouslycontinue aggressive marketing efforts to pull in demand. Recycle-A-Bicycle operations are flexibleand have been subject to past revenue variations, management is comfortable managing to theseissues.

2. Insufficient Raw materials to meet sales demandStrategy for mitigation: Recycle-A-Bicycle seldom has to actively solicit raw materials donations,and supply does not look to be constrained in the near future. If for some reason there is ashortage of bicycles we would initiate outreach efforts to increase supply. Used bicycles could bepurchased at police auctions as a reasonably inexpensive substitute to donated bicycles. Thoughmargin would suffer, Recycle-A-Bicycle would still be able to meet demand for bicycles and offer itshigher margin accessory and repair lines.

3. Insufficient labor to meet production demandStrategy for mitigation: Given current labor market conditions in New York City, we do notanticipate any issues. Our wage rate is very competitive with the market and we always have asurplus of labor. However, if a labor supply shortage exists, we would tap into our volunteer networkwhich has worked well in the past to meet seasonal demands for production.

4. Funding is not obtained on schedule Strategy for mitigation: The Executive Director has solid fundraising experience and is confident inthe goals listed. The addition of the new Development Director will enhance these strengths.Operations will be managed to the funding commitments that are available, and when possible,reserves will be created to help smooth cash availability.

5. Loss of senior management before training and succession plan is implementedStrategy for mitigation: The Board of Directors and others have committed their energy should anunplanned change in Senior Management occur. Recycle-A-Bicycle has several professional servicespartners such as their accountant and business management consultant who can help providetransitional support services.

6. Loss of a major partnerStrategy for mitigation: The Executive Director has many relationships with potential partners andis nurturing these as prospects for when the production/training facility is operating.



� S U M M A R Y / C O N C L U S I O N

Conclude your business plan with information on your financing needand next steps. Convince the reader that your business is a worthwhileinvestment through a quick summary of your business situation.

� RECYCLE-A-BICYCLE CONCLUSION

Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-YearStrategic Plan. These grants will be pursued through institutional funders with an interest inenvironmental stewardship and/or youth development.

2003 Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000 in grant funding will serve as working capital to support current operations as well as implement new marketing efforts. The additional $100,000 will support hiring additional staff, support costs associated with sourcing and obtaining the new production and training center and provide for other infrastructure improvements.

2004 Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds willbe used in part for working capital and in part to support more of the Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the production and training center,hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will be used for a down payment on the production and training center. Recycle-A-Bicycle will raise the additional $106,000 through fundraising efforts spearheaded by the new Development Officer.

2005 Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional costs related to expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours by Teens program.

Recycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track recordof growth and is now looking for capital in order to expand the social and environmental outcomesand develop more sustainable systems within the business.

Recycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer andsmall business in New York City. The organization serves a triple bottom line, benefiting the at-riskyouth and the New York City environment through a business model that is moving towardsustainability. Recycle-A-Bicycle is seeking to increase its effectiveness in all three areas - social,environmental and financial. As one of the leading organizations combining youth education,recycling and bicycling, Recycle-A-Bicycle has the capability to expand locally as well as develop anational reach.


pa r t i i : Exhibits

Supporting your business plan.

In your business plan, exhibits are the supporting materials that back up the story you have toldthroughout the documents. Include relevant information that helps make your case.

Examples of items that could be in the Exhibits Section include:

Detailed financial projections, monthly cash flows and other supportingfinancial information

Financial statements of the parent nonprofit

Resumes and biographies of key managers, staff or Board members

Descriptions of the parent nonprofit activities

Press clippings or other news items about the business or relevantprograms

PM&M Logic Model

Marketing materials for the business

Letters of support

Client/customer lists

Exhibits

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iii.1developing a social purpose business plan

pa r t i i i : r e s o u r c e g u i d e

Part III of theToolkit willprovide you with a few extraresources to assistwith the planningprocess.

Part IIIResource Guide



Every person and organization comes to the planning process withdifferent skill sets and expertise. The Resource Guide providesinformation on a few specific topics that may be new to you, at least in thecontext of business ventures. The section includes:

• Pitching your Business

• Working with Consultants

• Understanding Financial Statements

• Glossary of Business Terms

And a Couple Other Things...

Pa r t I I IResource Guide


pa r t i i i : Pitching your Business

Pitching Your Business Plan

Completing your business plan is a major task. But you are not done yet.Next, you will need to condense this immense amount of information andplanning into a pitch that is comprehensible and compelling. Thefollowing is a guide for developing a 10-minute presentation. You mayalso want to create a 3-minute "elevator pitch," a short, concise version ofthe 10-minute presentation.

The 10-minute Presentation

Welcome (30 seconds, title slide)• Introduce yourself and explain your role in the business.• Mention the purpose of the presentation and your “ask”.

Overview of Parent Organization (1-2 minutes, 1 slide)• Explain the mission of the organization and how you accomplish

this mission (key programs and services).• Describe the population that your business will serve and your

experiences with this population. Include a brief success story or anecdote.

The Social Purpose Business (3-4 minutes, 2-3 slides)• Describe the business. What is your business and what products or

services do you sell? Who are your customers and what is your market opportunity?

• Explain your competitive advantage.• Clarify how the social purpose business furthers the mission of the

organization.

Management Team (30 seconds, 1 slide)• List key team members and describe their experience.• Convince the audience that you have the right people to make this

business work!

Social Outcomes (1-2 minutes, 1 slide)• State the short term, interim and long-term outcomes (you might

include your logic model).• Briefly describe how you will track and measure your outcomes.

Financial Outcomes (2-3 minutes, 2 slides)• Summarize your assumptions and 5-year profit/loss projections. • Discuss the financial outlook for the business. • Explain your financial need and how you plan to fill this gap.

iii.4 developing a social purpose business plan


Conclusion: Next Steps and the “Ask” (1 minute, 1 slide)• Outline the next steps for the business? Include the timing of

these steps.• Include the "ask" - what do you want from the audience in terms of

financing, inkind resources, etc.• End on high note - summarize why this is a worthwhile business.

Tips for Presenting a Social Purpose Business to Potential Funders

Concentrate on your message and the ideas you want to convey.• Practice your introduction and your conclusion until you are

entirely comfortable with the first and last few minutes of your presentation.

• Focus on the "big picture" and the overall message you want to communicate to your audience.

Create a PowerPoint presentation that is professional and easy-to-read.• Avoid overcrowding.

- Use 3 to 5 high-level bullet points - then, expand on them when you speak.

- Use short sentence fragments to "telegraph" your points. • Avoid distractions.

- Use pictures and animations on your slides only when they add to your presentation.

- Keep the background simple and professional.• Include a Conclusions and/or 'Any Questions?' slide.

Talk confidently to individuals, not a faceless crowd.• Make eye contact.• Use the gestures, phrases and movements that come naturally to

you. Let your personality come through.• Remember, you know your subject better than anyone in the room• Use your breath for control.

- Before you get up to speak, take several slow, deep breaths.Inhale as you count to five, hold for 2 counts, and then slowly exhale as you count to five. Repeat several times.

- Before you start speaking, pause and take a deep breath.• When you speak, look at your audience, not at your presentation.

Be prepared for tough questions.• Work with your colleagues on a list of tough questions about your

business and funding plans.• Practice the answers to these questions.

Practice - it's the key to confidence.


pa r t i i i : Working with Consultants

Through your organizational assessment or Action Plan, you may find thatyou do not have the expertise or time to complete a part of the planning.Or you may believe that an outside perspective would be helpful in movingthe planning forward. In these cases, a consultant is a valuable tool. Whenworking with a consultant, it is important to think through what you needdone and the amount of staff time required to manage the project.

Before You Hire a Consultant

Develop a Draft Scope of Work Document.This document outlines the project to be completed and the associatedtimeline and deliverables (or work document) required. It will be used tosolicit proposals from consultants. Think about the following questions:

• What is your goal for the project? Define your project outcomes.• What type of expertise does the project require? • What are the qualifications you seek in a consultant?• What is the deliverable that is needed and how will it be used? • What is the time frame in which the work should be completed?• Who at the organization will manage the consulting project? • What is the budget range for the consulting project?

Identify Potential Consultants.Send your Scope of Work document to potential consultants beforemeeting with them. Ideas for finding potential consultants include:

• Reach out to organizations that are similar to yours for ideas, contacts and references of potential consultants.

• Contact professional associations such as networks of organizational development practitioners, facilitators, trainers and fundraisers.

• Contact local universities for student or faculty resources.

Choose a Consultant.Interview potential consultants in order to assess their skills as well as thefit with your organization. Key questions to ask during the interview:

• Have you worked on similar projects or consulted with groups similar to ours? What did you learn from the experience?

• What skills do you possess that will be helpful with our project?• How would you work with our staff, Board and constituents?• Will other members of the consulting team be working on the

project? Who are they? How will the tasks be divided up?• What challenges do you anticipate? How will they be addressed?• What do you see as our responsibility during the consulting

engagement?• Can the work be completed in the time frame and budget specified?

Working with Consultants

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After the interview, request a short written proposal including adescription of how they will complete the project, a timeline and a budget.Request that references and samples of the consultant's work be includedwith the proposal. The criteria you use to select a consultant will be somecombination of skills, experience, budget, timeline and personality.

Managing the Consulting Relationship

Write up a final Scope of Work and/or contract to formalize therelationship with the following information:

• Project description• Need for services• Deliverables (interim and final)• Timeframe for completing the work• Check-in times• Evaluation process• Budget and payment process

Prior to beginning the consulting arrangement, it is important to have acandid conversation about expectations and how you will handle thesituation in the event that expectations are not met.

• Provide a detailed briefing on your organization, what you are trying to accomplish and any research to date.

• Communicate that the Scope of Work may change once the work begins. Establish how such changes will be handled.

Don't become overly dependent on the consultant. The consultingrelationship is collaborative and you play an important role in shaping theprocess so that you can achieve your goals.

Establish set check-in times for the project to ensure that you have opencommunication. Determine when you will see drafts of the work.

• Develop agendas to guide the check-in meetings.• Review interim drafts of the work to ensure that the project goals

are being met.

Set aside adequate time to work with the consultant.

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pa r t i i i : Understanding Financial Statements

Understanding Financial Statements

There are three main reports that are prepared to deliver financialinformation about the health of businesses. These are: the Balance Sheet,the Income Statement and the Cash Flow Statement. The statements areused both internally to manage the financial performance and externallyto communicate the financial position to stakeholders or funders. Each ofthese provide separate types of information and can provide valuableinsights into the performance of the business during the previousaccounting period. They can also give early warning signals of problemsthat may arise in the future. As you read through this section refer to theexamples provided in Part IV of the Toolkit.

Balance Sheet

The balance sheet is a snapshot of a company's assets and liabilities on aparticular day. It is divided into two columns, with all the assets listed onthe left and liabilities listed on the right. The reason it is called a balancesheet is because both sides must "balance"; that is, they must have the sametotals at the bottom. There is a basic accounting equation which makes thebalance sheet "balance": Assets = Total Liabilities + Equity.

Some of the items listed on the assets or left side of the balance sheetwould be: Property, Equipment, Cash, Accounts Receivable andInventory, etc.

On the right side of the balance sheet, you would typically see thefollowing items: Bank loans (short term and long term), Accounts Payableand Owner's Equity.

This last item, Owner's Equity, is what is left over after subtracting thetotal liabilities from the total assets. This represents the net value of thecompany, which can be claimed by the owners of the company.

Analysis of Balance SheetThere are some key items on your balance sheet to analyze closely. Theymay be an early warning signal of impending problems with your financialstanding.

• Current ratio: This is mathematically calculated as the ratio of total current assets to total current liabilities. Since 'current' means items that will be received or payable within the next accounting year, it would be ideal for this ratio to be close to one. In other words, the total current assets and current liabilities would be equal. If that was the case, we could reasonably conclude that the company will be able to meet its obligations and remain solvent for the next year.



• Debt to Total Assets: This ratio is mathematically calculated as the ratio of total liabilities to total assets. Since the 'ideal' debt to total assets varies by industry (for example capital intensive businesses will have a higher ratio than service businesses), it is useful to compare this ratio with similar companies to see if a business may have too much debt.

Income Statement

The income statement summarizes the activities of a company during theprevious accounting period, and answers the following question: "Did wemake a profit last year?" It lists items such as revenues, cost of goods sold,salary expenses, marketing expenses, administrative expenses, and finally,net income.

Remember that the net income item does not equal the amount of cashthat the company generated. Due to accounting conventions and businesspractices (such as purchasing goods on credit), there can be significantdifferences in what the company declares as net income, and the amountof cash it generated over the course of the year. For this reason, we have athird report, call the Cash Flow Statement.

Analysis of Income StatementMost analysis of the income statement is done by evaluating each item onthe statement as a percentage of revenues. This method allows you tocompare these ratios across firms with vastly different levels of revenue.The following ratios are useful tools in assessing how much money thecompany earns as a percentage of total revenues:

• Gross margin: This is the gross profit (revenues minus cost of goods sold) as a percentage of total revenues - it tells you on averagehow much a company earns on the sales of its goods.

• Operating margin: This is the operating profit (before interest costs) as a percentage of total sales. The ratio tells you how much money a company spends to earn one dollar of revenues. The interest expense is left out since interest depends on the amount of debt taken on by a company, which is not strictly an 'operating' decision (rather, it is a financing decision).

• Net margin: This is net income as a percentage of revenues. This tells how much of the total revenues the company's owners can keep for themselves, after paying all the expenses incurred during the year.

Notice that these move down the income statement: first analyzing thegross profit, then operating and finally net profit. In this way, we canseparate problems and see at what stage the highest costs are incurred.


pa r t i i i : Understanding Financial Statements

Cash Flow Statement (CFS)

The CFS details the amount of cash that came into the company, andwhich was paid out of the company over the course of the previous accounting period.It documents the change in cash balance during the accounting period. Ithas three main sections:

• Cash Flow from Operating Activities (such as payments of salaries, rent on office space, purchases of goods and receipts from cash sales)

• Cash Flow from Investing Activities (such as purchases of a delivery truck, machinery or office building)

• Cash Flow from Financing Activities (such as loans received from a bank or investments by the owner of the company)

The total of these three sections is the Net Cash Flow. It can be a positiveor negative number, and, when added to the beginning balance in yourbank account, should give you the balance in the bank account at the endof the year.

Analysis of Cash Flow StatementWhile it is helpful to know whether the Net Cash Flow is positive ornegative, a negative net cash flow may not necessarily be a bad thing. Forexample, a company may have a positive cash flow from operatingactivities, but due to high investments in the business or repayments ofdebt the net cash could be negative. A high level of investment back intothe business (and resulting negative net cash flow) may actually be goodnews!

The key to analyzing the CFS is to identify where cash is being spent;arguably the most troublesome discovery would be a negative cash flowfrom operating activities. This would mean that you are spending morethan you earn in revenues - certainly not a sustainable position.

Summary

This section has briefly introduced the main accounting documents usedto report the activities of a business. When doing analysis across all thestatements, it is worthwhile not just to look at ratios for a single year, butcompare the trend of each ratio for several years.

Although we have highlighted a few of the key items to look at in eachaccounting statement, it must be noted that this is not meant to be acomprehensive discussion of financial analysis. Each industry has its ownunique accounting conventions, and any analysis must take into accountthe nuances of the specific company and the industry's accountingstandards and practices. If you are evaluating the performance of acompany, it is best to consult a professional accountant or experiencedfinancial consultant who would be able to help in this task.


pa r t i i i : Glossary of Business Terms

Glossary of Business Terms

Accounts PayablePayments owed to suppliers for goods and services.

Accounts ReceivablePayments owed by customers for delivered goods and services.

AmortizationThe process of liquidating (paying off) a debt through installmentpayments; amortization also refers to the process of proratingexpenditures over time in order to write them off.

AssetsThe resources that the company possesses for the future benefit of thebusiness (includes cash, inventory, accounts receivable, equipmentbuildings).

Balance SheetSnapshot of a company's holdings at a given point in time. Shows theassets owned by a company, the liabilities owed to others and theaccumulated investment of its owners.

Balloon Payment Principal is paid back in a lump sum at the end of the loan term. Thiskeeps payments lower during the life of loan as the company pays onlyaccrued interest.

BenchmarkingComparing your business with other similar businesses or competitors.

Brand EquityThe good will, positive associations and recognition earned by a brand.

Break Even PointThe amount of sales (in dollars or units) that will cover all the costs ofrunning the business.

Call Option The company's ability to pay back the debt before maturity. Calls areusually applied to bonds. Often a call option will require that thecompany pay more than the face value of the debt. Calls are also attachedto preferred equity.

Cash FlowThe money coming in to the business and the money going out is the flowof cash that determines whether a business will survive.



Cash Flow Statement (CFS)Document summarizing the business's cash flow position for a givenperiod. Often shows the sources and uses of cash.

Competitive AnalysisExamination of your company's position in the marketplace relative to thecompetition.

Core CompetenciesAdvantages and strengths your company has relative to the competition.

Cost of Goods Sold (COGS)The cost to your company of acquiring or producing the goods andservices sold in a given period of time.

Coupon Rate Interest rate on a bond (sometimes used to refer to the interest rate onany debt instrument).

Covenants A way for the debt holder to ensure some control over the company.Covenants include limits on different financial ratios (like assets toliabilities or debt to equity) and may bar the company from selling anymajor assets without approval from the debt holder.

Debt Service The regular debt payment that a company makes (monthly or annually),which includes interest accrued and a portion of the principal.

DequityHybrid financing instruments that combine certain characteristics of bothdebt and equity. Preferred stock is the most common example.

DifferentiationAny way a company markets its products and services to distinguish themfrom the others in the market. Ways of differentiating include features,fit, styling, reliability, packaging, sizes, service and brand names.

Fixed CostsCosts that do not vary with volume of goods or services produced or sold.Often includes rent and insurance.

Fixed IncomeA security in which the holder receives a specific annual interest incomeand a specific amount at maturity.

Gross MarginRevenue from sales to customers, minus the cost of goods sold (COGS).Tells you whether the business is making a profit, before consideringcorporate expenses.


pa r t i i i : Glossary of Business Terms

Interest-Only PaymentsDebt service in which company pays only the interest that accrues.Principal is usually paid back in a lump sum (balloon payment).

Income Statement (Profit and Loss Statement)Shows the flow of activity and transactions over a specific period of time.In general, revenue minus expenses equals income (profit).

LiabilitiesObligations to repay borrowing, debts and other obligations to providegoods or services to others (includes bank debt, accounts payable, advancepayments from customers to deliver goods or services, taxes owed andwages owed).

Marginal Revenue and CostThe revenue and cost of producing and selling one more item.

Market SegmentThe portion of all consumers that is the ideal buyer for a product orservice. For example, a snack food manufacturer might target a youngconsumer who makes purchases on impulse, while a gourmet foodmanufacturer targets an older consumer who does research on quality.

Market ShareThe ratio of company sales in a market to total sales in a market. Can beexpressed in dollars or sales units.

Maturity The length of the term of debt.

Moratorium Debt service is not paid for a specific amount of time (helps start-ups bynot requiring them to immediately begin debt repayment).

Nonrecourse DebtDebt for which the borrower cannot be held personally liable forpayment.

Operating Income/Operating Profit/EBITEarnings before interest and taxes, or the profit made from the operationsof the company, usually the production and sale of goods and services.Equals gross margin minus selling, general and administrative expenses.

Opportunity CostThe sacrifice made to use an asset for one purpose instead of another. Forexample, by deciding to produce more pizza, a café might have to producefewer sandwiches. The opportunity cost is the revenue lost fromsandwiches not sold.

Owners' EquityThe accumulated dollar measure of the owners' investment in thecompany. Assets minus liabilities equals owners' equity.

PositioningProjection of a product as having a certain desired image which makes itappealing to a certain segment of the market.

PrincipalThe original amount borrowed or financed; interest is paid on theprincipal.

Return or Return on Investment (ROI)A measurement of the amount of money that has been realized as a resultof a certain investment of resources; the amount earned in proportion tothe capital invested, usually stated as a percentage.

Secured Debt is guaranteed by an asset. If company defaults, that asset is sold andproceeds are used to pay the secured creditor. Typical assets includeland/buildings and accounts receivable.

Seniority The order in which debt holders are paid back. Each debt holder will havea different seniority. Senior, general and subordinate debt are the mostcommon terms for levels of seniority. All debt is senior to equity.

Variable ContributionAmount remaining from sales revenue after covering variable costs,expressed per unit of sales. This is the amount that will go toward coveringfixed costs.

Variable CostsCosts that vary with production or sale of goods and services. Oftenincludes materials, sometimes labor.

Working CapitalThe amount of funds available to pay short-term expenses. Seen as acushion to meet unexpected or out-of-the-ordinary expenses. It isdetermined by subtracting current liabilities from current assets.

developing a social purpose business planiii.14




Part IV containsmaterialsreferenced inParts I, II and III.Pull out thesesheets as you workthrough theToolkit in orderto guide yourplanning processand betterunderstand theconcepts.

Part IVWorksheets, Templatesand Examples

Part IV: Strategic Questions

Social Purpose Business Planning Strategic Questions Distribute this Strategic Questions Worksheet to a group of staff, managers and board members to help you evaluate your social purpose business idea from multiple perspectives within the organization.

1. State the overall mission of the organization.

2. Describe your social purpose business idea. What product or service do you plan to offer and who are your target customers?

3. Describe the clients that you expect to benefit from this idea in terms of demographics and needs.

4. How will the venture benefit your clients? What needs, interests and skills sets do they bring to the venture?

What programs do you have that currently serve the needs of your clients?

Have your clients expressed a special interest for new services? What kind of new services/ programs are they interested in?

What are your client’s key skill sets in terms of what is needed for the business venture?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.1

Part IV: Strategic Questions

5. What are the anticipated benefits or outcomes for your clients and the organization that

will result from starting a social purpose business? Client Outcomes

Organizational Outcomes

6. What assets will you use to create the business venture (e.g. building, property, equipment, intellectual property, proprietary processes)?

7. What other ways might you use these assets (e.g. sell the building or equipment, use the

equipment for a new program)?

8. What are the financial goals of the business (break-even, generate profits to be used for additional training or spin off revenues for other programs of the organization)?


Part IV: Organizational Assessment Survey

Organizational Assessment Survey This survey will help you to gauge your organization’s ability to develop a social purpose business. We suggest that you give this survey to a cross-section of your staff members to get their input into the organization’s capacity to start a new venture.

Assessing the Organization

1. The core values of the organization are:

2. The strengths of our organization are:

3. The areas of the organization that need improvement are:

4a. The financial, staff, and physical (equipment, property, etc.) resources that are needed for the business planning process are:

4b. The financial, staff and physical (equipment, property, etc.) resources that are needed for the launch and operation of the business are:



5a. The organization has the following financial, human, and physical resources available for the planning process:

5b. The organization has the following financial, human, and physical resources available for launch and operations:

6a. How might the organization acquire the missing financial, human and physical resources that are still needed for business planning?

6b. How might the organization acquire the missing financial, human and physical resources that are still needed for launch and operations?

7. The advocates for the social purpose business among the Board of Directors are:

8. What kind of assistance and/or expertise can your Board of Directors provide?

9. How would an advisory board or business development task force aid in your planning process? Who/what skills would you look for in recruiting members for this group?



10. The organization has the following strategic partnerships and relationships that will aid in developing the business:

11. What strategic partnerships or relationships are necessary in order to plan and launch the business? How can the organization develop these partners?

12. In developing the business, the organization expects to experience tension and/or resistance to change in the following areas:

13. How might a consultant help you in the planning or launch of the business? What work would they do for you?

14. The timeframe for the business planning process is:



Assessing your “People”

The entrepreneurship team, including key staff, Board members and other stakeholders will be comprised of:

Name Title/ Position

Role on Entrepreneurship Team

Skills/Expertise

Project Champion


Part IV: External Environment Assessment

External Environment Assessment This assessment is an initial “quick test” to assist you in thinking about the feasibility of your business idea in the context of your potential customers and marketplace. An in-depth market analysis will be completed later during the business planning process.

Questions to Consider Associated Challenges

1. Who are your potential customers? Describe them demographically. What similar products do these customers currently buy? What do they look for when buying similar products/services?

2. Who are your competitors? What are their strengths and weaknesses??

3. How will you compete? How will your business be different?

4. What is happening with the economy, your industry and your market? Are there major changes in what customers need and want, how they access the product or the price? How might this affect your business?



Performance Measurement and ManagementS

The following is a basic template for a Logic Model. In addition, twidea: The Recycle-A-Bicycle Logic Model, demonstrating a busineoperating a pilot and is in development. Note that the template pr

ACTIVITIES

INPUTS OUTPUTS

Business Activities

Business Outputs

Program Outputs

Program Activities

M Logic Mo

o examples aress that is curren

ovides space for

INIOUTC

Busines

Program

OrganizaOutcom

d

t b

T

s

e

Part IV: Logic Model Template

el Template

provided to help you think through your own business ly in operation; and the City Café, a business that is usiness, program and organizational outcomes.

LONG TERM OUTCOMES

INTERIM OUTCOMES

IAL OMES

Outcomes Business Outcomes Business Outcomes

Program Outcomes

Outcomes

tional s



Program Outcomes


DEVELOPING A SOCIAL PURPOSE BUSINE

SS PLAN IV.10

Recycle-A-Bicycle Logic Model

Inputs Activities

Outputs Initial Outcomes

O

Facilities

Board

Materials Donation

Students graduate from training

Conduct youth training programs

Staff

Consultant

Analyze operations & set production goals

Improved inventory & bookkeeping

Youth trained in bicycle repair and business concepts

Funding

Lopossupsale

Financing for new facility and programs secured

Conduct business activities at retail stores

Refurbish bicycles

Create resource development strategy

Ongoing sales activity

Facilities and staffing plan

Revised operating plan

Youth employed at RAB or other bike shops

Youth develop strong job skills

Hepraprogra

Van & Storage Facility acquired

Retvol

Youth Yo

hig

Strategy for resource development

Inventory and bookkeeping systems

Inteutc

ng-teitionportes

althycticegramduate

ail saume i

uth grh sch

Part IV: Logi

DEVELOPING A SOCIAL P

rim omes

rm staff s d by

lifestyle d by s

les ncrease

aduate ool

c Model Examples

URPOSE BUSINESS PLAN IV.11

Long-term Outcomes

RAB offers consistent programming

Organizational Sustainability achieved

Healthy lifestyle promoted to others by program graduates

Youth enter living wage careers or obtain post-secondary education

Graduates become environmental stewards

Part IV: Logic Model Examples


City Café A Social Purpose Youth Business

INPUTS INITIAL

OUTCOMES LONG-TERM OUTCOMES

INTERIM OUTCOMES ACTIVITIES OUTPUTS

Business begins to generate

income from sales

Business breaks even

Develop/revise Business Plan business plan

Completed business plan

Develop business strategy

Ideas

Parent

organization explores

additional revenue

generating activities

Staff Conduct market analysis

Organization becomes more entrepreneurial

Business

Business Advisory

Committee

Launched Provide employment and leadership opportunities for youth

Youth

participate in activities Funding

Youth develop skills and gain experience to

pursue meaningful job opportunities

Develop training curriculum

Youth advance in a meaningful

career

Youth receive employment and training

opportunities

Facilities

Implement training

Part IV: Action Plan Template

DEVELOPING A SOCIAL PURPOSE BUSINE

Task (WHAT)

Due Date (WHEN)

Responsibility (WHO)

Status/Notes

Category:

Category:

Category:

Use the activities on your Logic Model to determine what needs to be done with respect to the business. The Action Plan can be used to manage both the business planning process and the operations of your business.

Action Plan Template

SS PIV.13 LAN


Part IV: Conjoint Analysis

Conjoint Analysis As you learned in the Part II: Business Model Section, Conjoint Analysis is a process that helps you predict the price customers might be willing to pay, based on the weight that customers place on different decision factors associated with the product. Conjoint Analysis uses the following process:

1. Choose a range (3 – 8) of competitive products that you think are most like your product. 2. List attributes that you think are important to the customer when purchasing or using this

type of product. 3. Ask a sample of potential customers to rank the attributes in terms of importance in the

decision to purchase and then ask them to rank the competitors on these attributes. 4. Use a weighted average calculation to determine the price customers are willing to pay.

Example of Conjoint Analysis for Social Purpose Bakery Chocolate Cake The following shows a sample pricing analysis for a Social Purpose Bakery that is testing its signature chocolate cake to determine a basis for pricing its baked goods. Step 1: Choose a range of competitive products that you think are most like your product. Our Social Purpose Bakery was able to identify three bakeries that it believed were its prime competitors: The Cake Place, a gourmet grocer and Baked for Good. Step 2: List attributes that you think are important to the customer when purchasing or using this type of product. Our Social Purpose Bakery decided on the following attributes: Taste, Presentation, Ease of ordering, Convenience, Customer service and Social mission. Step 3: Ask the sample of potential customers to rank the list of attributes using a 100 point scale based on importance of the attribute in your decision to purchase. Attributes Ranking Taste Presentation Ease of ordering Convenience Customer service Social mission Total 100 Then ask the sample of potential customers to rate the competitive products on a scale of 1 to 10 (10 being the best) based on the attributes identified in Step 2. Also have them rate your product.



An example of the worksheet provided to the sample of potential customers for the Social Purpose Bakery is below: Attributes Bakery 1:

The Cake Place

Bakery 2: Gourmet Grocer

Bakery 3: Baked for Good

Test Case: Social Purpose Bakery

Taste Presentation Ease of ordering Convenience Customer service Social Mission Price of the Product TBD

Step 4: Use a weighted average calculation to determine the price customers are willing to pay. For example, the following are the rankings of one customer. Attributes Ranking Taste 65 Presentation 25 Ease of ordering 1 Convenience 5 Customer service 3 Social mission 1 Total 100

Attributes Bakery 1:

The Cake Place




Taste 10 8 7 9 Presentation 5 5 9 7 Ease of ordering 10 8 10 8 Convenience 6 9 6 7 Customer service 8 8 8 7 Social Mission 0 0 6 8 Price of the Product (actual price of competitors)

$35 $22 $30 TBD



Price Calculation: Attributes Bakery 1:

The Cake Place




Taste 10*65=650 8*65=520 7*65=455 9*65=585 Presentation 5*25=125 5*25=125 9*25=225 7*25=175 Ease of ordering 10*1=10 8*1=8 10*1=10 8*1=8 Convenience 6*5=30 9*5=45 6*5=30 7*5=35 Customer service 8*3=24 8*3=24 8*3=24 7*3=21 Social Mission 0*1=0 0*1=0 6*1=6 8*1=8 Total Score 839 722 750 832 Actual Price $35 $22 $30 ?

Determining your price: The Social Purpose Bakery evaluated how it ranked compared to the other three products and with respect to the importance of the different attributes. Based on this, the bakery was able to evaluate where it fit along the price continuum of the three other products. The price that our Social Purpose Bakery should be able to charge is between $30 and $35 because its weighted ranking is between that of Baked for Good and The Cake Place.

Gourmet Grocer

Baked for Good

Social Purpose Bakery

The Cake Place

Score 722 750 832 839 Price $22 $30 $30 - 35 $35



Part IV: Using the Revenue Model Template

Revenue Model Template The disk provided in the Toolkit contains templates that are meant to assist you in developing a five year outlook for your business. You can use or modify these templates, or create your own. In the Revenue Assumptions template, you are provided with space for three basic product lines. If you have more product lines, you will need to add sections to the template. This template is extremely basic and is meant to serve as a starting point for new businesses. Yellow coded cells are where you will enter your assumptions. Enter only numerical values. Blue coded cells are for text entries. Cells without color are coded with formulas and will be calculated based on the assumptions that you enter in the Yellow-colored cells. Instructions:

1. Begin with your primary product line. Enter the name of the product line in the blue-colored cell currently labeled “Product/Service A”. Then enter the name of the first month that you will be projecting (enter the date in the format: Month Year, e.g. February 2003).

2. Enter the price you will charge for this product/service in year one. Indicate in the blue box what units this price refers to. For example, one cake, one bicycle, a package of services, an “average” customer purchase, etc.

3. Estimate the sales volume per month for year one. That is, how many units will you sell each month. The template will calculate the monthly revenue from that product/service line and will show the seasonality by showing what percent of annual sales are generated each month.

4. Estimate the cost per unit in direct materials and direct labor costs. The template will total the cost and calculate the gross margin on each unit sale.

5. Now you will estimate future revenues. You will need to estimate increases in the three major assumptions: price, sales volume and cost of goods. You will enter the percent increase (or decrease) expected. The template will fill in the new price, sales volume and costs associated with your projected increase.

The template allows you to enter three product lines and at the bottom of the worksheet, calculates the total revenues, costs, gross profit and gross margins. If you have additional product lines, you will need to modify the template. A printed version of one completed Product Line and the total calculations is provided on the next pages.



Product/Service APricingPrice per unit = what you will charge 21.00$ Units per service (For example: per hour, per piece, per pound)

Sales Volume (Units sold) Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month

Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04Number of units to be sold each month 165 250 250 250 320 320 320 230 230 230 165Percent of total units sold 6% 9% 9% 9% 11% 11% 11% 8% 8% 8% 6%Sales Revenues (price x volume) $3,465 $5,250 $5,250 $5,250 $6,720 $6,720 $6,720 $4,830 $4,830 $4,830 $3,465 $3,465

Cost per unitDirect Material cost per unit 12.00$ Direct Labor cost per unit -

12 Total

165 28956%

$60,795

$ (Direct Labor is a tricky issue. Ask yourself if the cost truly varies with the number of units sold)Total cost per unit 12.00$ (Cost per unit should be less than the price per unit or else you will lose money on every item you sell!)

Gross Margin (%) 43% (Price minus cost, then divided by price)Gross Margin ($) 9.00$ (Price minus cost)

Increases for Years 2 - 5

Price growth rate New price

Unit sales growth rate New Volume

Sales Revenues

Cost per unit growth

rateNew cost per unit

Gross Margin

Year 2 0% 21.00$ 25% 3,619 75,994$ 1% 12.12$ 42%Year 3 1% 21.21$ 15% 4,162 88,267$ 2% 12.36$ 42%Year 4 2% 21.63$ 10% 4,578 99,035$ 1% 12.49$ 42%Year 5 2% 22.07$ 5% 4,807 106,067$ 2% 12.74$ 42%

One method of estimating increases in revenues is to think through changes in the price, sales volume and cost of goods that you will experience over the next few years. These cells allow you to look at how changes in these

factors wlll affect your revenues, margin and profits.

Insert date in format: March 2003



Revenue Model Summary

Revenues Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04Product/Service A 3,465$ 5,250$ 5,250$ 5,250$ 6,720$ 6,720$ 6,720$ 4,830$ 4,830$ 4,830$ 3,465$ 3,4$ Product/Service B 8,470$ 13,310$ 13,310$ 13,310$ 22,385$ 22,385$ 22,385$ 15,125$ 15,125$ 15,125$ 8,470$ 8,4$ Product/Service C 280$ 280$ 240$ 240$ 240$ 240$ 240$ 240$ 240$ 280$ 280$ 2$ Total Revenues 12,215$ 18,840$ 18,800$ 18,800$ 29,345$ 29,345$ 29,345$ 20,195$ 20,195$ 20,235$ 12,215$ 12,2$

Cost of GoodsProduct/Service A 1,980$ 3,000$ 3,000$ 3,000$ 3,840$ 3,840$ 3,840$ 2,760$ 2,760$ 2,760$ 1,980$ 1,9$ Product/Service B 1,400$ 2,200$ 2,200$ 2,200$ 3,700$ 3,700$ 3,700$ 2,500$ 2,500$ 2,500$ 1,400$ 1,4$ Product/Service C 140$ 140$ 120$ 120$ 120$ 120$ 120$ 120$ 120$ 140$ 140$ 1$ Total Cost of Goods 3,520$ 5,340$ 5,320$ 5,320$ 7,660$ 7,660$ 7,660$ 5,380$ 5,380$ 5,400$ 3,520$ 3,5$

Operating/Gross Profit 8,695$ 13,500$ 13,480$ 13,480$ 21,685$ 21,685$ 21,685$ 14,815$ 14,815$ 14,835$ 8,695$ 8,6$ Gross Margin (%) 71% 72% 72% 72% 74% 74% 74% 73% 73% 73% 71% 7

Annual Revenues Year 1 Year 2 Year 3 Year 4 Year 5Product/Service A 60,795$ 75,994$ 88,267$ 99,035$ 106,067$ Product/Service B 177,870$ 204,551$ 227,256$ 250,345$ 265,566$ Product/Service C 3,080$ 3,422$ 3,733$ 3,996$ 4,198$ Total Revenues 241,745$ 283,966$ 319,255$ 353,376$ 375,830$

Cost of GoodsProduct/Service A 34,740$ 43,859$ 51,447$ 57,158$ 61,216$ Product/Service B 29,400$ 34,486$ 38,694$ 42,625$ 45,216$ Product/Service C 1,540$ 1,711$ 1,866$ 1,998$ 2,099$ Total Cost of Goods 65,680$ 80,056$ 92,007$ 101,780$ 108,531$

Operating/Gross Profit 176,065$ 203,910$ 227,248$ 251,596$ 267,299$ Gross Margin (%) 73% 72% 71% 71% 71%

Projected Revenues based on changes in price, volume and cost of goods

Year 1 Forecast (month-by-month)

5-Year Projection

Total65 60,795$ 70 177,870$ 80 3,080$ 15 241,745$

80 34,740$ 00 29,400$ 40 1,540$ 20 65,680$

95 176,065$ 1% 73%



Part IV: Using the Fixed Cost Template

Fixed Cost Template In the Financial Projections Workbook, the Fixed Costs Template contains a list of possible expenses associated with a typical small business. Add and eliminate items from this list as needed. The Fixed Costs projections are formulated to allow a standard rate of increase over the course of the five years. However, when creating your projections, it is best to determine the rate of growth for each item separately. In some cases, you will know exactly how the expense will grow and in others, you will have to estimate.

Year 1 Year 2 Year 3 YeaAnnual Amount Annual Amount Annual Amount Annual Amou

Facilities ExpensesRent 12000 12360 12731 13Mortgage 0 0 0 0 0Utilities 2400 2472 2546Signage 0 0 0 0 0Office equipment (computers, copiers, fax machine) 2400 2472 2546Equipment Repair and Maintenance Services 1200 1236 1273

Administrative ExpensesInsurance 2400 2472 2546Payroll fees 300 309 318Legal fees/retainer 0 0 0 0 0Accounting fees 0 0 0 0 0Office supplies 2400 2472 2546Association Memberships 0 0 0 0 0Phone/Cell Phone/Pager 0 0 0 0 0Computer Software 500 515 530Parent nonprofit admin fee or overhead charge

Travel and Conference ExpensesConferences 0 0 0 0 0Transportation 0 0 0 0 0

Marketing and Sales ExpensesCredit Card FeesAdvertising Campaign 1200 1236 1273Fliers/coupons/other printing 2400 2472 2546Logo design/branding

Training or other Program-related ExpensesTraining curriculum 1500 1545 1591Program suppliesProgram overhead

Other/miscellaneous

Total Fixed Expenses 28,700$ 29,561$ 30,448$ 31,361$

Fixed Expense Growth Rate 3%

r 4 Year 5nt Annual Amount

113 13506

2623 2701

2623 27011311 1351

2623 2701328 338

2623 2701

546 5630 0 0 0

0 0 0 01311 13512623 2701

0 0 0 0

1639 16880 0 0 00 0 0 0

0 0 0 0

32,302$



Part IV: Using the Staffing Plan Template

Staffing Plan Template The Staffing Plan Template is a worksheet within the Financial Workbook. The template is divided into two sections: one for salaried employees and the other for those employees paid hourly. As in the Revenue Model, this is a basic template to guide your planning process and you may need to expand its scope or even redesign the model to fit your busines. In particular, you may need to develop a more detailed plan for adding part-time employees over the course of the first year as you ramp up your operations. Before you use this plan, you will need to determine the number of employees needed to fulfill the level of sales projected and provide support services as needed. To use this template, enter text in the blue colored cells and enter numerical values in the yellow-colored cells. The template will total the staffing costs in a table at the bottom of the page. A printed version of this worksheet is included here. Follow the steps below to use the staffing template.

1. Input the titles of the positions for salaried employees and the corresponding annual salary. 2. Estimate the percent of time for which each salaried employee will be paid each year. Your

business may employ some staff part time and then move them to full time as you grow. These cells allow you to demonstrate that increase.

3. Estimate the cost of living increase to be paid to salaried employees from year to year. 4. Enter the titles of the positions for hourly employees, the corresponding hourly wages and

cost of living increase. 5. Estimate the number of hours per week that each position will work each year for five

years. 6. Determine the number of employees in each position each year. This is a place where you

can increase the number of hourly employees over the years. 7. Enter the payroll tax, workers compensation rate, and fringe benefit rate for the business.

The template will total the staffing costs in the table at the bottom of the page.



Staffing Assumptions

Salaried Employees

Salaried Staff Positions Year 1 Salary Year 2 Salary Year 3 Salary Year 4 SalaryBusiness Manager 50,000$ 51,500$ 53,045$ 54,6$ Lead Mechanic 40,000$ 41,200$ 42,436$ 43,7$ Chief Financial Officer 50,000$ 51,500$ 53,045$ 54,6$ Assistant Manager -$ 30,000$ 30,900$ 31,8$ Marketing Director 45,000$ 46,350$ 47,741$ 49,1$ Human Resources/Payroll Manager 40,000$ 41,200$ 42,436$ 43,7$ Development Officer 40,000$ 41,200$ 42,436$ 43,7$

Annual cost of living increase for salary 3%

Salaried Staff Time (as % of FTE) Year 1 Year 2 Year 3 Year 4Business Manager 100% 100% 100% 1Lead Mechanic 100% 100% 100% 1Chief Financial Officer 5% 0% 0%Assistant Manager 0% 50% 50%Marketing Director 5% 0% 0%Human Resources/Payroll Manager 0% 0% 0%Development Officer 5% 5% 0%

Hourly Employees

Hourly Staff Positions and wagesYear 1 Hourly

WageYear 2 Hourly

WageYear 3 Hourly

WageYear 4 Hour

WageYouth mechanics 10.00$ 10.15$ 10.30$ 10.46$ none -$ -$ -$ -$ none -$ -$ -$ -$ none -$ -$ -$ -$

Annual cost of living wage increase for hourly 1.50%

Hourly Staff Time (Hrs/week/employee)Year 1

Hours/WeekYear 2

Hours/WeekYear 3

Hours/WeekYear 4

Hours/WeeYouth mechanics 15 15 15nonenonenone

Hourly Staff Time (Number of employees) Year 1 Year 2 Year 3 Year 4Youth mechanics 4 5 6nonenonenone

Staffing Expenses:Payroll taxes 9.425% % of total wagesWorkers comp - other 2.32% % of total wagesFringe benefits 20.00% % of total wagesWeeks per year 52.00 weeks used to calculate annual wages

Year 5 Salary36 56,275$ 09 45,020$ 36 56,275$ 27 32,782$ 73 50,648$ 09 45,020$ 09 45,020$

Year 500% 100%00% 100%

0% 0%50% 50%

0% 0%0% 0%0% 0%

ly Year 5 Hourly Wage

10.61$ -$ -$ -$

kYear 5

Hours/Week15 15

Year 5 7 8



Year 1 Year 2 Year 3 Year 4Business Manager 65,873$ 67,849$ 69,884$ 71,9$ Lead Mechanic 52,698$ 54,279$ 55,907$ 57,5$ Chief Financial Officer 3,294$ -$ -$ -$ Assistant Manager -$ 19,762$ 20,355$ 20,9$ Marketing Director 2,964$ -$ -$ -$ Human Resources/Payroll Manager -$ -$ -$ -$ Development Officer 2,635$ 2,714$ -$ -$ Subtotal Salaried Employees 127,463$ 144,603$ 146,146$ 150,5$

Youth mechanics 31,200$ 39,585$ 48,215$ 57,0$ none -$ -$ -$ -$ none -$ -$ -$ -$ none -$ -$ -$ -$ Subtotal Hourly Employees 31,200$ 39,585$ 48,215$ 57,0$ Total Staffing Costs 158,663$ 184,188$ 194,361$ 207,624$

Total Staffing Costs:Year 5

81 74,140$ 85 59,312$

-$ 65 21,594$

-$ -$ -$

30 155,046$

94 66,229$ -$ -$ -$

94 66,229$ 221,275$



Part IV: P-Flow Analysis

P-Flow Worksheet Think about your 4 Ps (Product, Price, Place and Promotion). As you fill in the chart, consider the extent to which one element makes sense in terms of the others. For example, Recycle-A-Bicycle targets the messenger and student market segments because Recycle-A-Bicycle bikes are more affordable than a new bike (average price of $125). In addition, promotions are primarily generated through grassroots efforts and word of mouth, both of which are strong ways to reach the messenger and student market segments. It would not make sense for Recycle-A-Bicycle to create glossy advertisements in Bicycling Magazine because those readers are more likely looking to buy new, high-end bikes.

FOUR P’S DESCRIPTION Describe the attributes of your product?

Product

What are the benefits? Who are your competitors? What are your costs?

Price

What is the value perception?


Part IV: P-Flow Analysis

Segmentation (list important customer groups in your market): Target (identify which of the segments will be your primary and secondary targets):

Promotion

Tools (list the tactics, as of now, that you think you will use to promote your business): Describe your current channels of distribution:

Place

List any other distribution opportunities:


Part IV: Positioning

Developing Your Positioning Statement Primary Positioning: [PRODUCT or SERVICE] is the brand of [CATEGORY] which to [TARGET] delivers [Unique BENEFIT] Now, create a secondary positioning statement. Change the target, and/or the benefit. This statement should represent the business opportunity that you feel is almost as important as your primary focus. Secondary Positioning: [PRODUCT or SERVICE] is the brand of [CATEGORY] which to [TARGET] delivers [Unique BENEFIT]



Part IV: Developing Indicators

Developing Indicators and Quick Test Worksheet

Instructions: 1. Identify the initial, interim, or long-term outcomes that you want to measure. Write the outcome below. 2. Describe this outcome in words. 3. Based on these descriptions, identify indicators or measures. 4. For each indicator, assess whether it is useful and practical. Outcome: _____________________________________________________________________

Outcome Description in Words

Indicator Useful? Practical?



Part IV: Data Collection

Data Collection and Management Worksheet Instructions: 1. Identify the outcome you want to capture and write it in below. 2. From the Indicators Worksheet, select the “best” indicators for the outcome. 3. Determine the data collection strategy. Identify how the data will be collected, what data

collection instrument will be used, who will be responsible, and how often the data will be collected?

Outcome to Measure: ______________________________________________________ Indicator Data Source and

Methods Data Collection Instruments

Who Will Collect the Data?

When will the Data be collected?



Part IV: Outcomes Management

PM&MSM Outcomes Tracking Template

OUTCOMES Indicators Status as of 3/31/03

Year 1 Target (4/1/02 - 3/31/03)

Year 2 Target (4/1/03 - 3/31/04)

Example: Reduction in waste entering NYC waste stream

Example: Tonnage of donated bikes collected

8 tons 15 tons 25 tons

Example: Youth acquire job skills and move into better paying long-term employment

Example: Number of students leaving the Recycle-A-Bicycle training program for full-time employment

10 20 30

Example: Average wage earned by youth

Minimum wage

10% above minimum wage

10% above minimum wage


Part IV: Outcomes Management

Uses of the Management Report

Who uses information?

What information do they need to know?

Why do they need to know information?

When do they need to know information?

Board Outputs & Outcomes Information

- Monitor Progress & Guide Planning

Quarterly Board Meeting

Senior Staff All (Inputs, Activities, Outputs, & Outcomes Information)

- Monitor & Manage Progress - Improving Performance

Monthly

Line Staff/ Supervisors

Inputs, Activities & Outputs Information

- Program Management - Day to Day Oversight

Weekly/Daily

Funders Inputs & Outcomes Information

Evaluate Investment Six month/Annual

Template for Management Report Who uses

information? What information do they need to know?

Why do they need to know information?

When do they need to know information?


Part IV: Sample Financial Statements

Sample Balance Sheet

June 30, 1998 JuAssets

Current Assets:Cash and Cash Equivalents 222,709$ $ Short-Term Investments 20,343Accounts Receivable - Net 143,928Merchandise Inventory 2,104,845Deferred Income Taxes 56,124Other Current Assets 37,734

Total Current Assets 2,585,683

Property, Less Accumulated Depreciation 3,636,917Long-Term Investments 28,716Other Assets 93,335

Total Assets 6,344,651$ $

Liabilities and Shareholders' E

ne 30, 1997

195,146 16,155

118,4081,714,592

34,11631,185

2,109,602

3,005,19935,16169,315

5,219,277

quity

Current LiabilitiesShort-Term Borrowings 92,475$ $ Current Maturities of Long-Term Debt 99,019Accounts Payable 1,133,177Employee Retirement Plans 80,104Accrued Salaries and Wages 112,749Other Current Liabilities 247,820

Total Current Liabilities 1,765,344

Long-Term Debt, Excluding Current Maturities 1,283,092Deferred Income Taxes 160,263

Total Liabilities 3,208,699

Total Shareholders' E

98,104 12,478

969,77764,66983,377

220,9151,449,320

1,045,570123,778

2,618,668

quity 3,135,952$ $

Total Liabilities and Shareholders' E

2,600,609

quity 6,344,651$ $

See accompanying notes to consolidated financial statements.

SAMPLE COMPANYCONSOLIDATED BALANCE SHEET

Period End: June 30, 1998

5,219,277



Sample Income Statement

Years Ended on June 30, 1998 June 30,

Net Sales 12,244,882$ $ Cost of Sales 8,950,156

Gross Mar

1997

10,136,8907,447,117

gin 3,294,726

Expenses:Selling, General and Administrative 2,118,149Store Opening Costs 71,651Depreciation 271,769Interest (Note 13) 74,735

Total Ex

2,689,773

1,754,78069,999

240,88065,567

penses 2,536,304

Pre-Tax Earnin

2,131,226

gs 758,422

Income Tax Provision 276,000

Net Earnin

558,547

201,063

gs 4$ $ See accompanying notes to consolidated financial statements.

Period Ending: June 30, 1998

SAMPLE COMPANYINCOME STATEMENT

82,422 357,484




e 30, 1997

Cash Flow Statement

Years Ended on June 30, 1998 Jun

Cash Flows From Operating Activities:Net Earnings 482,422$ $ Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:

Depreciation 271,769Amortization of Original Issue Discount 445Increase in Deferred Income Taxes 14,337Loss on Disposition/Writedown ofFixed and Other Assets 23,540

Changes in Operating Assets and Liabilities:Accounts Receivable - Net (25,520)Merchandise Inventory (390,253)Other Operating Assets (6,313)Accounts Payable 163,400Employee Retirement Plans 75,508Other Operating Liabilities 87,513

Net Cash Provided b

357,484

240,880192

7,637

14,263

(846)(108,712)

6,73255,61060,52731,103

y Operating Activities 696,848

Cash Flows from Investin

664,870

g Activities:(Increase) Decrease in Investment Assets:Short-Term Investments 19,848Purchases of Long-Term Investments (19,866)Proceeds from Sale/Maturity of Long-Term Investments 2,644(Increase) Decrease in Other Long-Term Assets (18,528)Fixed Assets Acquired (928,040)Proceeds from the Sale of Fixed/Other Long-Term Assets 38,202Net Cash Used in Investin

25,773(15,384)

4,811(5,472)

(772,792)31,183

g Activities (905,740)

Cash Flows from Financing Activities:Net Increase (Decrease) in Short-Term Borrowings (5,629)Long-Term Debt Borrowings 296,159Repayment of Long-Term Debt (15,458)Proceeds from Stock Options Exercised 12,140Cash Dividend Payments (50,757)Net Cash Provided b

17,199265,795(32,781)

210(28,653)

y Financing Activities 236,455

Net Increase (Decrease) in Cash and Cash Equivalents 27,563Cash and Cash Equivalents, Beginning of Year 195,146Cash and Cash E

221,770

154,75940,387

quivalents, End of Year 222,709$ $

See accompanying notes to consolidated financial statements.

SAMPLE COMPANYCASH FLOW STATEMENT

Period Ending : June 30, 1998

195,146

(731,881)



Part V containsthe full text of theRecycle-A-BicycleBusiness Plan.

Part VSample Business Plan


RECYCLE- A- BICYCLE, INC. NEW YORK

BUSINESS PLAN

APRIL, 2003

CONFIDENTIAL

FOR MORE INFORMATION, CONTACT KAREN OVERTON, EXECUTIVE DIRECTOR 55 WASHINGTON STREET, BROOKLYN, NY 11201 [email protected]

© 2003 RECYCLE-A-BICYCLE NEW YORK

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.1




TABLE OF CONTENTS

I. EXECUTIVE SUMMARY 5

II. MARKET OPPORTUNITY 11

DEMAND FOR BICYCLES CONTINUES TO GROW NATIONALLY ERROR! BOOKMARK NOT DEFINED. CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG 12 RECYCLE-A-BICYCLE COMPETES WELL AGAINST OTHER BICYCLE STORES 13 RECYCLE-A-BICYCLE HAS A STRONG PRESENCE IN ITS RETAIL TRADE AREAS 14 CUSTOMERS SEEK VALUE IN THEIR BICYCLES 14 RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE 16 MARKET OPPORTUNITY SUMMARY 16

III. BUSINESS MODEL 17

DESCRIPTION OF PRODUCTS AND SERVICES 18 “RE-MANUFACTURING” THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE 25 COMPETITIVE ADVANTAGES 20 STRATEGIC PARTNERSHIPS AND RELATIONSHIPS 21 REVENUE MODEL OVERVIEW 22

IV. SOCIAL OUTCOMES TRACKING 37

SOCIAL INDICATORS OF SUCCESS 37 ENVIRONMENTAL INDICATORS OF SUCCESS 38

V. OPERATIONS: FIVE YEAR STRATEGIC PLAN HIGHLIGHTS 25

SUMMARY OF STRATEGIC INITIATIVES 30

VI. MANAGEMENT TEAM 33

MANAGEMENT TRACK RECORD 33 PERSONNEL NEEDS BY STAGE OF DEVELOPMENT 29

VII. FINANCIALS 37

FINANCIAL ESTIMATES AND ASSUMPTIONS 41 RISKS AND STRATEGIES FOR MITIGATION 45 CAPITAL NEEDS, TIMELINE AND BENCHMARKS 47 APPENDICES





I. EXECUTIVE SUMMARY OVERVIEW Recycle-A-Bicycle, a thriving 501©3 nonprofit, has a dual mission: to provide youth development opportunities to at-risk populations in New York City and to promote environmental stewardship. The nonprofit operates two successful full-service used bicycle shops that employ young people trained in bike repair and mechanics. Through these bicycle shops, Recycle-A-Bicycle offers affordable and environmentally sustainable transportation options for commuters, recreational bikers and messenger/delivery persons. As a social enterprise, Recycle-A-Bicycle has a triple bottom line in which the social and environmental missions are balanced with financial returns. Since 1997, Recycle-A-Bicycle has salvaged bikes from the waste stream and refurbished them to sell to the public. Recycle-A-Bicycle also trains young people to fix bikes and assists them in acquiring the soft skills required in today’s competitive job market. Working closely with the Henry Street Settlement and Children’s Aid Society, Recycle-A-Bicycle integrates financial, social and environmental concerns into a successful business model. Recycle-A-Bicycle currently operates two retail stores, one in the East Village of Manhattan, the other in DUMBO, Brooklyn, New York. Toward these goals, Recycle-A-Bicycle:

1. Collects donated bicycles destined for dumping. 2. Trains at-risk youth for positions as bike mechanics and sales people, builds skills in

basic business concepts and computer training, and provides a safe alternative that is a positive influence on their development.

3. Refurbishes used bicycles through a training program. 4. Sells the bicycles to the community as an affordable, quality transportation option. 5. Employs graduates of the training program. 6. Operates retail stores that also sell accessories and repair services that diversify the

revenue stream and create additional profit. 7. Offers classes to adults on bicycle repair.

Recycle-a-Bicycle is at a critical juncture in its growth. While the business is currently profitable, the potential for further growth is significant. To better serve its mission and to address the demand for used bikes, Recycle-A-Bicycle plans to create a new production facility, fill key staff positions and enhance its infrastructure. By pursuing these strategies, Recycle-A-Bicycle can increase its youth outreach by more than 100%1 in the next two years as well as create an organization that is sustained on its operating cash flow, thus reducing dependency on corporate grant funds. MARKET OPPORTUNITY

1 Outreach refers to the number of youth involved in any RAB activity, including both youth training and organized youth bike rides.



The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the United States. Recent studies show that in the Northeast, 28% of adults participated in biking activities during a one-year period. New York City boasts a healthy cycling community consisting of commuters (over 100,000 people commute by bike each day), bike messengers/delivery persons and professional and recreational riders. Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in many cyclists wanting to purchase an affordable bike as well as one that is less likely to be stolen. The prohibitive cost of a new bike also generates business at used bike stores. Demand has outpaced Recycle-A-Bicycle’s capacity for the past three years. Despite the demand, used bike stores are not prevalent in New York City. Within Recycle-A-Bicycle’s trade areas, there are few other used bike sellers due to the high costs associated with used bikes including labor to repair, inventory system requirements and insurance. The supply of used bikes is also strong. National trends in cycling report that the number of bicycles purchased each year remains relatively constant while the number of people riding is declining. This indicates that more bicycles are being consumed per rider.

YEAR BICYCLES CONSUMED (MILLIONS)

U.S. RIDERSHIP (MILLIONS)

BICYCLES CONSUMED PER RIDER

1995 16.2 56.3 0.28 1998 15.8 43.5 0.36 2001 16.7 39.0 0.42

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001 Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.

COMPETITIVE ADVANTAGE OF RECYCLE-A-BICYCLE Recycle-A-Bicycle offers a unique product and service. Its social and environmental missions make it the only socially responsible bicycle retailer in New York City. Recycle-A-Bicycle has built a trusted brand name and its products are well known as quality alternatives to traditional new bicycles. Customers often say these bicycles are better than new, referring to both the quality and the social mission. Many customers are attracted by the low prices but feel much more compelled to purchase when they learn of the social and environmental stewardship that the organization embodies. Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City. Because of low labor and materials costs, Recycle-A-Bicycle is able to offer bicycles at very affordable prices, most at 50% less than a comparable new bicycle. The youth programs inspire young people to make better life decisions and touch many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-



being, provides a goal-oriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An “I can do it” attitude pervades Recycle-A-Bicycle. MANAGEMENT TEAM The management team consists of three highly skilled and dedicated staff with over 10 years of experience in bicycling retailing, 13 years in transportation advocacy, and over 7 years experience in youth education. The team has proven its ability over the years and is continuing to develop new strengths. The three key staff members are:

• Karen Overton - Executive Director Ms. Overton is the founder and leader of Recycle-A-Bicycle. Ms. Overton worked as the Bikes for Africa Project Director at the Institute for Transportation and Development Policy; a consultant for the World Bank, in the International Development Bank, African American Institute; and Pedals for Progress.

• Jared Bunde - Manager, DUMBO Shop Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as a messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as a bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. He has also excelled in his racing career, winning a silver medal for the NY State Track Cycling Championship in 2000 and 2002.

• Yoandy Ramirez - Manager, East Village Store Mr. Ramirez started his career with Recycle-A-Bicycle as a Summer Youth Employment student in 1999. Based on his hard work, Mr. Ramirez was promoted to Assistant Manager in June 2002 and most recently became the East Village Store Manager. He will graduate high school this summer and aspires to pursue a degree in computer science.

Members of the Board of Directors complement the skills presented by the management team. The Board consists of dedicated individuals from the following professions: education, finance, social work and transportation advocacy. Each Board member brings enthusiasm, a unique skill perspective and a broad network of contacts to the organization. SOCIAL AND ENVIRONMENTAL IMPACT To date, Recycle-A-Bicycle has worked with over 4,500 youth and staffed an average of 15 positions per year. Recycle-A-Bicycle improves the lives of at-risk youth in the New York City metro area through a hands-on, formal training program in bike repair, small business and environmental education. After completing the training program, many youth fill the part- and full-time positions available at the Recycle-A-Bicycle retail stores. In addition, some secure positions in other bike shops



across New York City. The organization’s strategic partners provide qualified youth counselors that recruit and work with young people who need assistance with basic job readiness skills and who can intervene in the case of serious issues regarding the social or mental well-being of participants. In 2002, Recycle-A-Bicycle worked with 772 youth through its training program. Over the next five years, the organization will increase its youth impact by 54%. In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New York City. In 2002, Recycle-A-Bicycle recycled over 14 tons of material destined for New York City’s landfills. Recycle-A-Bicycle expects to increase the amount of materials recycled to over 27 tons in 2007.

5-Year Projected Outcomes 2003 2004 2005 2006 2007

Youth participants to be trained 780 850 950 1050 1200 Number of positions to be filled2 22 28 31 34 37

Tonnage of material to be removed from the waste stream

17 22 24 26 27

FINANCIAL OVERVIEW Recycle-A-Bicycle plans to make three key investments over the next three to five years to expand its programs and create opportunity for revenue growth:

• Acquire a production and training facility that will provide an expanded and dedicated space for training youth as well as refurbishing bikes, therefore meeting more of the demand for used bikes in New York City;

• Acquire a van and hire transportation staff to allow for more strategic and coordinated pick-up of donated bikes as well as transfer of inventory between production facility and retail stores; and

• Hire additional staff to enable the organization to raise capital from institutional grantors for business expansion as well as for increased training and youth program services.

Recycle-A-Bicycle projects net operating losses in 2003 while development and fundraising efforts are invigorated, and the marketing, internet sales capacity, retail signage/merchandising, and other critical corporate infrastructure projects are further developed. The results of this investment will be greater sales revenue and significant improvement in net margin.

2 Includes both full and part time positions



Summary of revenue projections and net income

ecycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year

003 Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000

t

ts.

04 Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. re of

the

005 Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset

y Teens

ecycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track

l

ecycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer

ally

or more information on Recycle-A-Bicycle, please contact Karen Overton, Executive Director at [email protected].

-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year

003 Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000

t

ts.

04 Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. re of

the

005 Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset

y Teens

ecycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track

l

ecycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer

ally

or more information on Recycle-A-Bicycle, please contact Karen Overton, Executive Director at [email protected].

2003 2004 2005 2006 2007Sales Revenues 167,657$ 232,932$ 290,281$ 318,775$ 334,446$ Grant Revenues 71,091$ 176,396$ 172,049$ 188,875$ 198,129$ Net Income (11,472)$ 47,868$ 80,105$ 111,275$ 126,475$ Net Retail Margin n/a 21% 28% 35% 38% RStrategic Plan. These grants will be pursued through institutional funders with an interest in environmental stewardship and/or youth development.

Strategic Plan. These grants will be pursued through institutional funders with an interest in environmental stewardship and/or youth development. 22

in grant funding will serve as working capital to support current operations as well as implement new marketing efforts. The additional $100,000 will supporhiring new staff, support costs associated with sourcing and obtaining the new production and training center and provide for other infrastructure improvemen

in grant funding will serve as working capital to support current operations as well as implement new marketing efforts. The additional $100,000 will supporhiring new staff, support costs associated with sourcing and obtaining the new production and training center and provide for other infrastructure improvemen

2020These funds will be used in part for working capital and in part to support mothe Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the production and training center, hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will be used for a down payment on the production and training center. Recycle-A-Bicycle will raise additional $106,000 through fundraising efforts spearheaded by the new Development Officer.

These funds will be used in part for working capital and in part to support mothe Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the production and training center, hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will be used for a down payment on the production and training center. Recycle-A-Bicycle will raise additional $106,000 through fundraising efforts spearheaded by the new Development Officer.

22additional costs related to expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours bprogram.

additional costs related to expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours bprogram.

RRrecord of growth and is now looking for capital in order to expand the social and environmentaoutcomes and develop more sustainable systems within the business.

record of growth and is now looking for capital in order to expand the social and environmentaoutcomes and develop more sustainable systems within the business. RRand small business in New York City. The organization serves a triple bottom line, benefiting the at-risk youth and the New York City environment through a business model that is moving toward sustainability. Recycle-A-Bicycle is seeking to increase its effectiveness in all three areas – social, environmental and financial. As one of the leading organizations combining youth education, recycling and bicycling, Recycle-A-Bicycle has the capability to expand locas well as develop a national reach.

and small business in New York City. The organization serves a triple bottom line, benefiting the at-risk youth and the New York City environment through a business model that is moving toward sustainability. Recycle-A-Bicycle is seeking to increase its effectiveness in all three areas – social, environmental and financial. As one of the leading organizations combining youth education, recycling and bicycling, Recycle-A-Bicycle has the capability to expand locas well as develop a national reach. FF





II. MARKET OPPORTUNITY DEMAND FOR BICYCLES CONTINUES TO GROW NATIONALLY Bicycling has long been a pastime of children and adults alike and are used most often for social and recreational purposes. In fact, bicycle riding is now the seventh most popular sport in the country (out of 62). In July 2001, the Bureau of Transportation Statistics estimated that approximately one in four adults (25%) in the United States had used a bicycle in the last 30 days. An Outdoor Industry Association Report found that within the Northeast, over 28% of adults participated in biking activities during 1994-1995. However, cycling is highly seasonal and usage declines to as low as one in ten in the winter months. Statistics show that the number of bicycles purchased each year remains relatively consistent while the number of people riding is declining. This indicates that more bicycles are being consumed per rider.

YEAR BICYCLES CONSUMED (MILLIONS)

US RIDERSHIP (MILLIONS)

BICYCLES CONSUMED PER RIDER

1992 15.4 54.6 0.28 1995 16.2 56.3 0.28 1998 15.8 43.5 0.36 2001 16.7 39.0 0.42

10 Yr. Avg. 16.7 48.3 0.34 Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001 Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.

With fewer people cycling and a constant number of bicycles being consumed, either consumers are accumulating more bicycles or disposing of more bicycles. Recycle-A-Bicycle’s experience points to the latter. Further evidence of this “disposable” bike culture was indicated in the keynote presentation at the 2002 Taipei International Cycle Show, when Yoshizo Shimano, Chairman of Shimano Inc. said:

“American consumers buying mass-merchant bikes ride them fewer than 60 miles before hanging them up in their garages. In Japan the bicycle is so devalued that consumers dumped them in the streets creating a public nuisance. They [bicycles] have become a throw-away commodity.”

Source: Bicycle Retailer and Industry News, May 1, 2002 Recycle-A-Bicycle provides a unique solution to the commodification of bicycles while offering affordable, environmentally sound transportation and recreation options to residents of New York City.



CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG Using a conservative average (20% less than the national standard), nearly 200,000 new bicycles are consumed annually in Brooklyn and Manhattan alone:

UNITED STATES BROOKLYN MANHATTAN Population 277,800,000 2,465,326 1,459,596Bicycle Consumption per 1000 people

60.2 50 50

Annual Bicycle Consumption

16,700,000 123,266 72,979

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001. New York Data estimated CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG New York City boasts a healthy cycling community consisting of commuters, bike messengers/delivery persons, and professional and recreational cyclists. The New York City Department of Transportation estimates that 100,000 people commute by bike daily. In addition, there are several active bike-oriented organizations and clubs with memberships totaling over 10,000. The Five Borough Bike Tour, the largest cycling event in the U.S., takes place in New York City with a ridership of 30,000. Cyclists flock to New York City parks on the weekends during good weather. There are also New York City industries dependent on cyclists: messenger services, food delivery and pedicabs. New York City has over 100 miles of bike lanes and an additional 75 miles of Greenways for use by cyclists. For the most part, New York City's terrain is flat, and the high density and mix of land use lend themselves to cycling. Traffic and parking are constant problems facing drivers and cycling is generally a faster mode of transport for trips within a five-mile range. According to one bike shop manager, cyclists will be active in temperatures of 50 degrees Fahrenheit and above, leaving only the winter season unpopular for biking. The events of September 11th converted some commuters into cyclists. At this time, many people’s access to public transportation was disrupted or they became anxious about the possibility of biological warfare in the subways. The East Village shop did a record volume of sales and repairs from September to December. With a bus and subway fare hike scheduled for May 2003, the number of commuters cycling to work is expected to increase as commuters will choose to cycle rather than pay $4 daily for a round trip. On a more positive note, the government’s recent investment in New York City’s bicycle infrastructure, perceived to make conditions safer, helps to encourage cycling. These investments include $1.5 million, received in 1994, to plan and implement a comprehensive bicycle network for New York City. Through this effort, 500 miles of bicycle routes have been identified and New York City has produced the New York City Bicycle Master Plan as well as the first-ever New York Cycling Map. In 1996, an additional $2.4 million was invested in the implementation of the Plan.



Both of Recycle-A-Bicycle’s shops directly benefit from these improvements. A new bike lane is being painted along Avenue C in the East Village, directing cyclists from the Williamsburg Bridge to pass by the shop. More impressively, a dedicated bike/pedestrian path is under construction that will run along the East River on the Brooklyn side. One of the main entrances is located at Washington Street just one block from one of RAB’s shops. RECYCLE-A-BICYCLE COMPETES WELL AGAINST OTHER BICYCLE STORES Overview The retail bike industry in New York, like most cities in the country is comprised mainly of small, independent bicycle retailers that primarily serve neighborhood clientele. Mass merchants like K-Mart and Toys-R-Us and sporting goods stores like Sports Authority also sell bicycles. Among sellers of new bikes, mass merchants and department stores are the greatest competition for Recycle-A-Bicycle because they offer products at affordable prices. However, these competitors are not equipped to handle adjustments or repairs and do not employ professional bike mechanics trained to offer appropriate customer service. In addition, the selection is often limited and the bikes may not be assembled properly. Recycle-A-Bicycle is not in direct competition with most independent bicycle shops in New York City because the majority of these shops cater to the high-end market. The price of a new bicycle in these shops typically begins at $200. Recycle-A-Bicycle maintains favorable relationships with many of these stores and often will receive donations of materials from them. However, bike shops make their highest profit margin from the sale of parts and accessories and Recycle-A-Bicycle competes with these stores for accessory sales. Few barriers exist to opening a bicycle retail store, though a capital outlay of approximately to $100,000 is required ($80,000 investment in inventory, $10,000 in tools, and $10,000 in other various costs, plus a good credit history). In general, dealer margins have been declining on bicycles and accessories, and more retailers are closing. Recycle-A-Bicycle does not anticipate any new retailers opening in the East Village or DUMBO trade areas in the immediate future. New York City Market for the Sale of Refurbished/Used Bikes Most bike shops do not offer used bikes because the cost of labor to repair them is high, and because selling used bikes requires an additional inventory system and liability policy (new bikes are insured by the manufacturer). Furthermore, due to the high rate of theft in New York City, many consumers want assurance that the bikes are sourced from legitimate places, requiring bike shops to develop additional inventory and sourcing systems. Used bicycle dealers are the primary competition for RAB and will be discussed in detail with regard to the trade area of each of the retail stores. Thrift stores are another source for used bicycles. These stores offer inexpensive bicycles, however the supply is not steady and a bike is sold "as is", meaning that it has not been repaired and may not be safe to ride.



RAB has identified a market niche, used bicycles. Given the additional requirements such as a liability policy and inventory system, the majority of bike shops only sell new bicycles. While RAB directly competes with these shops for the sale of accessories, its core product of affordable, refurbished bicycles distinguish it from other bike retailers. RECYCLE-A-BICYCLE HAS A STRONG PRESENCE IN ITS RETAIL TRADE AREAS Recycle-A-Bicycle offers a unique product and service bundle that experiences limited competition in its two distinct retail trade locations. East Village, Manhattan, Retail Competition Bicycle retailers in the Lower East Side include:

• Frank's Bike Shop on Grand St • Bikes by George on 12th St/1st Ave; • Bike Works on Ridge St; • Two local thrift shops on Ave. B and 6th St/1st Ave; • Mobile bike mechanics on 7th St/Ave C and 10th St/Ave. A.; and, • Local department stores including Toys-R-Us at Union Square and K-Mart at Astor

Place. A healthy underground market of stolen bicycles sold in the neighborhood (i.e. Thompkins Square Park) also exists, but for the past few years the police have been controlling these venues. The trade area of the East Village Store is shown in Appendix B. The East Village is an established retail center with many affordable varieties of retail. DUMBO, Brooklyn, Retail Competition There are no other bike dealers in DUMBO. All are outside the radius shown on the trade area map in Appendix C. Internet Sales Competition There are no direct internet competitors for our product and service mix. Used bicycles are available on ebay, but there are few websites offering quality used bikes or parts. Recycle-A-Bicycle is planning to extend its internet sales capabilities to take advantage of this void as our prices are competitive even outside of New York. CUSTOMERS SEEK VALUE IN THEIR BICYCLES A strong market exists for used bikes because many consumers are unwilling or unable to purchase new bikes that typically start at $200 – 250. A typical RAB customer for a bicycle purchaser is 20 – 45 years old, will use a bicycle as a primary means of transportation, and has a median income of at least $20,000. Secondary customers are in similar age demographics, but will use the bicycle primarily for recreational purposes. Repair services and parts are sold to a wider variety of cyclists, and Recycle-A-Bicycle is a strong supplier to the messenger and delivery bicycling communities. One in three customers shop at Recycle-A-Bicycle because they recently had a bicycle stolen. This was determined during a survey of shoppers conducted over a month in summer 2002.



These customers reported that they were interested in purchasing a cheap, beat-up looking bicycle to reduce the likelihood of theft. Customers in this situation are also happy to learn that Recycle-A-Bicycle tracks every bike - from its source of donation to its final destination. Business is built on its reputation to avoid dealing in stolen bikes. The majority of customers purchase a bicycle to meet their primary transportation needs. Parts and repair sales tend to sell to the messenger and commuter communities. The fix-a-flat stations are busy in the summer serving these two communities and the enhanced accessory lines also appeal to these groups. East Village Customers Residents of the East Village are aware of Recycle-A-Bicycle as the organization has operated in the neighborhood for five years. The organization is well known and has attracted many local supporters. Key target customer groups include:

• New York University and Baruch College students; • Cyclists using the Williamsburg Bridge as a throughway to Manhattan; and, • Neighborhood residents shopping at other Avenue C retail storefronts.

DUMBO Customers DUMBO is seeing a revitalization of retail spaces attracting more residents to shop within the neighborhood. A new community bank opening directly across the street will dramatically increase foot traffic in front of the store. The new store is beginning to cultivate a repeat clientele. Marketing efforts are focused on Brooklyn, and the local artists and students have been the biggest market. The neighborhood is becoming more ‘upscale’ with several warehouse to condo conversions occurring. Key target customer groups include:

• New York Technical College and Long Island College which are in the trade area; • Cyclists using the paths off of the Manhattan Bridge and Brooklyn Bridge; and, • Cyclists using the East River Greenway.

ATTRIBUTE EAST VILLAGE

10009 ZIP CODE ALL OF MANHATTAN

DUMBO 11201 ZIP CODE

ALL OF BROOKLYN

Resident Population

58,595 1,459,596 47,746 2,465,326

Over age 18 46,290 1,213,652 40,687 1,802,827Ages 20 – 45 35,687 709,052 23,692 941,531% Renters 92.6% 80% 64.8% 72.9%Median Earnings

$43,767 $48,281 $56,293 $31,896

% bike to work 2.9% 0.9% 0.7% 0.5%Source: 2000 Census, Census 2000 Summary Files (SF-1, SF-3) by Zip code; Manhattan = 100 3-Digit ZCTA; Brooklyn = 112 3-Digit ZCTA



RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE As evidenced from the above chart, Recycle-A-Bicycle is located in prime home markets for bicycle commuters. East Village residents ride their bike to work nearly three times that of other Manhattan residents. The DUMBO trade area rate of cycling is also higher than the Brooklyn average, and should continue to grow. MARKET OPPORTUNITY SUMMARY Recycle-A-Bicycle faces a welcome challenge: to recycle the supply and meet the demand for used bicycles in New York City. The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the United States and studies show that adults frequently participate in biking activities. New York City boasts a healthy cycling community consisting of commuters (over 100,000 people commute by bike each day), bike messengers/delivery persons, and professional and recreational riders. Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in many cyclists wanting to purchase both an affordable bike as well as one that will be less likely to be stolen in the future. The prohibitive cost of a new bike also generates business at used bike stores. Demand has outpaced Recycle-A-Bicycle’s capacity for the past three years. Despite this demand, used bike stores are not prevalent in New York City. Within Recycle-A-Bicycle’s trade areas, there are few other used bike dealers. In addition, most retail bike shops do not carry used bikes due to the high cost of labor that is required to refurbish the bikes. The supply of used bikes is also strong. National trends in cycling indicate that bicycle consumers are purchasing more bikes, though ridership remains constant. This creates a situation in which there are many bikes either sitting idly in storage or being thrown out or abandoned. In New York City, as space is at a premium, the latter situation is more likely. Recycle-A-Bicycle estimates that the supply of used bicycles is ten times greater than what the business can currently collect; these unused bicycles currently end up in landfills.



III. BUSINESS MODEL

Recycle-A-Bicycle provides environmental education and job training for New York City youth.

Source: Recycle-A-Bicycle Mission Statement Recycle-A-Bicycle, a growing social purpose business, is a manufacturing and retail venture that provides youth with training and employment opportunities by refurbishing and selling used bicycles as well as offering accessories and parts and repair services. Recycle-A-Bicycle is built around the concepts of youth development and environmental stewardship. First, Recycle-A-Bicycle collects bicycles destined for the dump. These bikes are then processed by young people involved in the youth training program and sold to the community as an affordable alternative transportation option. Retail activities follow the principals of reuse, reduction and recycling. The two elements go hand in hand to create a viable business. Recycle-A-Bicycle’s operations generate considerable community benefits: waste reduction, an affordable source of non-polluting transportation, youth education, work force preparation, job creation and constructive social programming for youth.

• Recycle-A-Bicycle provides affordable and environmentally sustainable transport. • Recycle-A-Bicycle trains youth for positions as bike mechanics and sales people, build

skills in basic business concepts and computer training, and provide a safe alternative that is a positive influence on their development.

The youth training program provides Recycle-A-Bicycle with a relatively low cost labor input for the remanufacturing process. Youth are trained in the basic mechanics of bicycles and further benefit by developing job skills and understanding basic business concepts. In addition, they earn a stipend or school credits for their participation and they have the opportunity to earn their own bicycle as an incentive, which they are encouraged to use as their mode of transport to and from work or school. Students are trained at our DUMBO, Brooklyn facility or Children’s Aid Society partner site, and then have the opportunity to work in one of two retail shops, once they have demonstrated a certain level of competence. In 2002, Recycle-A-Bicycle worked with over 770 youth. Recycle-A-Bicycle takes advantage of very low cost raw materials supply. With a fairly limited amount of outreach, Recycle-A-Bicycle is able to capture over 1,000 bicycles per year from the waste stream. In accordance with the environmental mission, Recycle-A-Bicycle accepts bikes in any condition. This provides a critical advantage in parts sourcing and materials reuse. On average, the business has removed 13 tons of waste per year from the waste stream, for the past 7 years. Recycle-A-Bicycle is facing growing supply and demand for our product. Recycle-A-Bicycle has a proven track record and is now seeking capital to expand the social and environmental reach and develop more sustainable systems within the business.



DESCRIPTION OF PRODUCTS AND SERVICES Recycle-A-Bicycle operates two stores offering used bicycles, full repair services, and parts and accessories for bicyclists. East Village, Manhattan Store 75 Avenue C, New York, NY 10009 • Located in the East Village of

Manhattan. • RAB has operated in this

neighborhood since 1997. • The current location on Avenue

C opened in October 2000. • Sales have consistently grown. • Open Monday to Friday from 1

to 7pm and Saturday from 10am to 4pm.

• There are two work stands for repairs and on average three employees.

• Average sales are $234 per day. The East Village store at its opening.

DUMBO, Brooklyn Store 55 Washington Street, Brooklyn, NY 11201 • Located in newly revitalized

Brooklyn neighborhood, DUMBO (“Down Under the Manhattan Bridge Overpass”).

• The store opened in October 2002.

• Open Monday to Saturday from 12 to 7pm.

• Training classes are held in the evenings and weekend morning hours.

• The store has four workstations for repairs and training and on average 2 employees.

• Recycle-A-Bicycle administrative offices are located here.

• Average sales are $123 per day.

DUMBO Store during a local artists exhibition co-promotion



Recycle-A-Bicycle’s growing success can be attributed to the fact that it has moved to more accessible locations and has built a solid reputation in the community. Repeat customers are common, as well as visitors who were referred by word of mouth. A majority of customers choose to patronize the Recycle-A-Bicycle shops because of the social and environmental missions. A narrative of our history and major milestones is available in Appendix A. Product Line --Bicycles: Recycle-A-Bicycle offers a wide variety of refurbished bicycles. Over 50% of sales are in the road bike category. This is due to the fact that it is the most common type of donation, and therefore most available in stock. Recycle-A-Bicycle experiences high demand for mountain bikes, hybrids, three speeds, and cruisers. These types of bikes offer the cyclist an upright position that is considered more comfortable for commuting. Recycle-A-Bicycle also sells children's bikes, but has found that few parents want to purchase second hand items for their children. Children’s bike sales account for less than 5% of the bikes sold. All bicycle sales come with a 30-day warrantee. Product Line -- Repairs: Recycle-A-Bicycle offers full bicycle repair services for all models of bicycle. Customers come to Recycle-A-Bicycle because many bicycle shops will not repair older bicycles. The percentage of repairs to total income has ranged from 5% to 15%, gradually increasing over the years as staff with professional experience have been added. . Offering repairs helps to further Recycle-A-Bicycle’s environmental impact by reducing the number of bicycles that become unusable. Furthermore, parts recycled from demanufactured bicycles are not entering the waste stream and are put to productive use again. The shops are well positioned to specialize in the repair of bicycles manufactured during the 1970’s and 1980’s. Repair pricing is competitive with other bicycle retailers.

Product Line – Parts and Accessories: Both stores sell new and used accessories that make cycling safe and comfortable. The number and variety of accessories are currently being expanded, but the merchandise mix will remain focused on the safety, commuting and security categories. The most popular safety and security items that are sold include locks, helmets, lights, and bells. Commuting items include pumps, patch kits, racks, baskets, and fenders. The mark up on new items ranges from 50-150%, averaging 100%. Recycle-A-Bicycle offers discounted prices on used accessories acquired from donated bicycles. These are priced at wholesale rates because they require no capital outlay. The ability to stock and sell new accessories currently accounts for a little over 17% of total income and growth is expected as product offerings increase. Retail revenues have grown steadily throughout the past five years of operation. The trend in revenues has been towards increased sales of parts and accessories, driven primarily by customer awareness and loyalty. Recycle-A-Bicycle is also able to more efficiently special order items that will further increase sales in this category.



Recycle-A-Bicycle’s ability to quickly remanufacture bicycles, therefore meeting more of the demand for used bicycles, has been impaired by the lack of a focused production facility. Recycle-A-Bicycle expects the proportion of bicycle sales to increase once new inventory is created, as selling bicycles is the most effective way to serve both the social and environmental missions. Youth Job Training The youth involved with Recycle-A-Bicycle are recruited through the organization’s strategic partnerships with Henry Street Settlement and Children’s Aid Society. These youth come from low-income families and receive a wealth of services through the partner organizations. Recycle-A-Bicycle provides meaningful training and employment opportunities for these young people who in turn provide a low cost labor input for the business. Recycle-A-Bicycle works with over 750 students annually through a classroom training program focused on the following areas:

• Bike repair / mechanical overview; • Small business / setting goals; • Environmental education / recycling / stewardship; and • Safe cycling / road awareness.

Recycle-A-Bicycle also delivers innovative on-the job training programs in the following areas:

• Basic mechanics training / advanced mechanics training; • Customer service and communications; • Introduction to business management /entrepreneurship; • Accounting, marketing and business operations; • How cycling can create a healthy lifestyle and a social structure; and, • Recycling and environmental stewardship.

COMPETITIVE ADVANTAGES Recycle-A-Bicycle offers a unique product and service. Our social and environmental missions differentiate us from any other bicycle retailer in New York City. On a product basis, Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City. Because of low labor and materials costs, a Recycle-A-Bicycle bike is priced at least 50% lower than a comparable new bicycle from an independent bicycle retailer. Recycle-A-Bicycle prices are also competitive against other used bicycle dealers. Additionally, the 30-day guarantee is unique in the used bicycle marketplace and because Recycle-A-Bicycle tracks all inventory from its source, consumers are assured that they are not buying a product that was stolen or illegally obtained. The youth programs inspire young people to make better life decisions. Recycle-A-Bicycle touches many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-being, provides a goal-oriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An “I can do it” attitude pervades Recycle-A-Bicycle.



Consumers feel good about making their purchases with Recycle-A-Bicycle. Many customers report that they are drawn to Recycle-A-Bicycle because of the low prices, but feel much more compelled to purchase when they learn of the social and environmental stewardship. Recycle-A-Bicycle enjoys the following advantages in relationship to second hand dealers, chain stores, and bike stores:

• A legal operation that does not deal in stolen bikes; • An indoor, year round, predictable space; • Competitive prices; • Higher quality bikes than the competition; • A 30-day warranty; • A selection of accessories and the ability to custom order special accessories and parts • A full line repair services; and, • A social mission in which all proceeds are applied to the social and environmental

programs. STRATEGIC PARTNERSHIPS AND RELATIONSHIPS The key to Recycle-A-Bicycle’s success has been its ability to develop strong partnerships. This strategy encourages resource sharing and allows each organization to specialize in what it does best. Recycle-A-Bicycle contributes its curriculum, mobilization of donated materials, technical expertise, retail capabilities, and networks in the environmental and cycling circles. Partner organizations contribute space, cost of instruction, transportation for bike collections, youth recruitment, support services, and neighborhood connections. Recycle-A-Bicycle’s two strongest partners are described below. Henry Street Settlement, founded in 1893 by social worker/nurse Lillian D. Wald, is a not-for-profit arts and social service institution serving the people of New York City, especially Manhattan’s Lower East Side. Its innovative programs have been models for similar efforts in countless municipalities across the nation. Many Henry Street Settlement initiatives have led to major state and federal legislative changes. Recycle-A-Bicycle works in partnership with Henry Street Settlement to offer a job training program that puts youth to work. We collaborate with the Youth Employment and Counseling Services as well as the Workforce Development Center. Henry Street Settlement has qualified counselors to recruit and work with young people who need assistance with basic job readiness skills. These counselors are also available to intervene in the case of serious issues regarding the social or mental well being of our participants. Henry Street Settlement also offers youth leadership development opportunities, tutoring, SAT preparatory courses, and career counseling services to our young people. These services are funded primarily by contracts with the New York City Department of Labor and some foundation grants. Recycle-A-Bicycle offers environmental education, bike repair, earn-a-bike, basic business instruction, and cycling trips to an average of 60 students each year.



Children’s Aid Society, founded in 1853 by Charles Loring Brace, is dedicated to promoting the welfare of children in New York City. It was one of the first agencies of its kind in the US and became well known for opening youth lodging houses in the poorest and most populous districts of New York City. The Children’s Aid Society continues to be at the forefront of child welfare reform as well as in providing services that respond to society’s needs. Currently it maintains 22 sites that provide child care, academic assistance, counseling, after-school programming, job training and leadership development services. In 1990, the Children’s Aid Society partnered with the New York City Board of Education to open three community schools in Washington Heights, a low-income neighborhood in upper Manhattan. The unique partnership offers services to students, parents and members of the community such as health care, leadership and skills development (i.e. English as a second language and the parents’ association), and after-school and summer programming for young people. In May 1994, Recycle-A-Bicycle partnered with Children’s Aid Society and Intermediate School 218 to offer an after-school bike repair program. Based on its success, Recycle-A-Bicycle also became integrated into the summer program and then into the school day. The program offers environmental education, bike repair, earn-a-bike, and ride club activities to over 500 young people each year. Community Networks Because of the Shop’s social mission, we have developed relationships with organizations that are willing to promote the business. Examples of this include: • Transportation Alternatives features Recycle-A-Bicycle events during Bike Week; • The Five Borough Bike Club creates a fundraising opportunity by inviting Recycle-A-

Bicycle staff to break down bikes for their Montauk Century; and • the American Gardening Association featured our shop by offering garden cycling tours on

bikes rented from Recycle-A-Bicycle. Recycle-A-Bicycle also belongs to other networks relevant to its social and environmental missions:

• New York City Waste Prevention Coalition; • The Youth Bicycle Education Network; and, • Seedco’s Nonprofit Venture Network.

REVENUE MODEL OVERVIEW The organization has built a strong revenue base through its retail stores and also increased its ability to generate grant revenue by completing 501©3 status in July 2002. Grants will become a more important source of revenue for Recycle-A-Bicycle in the next five years as the organization seeks capital to expand its business operations and increase its youth outreach. The new DUMBO store, opened in summer 2002, will further increase Recycle-A-Bicycle’s ability to grow the bottom line.



Historical Revenue By Source

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

1998 1999 2000 2001 2002

Sales Donations Grants





IV. OPERATIONS: FIVE YEAR STRATEGIC PLAN HIGHLIGHTS Recycle-A-Bicycle has a strategic plan to expand the organization in order to increase the social impact of the business. The business is focused on processing more bicycles in order to remove a greater amount of material from the waste stream as well as to better meet the demand for used bikes. As a result, the business will be able to train and hire more youth. As capacity is currently constrained, the business has hit a plateau that cannot be overcome without additional staff, space and infrastructure. As a result, a Five-Year Strategic Plan was developed in 2002 through an intensive planning process that included input from Recycle-A-Bicycle staff, management, Board of Directors, and other stakeholders and partners. The plan identifies areas that are critical to the success of Recycle-A-Bicycle and will require an organizational focus. Strategies have been created in each category to address deficiencies, bolster strengths and create changes with the goal of making Recycle-A-Bicycle a more sustainable organization. A summary version of these results is shown at the end of this section. Operations and Production “RE-MANUFACTURING” THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE Materials Donation: Recycle-A-Bicycle promotes reuse and recycling of bicycles. Over 1,000 used bicycles are collected annually. Eighty percent (80%) of donations come from bike shops and apartment building superintendents, with the remainder collected from individuals and corporate donors. Bike shops and apartment buildings are the most prevalent source because bikes are often abandoned at these locations. Donation saves the cost of disposal and provides a tax deduction. Additionally, individuals who want to support Recycle-A-Bicycle’s mission bring in bikes, parts, and accessories. There are also several reputable volunteers who collect bikes in their neighborhood on garbage night and deliver them to our facilities. Finally, corporations organize employee collections and one bike manufacturer, Fuji, donates surplus inventory to the project. The organization will collect twice the number of bicycles when greater storage, production and transportation capacities are available. De-manufacturing process / remanufacturing process: The Youth Classroom Training Program curriculum was developed to teach bicycle mechanics skills through the disassembly and reassembly of key mechanical components. The first stage of the youth training program involves de-manufacturing damaged bicycles. Upon arrival, bicycles are assigned a number in chronological order of receipt and then logged into the inventory. All frame damaged bikes and very rusty bikes are slated for immediate de-manufacturing. The component parts are cleaned and inventoried for use in repairing other bicycles or for sale to consumers. Approximately 20% of the bicycles are de-manufactured. The remaining bikes are assessed for type, quality, and amount of repair time necessary to refurbish. Bikes that have the highest market value, that are in high demand (3 speeds and mountain bikes), and that are quickest to repair are worked on first. In addition, some customers put a down payment on a recent arrival and return to buy it fully repaired. These “pre-ordered”



bikes also receive priority in terms of the order in which bikes are refurbished. On average, a refurbished bike requires six hours of labor.

Remanufacturing a bicycle

In order for Recycle-A-Bicycle to expand its de-manufacturing and remanufacturing processes, it needs to have a focused production and training facility because the current manufacturing operations are fragmented. Though the educational mission is well served, there is lost opportunity as not enough bicycles are being manufactured to meet demand in the retail stores. This opportunity cost can make the difference in sustaining the organization through retail operations alone. Over 2,000 bicycles were not collected in FY2002 due to lack of resources to pick up and store these bikes. The new facility will allow Recycle-A-Bicycle to increase the amount of trash it removes from the waste stream and ensure a consistent amount of used bicycles for sale. Storage space will allow for more efficient raw materials sorting and reuse. And more space will allow Recycle-A-Bicycle to consider creating other product lines which support its mission, such as selling used parts on the internet. In addition, the retail stores will be able to display and sell more bikes as valuable square footage is currently being used for storage of raw materials and waste. Securing a new production facility will also enable Recycle-A-Bicycle to double the number of youth participants in the job training program. This will provide the learning environment they



need to apply their newly acquired knowledge. Young people that excel in this program will be hired by Recycle-A-Bicycle or placed in shops around New York City. With the new production center, Recycle-A-Bicycle will be operating from three locations. In order to facilitate movement of materials between the three locations, Recycle-A-Bicycle will also need to acquire a van. Recycle-A-Bicycle plans to purchase rather than rent the space for the new facility. One benefit of choosing ownership rather than rental space is the availability of capital budget grants. These grants can drive down the cost of ownership. Specifically, the Environmental Services Unit of the NYS Department of Economic Development offers matching grants for capital investments in remanufacturing businesses. In addition, there are capital grants offered by other organizations, such as the Charles Hayden Foundation, that have a particular interest in supporting youth initiatives. Strategy: Recycle-A-Bicycle will create and own a production and training facility for processing raw materials. In 2004, a facility will be identified, purchased and outfitted. Ownership of space will help mitigate risks presented by ownership changes, and also allow the organization to build equity on its balance sheet and have a more permanent outlook. The space will provide a more efficient learning environment for youth. More management attention will be placed on the process of manufacturing: from raw materials identification and sorting, to moving materials, to eliminating waste in the process quickly. This facility, acting as a central storehouse, will significantly improve the operations and profitability of the organization. Acquiring a van will also allow the group to nearly double the amount of donated bicycles that it could collect. To date, infrastructure has primarily been bootstrapped. Improved measurement systems for inventory and raw materials are necessary to ensure that increased production processes can be adequately managed. In addition, store productivity and production throughput need to be more closely tracked and analyzed to identify new areas of improvement. Strategy: Recycle-A-Bicycle will invest in new technology for its operations including a customer database and a centralized parts inventory database, continue to build its management team, and improve its communications processes. Staffing Recycle-A-Bicycle current supports eight staff positions. Five of these positions are filled by bicycle mechanics who hold positions of store managers and head mechanics at its two retail stores. The business manager is the Executive Director, Karen Overton, who manages the triple bottom line. Adding staff to the team to diversify the skill sets and reduce the burden on the business manager is a strategic goal for the organization. The store managers possess a good understanding and ability to deliver on the retail aspects of Recycle-A-Bicycle operations. Though the managers have been working as a team for only a short time, they have demonstrated strong potential. Because of their trade and industry



expertise, the team understands the social mission and how to integrate youth and learning into their operations. Retail and program management are adequately served by the team. Recycle-A-Bicycle relies heavily on volunteer labor to achieve several aspects of its corporate activities such as tutoring youth, website development and maintenance, and fundraising. Though there are a handful of motivated, talented individuals who donate their time to Recycle-A-Bicycle, this labor pool is unpredictable and does not provide a stable source of labor. Several gaps exist in key areas of organizational leadership. One particular area is resource development and fundraising. The need for fundraising and development has increased over the past several years as Recycle-A-Bicycle has experienced government cut-backs that limit their ability to fulfill the youth training and employment mission. For example, the New York City summer youth employment initiative has been a source of funding for employment opportunities for youth during the summer. However, this initiative has been cut back over the past two years, resulting in less funding available for Recycle-A-Bicycle to pay summer interns. In addition, adding staff at the leadership level will increase the organization’s ability to plan and implement additional programs to promote environmental stewardship and youth development. In addition, the Executive Director is often performing tasks of a relatively low skill level instead of doing higher-level work. The retail managers do not possess the skills to fill in areas where the Executive Director is not able to deliver, though they are highly capable retail operators. Administrative assistance is needed to reduce this burden on the Executive Director. A staffing and succession plan is being developed for organizational leadership, which will mitigate these issues. Strategy: Carefully managed staff growth in several key skill areas will allow for better assignment of responsibilities, diversification of risk, for more tasks to be completed, and for better accountability and organizational performance. The Board supports hiring new staff to focus on fundraising, allowing the existing Executive Director to move back into the position of program and operations oversight Recycle-A-Bicycle will also hire an Administrative Assistant as well as a Production Assistant to oversee operations at the Production and Training Facility (see below).



PERSONNEL NEEDS BY STAGE OF DEVELOPMENT These positions are reflected in the financial model. Additional positions not listed here may be required depending on the strategies pursued. Targeted Hire Date

Position Title Responsibilities

6/2003 Development Officer Fundraising/Development 9/2003 Administrative Assistant Administration 1/2004 Production Assistant Coordinate production and raw materials

collection Sales and Marketing When the production and training facility is in operation, additional marketing will be needed to increase the supply of donated bikes and create demand among customers. New staff and volunteers will be recruited with this task in mind, so that a concerted effort can be placed in marketing the organization and merchandising and sales within the stores. While the production center is in development, a formal sales and marketing plan will also be developed. Within this plan, new product offerings will be considered that will increase the stores’ revenues and profitability. Recycle-A-Bicycle can market its social and environmental missions much more aggressively within the stores and their trade areas. A campaign will be developed that highlights these two areas. This will include print media, an enhanced website, and a video that can be played in each store to assist consumers in immediately understanding why Recycle-A-Bicycle is the best place to purchase a used bicycle. In addition, Recycle-A-Bicycle will create and install much needed signage at the DUMBO store. Recycle-A-Bicycle will also investigate selling used parts on the internet. Two strategies will be explored: using E-Bay as a mechanism for sales or tapping into the Bicycle Trader website that specializes in the sale of second-hand bicycles, parts and accessories. Strategy: Recycle-A-Bicycle will create an aggressive marketing campaign, make improvements to point-of-sale merchandising in the stores, develop and implement a customer service training program, add new accessory lines to both operations and improve the website to better facilitate e-business. Additional Strategic Opportunities Recycle-A-Bicycle will continue to expand its social mission to groups that have unmet needs and can make use of the services offered by the organization. In 2003, Recycle-A-Bicycle published and distributed 3,000 manuals that detail the process of starting ride clubs. Youth-oriented organizations were invited to a workshop in April 2003 to learn how they can start these programs with the goal of starting up ten ride clubs in 2003. These organizations can invest in a ride club “fleet” by purchasing bikes from Recycle-A-Bicycle. This will allow Recycle-A-



Bicycle to further its social mission and put more kids on bicycles. Recycle-A-Bicycle will serve in a technical assistance capacity to these groups to ensure their success. As the number of graduates from the youth training program increases with the creation of the manufacturing facility, Recycle-A-Bicycle will increase its efforts to place youth in local employment. Lastly, the Tours By Teens program is an example of new programming that Recycle-A-Bicycle will be starting in 2004. This program will train teens to give tours of selected neighborhoods by bicycle. Teens will study the history of a neighborhood, research and compile a tour program. Tour leaders will be graduates of the Recycle-A-Bicycle bike repair curriculum so handling the groups’ mechanical needs will be covered. The Tours By Teens program will employ program graduates and will help Recycle-A-Bicycle improve its visibility throughout New York City. Strategy: Recycle-A-Bicycle will increase the impact of its efforts by adding several new programs to its portfolio, including enhanced ride clubs, adult education, and a tourist operation. SUMMARY OF STRATEGIC INITIATIVES Progress has already been made in several of these areas: a customer has offered to donate a vehicle to the project this spring; a New York University professor has adopted Recycle-A-Bicycle as a class project and will upgrade the website and develop an inventory system that facilitates e-business, and; free bicycle storage space has been identified in the East Village that will increase storage capacity by 100%. The Five-Year Strategic Plan includes the following major actions:

1. Hire for skills that are needed; Add staff to the RAB team; 2. Create a focused production and training facility and improve materials movement within

the organization; 3. Own the production and training facility; Build the RAB brand and balance sheet; 4. Institute stronger marketing and sales efforts to increase retail revenues; 5. Strengthen operations; and, 6. Pursue new social mission specific strategies.



Source: Recycle-A-Bicycle 5-Year Plan

2003 OR IMMEDIATE 2004 2005 / LATER Obtain temporary production and training facility

Purchase independent production and training facility

Investigate establishing new sites for student training to reach more students

Obtain financing for strategic objectives

Hire Production Assistant Renew DUMBO lease or consider purchasing space

Hire/acquire Administrative Assistant

Acquire a van for materials collection and distribution

Investigate starting uptown retail shop

Hire Development Officer Revitalize volunteer management program

Evaluate expansion into the Bronx

Investigate improvements to employee benefits program

Create used part / sales interface to the inventory database

Evaluate franchising Recycle-A-Bicycle regionally or nationally

Develop and implement marketing campaign including signage

Fundraise for Tours By Teens Program

Implement Tours By Teens Program

Purchase new computers and software to support inventory and accounting systems

Enhance E-business capabilities for bicycles

Market used parts on the internet through separate site

Set up inventory management system and review merchandising

Test selling used parts on the internet (through web auctions or set up independent site)

Renew East Village lease Update customer service training program





V. MANAGEMENT TEAM MANAGEMENT TRACK RECORD Recycle-A-Bicycle’s management has over 10 years of experience in bicycling retailing, 13 years in transportation advocacy, and over 7 years experience in youth education. The team has proven its ability over the years and is continuing to develop new strengths. Board of Directors membership complements the skills presented by the management team. Nearly all directors volunteer in capacities beyond their Board role. The Board consists of dedicated individuals with experience in: education, financial management and analysis, social work, and transportation advocacy. Each member brings enthusiasm, their unique skill perspectives, as well as a broad network of contacts to the Board and the entire organization. Board member biographies are listed in Appendix D. Karen Overton Executive Director, Recycle-A-Bicycle, Inc. Ms. Overton was the founder of Recycle-A-Bicycle when it began as the environmental education initiative for Transportation Alternatives in 1994. Prior to that, Ms. Overton worked as Bikes for Africa Director for the Institute for Transportation and Development Policy and as a consultant for the World Bank, in the International Development Bank, African American Institute, and Pedals for Progress. In 1998, Ms. Overton incorporated Recycle-A-Bicycle. Through her various positions, Ms. Overton has developed skills in the areas of project management (design, implementation and evaluation); research (data collection, analysis and publication); writing (Ms. Overton has authored several cycling manuals, magazine articles, and publicity pieces); training (design and implement training programs for youth and transport planners/economists); and public speaking at several alternative transportation symposia. Ms. Overton cycles year round. Ms. Overton has a Masters Degree in Urban and Regional Planning from the State University of New York-Albany, and is recognized as an expert in the field of alternative transportation planning. Jared Bunde Manager, DUMBO Shop Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as a messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as a bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. His racing career has excelled, winning a silver medal for the NY State Track Cycling Championship in 2000 and 2002. Mr. Bunde brings with him an interest in the arts and the environment. He has taken photography courses, permaculture and ecological design courses, and completed the Foundation Program at the Parsons School of Design.



During his tenure with Recycle-A-Bicycle, Mr. Bunde has increased the shop’s productivity and profitability. Through his efforts, the shop experienced an overall increase of $20,000 in revenue in 2002. Rich Conroy, Program Coordinator, Children’s Aid Society Mr. Conroy founded the Major Taylor Bike Recycling in 1998. He served as its director for a year before moving to New York City. During this time he developed the organization’s goals, raised funds and managed the budget, recruited volunteers, instructed students in bicycle maintenance and repair, and created the website. This experience makes him well qualified to coordinate the Recycle-A-Bicycle/Children’s Aid Society youth education program at Intermediate School 218. Mr. Conroy holds a PhD from Notre Dame from the Department of Government and International Studies, and taught political science classes at the college level for four years. Upon moving to New York City, he managed Metro Bicycles, a successful bicycle chain store in New York City, for three years. Mr. Conroy’s skills uniquely blend his experience in teaching and management with his love for bicycles. Rommell Bishop Head Mechanic, Children’s Aid Society Mr. Bishop enrolled in the Brooklyn Recycle-A-Bicycle training program at age 14. After two years, he volunteered to participate in the fundraising event, Bike Aid. This required that he ride his bicycle cross country for the entire summer. Upon his return, Mr. Bishop was employed as student assistant mechanic and served in this position until he graduated from high school. In 2000, he was hired as the Head Mechanic for Recycle-A-Bicycle at Children’s Aid Society. Mr. Bishop is an excellent role model for students, having come through the training program himself. Through his familiarity with the program, Mr. Bishop is able to create new opportunities for young people. In addition, he occasionally volunteers to chaperone bike trips, and spends extra time and effort on students eager to learn and build a bike. In 2002, Mr. Bishop enrolled in an airplane mechanic’s program offered at LaGuardia Community College. He currently works part-time at Children’s Aid Society and dedicates his afternoons to study. Yoandy Ramirez, Manager, East Village Store Mr. Ramirez holds the position of East Village Assistant Manager. He started as a Summer Youth Employment student in 1999 and was hired to work as a student mechanic on Saturdays. Based on his hard work, dedication and advanced mechanical skills, Mr. Ramirez was promoted to Assistant Manager in June 2002. He will graduate with a high school diploma this summer and aspires to pursue a degree in computer science.



Denny de los Angeles Head Mechanic, DUMBO Mr. de los Angeles started as an on the job trainee with Recycle-A-Bicycle in the spring of 2000. After two months time, Recycle-A-Bicycle offered him a full time job as mechanic due to his aptitude. He was promoted to East Village Assistant Manager the following year. Unfortunately, Mr. de los Angeles suffered from a broken leg, and when he returned to the organization in October 2002, he was given a mechanic’s job at DUMBO. Once business picks up in the spring of 2003, he will be promoted to DUMBO Assistant Manager. Mr. de los Angeles is completing his high school degree via a correspondence program. Kerri Martin Outreach Coordinator, Recycle-A-Bicycle Inc. Ms. Kerri Martin graduated from the College of New Jersey in 1994 with a B.A. in Sociology and a minor in French. She is fluent in French and German. Upon graduating, Ms. Martin was employed by Commerzbank in the Technology department where she d did database designing and data warehouse reporting. She also worked on Web Development Team. Ms. Martin joined Recycle-A-Bicycle’s volunteer Ladies’ Night in 1999 and has been actively involved with the organization until hired in 2003. She has dedicated her spare time to bicycle advocacy. She has been an active volunteer with Transportation Alternatives for several years, and served as a volunteer coordinator for one of their monthly bicycle count projects. She also produces a public access TV show called Bike TV, a weekly show on a wide range of bike related topics.





VI. SOCIAL OUTCOMES TRACKING SOCIAL INDICATORS OF SUCCESS Youth Training -- Recycle-A-Bicycle has worked with over 4,500 youth and staffed an average of 15 positions per year. Recycle-A-Bicycle improves the lives of many at-risk youth in the region by offering an effective training program in the areas of bike repair, small business, and environmental education. Strategic partners provide qualified youth counselors to recruit and work with young people who need assistance with basic job readiness skills and who can intervene in the case of serious issues regarding the social or mental well being of participants. Partner programs also offer youth leadership development opportunities, tutoring, SAT preparatory courses, and career counseling services to our young people. In addition to the skills training and self-esteem building that the youth training provides, many participants earn their own bicycles. The organization promotes bike riding as a form of recreation and transportation among the youth. The benefits of promoting an active lifestyle among youth are not calculated by the organization, but the benefits are assumed to be significant. In the future, Recycle-A-Bicycle may be able to track this increase in activity among youth participants. Youth Participants 1995 1996 1997 1998 1999 2000 2001 2002 Total 10-13 years 325 384 276 370 7003 430 609 737 3,83114-21 years 20 88 139 169 91 94 99 35 735Total 345 472 415 539 791 524 708 772 4,566 Recycle-A-Bicycle Jobs Filled (includes part time and full time) 1995 1996 1997 1998 1999 2000 2001 2002 Total Jr. Staff 0 0 0 0 0 14 10 8 32Sr. Staff 6 10 10 10 13 10 12 8 79Total 6 10 10 10 13 24 22 16 111

3 In 1999, RAB served 300 additional youth during a one-time summer mountain biking camp.



A “fix a flat” class in action

ENVIRONMENTAL INDICATORS OF SUCCESS Since its inception, Recycle-A-Bicycle has removed 109 tons of material from the waste stream and eliminated 104,244 trips by other polluting transportation sources. In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New York City. The organization removes tons of material from the waste stream each year. As the business increases its capacity to pick up, store and refurbish discarded bicycles, its positive impact on the waste stream will also increase. In 2002, Recycle-A-Bicycle recycled over 14 tons of material destined for New York City’s landfills. Over the next five years, the amount of tonnage removed will steadily increase. Additional environmental benefits are accrued as bicycles are used as alternatives to driving. To calculate these benefits, Recycle-A-Bicycle assumes that each bicycle sold replaces 28 car trips each year. Waste Prevention 1995 1996 1997 1998 1999 2000 2001 2002 Total Bicycles 556 617 787 926 1205 976 1061 953 7081Tons of Material

8.56 9.49 12.10 14.25 18.54 15.02 16.32 14.66 108.93

Represents tonnage of material removed from waste stream, and that 65 bicycles = 1 ton of waste



Air Pollution Prevention 1995 1996 1997 1998 1999 2000 2001 2002 Total Bicycles 311 208 435 468 665 510 483 643 3,723Trips 8,708 5,824 12,180 13,104 18,620 14,280 13,524 18,004 104,244 Recycle-A-Bicycle will generate increased outcomes through its expansion and growth. The following chart outlines the expected outcomes over the next five years.

Outcomes 2003 2004 2005 2006 2007 Youth participants to be trained 780 850 950 1050 1200 Number of positions to be filled4 22 28 31 34 37 Tonnage of material to be removed from the waste stream

17 22 24 26 27

Number of non-polluting vehicle trips generated

20,000 23,000 25,000 27,000 29,000

4 Includes both full and part time positions





VII. FINANCIALS Recycle-A-Bicycle has successfully grown and expanded through a self-financing approach. This approach was required due to the fact that Recycle-A-Bicycle did not obtain 501©3 status until July 2002. Without formal nonprofit credentials, the organization had limited access to grants or donations that would have provided the capital needed to grow more rapidly. Therefore, Recycle-A-Bicycle functioned much like a start-up small business, utilizing dedicated staff and growing only when net profits or donated funds were available to reinvest in the business. After five years of operations in the East Village, Recycle-A-Bicycle recognized the strong opportunity to grow its operations and training program through the creation of the DUMBO store. The diversification, additional space, and new market opportunity it provides will assist in the growth of Recycle-A-Bicycle. But the addition of the new DUMBO store has put demands on Recycle-A-Bicycle’s cash flow, as the store has not yet built up a sustainable level of sales. This has created a need for additional financing for working capital. As consumers become more aware of the store, the sales volume from retailing is expected to sustain operations. Recycle-A-Bicycle has reached a critical juncture in its lifecycle in which further expansion is required in order to meet demand and scale its youth development efforts. Affordable financing is required to support the Five-Year Strategic Plan. Financing will be pursued through philanthropic grants, debt financing and other socially supportive funders. This section reviews the near-term capital needs of the organization. Recycle-A-Bicycle has developed a five-year financial outlook to accompany this business plan. Please refer to Appendix E and Appendix F for details. Projections are based on historical performance and are realistic, but conservative estimates. Recycle-A-Bicycle believes it has the capacity to outperform the projections, given stability in staffing and few negative external factors. Significant assumptions to the plan are in shown in Appendix G. FINANCIAL ESTIMATES AND ASSUMPTIONS Recycle-A-Bicycle is at a critical juncture in its organizational development. Investment in building the organization’s equity and developing professional staff are expected to produce positive returns within the five-year period. INVESTMENTS Recycle-A-Bicycle plans to make three key investments over the next five years to expand its programs and create the opportunity for the level of revenue growth projected in the above graphs.

• Acquire a Production and Training Facility

In January 2004, Recycle-A-Bicycle plans to acquire a production and training facility that will benefit the organization by relocating the environmental and youth training element from the retail shops to their own facility. This will enable the stores to focus on retailing through



increased space in which to showcase finished bicycles and accessories. In addition, it will free up workstations, increasing capacity for repair services. The facility will also improve the shops’ appearances as there will be less donated bicycles and “work-in-progress” creating clutter.

Expected cost: Facility purchase cost of $330,000 for a 3,000 square foot facility assuming 10% down payment via a capital grant and 10-year mortgage payments of approximately $3,300 per month. In addition, $5,000 is budgeted for leasehold improvements. The addition of the facility will also require investment in a Production Assistant to staff the new facility. Expenses related to the Production Assistant include approximately $20,000 in salary and benefits.

• Acquire a van

The acquisition of a van will improve the efficiency by which materials are collected and transferred to appropriate project sites. A higher number of bicycles will be collected and consequently, productivity will increase as there will be a greater number of “easy” tune-ups and greater selection for customers.

Expected cost: Annual operating expenses of $6,000. No cost for acquisition because, as noted earlier, a customer has offered to donate a van to Recycle-A-Bicycle in Spring 2003.

• Hire a development officer

Recycle-A-Bicycle will hire an individual that is networked in the youth training and social services sectors. This person will be able to contribute immediately and their efforts will cover the cost of the position within 9 months.

Expected cost: $50,000 annual salary plus approximately $5,000 benefits

REVENUE The bicycle industry is seasonal in nature. The most lucrative season runs from April through August. The less lucrative season runs from December through March due to cold weather. Unlike other retailers, Recycle-A-Bicycle does not benefit from holiday consumption patterns as most customers prefer to give new rather than used items as gifts. The East Village store will outperform the newer DUMBO shop over the next few years because it has enjoyed a six-year presence in the neighborhood. Over the next five years as Brooklynites become more aware of the DUMBO shop, sales will increase to 80 – 90% of the East Village store sales. Recycle-A-Bicycle expects to grow revenue 100% in 2003 due to several factors:

• Full-year results of new DUMBO store (opened October, 2002); • Subway fare hike will prompt people to evaluate their commutes with some spillover

effect on Recycle-A-Bicycle sales; and



• Addition of new development officer mid-year (although greatest benefit will likely be realized in 2004).

Recycle-A-Bicycle’s sales revenue increases, although large in percentage terms, represents a conservative expectation. Despite doubling the retail capacity through the DUMBO store, bike sales are expected to increase by only 84% (from 339 in 2002 to 626 in 2003). 2002A 2003E East Village shop 294 348 DUMBO shop 45 278 339 626 Beyond 2003, Recycle-A-Bicycle expects revenue growth to accrue from its investment in marketing, as well as the full impact of the development officer. Recycle-A-Bicycle expects 71% top-line growth in 2004 through 40% increase in bike sales and 148% increase in grant funding including down-payment capital grant for new facility. In 2005 – 2007, revenue growth will slow to 12%, 10% and 5% respectively. After 2007, revenue growth is expected to level out at 3 – 5% annually. CURRENT FUNDING SOURCES AND COMMITMENTS SOURCE 2002 Percentage 2003 Percentage Sales Revenue 69% 65% Fundraising 31% 35% Recycle-A-Bicycle raised $50,000 in grant funding in 2002. Major support was provided by Bike New York. Grant funding in 2003 has been secured or is expected from Bike New York, The Citizens Committee for NYC, Travelers Foundation, Monterey Foundation and Silverman Foundation.



Revenue by category

339

626

1,2661,206

1,096

877

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

2002 2003 2004 2005 2006 2007

Grants Bikes Accessories Parts Service No. of bikes sold

EXPENSES The major expense for Recycle-A-Bicycle is labor. Recycle-A-Bicycle will create a succession plan that increases the professional staffing in order to strengthen the organization. Recycle-A-Bicycle will also invest in training, so that staff may be prepared to fill in any gaps that might occur. Mechanics will undergo sales and advanced mechanics training as this is a proven method for creating higher productivity. The organization will take advantage of its strategic partnership with Henry Street Settlement to secure an Administrative Assistant through Henry Street’s job-training program, at no cost to Recycle-A-Bicycle. The following chart examines the effect of the new strategies on net income over the five-year projections. Though net income will be negative in 2003, the organization will return to positive net income in 2004 and beyond.




Revenue and Net Income

238,748

409,328

462,329

507,649532,576

-11,47247,868

80,105111,275

126,475

0

100,000

200,000

300,000

400,000

500,000

600,000

2003 2004 2005 2006 2007

Revenues Net Income

(100,000)


RISKS AND STRATEGIES FOR MITIGATION Recycle-A-Bicycle has identified several risks associated with implementing its strategic initiatives as well as strategies to mitigate these risks. These are briefly described below.

1. Funding is not obtained on schedule Strategy for mitigation: The Executive Director has solid fundraising experience and is confident in the goals listed. The addition of the new Development Director will enhance these strengths. Operations will be managed to the funding commitments that are available, and when possible, reserves will be created to help smooth cash availability.

2. Store revenues lag behind plan: demand is low Strategy for mitigation: We would reduce operating costs by reducing labor by curtailing store hours during exceptionally slow periods (e.g. during a heavy snowstorm). We will simultaneously continue aggressive marketing efforts to pull in demand. Recycle-A-Bicycle operations are flexible and have been subject to past revenue variations, management is comfortable managing to these issues.

3. Insufficient Raw materials to meet sales demand Strategy for mitigation: Recycle-A-Bicycle seldom has to actively solicit raw materials donations, and supply does not look to be constrained in the near future. If for some reason there is a shortage of bicycles we would initiate outreach efforts to increase supply. Used bicycles could be purchased at police auctions as a reasonably inexpensive substitute to donated bicycles. Though margin would suffer, Recycle-A-Bicycle would still be able to meet demand for bicycles and offer its higher margin accessory and repair lines.

4. Insufficient labor to meet production demand Strategy for mitigation: Given current labor market conditions in New York City, we do not anticipate any issues. Our wage rate is very competitive with the market and we always have a surplus of labor. However, if a labor supply shortage exists, we would tap into our volunteer network which has worked well in the past to meet seasonal demands for production.

5. Loss of a major partner Strategy for mitigation: The Executive Director has many relationships with potential partners and is nurturing these as prospects for when the production/training facility is operating.

6. Loss of senior management before training and succession plan is implemented Strategy for mitigation: The Board of Directors and others have committed their energy should an unplanned change in Senior Management occur. Recycle-A-Bicycle has several professional services partners such as their accountant and business management consultant who can help provide transitional support services.



CAPITAL NEEDS, TIMELINE AND BENCHMARKS The projections indicate that grant funding of approximately $520,000 is needed over the next 3 years to cover costs associated with expansion of the business and training program. This funding amount includes a capital grant of $38,000 that will be used as a down-payment on the production and training facility. In three years (2005), Recycle-A-Bicycle will generate approximately $50,000 in net operating profit. Capital needs are greatest in 2003 and 2004 when new staff is hired and infrastructure related to the new production facility is added since these additional expenses are not be matched immediately with increased revenues. However, these investments will quickly produce positive returns for the organization as net income grows steadily from 2004 to 2007. In 2004, financing of approximately $300,000 is needed to purchase the training and production facility. This financing has been modeled as a 10-year mortgage at 6% annual interest. In addition, the following debt service chart includes a $100,000 loan beginning in 2003 to finance the beginning of the Five-Year Strategic Plan (assuming grant funds are not available).

Debt service

$(50,000)

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

2002 2003 2004 2005 2006 2007

Interest payment Principal payment Cash balance Debt balance Operating cash flow



Summary of Revenues, net income and net margins: 2003 2004 2005 2006 2007

Sales Revenues 167,657$ 232,932$ 290,281$ 318,775$ 334,446$ Grant Revenues 71,091$ 176,396$ 172,049$ 188,875$ 198,129$ Net Income (11,472)$ 47,868$ 80,105$ 111,275$ 126,475$ Net Retail Margin n/a 21% 28% 35% 38%

Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year Strategic Plan. These grants will be pursued through institutional funders with an interest in environmental stewardship and/or youth development. 2003 Recycle-A-Bicycle seeks $171,000 in funding in 2003. Thus far, the organization

has raised $38,000 of this funding need. Proposals for additional funding of up to $50,000 have been submitted and other funding requests will be made during the year. Approximately $71,000 in grant funding will serve as working capital to support current operations as well as implement new marketing efforts. The additional $100,000 will support hiring the Development Officer, support costs associated with sourcing and obtaining the new production and training center and provide for other infrastructure improvements. As this funding is vital for the growth of the organization and its ability to meet the objectives of the Five-Year Strategic Plan. Recycle-A-Bicycle has projected the $100,000 as debt financing and is able to support the debt service required through its steady cash flows and strong financial management. Funding from a grant source will allow the organization to avoid over $8,500 in interest expense over the next five years.

2004 Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds will be used in part for working capital and in part to support more of the Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the production and training center, hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will be used for a down payment on the production and training center. Recycle-A-Bicycle will raise the additional $106,000 through fundraising efforts spearheaded by the new Development Officer.

2005 Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional costs related to expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours by Teens program.



RECYCLE- A- BICYCLE, INC. NEW YORK

BUSINESS PLAN

APPENDIX



TABLE OF CONTENTS EXHIBIT APPENDIX PAGE

A. HISTORY AND MILESTONES 51

B. TRADE AREA OF EAST VILLAGE STORE 53

C. TRADE AREA OF DUMBO STORE 54

D. BOARD MEMBER BIOGRAPHIES 55

E. 2003 MONTHLY PROFIT AND LOSS STATEMENT 57

F. 5 YEAR PROFIT AND LOSS STATEMENT 58

G. ASSUMPTIONS TO FINANCIAL MODEL 59

H. EXECUTIVE DIRECTOR C.V. 61

I. COMMUNITY NETWORK REFERENCE 62

J. MEDIA COVERAGE 63 K. SUMMER YOUTH EMPLOYMENT CURRICULUM 64

L. SEEDCO LOGIC MODEL 67

M. PICTURES OF RECYCLE-A-BICYCLE 68


Part V: Sample Business Plan APPENDIX A -- History and Milestones of Recycle-A-Bicycle 1994 Transportation Alternatives receives NYC funding to initiate the Recycle-A-Bicycle project. A partnership is formed with Children’s Aid Society. The Manhattan Borough President inaugurates the project and our first class, teaching bike repair and environmental stewardship, is offered in May 1994. 1995 RAB partners with Eastern District High School. 1996 RAB publishes Tools for Life: A Start-up Guide to Youth Recycling and Bicycling Programs. Two thousand copies are printed and distributed. RAB partners with Henry Street Settlement and offers its first job training program. 1997 A dedicated work space is established in the Charas, El Bohio Community Center. A grant from the Urban Resources Project to Henry Street Settlement provided funds to create a youth job training program and to capitalize a bicycle retail business. This business model has been based on the donation of bicycles and their sale after the restoration work done by teens enrolled in the job training program. 1998 RAB becomes incorporated. A business plan is written in partnership with Henry Street Settlement. The first two RAB students travel cross-country with Bike Aid. 1999 Tours By Teens is developed by Henry Street Settlement students as part of NYC Summer Youth Employment Program. Students researched the history and culture of the East Village, mapped out a tour, designed a brochure, and led 3 pilot tours. The goal is to start-up a program that trains and employs teens as tour guides. 2000 RAB opens its first retail storefront in the East Village. 2001 A new storefront lease was negotiated on Avenue C, in the Lower East Side - an area that is still currently enjoying a great amount of investment. The relocation of retail activity from a third floor (walk-up) room based in a community center to a storefront doubled the amount of repair business, as well as facilitated bike sales and rentals. This space also provided separation of job training and retail activity, which has enhanced our ability to offer higher quality services to both customers and students.


Part V: Sample Business Plan APPENDIX A -- History and Milestones of Recycle-A-Bicycle (CONTINUED) RAB produces bike safety public messages for radio and television that’s paid for by the NYS Governor’s Committee on Traffic Safety. 2002 In May, a lease was signed to create a second retail location and training center in Dumbo, Brooklyn. Extensive renovation was required and the shop opened in October. In July, RAB received its official IRS 501-c-3 status, after successfully completing a 5 year review period. This status provides greater access to funders. In July, RAB received a Seedco grant to upgrade its business plan. In November, a major strategic planning effort was undertaken by all staff, management, and the Board of Directors. Input from key partners was included and a 5-Year strategic plan was created.


Part V: Sample Business Plan APPENDIX B -- East Village Trade Area Map


Part V: Sample Business Plan APPENDIX C --DUMBO Trade area map


Part V: Sample Business Plan APPENDIX D-- Board Member Biographies Jonathan Orcutt, Board President Mr. Orcutt is Associate Director, Tri-State Transportation Campaign. Since 1994, Mr. Orcutt has planned advocacy campaigns, supervised staff and raised funds for the Campaign, a highly effective mass transit and sustainable transportation advocacy organization in the New York/New Jersey/Connecticut metropolitan region. He is editor of the Campaign's award-winning weekly bulletin, Mobilizing the Region, and develops Campaign strategies on a wide range of transportation policy issues. He sits on the executive committee of the board of the League of American Bicyclists, a national advocacy organization, and is vice-president of the Kissena Cycling Club, a NYC race- and fitness-oriented bicycle riding group. Mr. Orcutt was executive director of Transportation Alternatives between 1989 and 1994 where he developed programs to promote bicycle transportation and traffic calming policies. Mr. Orcutt holds a B.A. with honors from Colby College. Sara Elinson Ms. Elinson is a Senior Manager at Standard & Poor’s in their Corporate Value Consulting group. This group, formerly PriceWaterhouseCoopers, provides clients with Mergers & Acquisitions advisory services, as well as broader corporate finance advice. She has advised clients on, debt refinancing, debt restructuring, and finance raisings. Additionally, she has provided capital structure valuations and advice. Ms Elinson holds an MBA degree from Cornell University. Ms. Elinson also volunteers her time for RAB as the Dumbo store manager on Saturdays. Christine Koenig, Ms. Koenig is Workforce Development Center / Chief Administrator at the Henry Street Settlement. She has worked at Henry Street Settlement since 1986 in direct services and administration. Ms. Koenig is the founder of the Greening Challenge-Youth for Ecology initiative that was the foundation for environmental programming in Youth Services. She has forged many collaborations within the environmental field and local movement. She also founded Beyond City Limits in 1990, an international exchange program for urban youth. Ms. Koenig holds a MSW degree and is certified as a field administrator.


Part V: Sample Business Plan APPENDIX D-- Board Member Biographies (CONTINUED) Ira Perelson Mr. Perelson has worked as a NYC high school social studies teacher (bilingual-Spanish) since 1975. His board interests center around youth development. Mr. Perelson served as the faculty advisor to the Student Unity Club at Eastern District High School for over ten years and as an Outward Bound instructor for two years. In 1995, Mr. Perelson founded the North Brooklyn Recycle-A-Bicycle project. He directed its activities for six years. During this tenure, he developed curriculum, forged a partnership with Green Maps System and created a map-making project, helped send six teens on cross-country bike trips, taught over 150 students bike repair, and managed an advisory board. Mr. Perelson continues to be an active RAB board member. He holds a B.A. degree from Brooklyn College and an M.A. in Chinese History from Columbia University. He is fluent in Chinese, Russian, and Spanish.


Part V: Sample Business Plan APPENDIX E – MONTHLY P&L 2003 Monthly Profit & Loss Statement

Profit & LossApril 3, 2003

Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03Sales

Classes 325 325 325 325 325 325 325 325 325 325 325 325 Swift folder 60 60 60 60 60 60 60 60 60 60 60 60 Grants 5,924 5,924 5,924 5,924 5,924 5,924 5,924 5,924 5,924 5,924 5,924 5,924 Capital grant - - - - - - - - - - - - Bikes 4,500 3,600 4,500 9,000 7,200 7,200 9,000 9,000 7,200 6,300 6,300 4,500 Accessories 1,350 1,080 1,350 2,700 2,160 2,160 2,700 2,700 2,160 1,890 1,890 1,350 Parts 2,363 1,890 2,363 4,725 3,780 3,780 4,725 4,725 3,780 3,308 3,308 2,363 Service 1,231 985 1,231 2,462 1,970 1,970 2,462 2,462 1,970 1,724 1,724 1,231 Credit card fees (74) (59) (74) (147) (118) (118) (147) (147) (118) (103) (103) (74)

Total net sales 15,679 13,805 15,679 25,049 21,301 21,301 25,049 25,049 21,301 19,427 19,427 15,679 Growth

Cost of SalesRepair supplies 648 518 648 1,296 1,037 1,037 1,296 1,296 1,037 907 907 648 Accessories 540 432 540 1,080 864 864 1,080 1,080 864 756 756 540 PT Retail mechanics 870 870 1,088 1,088 1,088 1,088 1,088 1,088 1,088 1,088 870 870 FT storage facility mechanic - - - - - - - - - - - - PS 218 mechanic 432 432 432 432 432 432 432 432 432 432 432 432 Retail mgr /asst mgr labor 6,240 6,240 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800 6,240 6,240 PT van driver - - - - - - - - - - - -

Total cost of sales 8,730 8,493 10,508 11,696 11,221 11,221 11,696 11,696 11,221 10,983 9,206 8,730

Gross profit 6,949 5,312 5,171 13,353 10,080 10,080 13,353 13,353 10,080 8,444 10,222 6,949 Gross margin 44.3% 38.5% 33.0% 53.3% 47.3% 47.3% 53.3% 53.3% 47.3% 43.5% 52.6% 44.3% Expenses

Salaried wages 2,917 2,917 2,917 2,917 2,917 2,917 2,917 7,083 7,083 7,083 7,083 7,083 PT Admin wages - - - - - - - - - - - - Payroll taxes 986 986 1,153 1,153 1,153 1,153 1,153 1,546 1,546 1,546 1,378 1,378 Workers comp & disability 206 206 252 252 252 252 252 270 270 270 224 224 Healthcare benefits 277 277 277 277 277 277 277 546 546 546 546 546 Accounting 83 83 83 83 83 83 83 83 83 83 83 83 Advertising 167 167 167 167 167 167 167 167 167 167 167 167 Automobile 100 100 100 100 100 100 100 100 100 100 100 100 Bad debt 10 10 10 10 10 10 10 10 10 10 10 10 Repair & Maintenance 42 42 42 42 42 42 42 42 42 42 42 42 Communications 372 372 372 372 372 372 372 372 372 372 372 372 Store expenses 17 17 17 17 17 17 17 17 17 17 17 17 Postage & delivery 42 42 42 42 42 42 42 42 42 42 42 42 Printing & repro 142 142 142 142 142 142 142 142 142 142 142 142 Educational materials 17 17 17 17 17 17 17 17 17 17 17 17 Travel & Entertainment 83 83 83 83 83 83 83 83 83 83 83 83 Ride leader - - - - - 1,200 1,200 1,200 - - - - Bank fees 17 17 17 17 17 17 17 17 17 17 17 17 Rent 1,600 1,600 1,600 1,600 1,850 1,850 1,850 1,850 1,850 1,850 1,850 1,850 Storage mortgage - - - - - - - - - - - - Insurance 167 167 167 167 167 167 167 167 167 167 167 167 Utilities 46 46 27 46 46 86 106 101 46 46 46 46 Expensed investments - - - - - - - 12,800 - - - -

Total expenses 7,289 7,289 7,483 7,502 7,752 8,992 9,012 26,654 12,599 12,599 12,386 12,386

Operating income (340) (1,977) (2,312) 5,851 2,328 1,088 4,341 (13,301) (2,518) (4,155) (2,164) (5,437) Interest expense - - (177) - - (177) - - (177) - (985) (177) Interest income - - - - - - - 46 189 185 179 174 Other income 28 23 28 57 45 45 57 57 45 40 40 28 Net operating income (312) (1,954) (2,460) 5,907 2,373 957 4,397 (13,198) (2,460) (3,930) (2,931) (5,411)


Part V: Sample Business Plan APPENDIX F -- 5-YEAR P&L 2003 – 2007 Annual Profit & Loss Statements

Profit & LossApril 3, 2003

2003 2004 2005 2006 2007Sales

Classes 3,900 3,900 3,900 3,900 3,900 Swift folder 720 1,080 1,440 1,440 1,440 Grants 71,091 138,396 172,049 188,875 198,129 Capital grant - 38,000 - - - Bikes 78,300 109,620 137,025 150,728 158,264 Accessories 23,490 32,886 41,108 45,218 47,479 Parts 41,108 57,551 71,938 79,132 83,089 Service 21,421 29,989 37,487 41,235 43,297 Credit card fees (1,282) (2,093) (2,617) (2,878) (3,022)

Total net sales 238,748 409,328 462,329 507,649 532,576 Growth 51.5% 71.4% 12.9% 9.8% 4.9%

167,657 232,932 # 290,281 318,775 334,446

148% 24% 10% 5%Cost of Sales

Repair supplies 11,275 15,785 19,732 21,705 22,790 Accessories 9,396 13,154 16,443 18,087 18,992 PT Retail mechanics 12,186 17,572 22,623 25,632 27,721 FT storage facility mechanic - 15,821 16,295 16,784 17,288 PS 218 mechanic 5,184 5,340 5,500 5,665 5,835 Retail mgr /asst mgr labor 87,360 89,981 92,680 95,461 98,324 PT van driver - 3,955 4,074 4,196 4,322

Total cost of sales 125,401 161,608 177,347 187,530 195,272

Gross profit 113,347 247,721 284,982 320,119 337,304 Gross margin 25.2% # 40.4% 38.9% 41.2% 41.6% Expenses

Salaried wages 55,833 87,550 90,177 92,882 95,668 PT Admin wages - - - - - Payroll taxes 15,133 19,264 20,269 21,097 21,854 Workers comp & disability 2,932 3,379 3,597 3,765 3,912 Healthcare benefits 4,670 6,650 6,749 6,852 6,958 Accounting 1,000 3,090 3,183 3,278 3,377 Advertising 2,000 2,060 2,122 2,185 2,251 Automobile 1,200 5,000 5,000 5,000 5,000 Bad debt 125 125 125 125 125 Repair & Maintenance 500 515 530 546 563 Communications 4,463 4,597 4,735 4,877 5,023 Store expenses 200 206 212 219 225 Postage & delivery 500 515 530 546 563 Printing & repro 1,700 1,751 1,804 1,858 1,913 Educational materials 200 206 212 219 225 Travel & Entertainment 1,000 1,030 1,061 1,093 1,126 Ride leader 3,600 3,600 3,600 3,600 3,600 Bank fees 200 206 212 219 225 Rent 21,200 29,664 33,668 35,668 36,000 Storage mortgage - 39,568 39,568 39,568 39,568 Insurance 2,000 2,100 2,205 2,315 2,431 Utilities 688 709 730 752 774 Expensed investments 12,800 2,000 - - -

Total expenses 131,944 213,785 220,289 226,662 231,380

Operating income (18,597) 33,936 64,693 93,457 105,923 Interest expense (1,691) (20,339) (19,585) (17,105) (14,623) Interest income 774 1,311 716 968 1,555 Other income 493 690 863 949 996 Net operating income (19,021) 15,598 46,687 78,269 93,851



APPENDIX G -- ASSUMPTIONS TO FINANCIAL MODEL Assumptions – Initiatives

InitiativesOn-going Date Cost Quantity IncrHire Development Officer Aug-03 50,000$ annual 4,167 month 3%Development Officer healthcare Aug-03 3,228$ annual 269 month 3%Hire PT van driver Jan-04 8.00$ hour 40 320 month 3%Hire PT administrative support (in-kind) Mar-03 -$ hour 40 - month 3%Purchase Prod/Training Facility Jan-04 110.00$ sq ft 3,000 $3,297 monthPurchase van (donated) Jan-04 -$ at purchase, plus: 417 monthHire Production Assistant for Prod. Facility Jan-04 8.00$ hour 160 1,280 month 3%

One-timeImplement inventory system Aug-03 800$ (2 computers)Leasehold improvements at storage facility Jan-04 5,000$ Tools and equipment at storage facility Jan-04 2,000$ Business consultant (remaining fees) Aug-03 4,500$ Real Estate Consultant Aug-03 $7,500

Assumptions – Expenses

ExpensesApril 3, 2003

Repair supplies 14% of bicycle sale price ($15-$20 of supplies per bicycle sold at an average price of $125)Bike accessories 40% of accessories sale price (100% margin for all products excluding locks; locks marked up approx. 50%)

Payroll taxes 9.425% of total wagesWorkers comp - exec 0.43% of total wagesWorkers comp - other 2.57% of total wages

AnnualAnnual Month incr Rent 2003 2004 2005 2006 2007

Salary - ED 35,000$ annual 2,917$ month 3% EV - Annual 13,200 18,000 18,000 18,000 18,000 Benefits 3,228$ annual 269$ month 3% EV - Monthly 1,100 1,500 1,500 1,500 1,500 Accounting 1,000$ annual 83$ month 3%Audit 2,000$ annual 167$ month 3%Advertising 2,000$ annual 167$ month 3%Van rental 1,200$ annual 100$ month 3%Bad debt 125$ annual 10$ month 0% Credit card feesRepair & Maint 500$ annual 42$ month 3% % of all sales 30% 35% 35% 35% 35%Communications 4,463$ annual 372$ month 3% transaction fee 2.6% 2.6% 2.6% 2.6% 2.6%Expenses store 200$ annual 17$ month 3%Postage & Delivery 500$ annual 42$ month 3%Printing & repro 1,700$ annual 142$ month 3% PT Labor 3% Annual increasesEducational materials 200$ annual 17$ month 3%Travel & Ent 1,000$ annual 83$ month 3% Manager $15.00 per hourBank fees 200$ annual 17$ month 3% Asst. Manager $10.00 per hourInsurance 2,000$ 167$ month 5% Mechanic $8.00 per hour

PS 218 Mechanic $8.00 per hour

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TotalUtilitiesWaste removal 16 16 16 16 16 16 16 16 16 16 16 16 192 Utilities 30 30 11 30 30 70 90 85 30 30 30 30 496

Annl incrTotal 3% 46 46 27 46 46 86 106 101 46 46 46 46 688

Ride leader - - - - - 1,200 1,200 1,200 - - - - 3,600

DUMBO Rent - 2003 500 500 500 500 750 750 750 750 750 750 750 750 8,000 DUMBO Rent - 2004 750 750 750 750 1,083 1,083 1,083 1,083 1,083 1,083 1,083 1,083 11,664 DUMBO Rent - 2005 1,083 1,083 1,083 1,083 1,417 1,417 1,417 1,417 1,417 1,417 1,417 1,417 15,668 DUMBO Rent - 2006 1,417 1,417 1,417 1,417 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 17,668 DUMBO Rent - 2007 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000


Part V: Sample Business Plan APPENDIX G -- ASSUMPTIONS TO FINANCIAL MODEL (CONTINUED) Assumptions – Income

IncomeApril 3, 2003

Weekly bike sales

Average bike price 125$ M T W R F Sa Su Total

Bike sales - EV 1 1 1 2 2 3 - 10 Bike sales - DUMBO 1 1 1 1 2 2 - 8 Bike sales - Total 2 2 2 3 4 5 - 18

Daily bike sales revenue 250$ 250$ 250$ 375$ 500$ 625$ -$ 2,250$

Bike sales JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TotalSeasonality factor 0.5 0.4 0.5 1.0 0.8 0.8 1.0 1.0 0.8 0.7 0.7 0.5 0.7 Expected sales - EV 20 16 20 40 32 32 40 40 32 28 28 20 348 Expected sales - DUMBO 16 13 16 32 26 26 32 32 26 22 22 16 278 Expected sales - Total 36 29 36 72 58 58 72 72 58 50 50 36 626

Bike Inventory JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TotalExisting Finished inventory 74 103 139 168 126 114 101 59 17 4 4 4 4 Existing WIP inventory 355 357 358 360 397 418 440 477 513 535 552 568 Restorable donations 67 67 67 67 67 67 67 67 67 67 67 67 800 No. restored 65 65 65 30 45 45 30 30 45 50 50 60 580 Available for sale 139 168 204 198 171 159 131 89 62 54 54 64 64

Total bikes sold 36 29 36 72 58 58 72 72 58 50 50 36 626

Ending finished inventory 103 139 168 126 114 101 59 17 4 4 4 28 28

Monthly bike revenue 4,500$ 3,600$ 4,500$ 9,000$ 7,200$ 7,200$ 9,000$ 9,000$ 7,200$ 6,300$ 6,300$ 4,500$ 78,300$ Lost monthly bike revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TotalAccessoriesRel. to bikes 0.30 1,350$ 1,080$ 1,350$ 2,700$ 2,160$ 2,160$ 2,700$ 2,700$ 2,160$ 1,890$ 1,890$ 1,350$ 23,490$ 2002 sales 14,894$ PartsRel. to accessories 1.75 2,363$ 1,890$ 2,363$ 4,725$ 3,780$ 3,780$ 4,725$ 4,725$ 3,780$ 3,308$ 3,308$ 2,363$ 41,108$ 2002 sales 28,820$ ServiceRelationship to parts 0.52 1,231$ 985$ 1,231$ 2,462$ 1,970$ 1,970$ 2,462$ 2,462$ 1,970$ 1,724$ 1,724$ 1,231$ 21,421$ 2002 sales 15,018$

Other revenue sources2002 2003 2004 2005 2006 2007

GrantsDonations 23,815 35,723 71,445 89,306 98,237 103,149 Contributions 21,055 31,583 63,165 78,956 86,852 91,194 Benefit 3,786 3,786 3,786 3,786 3,786 3,786

48,656 71,091 138,396 172,049 188,875 198,129

Total Grants per Month 4,055 5,924 11,533 14,337 15,740 16,511

Classes - Annual 3,900 3,900 3,900 3,900 3,900 3,900 Classes - Monthly 325 325 325 325 325 325

Swift folder

Commission per bike $60Bikes sold 8 12 18 24 24 24 Revenue - annual 480$ 720$ 1,080$ 1,440$ 1,440$ 1,440$ Revenue - monthly 40$ 60$ 90$ 120$ 120$ 120$

Other incomeSales tax credit 0.30% of taxable sales for prompt payment


Part V: Sample Business Plan APPENDIX H -- Executive Director C.V.

Karen Overton 55 Washington Street Brooklyn, NY 11201

[email protected] Work Experience: Executive Director, Recycle-A-Bicycle, Inc. (1998-present) Founded innovative organization dedicated to youth environmental education and job training that has worked with over 4,500 youth and removed 109 tons of waste from the waste stream. • Established the organization’s legal and structural framework; handle all finances • Hire and train permanent staff of six and organize volunteers • Successfully increased fundraising/development 200% over the life of the organization • Oversaw creation of a second successful retail establishment, including site selection, tenant buildout,

merchandising, and community development • Led 5-year strategic planning effort; writing business plan and sourcing financing to grow the business • Co-authoring training manual “One Revolution at a Time: How to Start and Run a Youth Cycle Club” and

providing technical assistance to youth groups • Serve as technical consultant to other youth and transportation programs nationwide Recycle-A-Bicycle Project Director, Transportation Alternatives (1994-1998) Founded a youth environmental education project in which duties included: • Developing partnerships with youth organizations • Fundraising & coordinating material donations • Developing curriculum & instructing • Publishing “Tools for Life: A Start-Up Guide for Youth Recycling and Bicycling Programs” Bikes for Africa Project Director, Institute for Transportation and Development Policy (1992-1994) Established a bicycle project in Beira, Mozambique in which duties included: • Hiring and training staff • Running revolving credit fund for women peasants • Fund raising • Research and publication of project’s socio-economic impact Education: 1993 - Masters in Urban & Regional Planning. State University of New York at Albany. 1985 - Bachelor of Arts in Latin American and Caribbean Studies. State University of New York at Albany. Special Skills: Fluent in Portuguese, working knowledge of Spanish. Proficient in Quickbooks and other common applications Affiliations: 1997 to present Director and Treasurer, Institute for Transportation and Development Policy, Appointed to Board of Directors of global transportation policy and program development organization. Elected Treasurer of the Board 2001 to present Advisory Board Member, Ryan-Nena Health Clinic, Appointed by clinic director to advise staff of largely government-funded institution that provides services to low income HIV-positive residents of Manhattan’s Lower East Side.


Part V: Sample Business Plan APPENDIX I -- COMMUNITY NETWORK REFERENCE MAJOR PARTNERS Henry Street Settlement www.henrystreet.org Children’s Aid Society www.childrensaidsociety.org AFFILIATES Transportation Alternatives www.transalt.org Five Borough Bike Club’s Montauk Century www.5bbc.org New York City Waste Prevention Coalition www.nycwpc.org Project Renewal www.projectrenewal.org The Youth Bicycle Education Network www.yben.org Nonprofit Venture Network www.seedco.org


http://www.transalt.org/

Part V: Sample Business Plan APPENDIX J -- MEDIA COVERAGE Copies of articles are available upon request. Spinning on 2 Wheels of Fortune, David Gonzalez, The New York Times, Saturday, May 31, 1997, p. 21. Recycle-A-Bicycle, YES. A Journal of Positive Futures, Winter 1997/1998. Summer Fun for Recycle-A-Bicycle, Greenline: The North Brooklyn Community News, September 1999, p. 1. Honor Roll: Kristina Rodriguez, Todd Edelman, Latingirl Passages, August-September 2000. Program gets ‘em in fresh gear, Matthew Creamer, New York Daily News, Sunday, October 8, 2000. Wanna’ get inspired yourself?, College Bound Magazine, November/December 2000.. Reality Pokes Its Nose Into the Tents, Guy Trebay, The New York Times, Tuesday, February 11, 2003, p. B10. Urban Legend: Karen Overton. Tracie McMillan, CityLimits, June 2003, p. 7.


Part V: Sample Business Plan APPENDIX K -- YOUTH EMPLOYMENT CURRICULUM SAMPLES

Derallieurs and Gears

Goals: To understand the function of gears and how to use them to increase distance and speed. Students will disconnect, inspect, lubricate and reinstall a gear cable.

Set-up:

- 5 bikes with functioning rear and/or front derailleurs - 8/9/10 y-wrenches - cable cutters

Discussion Questions:

- What are gears? What do they do? - When would we want to make it easier to pedal the bike? When would we want to

make it harder? - Who has a bike with gears? Do you use them often? - Do gears help cyclists ride farther?

The Lesson:

1. Ask for two volunteers to come up to the bike. Walk them through how to shift gears (one pedals, the other shifts). Stress that one should never shift gears unless the pedals are moving (not just the wheel). Tell the students to watch how the chain moves.

2. Ask the pedaler if it is easier to pedal in the low or high gears. 3. Have the pedaler turn the pedals as fast as he/she can when the bike is in low gear. Stop

the wheel and try it again in high gear. Ask the students if the wheel turned faster the second time.

4. Name the parts and explain how the cable system works. 5. Demonstrate a derailleur cable “overhaul”

- Loosen the eyebolt and disconnect the cable - Take the cable out of the housing - Inspect cable for rust and damage - Replace or straighten cable if necessary - Oil cable housing - Reinstall cable - Check and adjust cable tension

6. Assign groups to bikes to perform lesson. 7. Clean up.

Classroom Lesson Plan © 2003 Recycle-A-Bicycle NYC


Part V: Sample Business Plan APPENDIX K -- YOUTH EMPLOYMENT CURRICULUM SAMPLES (CONTINUED)

Environmental Education & Cannibalizing Bikes

Goal: To understand the environmental impact of garbage and recycling. To understand the

positive environmental contributions of RAB and its students. To recycle bicycle parts. Set-up:

- Get out bikes and bike parts to be disassembled (ex. steel drop handlebars, rusty wheels)

- Write the three rules of cannibalizing on the board: Keep similar pieces together!!!, finish taking off one part before moving on to the next one, put pieces away.

- Get one example of a complete brake and a disassembled brake Opening discussion questions:

- What happens to your garbage when you throw it away? Where does it go and how does it get there?

- How much garbage do you throw away at your house per week? How many apartments are in your building? How many buildings are on your block? How many blocks are there in NYC? How much garbage do we throw out every week?!

- Do garbage trucks cause air pollution? How does it effect the environment if we have to ship our garbage far away?

- What can we do about the garbage problem? The Lesson

1. Have the students look around at all of the bikes and pieces in the shop. Explain that most of these pieces would be in the garbage if it weren’t for RAB.

2. Explain the three fates of a bicycle that enters the shop (earned, sold, disassembled) 3. Describe how we use the parts off of cannibalized bikes to build new ones. 4. Demonstrate how to keep like pieces together by showing an example of a complete

brake (all in one piece) and a disassembled brake (in 15 pieces). Show how difficult it would be to reassemble a brake if one piece is missing.

5. Assign students to bikes or cannibalizing projects. Students can use the tools from the boards.

6. Ten minutes before class ends, students stop working on bikes. 7. Instruct students on where to put parts. Get one container for miscellaneous small parts. 8. Clean up and put away tools.

Classroom Lesson Plan © 2003 Recycle-A-Bicycle NYC


Part V: Sample Business Plan APPENDIX K --YOUTH EMPLOYMENT CURRICULUM SAMPLES (CONTINUED)

Bike Safety Check-up Goals: To apply the cumulative information from the previous lessons to perform a complete

bike safety check. To learn the most important things to check on a bike before every ride.

Set-up:

- five booby trapped bikes with 6-10 problems each - A written list describing the make, model, color, and type of each bike and a

description of every problem - Photocopies of a checklist of how to evaluate a bike - Pencils and blank paper

Opening discussion questions: - Name all of the lessons we have had in this class. - Why should we check our bikes before we ride? - What can happen to you if the bike has problems? What can happen to the bike?

The Lesson:

1. Go over the check list using student volunteers to help demonstrate each step. 2. Break students into groups and pass out a checklist and pencils to each one. 3. Have the students write the make, model, color and type of bike on the top of a blank

paper. 4. Have students evaluate each bicycle. Make them take their time and go over the check

list from top to bottom. They should write a complete description of every problem on their paper.

5. Once they have performed a thorough safety check, compare their answers with the pre-written list of problems. If they are missing any, ask them to go back and look for more problems.

6. Clean up. Classroom Lesson Plan © 2002 Recycle-A-Bicycle NYC


APPENDIX L --SEEDCO LOGIC MODEL‘((This Logic Mode was modified for use in this toolkit)

Inputs ActivitiesOutputs Initial Outcomes

Facilities

Board

Materials Donation

Students graduate from training

Conduct Youth Training Programs

Staff

Consultant

Analyze operations & set production goals

Improved inventory & bookkeeping

Youth trained in bicycle repair and business concepts

Funding

Lonpossupsale

Financing for new facility and programs secured

Conduct business activities at retail stores

Refurbish bicycles

Create resource development strategy

Ongoing sales activity

Facilities and staffing plan

Revised operating plan

Youth employed at RAB or other bike shops

Youth develop strong job skills

Heapraprogra

Van & Storage Facility acquired

Retvolu

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Strategy for Resource Development

Inventory and bookkeeping systems

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L PURPOSE BUSINESS PLAN V.67

Long-term Outcomes

RAB offers consistent programming

Organizational Sustainability achieved

Healthy lifestyle promoted to others by program graduates

Youth enter living wage careers or obtain post-secondary education

Graduates become environmental stewards

Part V: Sample Business Plan APPENDIX M PICTURES OF RECYCLE-A-BICYCLE

Yoandy Ramirez in the East Village Store



Working on a bicycle

Local bike tour

Youth field bike trip to Montauk beach




Local bike tour

NYC Council Member Margarita Lopez visits Recycle-A-Bicycle

Documents

A Toolkit for Developing a Social Purpose Business Plan - Seedco