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THE ENTREPRENEURIAL NONPROFIT’S
ROADMAP TO SOCIAL ENTERPRISE

A complete guide to design an ideal social enterprise by +Acumen

Your complete guide to design an ideal social enterprise that will diversify revenue without distracting from mission

In this six part series, +Acumen will help you to ask serious questions about your nonprofit and whether it is ready to explore the long and often arduous journey towards social entrepreneurship and earned income revenue streams.

Part One: The Six Signs

6 Signs Your Nonprofit is Well-Positioned to Start a Social Enterprise

Nonprofits have pursued entrepreneurial revenue streams for decades, with organizations like Goodwill Industries and The Girl Scouts first pioneering earned income models that supported their social mission. As conversations about social innovation and social enterprise have increased, many nonprofits are now wondering if they should consider launching an entrepreneurial venture to diversify their funding. Perhaps you’ve been wondering if it’s a path that makes sense for your nonprofit.

After all, earning unrestricted cash can enable your organization to flexibly try out new programs, reach new beneficiaries, and sustain your core work, even in uncertain financial times.

That said, developing a social enterprise is not a silver bullet or an easy journey. Like any entrepreneurial venture, pursuing an earned income stream for your nonprofit comes with considerable risk. So when should you take on this challenge?

Below are six signs that your nonprofit may be well- positioned to start a social enterprise.

1. Your nonprofit leadership team supports the idea of social enterprise

Turning a social enterprise idea into a profitable revenue stream that adds to your nonprofit’s bottom line will not happen by accident. Your social enterprise strategy needs to be more than a side project that one individual person is pursuing; you need to have buy-in from the top, early on.

Ask yourself, who is championing the idea of social enterprise in your organization right now?

If the conversation does not yet involve key decision makers, it is time to get them involved. When a nonprofit leadership team champions social enterprise, it sends a message that developing these entrepreneurial projects is not just a passing fad, but a core element of the strategic plan.

On the flip side, if your nonprofit leadership team is on board but social enterprise is not well-understood by the rest of the staff, it is helpful to socialize the concept more broadly. You could bring in a speaker to introduce social enterprise at your next team gathering, or put a call out to form a working group and get more people involved in the conversation.

A social entrepreneurship expert speaking on stage to a group of nonprofits

We have seen many nonprofits and companies take the +Acumen course on “Social Entrepreneurship 101” with their teams to introduce a broader range of people to entrepreneurial concepts. We’ve found that, for nonprofit employees in particular, it helps to share case studies from other organizations that have successfully piloted earned income streams without divesting from their core social mission. Often the strongest examples of nonprofit-run social ventures directly support the mission. For example, an assisted living nonprofit for seniors might design software to improve caregiver communication that can then be sold to other related organizations.

Many nonprofit employees have gotten into their fields because they care deeply about the social impact of their work and can get wary when discussions of profits and revenue are suddenly introduced. You can mitigate these fears by sharing real stories of other nonprofits that have navigated these challenges effectively.

Bringing together leadership and employees from all levels of the organization early in the process will promote a greater sense of engagement and ownership. If your nonprofit already has a fairly entrepreneurial culture, introducing and gaining buy-in for a new social enterprise strategy might come naturally.

2. Your nonprofit is resilient in uncertain times

Starting a new social venture will inevitably come with many unknowns that need to be navigated on the fly.

One constant of entrepreneurship is that things are always changing. Shifting political environments, evolving customer needs, and other factors outside your control will impact how well your business does at any given moment. For example, if your nonprofit sells textbooks to subsidize your education programs, how do you react to the trend towards digital materials?

As much as you plan for and seek to mitigate risks, the unexpected will occur, and your organization’s ability to evolve and make decisions in these uncertain times is key to success.

This was the case for social enterprise Liberty & Justice, that faced a shock in 2014 when Ebola landed in the very same location as their factory right after they had secured two contracts worth $40 million dollars. Thanks to a resilient and adaptable team they were able to come out of the crisis ahead.

Think back to a time when your organization faced an unexpected obstacle that was out of your control. How did your nonprofit leadership team respond? How did your front-line employees respond, and everyone in between?

A culture of resilience and grit is going to make this challenging undertaking of launching and running a social enterprise much smoother.

Curious to learn more and improve your nonprofit’s capacity in this area? Award-winning psychologist, Angela Duckworth, shares her strategies for building habits of perseverance in the +Acumen Master Class on Building Grit.

3. You already have the relevant talent, or are willing to invest in growing it

Nonprofits that have the most success with social enterprise realize they need leaders and staff with relevant business experience at all levels of the organization.

It’s ideal to have team members with general entrepreneurial experience to drive the initiative forward in early stages, and later to bring on people with industry-specific experience.

Imagine a family member came to you with a new restaurant idea looking for investment. Would you risk your hard-earned savings if they said they had no chef and no one on the team who had ever planned or priced a menu, purchased from food suppliers, or recruited, trained or scheduled staff? It would be a nightmare!

Although you might already have staff who are enthusiastic about the new venture, ask yourself if the group that is moving the idea forward is missing key skills.

The same is true if your nonprofit plans to open a restaurant to bring in earned revenue and support your mission (which could be something like training ex-incarcerated individuals so they can go on to gain long term employment).

Although you might already have staff who are enthusiastic about the new venture, ask yourself if the group that is moving the idea forward is missing key skills. If so, this will need to be addressed sooner than later. We often see that nonprofits have staff who are great experts on the issues they are tackling (such as hunger, homelessness, or environmental conservation), but when it comes to sales, marketing, and business strategy, they might need to bring in new people to complement their skills.

As the vision for your earned income stream comes together, bring in people with experience in that specific role or industry so that they can help your team take your ideas to the next level.

To get a head start on building a strong team for your social enterprise, register for an upcoming session of the free +Acumen course, Human Capital Strategy for Social Enterprises.

4. You can take calculated risks without jeopardizing your organization.

Piloting a social enterprise model will likely take your nonprofit out of its comfort zone. Stretching into this new territory will come with risk. Your organization will likely invest both time and resources not only once you start implementing, but also to get to that point.

You can greatly reduce these risks by tapping into existing knowledge and seeking mentors as you plan out and put your social enterprise idea into action. But if your nonprofit’s resources are already spread so thin that a misstep will result in dire consequences, then pursuing social enterprise is going to be a stressful way to go. In this case, switching gears to secure some more stable and predictable funding before turning back to social enterprise will be more prudent.

Your nonprofit staff and board members should go into social enterprise development with eyes wide open to the uncertainties and liabilities

There are four main types of risks that new ventures face--and nonprofit ventures will face them too.

Harvard Business Review describes these risks as:

  • Demand risk (how likely your customers are to adopt your solution)
  • Technology risk (when the solution uses new technology)
  • Execution risk (how likely you can pull together the team and partners needed to implement your idea)
  • Financing risk (access to funding)

They add, “the entrepreneur’s task is to manage this uncertainty, while recognizing that certain risks cannot be influenced by their actions.”

All this to say, the risk of failure is baked into business. Your nonprofit staff and board members should go into social enterprise development with eyes wide open to the uncertainties and liabilities.

"You don't learn to walk by following rules. You learn by doing and by falling over." — Richard Branson

5. You see an opportunity to fill a gap in the market, or you are willing to explore until you find one

Perhaps the biggest potential downfall of any new business is missing the mark on product-market fit.

The surest way to guarantee a hard uphill battle is to put out into the world an offer that your target market doesn’t care enough about, or simply doesn’t want.

One promising way to avoid this situation is to look for the gaps in service you see your existing beneficiaries facing. This will indicate that there could be a genuine need for a new offering. Then, you need to test whether there is willingness to pay for that new offering. If you have a hunch there’s a way to monetize it - you are in a great position!

Let’s be clear, you don’t need to have your social enterprise idea completely figured out before starting, but you do need to put a healthy focus on rigorously exploring who you desire to serve, what will make a difference for them, and whether they will be able to pay for the product or service. You should also plan for plenty of testing and refining in the early stages.

One of our most popular free courses at +Acumen, Introduction to Human Centred Design, teaches learners to use design thinking to understand potential customers in a way that allows you to create better solutions for their challenges.

Bonus Tip: The most profitable social enterprise ideas can be the simplest ones! You don’t need to disrupt an industry with a breakthrough innovation. In fact, executing a business that has established ‘competitors’ can be the least risky because there is proven business model you can learn from and replicate with your unique twist (a great tool for this process is the Business Model Canvas).

“What good is an idea if it remains an idea? Try. Experiment. Iterate. Fail. Try again. Change the world.” — Simon Sinek

From the Field

When it comes to evolving business models Qasim Qasi, Acumen Fellow and founder of Amden, a Pakistan-based revolving livestock model similar to microfinancing, has experienced it first hand. He shares how the turning point from grant-seeking NGO to for-profit social enterprise began with an impact study 3 years in. Even though Amden’s model was already primed to scale with earned income, the intention of focusing on financial sustainability in the last 4 years brought forward new improvements.

Amden’s model for eradicating chronic poverty is to transfer livestock to families, and during 18 months collect back a number of goats and poultry birds after the flock has grown. They transfer 3 goats and 10 poultry birds, and during 18 months (on a quarterly basis) they recover the offspring, typically 5 goats and 15 birds or 750 eggs. Since the asset is livestock, not cash, recovering these offspring is what repayment of principal and interest is to cash microfinancing.

Since focusing on financial sustainability starting in 2014, Amden added a comprehensive training program running beside microfinance for families to learn how to maintain the health of livestock, get maximum breeding, and how to run it like a business and grow into a modern agriculture entrepreneur.

6. You are open to new approaches and doing things differently

It can be quite a shift to look at challenges through an entrepreneurial lens rather than the more traditional charitable lens you may have used in the past. Starting a social enterprise will challenge your staff, teams, and culture in new ways.

Being open to testing new approaches and learning new skills along the way will allow you to ride the waves of entrepreneurship.

The truth is you may never feel 100% ready… and that’s okay because it means your risk mitigation gene is turned on!

Your social enterprise endeavour might require reframing mindsets or beliefs around what it means to sell and earn money, how to use lean methodology approaches to take your idea to market, or how to work smarter, not harder with a systems approach.

You can expect to trade grant applications and slow turnaround times for testing and continuous iteration to nail your offer and business model.

The more nimble and open your team is to make decisions with imperfect information, the quicker you will solidify an earned-income strategy that not only brings in consistent revenue, but also contributes to the bottom line.

“In a world that’s changing really quickly, the only strategy That’s guaranteed to fail is not taking risks.” — Mark Zuckerburg

If you can see your nonprofit adopting or embodying these six characteristics, you are likely as ready as you’ll ever be to start building out your social enterprise idea. (The truth is you may never feel 100% ready… and that’s okay because it means your risk mitigation gene is turned on!)

The next step will be to start navigating the windy path of launching a social enterprise - a path that will have you determining what idea will work best for you, planning out your business model and strategy, and finally putting that plan into action!

Our best advice if you are setting out on this road is to surround yourself with the mentors and peers who can help you navigate through the inevitable twists and turns.

You've reached checkpoint #1!

Checkpoint One: Readiness Self Assessment

Complete this short checklist to determine which fork to take in the road up ahead.

IN GENERAL

  • Has an entrepreneurial spirit
  • Is resilient in uncertain times
  • Views change positively
  • Is open to trying new approaches, failing sometimes, and using that as learning for the next step
  • Understands social enterprise is way to further our mission in a new sustainable way (and is not necessarily a quick and easy solution to funding pains)
  • Has leadership that is supportive of the idea of social enterprise
  • Is open to trying new approaches, failing sometimes, and using that as learning for the next step
  • Has experience in the industry we anticipate working in, and/or with the target market we anticipate creating an offer for

If you checked at 4 or more boxes above, you are in good shape to keep heading down the Entrepreneurial Nonprofit’s Roadmap for Social Enterprise Success!

If you checked less than 4 boxes, this might be a good time to take a quick pit stop in your social enterprise journey. It doesn’t have to be the end of the road though - take your learning so far back to your team to discuss how you can improve your readiness for entrepreneurial pursuits. Here are some resources to guide you through this exploration:

How to Build a Culture of Entrepreneurship in Your Nonprofit Organization

Seth Godin’s Leadership Workshop

Scott Sonenshein on Resourcefulness

Angela Duckworth on Building Grit

After more exploration and discussion, your nonprofit management team could determine that it’s not the right time, or the best fit, to move forward with a social enterprise strategy. That’s ok! Using an entrepreneurial strategy will not be the best path for every nonprofit to accomplish the goal of greater financial sustainability. Here are some additional resources for nonprofits seeking new ways to grow financial sustainability outside of social enterprise:

Finding Your Funding Model: A Practical Approach to Nonprofit Sustainability

Strategies for Sustainability in Uncertain Times

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Part Two: Essentail Mindsets

6 Essential Mindsets Enterprising Nonprofits Need to Adopt

Why do some social enterprises succeed while others fail? Access to capital is critical.The right team is essential. And having a breakthrough idea is important. Yet, there are examples of both successes and failures in every scenario.

So what separates a successful enterprising nonprofit from one that struggles to generate earned income?

One factor that will significantly impact social enterprise success is how a team interprets and reacts to the challenges that inevitably surface along the way. Some pivot, adapt, and iterate while staying laser-focused on customer needs. Others are slow to react or don’t adequately listen to the people they are trying to serve.

To drive towards sustainable profitability and impact, nonprofits launching and growing social ventures will do well to embody these essential mindsets:

1. Focus Fosters Expansion

It feels counterintuitive, but the idea that focus fosters expansion can dramatically influence the decisions you make while growing a social enterprise.

Being everything to everyone is impossible. If a nonprofit wants to serve the entire population of Canada with coffee beans that support sustainable farming practices because ‘everyone drinks coffee’, this blanket approach will only spread efforts thin and yield scattered results.

Instead, narrowing in on a specific segment of the market means messaging and strategies can be laser-focused and resonate much more deeply. In this case, focusing marketing efforts to connect with people in Vancouver who are already involved in the social sector could result in becoming the go-to coffee brand for social activists.

The more specific you are in defining who you serve and exactly how you serve them, the better you will be able to communicate that value...

Sarah Robb O’Hagan, a marketing executive and business leader behind brands like Virgin, Nike, Gatorade, and Flywheel calls this playing your “Specialist Game.”

“The secret to success,” she writes, “is specializing in two different ways. On the one hand, to develop out of the broad range of your extreme skills and interests one narrow, specialized method or product or area of expertise that’s all yours. On the other hand, to find an equally narrow, specialized audience that absolutely needs and loves what you’ve got to offer. When you take the specialized offering to the right specialized audience, stand back! You are now playing your Specialist Game--and amazing things are going to happen.”

One reason people dedicated to creating positive change find it hard to focus is they tend to be systems thinkers. They can tap into the webs of complexity in a way that promotes innovative solutions that haven't been tried before. However, this desire to impact the system in a significant way makes it hard to ‘stay in one lane’ and focus in on the slice of the ecosystem where they can have the most influence.

As an entrepreneurial nonprofit, you might be tempted to do it all, right now, because you see the big picture. However, when starting a brand new social venture it is not feasible to take on too much at once. As carefully as you map out your plan, hitting your milestones will inevitably take longer (or be harder to reach) than you first expect.

The best way to combat this is to get ultra-focused. The more specific you are in defining who you serve and exactly how you serve them, the better you will be able to communicate that value and ultimately deliver on that promise.

Note that getting specific does not mean giving up on your big picture plans or long-term vision of what you dream your social enterprise to be. It just means that you focus on one element at a time, master it, and then move on to add the next layer.

Switch Mindset: Instead of feeling like you are missing opportunities if you narrow in, focus on being the best you can be at one thing for one group of people.

Practice: With every strategic decision (like defining your offer and your target market and even your specific strategies like creating your marketing plan) ask yourself, “how can I get even more focused here?”

From the Field

When asked what has allowed her team to remain a constant contributor to the entrepreneurship ecosystem in conflict-ridden Northeastern India over the past 17 years, Acumen Fellow, Shiroi Shaiza of Entrepreneurs Associates, shares:

“Focus. Our focus has always been business entrepreneurs and it's never shifted. Even now as we plan to incubate small enterprises, and add market aggregator services, it's always focused around entrepreneurship and building entrepreneurs. Since the organization is well-reputed today, many agencies approach us to take up trainings and projects. For example, if the Government of India brings a new policy with policies focused on the Northeast, it gives a lot of NGO’s the opportunity to promote certain things, but for us, we don't do it based on that. But if it's anything related to entrepreneurs, we'll do it.”

2. Marketing, Selling or Making Money Isn’t Evil

Traditional charity and the social sector has a complicated relationship with money. (Whether or not you entirely agree, Dan Pallotta’s TED talk is a good starting point for exploring this.) It’s not surprising that one of the hardest mindset shifts for nonprofit leaders to make when they consider starting a social enterprise is around selling and making money.

As an entrepreneurial nonprofit you need to get comfortable with the idea of selling your goods and services. This means not only earning money to cover your costs but also generating profit so there are funds available for reinvestment and growth. You could earn revenue by charging your beneficiaries directly for products and services that they will value at fair or subsidized prices. Or you could charge other customer segments for your products or services and earn money to cross-subsidize your core impact activities. For example, Aravind Eyecare, the famed social enterprise in India, lets people pay what they can afford for cataract surgery. This usually means that higher income customers end up subsidizing care for the poor. They’ve landed on a model that offers the dignity of choice to all customers in a financially sustainable way. Rather than being a “dirty” activity, asking customers to pay enables Aravind to reach more people and increase their social impact.

People vote with their dollars when it comes to letting companies know about the kinds of features and options they want.

If selling feels uncomfortable, sleazy, or pushy, it’s time to reframe this mindset and start thinking of selling as a service. In the +Acumen Master Class, the Art of Selling, Daniel Pink discusses how to make sales personal, purposeful, and human.

Marketing and sales are essential for growing a thriving business; neither are inherently a bad thing. The goal is not to push solutions on people who don’t need them, but to be visible so the people who do need them can benefit. Further, you can choose to align marketing and sales with your organizational values in a way that is authentic and transparent.

When it comes to sales, Cortni Grange, Executive Director of FLYE advises other nonprofit leaders, “Think of sales first. Don’t think you need to craft the perfect idea or perfect program or perfect partnership. Instead think of how you will sell (your product or service or idea) from Day 1. Because if you can’t sell it, you can’t grow it, you can’t craft it, you can’t partner with it. I’ve realized that sales strategy and the ability to get people to give you money is the most important thing you can do as a leader in the nonprofit space.”

At Acumen, we’ve found that when our investee companies ask customers to pay for goods or services, they get far more market feedback on how people really feel about their offerings than if they simply gave them away. People vote with their dollars when it comes to letting companies know about the kinds of features and options they want. In this way, many social enterprises end up developing solutions that more low-income consumers find desirable and relevant--because they only buy something like a cookstove, mosquito net, or solar home system if they really value it. In the best cases, sustainable business models power social impact, rather than detracting or distracting from it.

Switch Mindset: Instead of viewing marketing as pushy, remember that the better you spread the word about the value your social enterprise provides, the more likely you are to connect with the people waiting to benefit from your offers.

Instead of making money at other people’s expense, the more money you earn:

  • Has an entrepreneurial spirit
  • Is resilient in uncertain times
  • Views change positively
  • Is open to trying new approaches, failing sometimes, and using that as learning for the next step

Practice: Next time you feel shy about marketing or selling, list 10 ways the product of service you offer will benefit the person you are speaking to. Next time you feel guilty about making money, list 10 ways unrestricted funds will serve to further your mission.

3. Launch Lean & Test Often

The longer you stay in planning mode at your desk, the longer it will take you to get your social enterprise generating earned revenue in a repeatable way in order to achieve financial sustainability.

The fastest and most accurate information comes from experimentation and testing. Lean Startup principles teach us to adopt a ‘done is better than perfect’ approach. With every idea and hunch you have the best way to test it is to take action, get feedback to inform whether it's working or not in the real world, and then adapt the plan going forward based on that information.

If selling feels uncomfortable, sleazy, or pushy, it’s time to reframe this mindset and start thinking of selling as a service. In the +Acumen Master Class, the Art of Selling, Daniel Pink discusses how to make sales personal, purposeful, and human.

“No business plan survives first contact with a customer” — Steve Blank

Lean Startup principles also teach us to grow new ventures in a way that reduces risk. Building your social enterprise idea in smaller, less complicated versions or pilots allows you to gain valuable feedback and iterate along the way. Not only is your risk of losing valuable resources lowered but the value proposition you present to your potential customers is going to be much stronger. Starting small does not mean you have think small. Keep your vision for disrupting the status quo and impacting the system at the forefront but remember to focus your action and implementation one step at a time.

...it is better to ‘fail fast’ and embrace every failure as fuel to propel forward...

Expect to continuously iterate and refine your social enterprise business model. As you navigate an evolving marketplace - new competitors, changing customer needs and preferences, technological breakthroughs - strategies that worked in the past may not yield the same returns. Adopting a mindset of continuous testing, learning, and evolution will allow your social enterprise to adapt with changing tides.

At Acumen, we’ve seen that some nonprofits we’ve worked with have a particularly hard time adopting a lean approach because they are so beholden to funders who encourage top-down planning. Or they are accustomed to developing long-term theories of change and monitoring and evaluation plans that assume nothing will change. If you hope to get an entrepreneurial venture off the ground, you need to shift from a mindset of upfront planning to one of continuous testing and adapting.

Taking a lean approach may be discouraging at times. You will test new offers, new marketing campaigns, new communication strategies, and many of these will fail. But it is better to ‘fail fast’ and embrace every failure as fuel to propel forward and steadily adjust course towards the end goal. You won’t nail your business model and strategies the first time, but with persistence you will find a way to make it work and create sustainable impact.

Switch Mindset: Instead of relying on the best laid plans, rely on purposeful action to get real feedback and insight to guide next steps. Stay true to your goals but flexible in the path you take to reach them.

Practice:What is one specific action you can take to gather feedback from your potential customers to confirm planned next steps are in fact the best direction to go?

4. Humility & Learning as an Advantage

At +Acumen, our team has learned that even with a wealth of experience with a specific cause there is always more to learn and understand. Staying humble and keeping our eyes and ears open has allowed us to learn new and sometimes surprising insights that we could have missed if we thought we had all the answers.

As an entrepreneurial nonprofit these unexpected learnings should be welcomed and celebrated, not feared. With every new insight gleaned you are better positioned to respond to the needs of those you serve and better support them.

Hand-in-hand with humility comes open listening and continuous learning. Keep the lines of communication open internally with your team and externally with your partners and collaborators. Principles of Human-Centered Design teach us to practice empathy with a beginner’s mindset. By parking assumptions at the door we can be open to really listen and learn from those we serve.

Switch Mindset: Instead of feeling like you need to have all the answers before taking action, get clarity from a cycle of careful listening, iterative learning and purposeful action.

Practice: Ask yourself, “how can I step back and create space to let my customers lead the way?”

5. Learn to Love the Grey Areas

Acumen realizes that our values live in tension with each other. For example, we can be generous while keeping ourselves and each other accountable, we can listen and also take the lead, and we can remain humble while also pushing forward audaciously.

If you ever find yourself stuck in a dilemma between a rock and hard place, chances are there is a third option you haven’t thought of yet.

Acumen founder, Jacqueline Novogratz, shares about these tensions: “We wanted to say out loud what we know to be true: the work of creating change requires the moral imagination and, at times, courage, to consider trade-offs as we make the best decisions we can.”

As much as we try and simplify the paths available to us, these decisions are seldom black-and-white. Sheila Heen of the Harvard Negotiation Project encourages people to “start from the third story” when trying to navigate difficult choices and conversations. If you ever find yourself stuck in a dilemma between a rock and hard place, chances are there is a third option you haven’t thought of yet.

Most situations cannot be solved with a blueprint or framework, so you will need to become comfortable playing in the messy middle grey areas where social change takes place. On the positive side, awareness of these natural dichotomies opens up the possibility for meaningful conversations. Innovation flourishes when faced with constraints.

Switch Mindsets: Instead of feeling trapped or restricted by opposing tensions, such as juggling financial and impact returns, use these grey areas as fuel to push yourself forward to novel solutions.

Practice: Think of a time when you had to choose between two options that were at odds with each other. Looking back now, do you see a third alternative that might have been a better way forward?

Going forward, have an open and honest conversation with your team about the grey areas that come up in your work. Discuss ways you can navigate these tensions from a place of possibility and innovation.

6. Avoid Confusing Social Need with Market Demand

As a nonprofit committed to your social or environmental mission you are already doing great work. Chances are you also have a long list of ways you could create more impact if you had unlimited resources and bandwidth. If the goal of your social enterprise strategy is primarily to diversify funding, be mindful of designing a new venture that delivers more incredible impact but lacks profitability.

In the early stages of exploring your social enterprise ideas, make sure you are calculating your expected market size and doing back-of-the-envelope calculations to build your financial model and understand the numbers you’ll realistically need to hit. Not every social need has a clean tie to market demand. For example, we’ve known how to cure malaria for hundreds of years yet it still kills thousands every year and prevents people from being able to work. However, people still don’t want to pay for and/or use bed nets. In this TED Talk, journalist Sonia Shah helps illustrate the difference between social need and market demand.

In the early stages of exploring your social enterprise ideas, make sure you are calculating your expected market size and doing back-of-the-envelope calculations to build your financial model and understand the numbers you’ll realistically need to hit. Not every social need has a clean tie to market demand. For example, we’ve known how to cure malaria for hundreds of years yet it still kills thousands every year and prevents people from being able to work. However, people still don’t want to pay for and/or use bed nets. In this TED Talk, journalist Sonia Shah helps illustrate the difference between social need and market demand.

Switch Mindset: Instead of expecting all social needs can be met with a social enterprise model, challenge yourself to find proof there is a sizeable market opportunity with an audience willing and able to pay.

Practice: After the initial brainstorm but before selecting which social enterprise idea to move into the pilot stage, pressure test the top contenders against market opportunity and financial feasibility criteria. Calculate your potential market size. See how the ideas deliver independent of social or environmental benefit.

You've reached checkpoint #2!

Checkpoint Two: Essential Mindsets Recap

In summary, the top 6 essential mindsets enterprising nonprofits need to adopt are:

  • Focus fosters expansion
  • Marketing, selling, or making money isn’t evil
  • Launch lean & test often
  • Humility & learning as an advantage
  • Learn to love the grey areas
  • Avoid confusing social need with market demand

Now that you’ve reviewed them all, ask yourself:

  • Which mindset does your organization do well to embody the most often?
  • Which mindset shows up the weakest in your organization right now?
  • What steps can you take to practice growing or improving the essential mindsets?

If you feel like your organization’s culture promotes these essential mindsets, keep reading the Entrepreneurial Nonprofit’s Roadmap for Social Enterprise Success.

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Part Three: Before Planning

Tackle this Step Before Planning Your Social Enterprise

Increasing examples of nonprofit-run social enterprises offer endless inspiration for creative ways to generate revenue outside of traditional philanthropy and grants.

Perhaps these novel earned income options feel like the silver bullet you’ve been waiting for to finally solve your funding shortfalls. In truth, the ideas with highest potential of success for your organization are often the ones that leverage what is already working well for you.

As an expert in your field, it’s easy to forget just how valuable your existing strengths, assets and core capabilities are... but this is precisely where you should start the process

Before getting into the details of why it’s to your advantage to build an earned income stream that is aligned both with your mission and your strengths, let’s look at the spectrum of business models available to entrepreneurial nonprofits seeking to launch an earned-revenue strategy.

A Spectrum of Social Enterprise Models for Nonprofits

In short, there are three common structures as described by MaRS and Virtue Ventures.

First there are external (or independent) social enterprises, where the revenue-generation activities are separate from delivering on the organization’s social mission but profits go back to fund it. Further along the spectrum are integrated social enterprise models where there is overlap between the mission and revenue-generation activities; the enterprise is created to financially support and expand upon an existing mission, but is not essential to delivering on it.

...it’s worthwhile seeing if you can create an embedded model that builds on your organization’s existing strengths...

These models can be effective depending on your situation, but the healthiest social enterprises are often ones where the social or environmental impact model and the business model are closely linked together. When the level of financial returns are intertwined with the impact returns, and vise versa, this is called a fully embedded social enterprise. In other words, the enterprising activities and the impact activities are one in the same. When better results are achieved from one, results from the other improve as well.

One of the most straightforward illustrations of an embedded model is where you charge you end users a nominal fee for the products or services that will directly help you fulfill and achieve your social impact mission. So, for example, if you are a health clinic you might charge for your services or offering a sliding scale payment plan--where some people get to access the for free and others pay fair prices they can afford. Or, if you are an anti-malaria organization, you charge people a small amount for bednets or mosquito repellent and so for every unit sold, you also achieve a unit of impact. If you can find a way to charge fair prices for services or products that your organization is already offering or that would complement your mission, you can begin to recover revenue from existing or new customer segments without taking your eye off your social mission.

If you are exploring the possibilities for generating earned revenue to further your nonprofit’s mission, it’s worthwhile seeing if you can create an embedded model that builds on your organization’s existing strengths, assets and core capabilities.

1. Building on strengths reduces the learning curve.

If your organization launches a social enterprise outside of your scope of knowledge, you are piling onto an already long list of new skills and expertise you’ll need to develop. Figuring out your suppliers, costs, pricing, ideal customer, and competition will keep your team busy enough without also requiring that you understand a new target market, conduct industry research and design a new offer entirely from scratch.

When you build off existing experience and knowledge, you cut your learning curve down significantly.

From the Field

You might remember Shiroi from Part Two of the Roadmap. Her team has been supporting the entrepreneurship ecosystem in Northeastern India since the early 2000’s. Over that time, what is collectively known as Entrepreneurs Associates has accomplished this through the entities of NGO, Cooperative, non-banking financial company, and most recently, two market linkage companies. Together these entities support their customers in new ways plus add to the long-term financial sustainability of the organization.

Here’s how their model evolved:

In the very beginning, they founded an NGO to encourage people to take up entrepreneurship in an area of India where securing a government job was the ideal. They quickly discovered a gap that needed filling in order to achieve the impact they were striving for. Many of the individuals they supported did not have access to funding to start their new enterprises; this prompted Entrepreneurs Associates to start a microfinance program. It went so well that in 2010 they partnered with the government on a public-private partnership and started a thrift and credit cooperative so they could expand to serve more entrepreneurs.

This served their entrepreneur base well for a few years, but they still ran into limitations with these two divisions. After 13 years experience, in 2013 Entrepreneurs Associates expanded by opening a new division - a for-profit non-banking financial company (NBFC). This opened up more possibilities to serve their target market with larger loans while keeping in account the unique environment of working in Northeastern India (where, as a tribal society, they have customary restrictions with land holding.)

Each step in this evolution built from Entrepreneurs Associates’ past experience, eventually allowing them to grow a strong earned income stream.

2. When you develop a social enterprise related to your core mission, you can leverage your existing relationships

If you build an external social enterprise model, you will likely be branching into new territory. This will require establishing a new network of champions and collaborators to support you.

However, if you develop an integrated or embedded model, you naturally build off your existing credibility and experience. This means you’ll be leveraging a network of stakeholders who are already bought into your mission and vision. They will be more likely to ‘get’ the earned-income strategy and offer any support they can.

One example of this is Calgary Reads which provides children with the essentials to become thriving readers. One initiative that has generates significant revenue for them is their annual book sale. Growing in scale each year over the past 15 years, the event generated over $300,000 from the sale of more than 100,000 donated books in 2017. The organization credits much of the event’s success to a full community effort, from the thousands of people who attend the sale or save books throughout the year to donate, to the local media and companies who support it. With the book sale being so closely aligned to their mission of encouraging reading amongst families and children, it’s a natural way to advance their work throughout the community.

So when evaluating what type of social enterprise model to develop, consider that it takes significant time to build up expertise and credibility in an industry. Why start over in completely unknown territory?

3. Building on your organizational strengths reduces the risk of distracting from your mission

When beginning to develop earned income streams, nonprofits often worry about mission drift, or the process of commercial activities pulling an organization away from fulfilling its mission. When the revenue-generating activities of a nonprofit are independent of the core mission, the organization has a higher chance of finding itself in situations where profitability and impact are at odds with each other. The more embedded the model, the less possibility there is for those activities to take attention, time, or resources away from the mission.

Kick4Life, a registered charity and social enterprise with offices in Lesotho, the UK, Luxembourg and the USA, serves vulnerable children and young people with intensive academic support, football coaching and character development through Kick4Life Academy. They aim to support participants to gain post-secondary education at international universities.

...brainstorm a list of assets, strengths, and skills you possess and use it as a jumping off point for generating earned-income business ideas...

Part of their program includes developing football skills as a way to help kids secure scholarships, while also strengthening teamwork, leadership and communication skills. Kick4Life explains, “We can more effectively leverage the enormous wealth and influence of the football industry for social development by becoming a part of it. We believe this new type of model, combining the football industry and the Sport for Development sector, is needed to uncap the power of sport for social change.” As they grow the reach of their football club, they can likewise grow the reach of their Kick4Life Academy program (thus impact), and vis versa.

To arrive at an embedded model, first conduct a review of how your organization already excels and the assets or opportunities you have unique access to.

Earned income ventures are most successful when three critical elements overlap:

  • Organizational assets - what you already own or have access to, i.e., office space, commercial kitchen, printing facilities, etc
  • Organizational strengths and skills - what you are already great at, or skills and knowledge you possess, i.e., dementia care, government regulations, local markets, distribution, copyright law, etc
  • Market opportunity - customers who are willing and able to pay

A simple exercise to get started is to brainstorm a list of assets, strengths, and skills you possess and use it as a jumping off point for generating earned-income business ideas. Once you have a list of ideas, you can see which ones are also mission-aligned and have potential market opportunity (part 4).

Another exercise +Acumen has found highly valuable is using a Core Map to help you determine where your expertise lies now and how you can expand into new markets strategically. In 2014, Acumen co-authored a study with Bain and Company that found that agricultural enterprises were most effective if they had a clearly defined “core”. Your “core” is what your organization does distinctively well. This is typically the combination of 3 things:

  1. The products or services you’re uniquely good at developing or delivering
  2. The customer segments you’re uniquely good at serving
  3. The geographies or markets where you are dominant

When you combine these three elements, you get a picture of the foundational parts of your organization. This can illuminate opportunities for growing your reach with a revenue-generating social enterprise while also preventing mission drift.

You've reached checkpoint #3!

Checkpoint Three: Before Planning Your Social Enterprise

Below is a detailed guide for completing the 'Map Your Core' exercise to put into practice what you have learned so far. It’s followed by a mini case example to see how the famous Aravind Eye Care organization grew over time.

'MAP YOUR CORE' EXERCISE

In 2014, Acumen co-authored a study with Bain and Company that found that agricultural enterprises were most effective if they had a clearly defined “core”. Your “core” is what your organization does distinctively well. This is typically the combination of 3 things:

  • The products or services you’re uniquely good at developing or delivering
  • The customer segments you’re uniquely good at serving
  • The geographies or markets where you are dominant

When you combine these three elements, you get a picture of the foundational parts of your organization. This can illuminate opportunities for growing your reach with a revenue-generating social enterprise while also preventing mission drift.

The core map is a tool that can help you think about your areas of focus by determining where your expertise lies now and how you can expand into new markets strategically. It is organized along vectors representing your product or service, your customers, and your target geography. Note that other dimensions can be added, but this simple version is a way to get started.

With each level removed from the core, your product, customers, and geography become a little less central. That is, you begin to expand into adjacencies or markets that are related, but not directly included in your core.

As you think about developing a social enterprise idea, you’ll want to build upon areas that are already close to your core—rather than branching into totally new directions when you do not already have existing strengths or resources. Mapping your core in this way will also help you determine which adjacencies to explore first, as it’s best to branch out only one dimension at a time.

COMPLETE THESE STEPS

  • Identify your organization’s target products/services, customers, and geography. Keep in mind that these do not have to be things that generate revenue. Write these next to the first “rung” of each spoke on the diagram.
  • Then identify your adjacencies. These are the areas that are close to your targets, but might be one step removed. Write these on the second “rung” of each spoke.
  • Figure out your furthest “reach” area that is still related, but is not central to your current business. Write these on the third rung.
  • Then take the areas you are currently serving and shade that core area red. Shade new areas that you are beginning to expand into (or would like to in the near future) gray.

MINI CASE STUDY

As you think about developing a social enterprise idea, you’ll want to build upon areas that are already close to your core—rather than branching into totally new directions when you do not already have existing strengths or resources. Mapping your core in this way will also help you determine which adjacencies to explore first, as it’s best to branch out only one dimension at a time.

Below is an example of what Aravind’s core map structure could be:

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Part Four: The Reality

The Reality about Making Money with Social Enterprise

If you’ve been following along with this series, you likely have a few promising ideas for how you could grow your nonprofit’s earned income (if not, you can catch up by reading 'Signs you’re well-positioned for social enterprise', 'essential mindsets for entrepreneurial nonprofits', and 'uncovering enterprise ideas based on your strengths').

However, as critical as this internal exploration is, you’ll also need to examine the external environment in which your business is situated. Before moving onto the next phase of outlining possible business models and implementation plans, it’s time to determine which ideas are worth committing time and effort into developing.

“It’s not about ideas; it’s about making ideas happen.” — Scott Belsky

Not every remarkable idea will make a promising social enterprise. And not every promising social enterprise will be the most fitting for your particular organization to launch and run.

You need to examine the preliminary potential of your ideas before you go too far down the path of detailed business planning. Specifically, even if you feel like you have a promising idea, how can you be sure it is a solution your target customers genuinely need and are willing to pay for? Have you looked at expected costs and revenues to see if this big idea has the potential to bring in the funds you are hoping for?

Asking these type of questions will allow you to eliminate the social enterprise ideas that sound great in theory, but may not serve your revenue and impact goals in the long run.

Below are the five main steps you should go through to answer these questions before you go any further down the path of developing out your plan.

1. Know your Goals

The first step in evaluating the potential of each of your new venture ideas is to determine what exactly you hope to achieve for your organization as a result of this work.

Social enterprise goals fall into three main categories:

Financial Goals

How much earned income are you hoping to generate to complement (or replace) your existing funding streams?

Impact Goals

Is there a specific area of impact you want to better address through the social enterprise? How can you define this goal in measurable terms?

What constraints affecting operations need to be considered as you develop an earned income strategy? Here, think of your primary resources - human resources, money, time, etc. - and how each will be used in and impacted by a social enterprise strategy. Often these considerations will be informed by the overall strategic plan for the organization and driven by the board and executive team.

You need to consider both financial and impact goals when evaluating the potential of your idea because, although the mission remains the driving force behind your work, the financial results will help you achieve it.

Organizational Goals

Is there a specific area of impact you want to better address through the social enterprise? How can you define this goal in measurable terms?

We are used to assigning metrics to financial goals, but here it will be helpful to define a quantifiable metric related to achieving your mission-driven goal. For example, if you are a solar lantern company, your mission might be delivering energy to the world’s poor and your metric might be the number of households that complete productive activities after dark because they have access to a light.

These three categories of goals will look different for every nonprofit, so it’s important to use them as guideposts as you determine which social enterprise idea to pursue. You will come back to these goals in the final step and use them as filters to determine whether or not to move the your top idea(s) into the next phase of development.

2. Determine the Desirability of Your Idea

The number 1 reason new startups fail according to CB Insights’ review of 101 companies after shutting down is that there was no market need for the solution they created.

Knowing who your ideal customer is, why they need your solution, and how it compares to the rest of the options available will all help you evaluate the desirability of your idea.

When estimating the market opportunity and customer demand for your offer, you want to look at:

  • Your customers’ willingness and ability to pay
  • How your solution provides real value and compares to alternatives
  • The overall size of the market

You can come up with an incredible product or service, but if your customers can’t afford it or are unwilling to adopt it for cultural or other reasons, your business will fail.

When you find the right combination of pain relievers and gain creators that matter to your customer, you will have developed a value proposition.

To determine your customers’ willingness to pay, you need to understand their finances. How are they currently solving the pain your solution alleviates, and what is that costing them?

Next, you need to understand why your customers value access to your product or service. How will you make it a clear choice to choose your product or service over those offered by your competitors? To understand your advantage, you have to deeply understand what matters to your customers. These typically fall into two categories 1) the pains or problems they are facing in their lives that your product could solve, and 2) the types of gains or aspirations they have. Are they looking for increased convenience and time-saving? Do they care about status and want a new product because of the social benefits it would offer? Are they motivated by the things that could help them care for others?

When you find the right combination of pain relievers and gain creators that matter to your customer, you will have developed a value proposition. A value proposition is the articulation of how your product or service can create value or meaning for your customer.

Once you understand who your ideal customers are and are confident there is real demand for your offer, you next need to determine whether there are enough similar potential customers to support the long-term growth of your business. In other words, how big is the market and how much of that market can you conceivably reach? Is the market opportunity growing, stable, or declining?

3. Determine the Viability of Your Idea

Next, you need to look at the financial viability of your idea. Does it make sense as a revenue-generating enterprise? Do the economics support making a profit, and is that potential profit worth it given the inputs required to generate it?

There are two main financial components to examine at this stage. First, you should roughly estimate your start-up expenses, which are all of the costs incurred before you’ll open the doors to customers. The second is the operating financials, which account for ongoing expenses and projected sales (revenue).

For operating financials, make a rough estimate of your total costs. Keep in mind the expenses required to run the business include both the “cost of goods sold”, or costs that vary with the number of units (i.e. shipping or packaging), and overhead costs that are fixed no matter how many units you sell in a given period (i.e. rent or equipment needed for production).

...try to figure out how long will it take you to reach financial breakeven.

A lot can go into pricing your offer, but at this stage keep a high-level view and estimate to the best of your ability with easily accessible information. You want to determine your price based on the value it provides to the user and as it compares to the alternatives, not strictly based on your costs (although of course, it needs to be higher than your costs!)

Estimate how many units you will be able to sell in your first year of operations and run the numbers to see how profitable the idea is on paper. Keep in mind that this is a starting point, and if the numbers are not what you hoped, it doesn’t mean the concept isn’t viable. However, you may need to develop variations on your business model as you start gathering more insight from your target market.

You can expand your estimates past year one out to see how the forecasts look over the first five years. Estimating further out than that will not be useful since so much can change over that period.

Based on this preliminary view, try to figure out how long will it take you to reach financial breakeven. Breakeven is the number of ‘units’ that need to be sold in order to cover all of your costs - remember costs here include the variable costs that go into delivering each ‘unit’ of value plus the fixed overhead costs that are split between all of the units sold in given time period.

You should also consider how the venture’s financial needs will evolve as it scales. In the first six months as you ramp up production, you may only need 1 part-time staff member, but with sales estimates increasing for months 7 - 12, you might need to increase that staff member to full time, doubling their cost.

Remember that the financial requirements and potential revenue will look different in the early stages when you are testing a ‘minimum viable product’ to gather feedback from your users versus when the enterprise is running at scale.

4. Determine the Practicality of Your Idea

At this point, you should have assessed the desirability of your idea, or the value your solution offers to potential customers. You should have also pressure tested the viability of the idea, which is the level of demand in the marketplace,compared to the costs you will incur and potential revenue you will gain. Now, you want to look at the practicality of implementing your idea. That is, how difficult will it be to execute this idea, and what resources will be required to promote, produce, and deliver the product or service?

You’ll want to consider the time required from your team both pre-launch and for ongoing operations, specialized equipment or space that will need to be secured, or intellectual resources. Is there significant research and development required to develop new technology or other intellectual property that would be necessary? Are there suppliers or partners that will be essential for implementing this idea?

These questions are a starting point. For more details, review the Feasibility Questionnaire Checklist in Checkpoint #4 of this the 'Entrepreneurial Roadmap to Social Enterprise' to guide you through key questions around the strategic alignment, market opportunity, operational capabilities, financial potential and impact potential of your social enterprise shortlist.

5. Goal check

Now that you’ve run your top ideas through the market desirability, financial viability and operational practicality lenses, check back to the goals you set out in step #1.

How does each of the directions you are considering stack up when compared to the financial goals, impact goals, and organizational constraints? If a top idea is not apparent, it might be worth setting up a quick scorecard to give each possibility a score out of 10 in each category, and then add these up to see how the ideas rank in order.

From the Field

We recently spoke with Kaushik, one of the founding members of Kheyti, a non-profit social enterprise bringing ‘greenhouses in a box’ to small farmers in India to help them mitigate against unpredictable climate fluctuations that impact crop yield and profitability. Only a few years into development, Kheyti already has 50 farmers using their greenhouses (and 100 more starting early 2018). These greenhouses offer a way for farmers to generate consistent income throughout the year while using 90% less water and growing 7 times more food.

When asked how they developed this solution for small farmers, Kaushik shared that, when they started out in 2015, the team didn’t know greenhouse-in-a-box would be the main offering. This solution came about after speaking directly with about a thousand farmers in the first six months. Even though each of the founding team members had extensive experience working with small farmers, they were determined to reset their understanding of the problems faced so they could develop a solution that impacted the root of the challenges. From these extensive conversations, the team realized the central obstacle farmers faced was a disconnection between how hard they worked and how well they did financially each season. This is due primarily to external forces related to the climate like excessive heat, unseasonable rain, pests and diseases, all causing ruined crops.

With a sound understanding of the problem, and keeping farmers at the center of developing the impact and business model, Kheyti tested several possible ideas.

The most important factors each possible solution needed to address were:

  • Was there a revenue model around it and how much could it generate?
  • What was the impact it would create for the farmers?
  • How scalable would it be?
  • Did it address ubiquitous needs or was it something that is unique to a specific set of farmers?

Only after gaining feedback from the farmers about possible solutions, and running them through these questions, did the team determined the ‘greenhouse-in-a-box’ would have the most potential.

Even though Kheyti is still iterating some elements of their model before scaling up, early results show their thoughtful, farmer-centered approach to social enterprise development is promising. Out of the first 15 farmers to go through a full season, 14 of them signed up for a second greenhouse.

In summary, Kaushik says it best when he shares this advice:

“The heart has to be impact-focused, but the head has to be market-based. I’m asking, am I adding value to my customer? Am I creating returns for my stakeholders, whether it’s shareholders or farmers or my own employees? One challenge I find is people want to go in one camp or another - ‘I’m a nonprofit social enterprise focused on impact’, or ‘I’m a for-profit social enterprise focused on returns’ but I think those two go hand in hand.”

Next Steps

After going through this process, you likely have a better sense of which path will be the most lucrative and the best fit to support your organizational goals.

One of the best tools to start planning out your idea is the Business Model Canvas. By completing a rough sketch of your business model,you can dive deeper into the specifics and begin testing your idea with potential customers to gather their feedback.

You've reached checkpoint #4!

Checkpoint Four: The Reality Recap

In this section, we walk you through three exercises to help you assess the true market opportunity of your earned income idea.

First, estimate how many people there are in your target market to see if there might be enough demand to justify building a financially viable solution.

Then use the Feasibility Questionnaire Checklist as a guide to lead your team through key questions around strategic alignment, market opportunity, operational capabilities, and financial potential.

Finally, put some numbers to paper to estimate the point of financial breakeven to get a sense of how quickly you will be able to start generating profits with your current idea.

DETERMINE THE MARKET SIZE

To figure out how big your serviceable, obtainable market is by following the step-by-step guide to calculating market size. You’ll be trying to figure out whether enough people exist in your target market in order to build a financially viable solution to their problems.

Step #1 - Identify your total addressable market

What would it look like if you took your company to scale? You’ll need to use external data sources and some basic logic to figure this out. Steve Blank, a leading thinker on entrepreneurship in Silicon Valley, suggests that you “Use industry-analyst reports, market research reports, competitors' press releases, university libraries and discussions with investors and customers to "size" the overall market. Use whatever metric is most appropriate: units, dollars, pageviews, eyeballs, whatever.”

Step #2 - Identify your served available market

Who will your business model actually serve? This is where you calculate how many people you can actually reach with your sales channels.

Step #3 - Identify your serviceable obtainable market

Who can you realistically serve in the short term? This is where you figure out how many of your most likely buyers exist.

FEASIBILITY QUESTIONNAIRE CHECKLIST

The feasibility planning process includes systematic exploration key assumptions for the planned business model to work as anticipated.

Through secondary research, focus groups, surveys, and conversations with potential customers (and possibly also with industry experts), you’ll gain a better sense for the overall feasibility of the social enterprise.

Below are some key questions you should explore in the feasibility process*:

Strategic Alignment:

  • How well does the idea fit with the organization’s mission?
  • How difficult will it be to promote, produce, and deliver the product/service?
  • What organizational structure will work best?
  • What HR skills and capacity will be required to implement this?
  • What leadership and management will be required?

Market Opportunity:

  • Who are your primary customer segments and do you have a compelling value proposition for them?
  • How big is the market and is it growing?
  • What are the major trends in the market right now?
  • Is there a demonstrated and proven need for this product/service?
  • Who are the competitors in the space?
  • What is your competitive advantage / differentiation?

Operational Capabilities:

  • How long will be take to produce/procure the product?
  • Who are key suppliers needed?
  • What facilities and/or equipment is needed?
  • What is the distribution plan?
  • Are there any regulations, testing or quality control requirements that need to be addressed?
  • What are the major milestones that need to be hit?
  • What are the potential risks, possible consequences and impact of these risks, and mitigation strategies that might be required?

Financial Potential:

  • What are the expected start up costs?
  • How much start up capital will need to be invested and where will it come from?
  • What are the expected operating costs?
  • How much working capital will be required and where will it come from?
  • How will you price your product/service, what are the costs and what is your profit margin?
  • What are the sales projections?
  • Does seasonality have an impact on sales or sales cycles?

After you’ve explored the feasibility of your idea it should be clear whether it makes sense to undertake small pilot or prototype.

*Adapted from ENP - The Canadian Social Enterprise Guide

FEASIBILITY QUESTIONNAIRE CHECKLIST

You can evaluate which of your top ranked ideas have the greatest financial potential using a “back of the envelope” calculation This is a quick calculation that can be done within a half an hour with limited information. The goal is not to spend lots of your valuable time searching for exact costs and projections, but to make an educated guess on the rough potential for financial gain for each idea.

For the Back of the Envelope calculations, you will determine all the major startup costs, possible revenue, and then work through a break-even analysis to make sure the business will start generating enough money to sustain itself before the startup money runs out.

All of the calculations and assumptions in a Back of the Envelope exercise may seem overwhelming at first, but keep in mind that the purpose is to get a sense of the overall financial and impact potential of an idea.

Step 1 - Getting started

  • What major upfront costs (fixed costs) are required to start this initiative? (FC)
  • What are your variable costs per unit sold? (VC)
  • What is the potential revenue you could earn per client (the sale price)? (RPC)

Step 2 - How many units do you have to sell to ‘break-even’?

The term break-even describes how many units of product or service you have to sell to cover your basic costs. Before you reach break-even, the initiative will be costing your organization money (i.e. the income generated will not cover the cost of doing business).

At break-even, the revenues are equal to the costs. Additional units sold after your break-even number has been achieved should result in net revenue (in other words money, extra money that can go towards funding your programs!)

Break-even = FC / (RPC - VC)

Step 3 - How much money can you make in year one?

  • How many potential clients could you serve in your first year? (#C)
  • What is the potential revenue you could make in your first year? (R)
    • R = RPC x #C
  • What are the total expenses in year one? (E)
    • E = (#C x VC) + FC
  • What would the net income be in year one? (NI)
    • NI = R - E

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