Virtue Ventures Business Plan Template by Issuu Venturesource

BUSINESS PLAN PREPARATION OVERVIEW1 Purpose and Audience Business plans are used internally as management and planning tools for the social entrepreneur, and externally as a prospectus for potential investors (donors and lenders). The business plan's intended purpose will dictate its content and form. The key is to know the information needs and priorities of your audience. When used by organization management, business plans need to be detailed to serve as a strategic and operational blueprint for running the business. Investors, on the other hand, are interested in business viability and want to assess their potential return on investment (social and/or financial). For example, traditional nonprofit donors commonly focus on the social objectives, projected impact, organizational structure and its relationship to the host or parent organization, sustainability strategies and budget. Whereas investors (lenders) are primarily concerned about financial returns, and therefore look for viability in the model, competitive positioning, business concept, realistic financial projections, and a strong management team. The express uses of a business plan are as: •

Sales document for raising grants from donors and investors.

•

Internal management guide for all organizational functions.

•

Communication tool to inform key stakeholders, staff and clients/beneficiaries.

•

Your business plan articulates the sound implementation of your scaling strategy.

Information that needs to be reflected in a business plan: • A solid business concept. • A viable business model to support stated scaling activities. • A business focus indicating clear and obtainable business objectives—the business is not overly diversified and the organization is focused on a particular business area. • An understanding of the target populations' needs and a strategy to meets these needs. • A clearly articulated social purpose relevant to business activities. • Social objectives are realistic and measurable. • An attractive industry that demonstrates healthy revenue potential and offers the social organization comparative advantages and competitive positioning. • A sufficient market for selling products and services. • An analysis of market trends and projected changes—stated anticipation and preparation for these changes. • An analysis of industry factors incorporated into relative aspects of business operations. • A market-driven organization with an in-depth understanding of customers needs and desires. • Products and/or services that meet customers stated needs or desires. • A competent management team. • A functioning and representative board of directors with decision-making authority and accountability for results. 1

Excerpted from: Alter, Sutia Kim, Managing the Double Bottom Line: Business Planning Workbook, Pact Publications, Washington DC 2000 © Virtue Ventures Business Plan Template

• • •

Well-conceived strategies reflecting strategic environment and market realities to achieve business and social objectives. Financial discipline demonstrating the ability to operate with reference to the financial bottom line. Financial strength evidenced through accurate financial statements, a balanced financing mix, concrete future funding opportunities, and realistic projections.

Time period—Business plans cover a specific period of time. Although there is no prescribed duration, most plans are developed for one to five years of operation. As is the case with private companies, a business plan may be linked to financing needs for a certain stage of organization development, like start-up or growth. If you are writing a business plan as part of an grant application requirement, it may coincide with the funding cycle but should nonetheless reflect organizations' reality and not solely the time frame or price tag of the donor or investor. Length—a business plan should be anywhere from 10 to 30 pages (not including appendices). Length is predicated by the complexity of the business and purpose of the business plan. A simple start-up project or organization with only one or two services in just a few markets should have a brief plan. A more complicated organization with several products/services, serving multiple markets, will need a much longer business plan to accurately depict its operations. A business plan intended for internal management use may be substantially longer and more detailed than a plan prepared for a donor or investor. Length of business plan sections—other than the executive summary, there is no prescribed length for individual business plan sections. Depending on the type of business, its development stage, the audience and the business plan's purpose certain sections will warrant more information and explanation than others. Internal business plans tend to be more detailed than sales plans. Brevity throughout is a good rule. Say as much as you need to and no more. Resist the temptation to give all the details. Language—use clear, concise, straightforward business language and avoid jargon and rhetoric at all costs. The tone should be professional and knowledgeable with the overall goal of expressing confidence and optimism about the prospects for your social organization. Repetition—writing a business plan is the exceptional occasion when repetition is justified (warranted by the fact that business plans are rarely read cover to cover by one reader.) Generally, several different readers will review sections pertinent to their expertise. Information that is important, relative or impressive to more than one part of the business plan should be repeated where it adds value. Graphics—as the old saying goes, "a picture paints a thousand words". When appropriate, use photographs, diagrams, graphics and tables to illustrate and support your arguments, conclusions and projections. Graphics also breaks up texts and gives the reader a visual image of the narrative. Numbers—using numbers lends credibility, especially in businesses where success is measured quantitatively. For example, projecting performance in percentage change; referring to market size; supporting your conclusions with statistical information, etc. validates your business acumen.

Presentation—select a typeface that is easy to read and no smaller than 10 points. Use bullet points to offset specific information, and to break up text. Avoid cramming too much information on a page. The layout should be "airy" as opposed to "dense" with plenty of white space on the pages. Historic information—a business plan's foremost objective is to detail future plans, therefore the historic information must be used strategically and sparingly. There are two reasons for including historic information. First, to orient the reader by giving background information on when the social organization was founded, why and by whom, and how the business has evolved. Second, to justify management decisions on future strategies. For example, the decision to modify a product may be in response to a client’s feedback during market research. In this case a brief explanation of product experience in the market and subsequent analysis supports the strategic decision to make changes to it. Dwelling on the past, however, is an error made by many novices. If your plan seems too long, check to see if you have gone overboard on historic details. Format—if you look at a lot of business plans, you will invariably see great variety in style, focus and type of information presented, but all business plans have a standard format. The business plan format is designed to present information in a sequence that is logical for the reader. This format enables donors, investors and managers accustomed to reading business plans to find pertinent sections easily. Bear in mind that the order in which information is presented is not necessarily the order in which you will conduct research or write the plan. Use your judgment on logical sequence for research, writing and synthesizing information before feeding into the business plan format. Information—A business plan is a flexible document. The exact information and details of your target market, strategic environment, and respective plans for marketing, operation, human resources and finance are dependant on your organization, its development stage, type, strategic direction and context. Include only the information that best portrays your organization’s realities and reflects your future plans. Consolidate information provided in the template if it better serves to convey your details of your organization’s plans. Assumptions—tell your readers the rationale on which key decisions have been made and strategies plotted. Stating assumptions is a requisite part of preparing financial statements because without them, financial projections are meaningless. For social entrepreneurs noting assumptions in marketing, operations and human resource sections as well as in finance is good planning discipline demanding that they examine the logic behind their decisions. Writing down the assumptions also strengthens your plan and increases your credibility to stakeholders. Other than in the financial section, assumptions are not a required part in a business plan, however, they are recommended. Appendices—these attachments substantiate the information in the narrative section of the business plan by allowing for greater detail without forcing the reader to plow through a lot of superfluous text. Typically appendices include financial statements and budgets; job descriptions; maps indicating location of organizations and branches, subsidiaries or partners; market research results and studies; impact instruments and study results; resumes of key managers and board members; marketing materials such as brochures, flyers, promotional campaigns; plant floor plan or facilities layout; photographs of clients, facilities, staff and equipment; lists of contracts with suppliers, purchasers and distributors, and/or letters of intent to contract; favorable articles in the press on the work of your organization; customer and clients endorsements; and terms of reference for technical assistance consultants. Letters of support from donors, reputable nonprofit © Virtue Ventures Business Plan Template

organizations, and civic leaders are also good to include in the appendix section of your business plan and can enhance opportunities for funding. Changes—Business plans are fluid documents, a blueprint for your organization’s scaling activities that must be revisited and modified regularly. Modifications usually result from changes that occur in the operating environment, organizational factors (i.e. staff changes), or client/beneficiary needs, wants and preferences. When this happens, it is essential to make changes to your business plan to reflect the current reality as well as projected future trends. Business plans should be revisited every six months to one year to ensure you are on course. Template—The template is intended as an aid to help you develop your business plan for scaling your impact. The questions within it serve as guidelines for your final business plan. You are not required to answer every question, however, your business plan should address the thematic sections outlined in this business plan template. Feel free to make changes, additions and omissions to this template to best suit your organization. Business Plan Contents 1. Executive Summary 2. Organizational background and business description 3. Target Market 4. Market Description and Strategic Environment 5. Marketing Plan 6. Management and Personnel Plan 7. Operations Plan 8. Social Impact 9. Financial Plan 10. Risk Assessment and Contingency Plan 11. Supporting Documents

Detailed Contents 1. Executive Summary 2. Organizational Background And Business Description 2.1. Organizational Description 2.1.1. Historic overview 2.2. Vision and mission statements 2.3. Core values 2.4. Strategic goals and objectives 2.5. Key accomplishments 2.6. Description of social enterprise(s) and/or social program(s) 3. Target Market 3.1. Customer profile 3.2. Needs and wants 3.3. Customer levels 4. Institutional Assessment and Strategic Environment 4.1. SWOT analysis (strengths, weaknesses, opportunities, threats) 4.2. Industry Characteristics 4.3. Competitive Analysis 4.4. Market Potential 5. Marketing Plan 5.1. Value proposition 5.2. Product strategy 5.3. Price strategy 5.4. Distribution (place) strategy 5.5. Promotional Strategy 6. Management and Personnel Plan 6.1. Staff requirements 6.2. Recruitment strategy 6.3. Governance plan 7. Operations Plan 7.1. Impact measurements 7.2. Process: 7.2.1. Production 7.2.2. Delivery systems 7.3. Policies and procedures 7.4. Systems 7.5. Supply chain management 8. Financial Plan 8.1. Financial objectives 8.2. Budget 8.3. Cash flow projections 8.4. Income statement 8.5. Balance Sheet 9. Risk Assessment and contingency plan 9.1. Key risks and counter strategies 9.2. Sensitivity analysis 10. Supporting Documents

ÂŠ Virtue Ventures Business Plan Template

10.1. 10.2. 10.3. 10.4. 10.5. 10.6. 10.7. 10.8.

CV Marketing materials (sample brochure, annual report, etc.) Maps Client/beneficiary profiles Audited financial statements Letters of support Contracts etc.

ÂŠ Virtue Ventures Business Plan Template

Name: _______________________ Business Plan 20__ to 20__ Suggestions for the time period of business plan The business plan period should be for 1 to 5 years. Multiyear business plans are not always accurate because it is difficult to project into the future. Since a social enterprise business plan is an implementation tool, it should cover a period of time that allows you to predict it contents realistically. The older the social enterprise, the easier it is to estimate the future using historical information and experience. General rules for business plan period. 1) For an established social enterpriseâ&#x20AC;&#x201D;one that has been operational for several yearsâ&#x20AC;&#x201D;the business plan should cover three to five years; 2) a new project/program or social enterprise in its first year should have a one-year plan; 3) an existing and expanding social enterprise should have a two-year or three-year plan; and 4) an organization writing its first business plan should do so for a one year period in order to keep projections and assumptions based in current reality.

Contact person: Address: Website: Phone number: Fax: E-mail:

Submission date:

ÂŠ Virtue Ventures Business Plan Template

1. EXECUTIVE SUMMARY Executive Summary—the executive summary is arguably the most important section of the business plan for an external audience. This is simply because it is read first and may be the deciding factor as to whether or not you will retain your audience. Executive summary highlights key points reflected in the body of the business plan. Each subject should be brief (a synopsis of the details section in the body) no more than a couple of lines, soliciting the reader’s attention to the relevant section of the business plan for more comprehensive information. The executive summary needs to be brief—1-2 pages— written in concise language and should articulate: 1. 2. 3. 4. 5. 6.

Problem statement and opportunity Unique Selling Proposition Scaling goals Scaling strategies Impact objectives Ask – how much money you need to achieve your objectives

Within the context of the executive summary convey the following: • • • • • • • • •

Your scaling strategy is pragmatic and feasible. Your scaling approach is well thought out and evidences foresight and thorough planning. You have set sound, achievable impact targets. You have demonstrated that a “market” (wants and needs) exists for your goods and/or services. Your approach to scaling is meaningful in terms of serving the needs of a specific target population (clients or beneficiaries). You have an experienced team to execute the plan. Your financial projections are realistic and quantifiable. You justify how much money you need and how you will use it to implement your scaling strategy. You articulate how you plan to achieve sustainability.

Suggestions for preparing executive summary Prepare it as a “stand-alone” document. Someone who reads only the Executive Summary should have a clear idea of the proposed scaling strategy, what it will accomplish, who will run it, and why it will be successful. Write it last, after all of your other material has been written.

2. OVERVIEW AND BACKGROUND Social Problem – what is the social problem that your organization seeks to solve? Please give details on the nature of the problem as well as the benefits of solving this problem. Unique Selling Proposition - why is your organization uniquely qualified to address this problem? Introduce your organization’s work and past accomplishments, and relevant history; explain programs and clients (beneficiaries). Background information should pertain to the business plan and give justification for your scaling. As well, it should demonstrate your organizations strengths and the alignment of these strengths to your scaling plan. In other words, what are the qualities of your organization, and how will these qualities be applied in order to scale successfully? Use the following questions as a guide for this section.

• • • • • • • •

An overview of your organization. Your organization’s legal status. Relevant historical information relating to your organization – information on when, how and why it was formed etc., significant accomplishments. Information relating to the geographical area you work in and the type of clients you work with. The nature of the work that you undertake – and how you deliver it. Your vision for the future of your organization. How do you intend to scale your organization (include organizational qualities/strengths to achieve scale). What you are seeking to achieve over the life of the Business Plan.

This section should be no longer than a page. Include only those points germane to present and future to scale your impact.

Vision, Mission & Values Vision Statement - communicates the long-term direction and future of your organization (10 or more years). What will the organization become after scaling? What is the vision of your organization?

• • • •

Suggestions for Developing Your Vision Statement A vision is the mental image of the successful accomplishment of your scaled organization—“your dream.” A vision articulates direction It inspires and motivates stakeholders (internal and external). An effective vision statement succinctly communicates an uplifting philosophy that energizes your stakeholders to embrace challenges in order to successfully accomplish goals.

Mission Statement - describes the purpose and principles of your organization as well, it articulates the strategy you will use to accomplish your goals and objectives. A mission statement also defines your target population and embodies the organizational values of your organization. In short the mission statement should address: the problem (why), the purpose (what), the client (for whom), the business/method (how), value proposition (who). What is the mission for your organization?

Suggestions for Developing Your Mission Statement 1. Who is your target? 2. What is the problem that you are trying to solve? 3. What are the results your organization seeks to accomplish? 4. How will your organization achieve its purpose? What activities/programs/methods will you undertake to achieve these ends? 5. What are the values of your organization? (See core value question below).

Core Values - what are the guiding principles of your organization? What are the 3-5 values embodied in the work of your organization? How are these values emulated in what you do (activities); how you are perceived by the public (traits)?

Goals & Scaling Strategy Strategic Goals - enduring statements of direction that amplify the mission statement and focus the organization’s efforts. What are the overriding goals of your organization? Strategic goals aim to solve significant problems for your beneficiaries. Limit your strategic goals to keep your focus, and to help you prioritize your strategies and activities.

Scaling Strategy - What is your overarching scaling strategy (or strategies)? Please give a detailed response on how you plan to scale your impact through this process. Refer to where you are beginning your scaling activities as a reference point to where you want to go. (Remember you may implement more than one scaling strategy simultaneously).

Internal • • • • •

Affiliation

Increase Effectiveness and Performance Organizational Branching / Replication Merger / Acquisition Volunteer Engagement Technology delivery

• • • •

Licensing or Franchising Micro-Franchising Partnerships and Alliances Networks

External • • •

Knowledge Dissemination Advocacy Influencing Public Awareness

Objectives – objectives must be tangible and support the accomplishment of your mission and scaling strategy. Objectives

Deadline

1. 2. 3. 4. 5.

Suggestions for developing objectives Think of objectives as mini-goals or tasks that support the achievement of your scaling strategy and mission. Objectives should be “SMART”: Specific to the point, precise and concise Measurable quantifiable or absolutely calculable Achievable realistic under the circumstances Relevant supporting accomplishment of the mission and contributing to realizing the vision in the long term Timebound corresponding to the period of the business plan

3. TARGET MARKET This section of the business plan describes the target beneficiaries and the social impact your organizations is seeking to create, and gives a general overview of existing market conditions. Problems occur when the beneficiaries are described too broadly, or on the other hand, too narrowly, offering little room for growth. Information in the market section should be substantiated with market research.

Target Market –Who are your customers/beneficiaries/clients and what are their characteristics? Describe their main characteristics (demographic, geographic, psychographics.) Describe ONLY those characteristics that relate to clients’ decision to use your services (wants and needs filled). Target Market

Geography

Demography

Psychographics

Geography – where they are located Demography – age, income level, education, health Psychographics – traits related to social class, lifestyle, religion, castes, preferences, etc.

Wants and Needs - What are the needs and wants of your target market?

Suggestions for developing target market section Identifying your target market? Determining whether your target market is your beneficiaries, clients, customers, or a combination of all of these, is based on whom the business plan is for. In other words, which constituents are you trying reach and provide productions and services to in context of this business plan? Remember that social enterprises often have several stakeholders and constituents, so be clear about the purpose of the plan. Target Market Profile - Focus on common characteristics of your beneficiaries/clients or customers related to their decision to use your service. If your organization is impacting different groups of beneficiaries, give the characteristics that categorized them. Beneficiary characteristics have implications for your social programs. For example

beneficiary groups may be defined by where they live, the language they speak, their status in a household—i.e. single female head of household—their income, economic activities, health, education level, etc. Wants vs. needs – social service and development organizations tend to focus on “perceived needs” of beneficiaries; in other words what we think beneficiaries of social impact need, rather than what they want. Be vigilant about understanding these differences when you are conducting market research. Providing services to clients and beneficiaries that meet their wants as well as their needs will help your organization to increase its impact, be competitive and foster market demand for its services. Serving client wants is an integral component to dignity and respect.

Segmentation of Target Market - This section describes the division or “segments” of your target market into smaller groups. The rational of market segmentation is to improve services or marketing effectiveness by tailoring to smaller groups that have similar characteristics related to their decision to use your organization’s services or by the benefits that they receive. Identify and prioritize your target markets (primary, secondary, tertiary). Additionally, give an indication about the target market size (as it relates to scaling), their needs and wants and the type of impact you create. Note: you may have different markets for different services.

Market

Needs / wants

Size

Type of impact

Primary: Secondary: Tertiary:

Target Market Levels Once you have identified your principal target markets, you will have to probe beneath the surface a bit. Target markets can be more complex than they appear: 1) those who use the product or service; 2) those who purchase it; 3) those who decide to use it; and 4) those influence the product or services use or purchase. These difference markets must be considered as well in your business plan. This vertical market segmentation is intended to help you distinguish the levels in your target markets.

Explanation of Target Market Levels o The Decision Maker - The person/entity who makes the decision to use or purchase products and/or services. In social organizations the decision maker donors, parents, clients or the government. o The Purchaser - The person/entity who actually purchases the product. In social organizations the purchaser may be the government, donors, clients, or private firms. o The User - The person/entity who primarily consumes or uses the product or service. In social organizations the user is most often the client or beneficiary. o The Influencer â&#x20AC;&#x201C; The person/entity who influences decision to purchase or use a product or service. In social organizations the influencer may be the government, donors, insurance, regulatory environment, competition, parents, or private firms.

Service/Product

User

Decision-Maker

Purchaser

ÂŠ Virtue Ventures Business Plan Template

Influencer

4. INSTITUTIONAL ASSESSMENT AND STRATEGIC ENVIRONMENT SWOT Analysis – a SWOT analysis turns your understanding of internal and external dynamics into an actionable strategy. This section of the business plan analyzes your organization’s strength and weaknesses with respect to achieving its scaling strategy and ability to accomplishing its mission and objectives. In doing so, the SWOT also assesses related opportunities and threats in the external environment. Strengths and Weaknesses - all organizations have strengths and weaknesses; social entrepreneurs work to emphasize strengths and reduce the effect of weaknesses on their social organization. Identify whether the social organization’s internal condition is a strength or a weakness and give an explanation why, and what effect it has on your organization’s ability to scale. Add any internal conditions that are not included on the list. Internal Condition

Explanation

Products and services Image / Reputation Mission Financial resources Infrastructure Human resources Capacity Partnerships Location Beneficiary relationships Leadership Technology Innovation/creativity Location(s) Structure Operating efficiencies Strategic alliances MIS External relations

Strategies - How will you mitigate weakness and threats and leverage strengths?

Suggestions to developing S/W section Strengths are internal conditions—skills, abilities, and aspects—that enable your organization to deliver the wanted services to its beneficiaries/client. Strengths also distinguish your social organization from other organizations working in the same field. Examples of strengths include skilled staff, a good reputation, and lots of resources. Weaknesses are internal conditions that can lead to poor performance. Examples of weaknesses are obsolete technology or equipment, poor quality control, and weak managerial skills. !!!! Strengths can also be weaknesses and vice versa. Identifying weaknesses is not bad, it helps you think about how you can improve your organization and successfully implement your scaling strategy.

Client/Beneficiary Perceptions – how do your customers and beneficiaries see your organization? Understanding client/beneficiary perceptions about your organization is an important part of executing your scaling strategy. Organizational Characteristic

Explanation

Service benefits Value Quality Reputation/name recognition Social image

Opportunities and Threats - are external forces outside the social organization and beyond its control. They can help your organization by providing new opportunities or endanger its success; sometimes they do both. Determining potential opportunities helps you prioritize and plan how to use opportunities that fit with your organizations mission and will enable you to scale your impact. Identifying potential threats can help you avoid problems and lower the negative impact of external factors on your organization and your scaling efforts. Examples include: • Legal and regulatory policies • Economic environment • Political instability or insecurity • External Infrastructure (roads, power/utilities, water, etc.) • Transportation & communications • Climate/weather • Technology • Raw materials

• •

Demographics (including language) Natural disaster

Suggestions to developing 0/T section Opportunities are current or future conditions that an organization might use to its advantage. • Example: a sudden change in the regulatory framework like a new US law gives economic preferential treatment to developing countries by lifting import duties and tariffs, thus providing an opportunity for a textile cooperative to expand its market and export its product. A bumper crop (large) of peanuts lowers the price and increases supply providing an opportunity for a nutrition program to vary its products, cut its costs or perhaps begin to produce peanut butter. Threats are current or future conditions that might harm an organization. • Example: a drought or a season of heavy rain could pose a threat to products in an agricultural an organization. Poor roads or a lack of vehicles can threaten transport of needed food to famine areas. Political instability can threaten rural health organization by restricting mobility or calling for curfews, which prohibit distribution of health inputs or reaching the sick and needy. Both – sometimes external forces can be both threats and opportunities at once. • Example: poor infrastructure like undependable electrical supplies can threaten a housing organization that relies on power to manufacture bricks for the homes it builds. At the same time, there is an opportunity to switch to an alternative source of power such as solar, battery or human generated power, or by developing an appropriate technology for manufacturing. In the end, one of these may also be more economical.

Industry Characteristics Characterize the industry (or sub-sector) in which your organization operates (i.e. primary health education for rural mothers, girls’ education grades1-4, microfinance, small-holding cotton farmer, handicraft production, etc.) Industry = a description of organizations that provide more or less similar products or services to a more or less similar target market.      

Range of products/services in industry Size (annual allocations in units and dollars, overall profitability) Number and concentration of competitors controlling the industry Size trends (emerging, growing, stable, declining) Factors affecting service dissemination or sales (price, quality, reputation, seasonality, economic environment, demographic shifts, etc.) Success factors (access to supply, referral network, low costs, etc.)



Barriers to entry (time, cost, expertise, market saturation, customer resistance, threat of substitution, technological innovation, legal and regulatory barriers) Purchasing characteristics (who pays, how much they pay, terms or conditions of payment)

Market Potential This section analyzes the market potential of your service and which supports scaling projections. Market potential is determined by: 1) Demand— indicate that your target market wants/needs your services; 2) Opportunity—establish that there is an opporunity exists for your organization because needs/wants are unmet or underserved in this market; 3) Barriers—demonstrate that there are no insurmountable obstacles that prevent you from operating/entering the market— i.e. restrictive regulatory environment, cost, competition, etc. And 4: Social Need- evident that your organization is responding to a social problem or social market failure and will generate social impact as a result of its services. In this section you must demonstrate that you understand the market and that your decisions are based on facts, not assumptions (back it up with market research). o Demand - Why does your target market WANT your services? o

Barriers and challenges - What barriers may exist that may prevent from becoming a successful player/or limit its success? How will your overcome these barriers?

Opportunity – what is the market opportunity (or niche)? Why does the opportunity exist? Why is your organization uniquely positioned to take advantage of this opportunity?

Social Need – how will your organization create social impact by serving this market?

Size and trends

Suggestions for developing section on market potential Be honest about barriers and realistic about the strategies you will use to overcome them. Many successful social entrepreneurs faced barriers to scaling; the critical piece is to identify whether an opportunity exists for your organization. Examples include: ● ● ● ● ● ● ● ●

High costs that must be paid in advance A long time to establish your organization Expertise that is hard to find or expensive Lack of suppliers or distributors Many other organizations providing the same service Regulations and laws Lack of high-quality staff Beneficiary resistance to use the service

Demand - There may be a real need for a product or service, but low desire to use it, hence no demand. The most convincing way of showing client desire in products and services is with market research. If you have not conducted market studies then include examples of successful similar ventures in other communities.

Competitive Analysis Other Organizations Offering a Similar Service Although social organizations share a vision to make the world a better place, they also compete against each other for limited resources. This competition gets more difficult when other organizations offer similar services in the same area where your organization works. This section analyzes other organizations offering similar services and demonstrates your understanding of them. What other organizations offer similar services? How are their services the same or different from yours? Other Organizations

Similarities of their services

Differences of their services

Competitive advantages of your organization

and differences

   

What are the capabilities, customers, quality of your competitors? State what makes them successful (if they are) Describe how much of a threat are they to your scaling efforts? Compare with your organization: strengths, weaknesses, competitive edge

Suggestions for developing section on competitors Do not leave out information on other organizations that offer similar services to yours in the business plan. Competition is a healthy part of the social organization environment. The fact that other organizations are providing similar services validates the work of your social organization. Saying that no other organizations are doing similar work sends a danger signal to investors—it can be perceived as a sign that no one else sees value in what your social organization is doing. Focus on how much you know about other organizations’ programs and operations relative to yours. Compare your social organization’s strengths with the strengths of other organizations providing similar services. Some examples of strengths could be: leadership, location, resources, reputation/name recognition, staff, strategic alliances, material supply, beneficiary relationships, organizational structure, capacity, operational efficiencies, etc.

Comparative Advantages What are your organization’s comparative advantages (unique factors within a social organization that make it better than other organizations)?

Suggestions for developing section on comparative advantages Focus on how much you know about other organizations’ programs and operations relative to yours. Compare your social enterprise’s strengths with the strengths of other organizations providing similar services. Some examples of strengths could be: leadership, location, resources, reputation/name recognition, staff, strategic alliances, material supply, beneficiary relationships, organizational structure, capacity, operational efficiencies, etc.

4. MARKETING PLAN Marketing is planning and implementing a strategy to reach your clients and inform them about your social enterprise and its products and services. The components of marketing can be described as the "four P's". • Product consists of the products and services that your social enterprise furnishes; it is characterized by quality, assortment, packaging, and guarantees. • Price is the amount you will charge customers for the products or services. • Promotion is how you will create awareness of your products or services in the marketplace; advertising, publicity, and sales are aspects of promotion. • Place (distribution) is how you will bring your products or services to your customers; distribution comprises wholesalers, retailers, multilevel marketers, and sales representatives Value Proposition The value proposition is the purpose of your organization. The key is to show the social impact that your organization creates for its beneficiaries and how much they value that impact. You can do this by telling how your social organization will create change in beneficiaries’ behavior, condition, or quality of life and how important that impact is from the beneficiaries’ perspective. Indicate the problem your organization is solving for its beneficiaries and how much they value the resolution of this problem. What is your value proposition?

Products and Services This section describes the features of your organization’s products and/or services and the benefit they offer to your beneficiaries/clients. o

Features are the characteristics of a produce or service.

Benefits are advantages or value a product or service offers its beneficiaries.

Describe key features and benefits for each of your products and/or services. Service/Product

Features

Benefits

Example: features and benefits of micro-loan

Features

Benefits

Small working capital loan

A vehicle to grow the business

Weekly repayment

Ease of repayment

Collateral free

Access to credit

Easy application progress

Convenient; low stress

Savings

Economic security

Solidarity group

Emotional support, technical assistance, and networks

Product Life Cycle The product's life cycle is the process through which a product or service enters, grows, saturates, and leaves the market. During the life span of your product or service, you will reformulate your marketing strategy several times—not only as a result of changes in market conditions or new competitors but also in response to changes in clients and customers' interest and requirements for the product or service. The four stages of a product's life cycle are introduction, growth, maturity, and decline. Each stage is marked by specific characteristics. Product / Service

Stage in Life Cycle

Implications on Marketing

Suggestions for developing section on product life cycle The following are the product/service stages Introduction—when a product/service is new in the market. During the introduction stage there are few competitors, marketing costs may be high and the focus is on education potential clients about product/service benefits and getting them to try the product or service. During the introduction stage you will be developing the market from your products / services.

Growth — a period during which the market rapidly accepts of the product/service and there is a dramatic increase in its use. During the growth stage competitors enter the market; marketing costs of funding growth can be high (focused especially on promotion and brand), marketing shifts to creating repeat clientele and strengthening the social enterprise image. Maturity — this stage is marked by stabilization of users and flattening costs. The market may become saturated and competition fierce. Marketing efforts concentrate on reaching new targeting market and increasing the size of the market reached or reintroducing the product or service by adding new features and benefits. Decline—a period indicated by falling usage of a product or service. At this stage an enterprise must decide whether it wants to try to rejuvenate the product by investing in development and aggressive marketing or exit the market.

Product Strategy A product strategy consists of any changes you make to the features of your product or service, information on in-process or future activities related to the development of new products/services, consolidation and cancellation of products or services. What strategies will you use for your products and services? Will you add features or make improvements to your products/services? What are your plans for new products and services, or retiring old ones? Product/service

Strategy

Suggestion for developing “product strategy” for services2 Nonmaterial Product When you sell or deliver a service, you are selling or delivering intangibles—a technique, advice, a process, or a result. From the clients' perceptive, it is often difficult to discern what specific benefits they are buying or using. 2

Excerpted from: Alter, Sutia Kim, Managing the Double Bottom Line: Business Planning Guide for Social Enterprises, Chapter 5: Marketing Plan, Pact Publications, Washington DC 2000 © Virtue Ventures Business Plan Template

Strategy: Define your services and package them so that their benefits are more tangible to customers. Accompany services with complimentary manuals, tools, and templates to make the services more "material." Link services to a "product output" so that clients feel they are clearly getting something concrete for their money. For example, rather than sell business training, sell a "business plan" and ensure that customers walk away with one in hand. Bundling services with products can make services more discernible; management information (MIS) technical assistance can be delivered as a complete system with software or manual records. Quality Is Subjective There are few standards for measuring quality in services. When clients demand accounting, legal, or education services, etc., they are not always qualified to assess the quality of the service itself. In this case, quality is based on trust or amiable relationships with the service providers. For example, if your organization provides consulting services, your clients’ patronage is grounded in their relationship with a consultant they like. This leaves your organization vulnerable to losing clients if the consultant quits. Strategy: Develop your reputation and image as a high-quality service organization by using client references and testimonials. Document your methodology and emphasize training your staff. Build client identification with the organization through branding—"X Organizations Primary Health Delivery Methods"—and emblazon materials with your logo and name. When possible, encourage clients contact with different staff members. Limited Use Most small organizations operate with limited funds and therefore must carefully weigh the benefits of each investment. Paying for professional services is fairly low on such clients' list of priorities, and they may prefer to invest their money in assets or human resources which will have a higher return for the organization, such as technology, equipment, or employees. Additionally, the nature of many service organizations does not invite frequent or repeated use; for example, training, accounting, clinical, or legal services may be sought only a few times a year. Strategy: Stay close to the clients, understand their needs and wants, and tailor your services accordingly. Use client satisfaction surveys or evaluations as a standard procedure after providing a service. They are ideal instruments for finetuning services to fit the changing needs of customers. For limited use services, you may find that you need to diversify your services or expand in your market.

Price strategy Does your social enterprise sell any of its products or services? !! Earned-income is not suitable for all social enterprises. If your social enterprise does not employ cost recovery strategies skip this section. What is your price model and rationale for using it? Give price of each product or service you sell and details on how you determined these prices.

Who is paying for your products or services?  Client or beneficiary  Individuals outside the organization  Donors  Government  International organization (NGO, multilateral or bilateral)  Private company  Local NGOs or the community  Other Suggestions for Completing Price Section Price-setting decisions are based on the social enterprise’s mission, revenue model, competition and the financial objectives. For example if the financial objective is 25% cost recovery and you sell -services for a fee to your clients, then your prices may be below market (or subsidized). Whereas if the financial objective is 100% of operational self-sufficiency and client-made products are sold to external customers, pricing is based on competitive market rates and sufficient margins exist to cover costs and generate income. Pricing is determined by a few variables: "perceived value," or the maximum price clients will pay, based on what the product is worth to them; competitors' price for the same or similar product or service, clients’ willingness to pay (based on perceived value); and the marketing strategy. For example you may begin with a low price—one that does not meet your financial objectives—to get customers to try your product or service, and then increase it later. Floor price is the lowest price you can offer customers and still meet your financial objectives. Ceiling price is the highest price customers will tolerate before they stop buying from your social enterprise.

Break Even Analysis A break-even analysis determines at which point your revenues from sales equal your costs. Called the break-even point, it also establishes your price floor. The diagram is an illustration of a break-even point (). The following exercises will help you determine the amount of revenue your organization needs to generate and the number of units it must sell to break even.

Revenue & Costs

Revenues Operating Profit

$10,000

$7,500

Costs



$5,000

Operating Loss

$2,500

1,000

5,000

10,000

Number of Units Sold

Determining Costs The first step is to determine the costs to manufacture your product or offer your service. Once you know your costs, you can calculate your break-even point. Definition of Fixed and Variable Costs Variable costs are the expenses that vary with the amount of services rendered or goods produced. They include costs such as raw materials, transportation costs for distributing products, inputs or materials used, and wage or piece-rate labor. For example, the number of trainers you hire to teach business development courses may be dependent on how many classes will be taught. Calculating Variable Costs Calculating variable costs is trickier than calculating fixed costs because it requires breaking out costs of all inputs used in producing one unit of a good. Therefore, if © Virtue Ventures Business Plan Template

you are offering a training service, you will need to calculate all costs related to providing that training. This might include a contracted trainer's fee, materials, space (if you plan to rent space outside your regular office), snacks you will provide, etc. Reusable supplies, such as pens, need to be costed by their estimated life span, or their total cost divided by the number of times you can use them. Formula for Calculating Break-Even Units To determine how many units must be produced and sold to break even, use the following formula: Fixed costs (FC) Price per unit (PU) – Variable cost per unit (VC) = Number of units needed to break even (#BE) USE “BREAK EVEN ANALYSIS” EXCEL SPREADSHEET FOR THIS SECTION

Sales Plan How do you plan sell your products or services?

Sales Target What is the product/service volume and dollars? Product/Service: Historic Historic Cost per unit

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Price per unit Number of units sold Revenue in dollars Product/Service:

Historic

Cost per unit Price per unit Number of units sold Revenue in dollars

Product/Service:

Historic

Year 1

Year 2

Year 3

Cost per unit Price per unit Number of units sold Revenue in dollars For each product or service you sell, give the cost and price per unit, the number of units you will sell and the total projected revenue. For an established social enterprise with a three-year business plan, years 1-2 should be historic figures – prior to the current year, and 3 years projected. For a new initiative or pilot social enterprise with no previous track record, rely on projections—based on the business plan period—only.

Suggestions for Completing Sales Section Product unit measurements are usually straightforward, equal to one physical product, or one product grouping, like a deck of cards. Services are vaguer than products and must be clearly defined by the social enterprise. Some service examples include a visit to the clinic, an academic year of elementary schooling, a training seminar or hour of counseling or consulting. Figuring out unit costs for either a product or a service can be difficult because you must include the cost of materials, labor (staff time) and overhead. Unit is a quantity used as a standard measurement of “output” for a product or service. Units are used to measure costs to make a product or render a service; as well as to indicate their selling price. !! Prices and costs may change from year to year.

Outreach / Promotion Plan Outreach is planning and implementing a strategy to reach your beneficiaries and inform them about your social organization and its products and services. Outreach / Promotional Vehicles Outreach vehicles are the means for getting information about a social organization’s products and services to its beneficiaries. Outreach is an important for successful scaling. o

Fliers / posters

Brochures

Public Relations (free media stories featured in the newspaper or on television by journalists)

Events, demonstrations and Trade shows

Displays

Billboards

Information meetings with clients/beneficiaries (held in markets, villages, community center, schools or social organization's offices, these meetings inform potential beneficiaries about products and services offered).

Gifts (free enticements such as lunch, T-shirts, samples, etc. to get potential beneficiaries to try a product or service).

Personal contact (visits made by community development workers or village leaders to potential beneficiaries' homes or work sites).

Partners, collaborators, networks or affliates, that help get the word out to their beneficiaries or community about your social organizationâ&#x20AC;&#x2122;s products and services.

Referrals (word of mouth)

Broadcast (public service announcements or paid advertising on radio or television)

Print Advertising (paid ads in newspapers, magazine or other print medium)

Outreach / Promotional Plan What is your outreach strategy? Explain Why you selected certain outreach vehicles? (How do they FIT with your organization?) How you use them to promote your social organization? How many potential beneficiaries can you reach? How often will you use a given promotional vehicle? (What is the frequency)

Vehicle

Fit

Reach

frequency

Cost

Suggestions for developing section on Outreach / Promotional Plan Outreach vehicles must be suitable for reaching your beneficiaries. For example, if your beneficiaries are illiterate then publishing ads in newspapers is not the right way to reach them. In villages where most residents have radios, announcing service on the airwaves is probably a good outreach vehicle for reaching a lot of potential beneficiaries. Conducting village-level information meetings is a good way to cultivate support for a local water project. Emphasize cost efficiency and appropriate fit of outreach vehicles.

ÂŠ Virtue Ventures Business Plan Template

Image What effect will scaling have on your organization’s branding / reputation? How do you want your organization to be perceived as it scales? How will you manage your brand in the scaling process?

Distribution Strategy The distribution (place) strategy articulates how you will get your products or services to your customers/clients/beneficiaries. Distribution is a key component of alleviating a common constraint faced by clients and beneficiaries for social organizations—market access. Distribution strategy identifies the target markets— who and where they are—and the method—how you will deliver your products and services. Method and Market together create a “distribution channel.”

Channel Map – following the example of the diagram below map your distribution channels. Example of Distribution Channel Map for Social Service Organizations Micro-loan Handicraft Education Customer

Student

Client Public schools

Exporters Village bank

Domestic retailers Wholesalers

Village/Community

Brokers

Government & Educators

Private schools Teachers

Promoter Customer

Microfinance Institution

Handicrafts Cooperative Education Organization

Method: Extension through promoter, community leaders Markets: Primary village bank Secondary client

Method: direct sales to customer, domestic wholesalers and retailers Brokers Markets: primary domestic customers buying handicrafts Secondary international customers

Method: train private school teachers in methodology; package pedagogy building on Gov’t programs and train gov’t educators Markets: primary Government education programs; secondary: private school teachers students

Where? Plan for number and location of target markets. When? Plan for time period (should correspond to business plan). Who? Staff/contractors required to carryout distribution strategy. How? Method that will be used to distribute product at every level of the distribution chain. ♦ What are the budgetary implications? Cost to distribute product/service according to proposed strategy. ♦ ♦ ♦ ♦

♦ What synergies does your distribution strategy capture? ♦ How does your distribution strategy contribute to achieving the overall marketing objectives?

Suggestions for developing section on distribution strategy For service industries—microfinance—distribution strategy may be based hours of operation and location of your services and on whether they are convenient and easily accessible for your client. For production enterprise—handicraft cooperative—distribution of products to markets entails placing them in retail outlets and often involves intermediaries like sales agents, transportation services, storage, export brokers, etc. For social service—education organization— distribution may have to do with providing resources and training to the government or teachers in order to improve education for students (the users). A good distribution strategy should give attention to efficacy, efficiency, cost, and customer service. A good distribution strategy should give attention to efficacy, efficiency, cost, and customer service.

5. Operations Plan The operations section of a business plan is concerned with the day-to-day functions of running your organization or enterprise. Focused on administrative and processes, the operations plan helps social enterprises increase efficiency, improve quantity, and reduce costs. Describe your supply chain.    

Key relationships Costs; economies of scale Supply interruption vulnerability Gaps

What supply chain development is required to make your social service or venture successful? What is your supply chain management strategy?

Suggestions for developing section on supply chain A supply chain, logistics network, or supply network is a coordinated system of organizations, people, activities, information and resources involved in moving a product or service in physical or virtual manner from supplier to customer or client. Transform raw materials (physical and intellectual) and components into a finished product. Some examples include: Education Supply Chain - the process of developing an education concept into a methodology with standard training modules; Handicraft Production Supply Chain – procure hand woven cloth, design products, then transform into home accent products and clothing, which is delivered to the end customer; Microfinance Supply Chain – procure capital for on-lending, then promoters disburse micro-loans through SHGs to clients. Supply chain development is often an essential ingredient of successful social service organizations and social enterprises. Supply chain management is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer/client requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-ofconsumption.

Describe your facility, along with improvements required    

Suitability Scalability Limitations Lease or own © Virtue Ventures Business Plan Template

Quality Assurance How will you ensure quality/consistency of your products and/or services to your target market?

Suggestions for developing section on Quality assurance should not be confused with "high quality." Quality Assurance simply means that you are able to provide consistent products and services to your customers and/or clients. Consistency is an important service/product attribute for retaining customers and/or clients because it gives them the comfort of knowing exactly what they will get each time. Training, documented step-by-step process and procedures, quality checks, quality standards, quality supervision are all strategies for assuring quality of your products and services.

Operational Efficiency and Productivity This section describes how productively and cost effectively your social organization or enterprise is able to provide its products or services to its clients. A change in these numbers over time indicates productivity and trends.

Fill out the following table. Historic

Historic

Year 1

Year 2

Year 3

Number of products/services rendered. Total number of clients served Total Costs Cost efficiency ratio

ÂŠ Virtue Ventures Business Plan Template

Efficiency Calculations Explained ● Number of products/services rendered - historic or projected in the period. ● Total number of clients served – beware the number of services/product delivered is not necessary the same as number of products/services. Some social enterprises render multiple products/service to their clients. ● Total Expenses – must be consistent with numbers presented in the financial section. ● Service/product efficiency ratio formula: total expenses divided total number of services ● Cost Efficiency Ratio formula: total expenses divided by number of clients. Social enterprise efficiency and productivity trends are important indicators of management competence and program cost-effectiveness. Cost efficiency ratios indicate a social enterprise’s ability to decrease its costs over time—a decreasing trend is positive. Service/product efficiency ratios demonstrate a social enterprise’s ability to render its products and services at lower unit costs—a decreasing trend is positive. Number of clients served and number of product/services delivers shows a social enterprise’s ability to improve its productivity—an increasing trend is good in this case.

Management Information System    

Tracking, monitoring, and reporting Course-corrections Internal controls (to protect the organization from wastage, fraud, theft, embezzlement). Systems growth and management required for scaling

Stakeholder Relations Strategic Partnerships and Alliances Cooperating with a complimentary organization can strengthen the performance of your organization and enable it to better satisfy its scaling objectives and achieve its mission. Emphasize the benefit of the partnerships to improve or increase chances for creating social value and serving your beneficiaries. Donors and investors like to see partnerships because it often means that the investment dollars go farther

(spread over more than one organization) and that duplication is not occurring. Strategic partnerships are often a key success factor for scaling. List strategic partners and service provider organizations involved: Current Partner

Benefit

Future Partners

Projected Benefit

Customer Response For a social organization to be successful it must know what its beneficiaries want and how those needs can be met with new products and services and by improving the old ones. This requires beneficiary interaction and feedback. Describe how your social organization gathers information from its beneficiaries on what they want and how it uses this feedback to improve the products and services it provides.

Suggestions for developing customer response section Gathering information from clients and customers can be done through surveys, evaluations and meetings between staff that have contact with clients (program staff) and those that donâ&#x20AC;&#x2122;t. For example, doctors and public health workers have constant contact with clients of a clinic social organization, whereas the executive director does not, though he or she may be a key decision-maker in developing new services. In this situation doctors and the ED should have regular meetings to discuss client feedback on how to improve existing services and what new services they desire.

ÂŠ Virtue Ventures Business Plan Template

Social Impact Give information about the methodology or systems your social organization uses to capture and measure information on the benefit of your products and services. o o o o

How is social impact tracked and measured? How is impact information used in management decision-making? What impact indicators will your organization use? How will impact of scaling be reported?

Suggestions for quantifying social impact Social Impact must be quantified to evidence accomplishment of scaling objectives and progression towards accomplishing your mission. Monetizing social impact also supports fundraising by correlating impact with cost (see example below). Social Impact is usually related in numbers of clients benefiting from program activities (number of vaccinations, number of children in school, number of beneficiaries trained). Social impact can also be quantified by new skills learned, income earned, improvements in mortality rates, literacy, or standard of living, self-esteem, social status, etc. Most development organizations have experience in quantifying social impact using impact and proxies. Take the example that your social organization or enterprise is contributing to the goal of “alleviating poverty” and your strategy is employment creation. Social Impact indicates that $40,000 buys 150 jobs, this increases average beneficiary income by 50%, economic security with an average savings of $30, which saves NGOs $100,000 in social costs to the target population for education, heath and food distribution which can now be paid for by the beneficiaries themselves. Benefits can be tangible such as cost savings, or intangible such as preventing disease or improved beneficiary self-esteem, but to be significant, they must be definable and measurable. Time – specify period of time in days, weeks, or months associated with the period of the business plan. Provide baseline information as a starting point to compare progress. Allow adequate time to accurately realize social impact—you will be held accountable to them. A three-year business plan may measure impact once, annually or biannually depending on time necessary to achieve and measure impacts.

Human Resources Plan Team - People are the most important asset of a social organization. In order for your organization to succeed, you need to have people with the right kinds of skills and experience running it. Donors and social investors need to know that you have people with the necessary skills and experience to realize a successful venture, so if problems occur, their investment will be protected. Management and Staff Who are the key people on your social organization’s team? Describe the person’s role within the social organization and the specific areas where they work—outreach, finance, operations, etc. You can include CVs in business plan appendices.

Name

Title and Position in Organization

You may want to describe valuable experiences that help qualify the team members for what they are doing within the social organization. Experience can be related to a past job or pertinent life experience. Include information on recent employment history and don’t forget that it’s often the intangible skills that social entrepreneurs possess more than work experience and education that set them apart. What are these?

Recruitment and Retention Plan Scaling social impact often requires hiring new staff and management, what are your plans to grow human resources in your organization and how will you attract these new people? o

How many new people will you hire, for which positions and over what time period?

Explain how the new staff will help achieve the scaling objectives of the social organization.

How will you recruit new staff?

How will you motivate staff to support scaling efforts?

Will you provide financial incentives or bonuses based on performance? Explain

Position in Organization

How this position supports scaling

P/T, F/T, Contract

Cost

Capacity building o What is type of staff and management capacity building will be necessary to ensure scaling success? o What is your capacity building plan? o What capacity-building activities will be needed to realize your mission and objectives? o Organize capacity-building needs of the enterprise by function. o Set clear benchmarks you expect to achieve. o Note the participants you have targeted for the capacity-building activity. o Note the method you will use to impart knowledge. o Note the provider that will deliver the information (specify internal or external). o Specify the time period for institutional development (yearly, quarterly, etc.).

Governance Typically the board of directors helps social entrepreneur by listening to new ideas and giving advice, by providing connections to a bigger network of people, and by helping the organization manager raise funds. They can also monitor the organizationâ&#x20AC;&#x2122;s activities as well as account for its use of funds and its legal and regulatory compliance.

ÂŠ Virtue Ventures Business Plan Template

Who are your top advisors or board members? Indicate board members and give an indication of what skills and resources they contribute to your organization.

Who are your top advisors or board members? Indicate board members and give an indication of what skills and resources they contribute to your organization. Name

Title & Company

ÂŠ Virtue Ventures Business Plan Template

Contribution

Financial Plan The social organization’s purpose is to create and sustain value for its beneficiaries. Your job as the leader the organization is to ensure you have a clear strategy to achieve sustainability. A strong financial plan is a critical element of the organization’s ongoing success. Discuss your plans to meet your financial needs through earn-income, fundraising plans, financial management, organizational capacity required to implement your scaling plan. Sustainability is the number one concern for social investors and donors.

Budget A budget itemizes a social organization’s expenses and revenues. Budgets are used to show actual amounts spent in past years, as well as estimating how much you will spend in the future. Budgets seek to give an overall picture of expected income and expenditure; however budgets do not reflect the actual timing of money that flows into and out of your organization Prepare a budget. Fill in the specific budget line items for your organization using relevant categories and line items. For an established social organization provide historic performance figures for a year–prior to the current year and project revenue and expense for duration of business plan.

USE “BUDGET SPREADSHEET” TO COMPLETE THIS SECTION

Suggestions for developing Budget Section of Financial Plan Provide realistic financial figures. Presenting only best case scenario financial projections, underestimating or padding financial needs will raise investor / donor suspicion. Be sure financial information is as accurate as possible; check what the actual figures are. Do not guess what will you spend on salaries, utilities etc – look at what you have paid previously – or what other people are paying for similar posts. Don’t forget to include other staff costs such as insurance, pensions, expenses etc if they are relevant. Include an allowance for inflation each year – this will affect the costs of employing staff as well as many other items of expenditure. It is unrealistic to expect to pay the same year-on-year – and your staff may be unlikely to continue to work without an increase in their salaries!

Make certain you include everything! A budget should contain all the costs of running your organization – from rent to rates and from the cost of supplies to utility bills. If you are producing a budget on a spreadsheet and feel the sheet is getting too detailed, think about creating a series of sheets all linking to an overall summary spreadsheet. For example, you might have one for the costs of running your premises (containing items such as heat, light, rates etc) and then have the total of this sheet going forward to your overall summary spreadsheet. Scaling plans may be reflected in the budget by significant variations between historic performance and years projected figures in your business plan. Explain clearly major differences and assumptions underlying your projections.

Cash flows Cash flow projections aim to ensure that your organization will have enough money in the bank to allow it to pay for all the goods and services it may need throughout the year. As well as reflecting the actual timing of money moving in and out of the organization, Cash flows also take into account the money available at the start of the year and give a figure for the money that will be available to your organization at the end of the year. Many organizations go bankrupt each year because, although they had a full ‘order book’, they did not have enough cash available to pay their bills. We want to work with you to ensure that this doesn’t happen to your organization. Cash flows show the actual cash position of your organization and should be completed in spreadsheet format. This needs to show month-by-month figures for the remainder of your current financial year and the subsequent 12 months and then should be projected on an annual basis for two more years after that. Ideally we would like to see you commenting on three overall financial scenarios: 1. A realistic projection of your organization’s cash projections for scaling 2. A worst case (where you show the effect of any ‘uncertain’ sources of income failing to be secured) 3. A best case (where income might exceed your realistic projection)

USE “CASH FLOW SPREADSHEET” TO COMPLETE THIS SECTION

Suggestions for developing Cash Flow Section of Financial Plan The essential difference between budgets and cash flows is best demonstrated by an example. Suppose your organization has a post funded by a grant from the World Bank. The person filling the post works full time, 12 months of the year, but the World Bank pays the grant in quarterly installments and 3 months in arrears. A month by month budget would usually show the expenditure on the person’s salary as spread evenly over 12 months and would normally show the income spread over 12 months as well. This reflects the way the organization thinks about employing staff - they are paid every month so it is normal to match up the income and expenditure in a similar fashion. However, that is far from what would actually happen in cash terms - the cash flow would show the actual situation – so the payment for April, May and June would come in a single lump sum payment – in September - even though the salary payment has to go out each month! This could give you a real problem of paying the salary costs for up to six months before receiving any grant towards those costs. If this pattern were repeated across a number of budget areas, such cash flow variations could make a significant difference to the amount of cash (often called ‘working capital’) you would need to keep your organization’s finances in a healthy condition. You therefore need to bear this in mind when creating your cash flow – make sure it reflects when the money will actually arrive and when it will leave your account to pay your bills. It is nearly always easier to construct your budget first and then build your cash flow from that; once you know how much you need to raise or spend then you can think about when it is likely to arrive or leave. You must include both opening and closing cash balances in your cash flow – since a cash flow seeks to reflect the amount of cash in your business, you must know how much you started, and will finish, the year with. The opening balance (the amount of cash your organization had prior to the start of the cash flow) must link either to the figure in your last set of audited accounts or to the last set of management accounts produced in your organization. In this way we can be sure that the amount of ‘cash’ shown in your organization is accurate.

Income Analysis The income analysis sets targets for income by type and source as well as providing a clear picture of current funding mix. The income projections are forecast in relation to financial needs determine in the budget and cash flow. The income analysis is a good framework for monitoring fundraising and earned income activities and communicating funding targets to board members, donors, staff and other stakeholders. USE “INCOME ANALYSIS” EXCEL SPREADSHEET TO COMPLETE THIS SECTION Fundraising Plan What is the total amount that your organization needs to raise to implement your scaling strategy? Rs _______ ($) ______________________ This amount will cover period: from: ____/_____ to ____/____ (should correspond with business plan) For what specific purpose(s) will money be used? What funders supported your organization in the past? What type of funds did you receive and how were they funds used? Fill out the chart. Previous Funders

Type of Funds

Use of Funds

Period Covered

● Previous Funders – names of foundations, institutions, and individuals who have funded your social organization in the past. ● Type of Funds – grants, cash donations, investment funds, in-kind support, and soft loans (program related investments and low interest loans). ● Use of funds– overhead, salaries, capital investment (for equipment, vehicles, computers, etc.), technical assistance and training, scholarships, program costs, indirect cost recovery, etc. ● Period Covered– dates of the period covered by funding from start date through completion.

From whom will you raise the money your social organization needs in the future? What type of funding do you need, for what purpose and when? What is the likelihood that you will receive funding from the donors you identified? Future Funders

Type of Funds

Purpose

Dates:

Probability (%)

Assumptions

Future Funders – names of potential investors or donors (foundations, institutions, and individuals) for your social organization. Type of Funds – grants, cash donations, investment funds, in-kind support, and soft loans (program related investments and low interest loans). Purpose – overhead, salaries, capital investment (for equipment, vehicles, computers, etc.), technical assistance and training, scholarships, program costs, indirect cost recovery, etc. Duration – dates of the period covered by funding Potential – the likelihood of receiving money from this funder Assumptions – explains the circumstances that your conclusions are based on.

Profit and loss statement Profit and loss statement indicates whether your enterprise is making or losing money. It summarizes the amount of revenue earned and expenses incurred (historic) or projected by social enterprise over a period of time. The profit and loss statement is sometimes called a statement of activity or an income statement. Give historic (past year only) and projected figures for income and expenses. Follow the explanation for summing income and deducting expense to arrive at totals. State the assumptions that your projections are based on. • For example: rent prices remain constant for the three year period, salaries increase by 30% in year 2 due to hiring for several new positions and standard increases for inflation, sales increase steadily by 20% each year.

Note: profit and loss statements are different for social enterprises rendering services than for social enterprises selling products, so make sure to use the appropriate statements. If yours does both use the Profit and Loss for Product Social Enterprises. Profit and Loss for Service-Oriented Social Enterprises Use this profit and loss statement if your social enterprise only sells services. INCOME

Profit and Loss for Service-Oriented Social Enterprises Historic Year 1 Year 2 (Previous year)

Year 3

1. Service sales 2. Grants and contributions 3. Other Income 4. (1+2 +3) Total Income OPERATING EXPENSES 5. Salaries 6. Employee benefits 7. Payroll taxes 8. Rent 9. Repairs & maintenance 10. Equipment rental 11. Furniture and equipment purchase 12. Vehicle(s) 13. Vehicle maintenance & repairs 14. Depreciation and amortization 15. Insurance 16. Interest expense 17. Utilities 18. Telephone 19. Office supplies 20. Dues, subscriptions, licenses 21. Training materials + services ÂŠ Virtue Ventures Business Plan Template

22. Postage and freight 23. Marketing and promotion 24. Sales commission 25. Legal and professional services 26. Technical assistance 27. Travel 28. Miscellaneous 29. Other 30. Total Operating Expenses (sum 5 through 29) 31. Net profit/loss before tax (5 minus 30) 32. Provision for taxes 33. TOTAL NET PROFIT/LOSS (31 minus 32)

Profit and loss statement assumptions:

Suggestions for developing deprecation section Assets (except land) lose their value due to age and wear and tear. The social enterprise claims this loss of value as an expense calculated on a depreciation schedule. In the profit and loss statement accumulated depreciation is listed as an expense, whereas in the balance sheet it is deducted from total assets. Depreciation schedule: The depreciation schedule assigns an asset “a useful life”—meaning that it is considered usable for a number of years before becoming obsolete (out of date—or no longer considered useful). The value of the asset is divided by the number of years of its useful life, then each year this amount is deducted. For example a computer costs $3,000 new and has a useful life of three years, therefore annual financial statements subtract $1000 for deprecation for the computer for three years until its value is zero—at the end of three years. Just because an asset is fully depreciated doesn’t mean that you have to stop using it, it simply means that its value does not appear in your financial statements.

Each country has an approved depreciation schedule, check with an accountant or government tax offices. Below is an example of a depreciation schedule: Building Equipment Furniture Vehicle Computer

20 years 10 years 5 years 7 years 3 years

INCOME Products and service sales–the total amount of money earned from your social enterprise’s product and service sales before expenses. Grants and contributions – revenue from donors, government, social investors, parent organization, individuals in the form of grants and contributions. Other Income (not sales)– revenue from fees, rental, commissions, unrelated business income and interest on investments (not associated with product and service sales). Total Income = sum of all income OPERATING EXPENSES Salaries - management and staff Employee benefits - paid vacation and leave, health insurance, 13th month, etc. Payroll taxes - laws are country specific Rent—rent or mortgage payments for office and/or facilities Repairs & maintenance - cleaning services, repairs to property, etc. Equipment rental - leased equipment for nonproduction usage Furniture and equipment purchase - self-explanatory Vehicle - purchase (moped, truck, car, etc.), plus mileage Vehicle maintenance & repairs - service and repairs Depreciation - value of assets depreciation (see schedule). Insurance - liability, vehicle, theft, fire, equipment, etc. Interest expense - interest owed on borrowed capital Utilities - water, heat, power and electricity Telephone – expenses for phone, fax and internet lines, long distance and cell services Office supplies - usual office supplies (pens, staplers, paper, white boards, etc.). Dues, subscriptions, licenses - membership dues for affiliations or trade associations; fees for operating/product licenses, trademarks, or patents Training materials + services - supplies and materials; contracted technical assistance © Virtue Ventures Business Plan Template

Postage and freight – shipping and freight, DHL, postage and stamps Marketing and promotion - advertising, brochures, posters, fliers, samples, displays, etc. Sales commission – financial incentives paid to sales force or individuals for selling products and services. Legal and professional services – cost for contracted professional services (attorneys, consultants, auditors, accountants, technical specialists, etc.) Travel – transportation, room, board and stipend applied while traveling on business. Miscellaneous - self-explanatory Other - Additional category pertinent to enterprise, but not captured in itemized list Total Operating Expenses - sum of all operating expenses Net profit/loss before tax – sum of surplus (profit) or deficit (loss) before paying taxes. Provision for taxes - tax on profits. Laws governing taxes on nonprofit earned income vary from country to country. For-profits must pay income and sales tax. NET PROFIT/LOSS —total the social enterprise has earned or lost from its operations.

Balance sheet The balance sheet provides a snapshot of the value of the enterprise at a point in time. It gives a picture of the social enterprise’s working capital and asset requirements and debt and equity positions, based on reasonable assumptions. Balance sheet must balance what it owns (assets) and what it owes (net worth and liabilities). Get help from a qualified accountant to help prepare financial statements Give historic and projected figures for assets, liabilities and net worth. Use the formula for balancing the balance sheet: Assets = Liabilities + Net Worth. Provide and explanation of the assumptions the balance sheet is based on. Include the participation of qualified accountant or financial manager when preparing balance sheet projections.

Balance Sheet ASSETS

Historic (Previous Year)

Year 1

Year 2

Year 3

Current Assets Cash Accounts receivable Inventory Prepaid expenses Other Land Building Equipment & furniture Vehicles Other assets Less (accumulated deprecation) TOTAL ASSETS LIABILITIES Current Liabilities Accounts payable Short-term notes Interest payable Accrued payroll Taxes payable Total Current Liabilities Long-Term Liabilities Mortgage payable Long-term notes Total Long-Term Liabilities TOTAL LIABILITIES NET WORTH Donor contributions Owner contributions Reserves for bad debt Shareholder equity Retained earnings (Losses) prior years Net surplus/(deficit) TOTAL NET WORTH

ÂŠ Virtue Ventures Business Plan Template

What are the assumptions behind your balance sheet projections?

Balance Sheet Explanation ASSETS - property, cash and investments owned by social enterprise. o Cash – petty cash, money in the bank such as savings and checking accounts. o Accounts receivable – money owed from customers who receive products or services before for they payment—i.e. purchases made on credit. o Inventory - finished products for sale. o Prepaid expenses – services that a social enterprise buys in advance of use—i.e., office supplies and insurance. o Other - investments such as stocks or time deposits that can be easily converted into cash. o Land – land owned by the social enterprise, whose the value is given at the original purchase price o Building – facilities, houses, buildings owned and used by the enterprise o Equipment, furniture and machinery –used by the social enterprise and listed at original purchase price o Vehicles – cars, trucks, motorcycles, mopeds- used by the social enterprise and listed at their original purchase price. o Other assets - enterprise resources not listed in above asset categories— i.e., intangible assets such as trademarks, patents and goodwill o Accumulated deprecation - Assets (except land) lose their value through age and wear and tear. The enterprise claims this loss of value— “depreciation”—as an expense of doing business and deducts it from total assets. Accumulated depreciation is the sum of all the years' worth of wearing out that has occurred in the assets. Asset depreciation is calculated by using a depreciation schedule. (For more information on depreciation go to the section on profit and loss statement). Accumulated depreciation is presented as a negative number in the balance sheet and deducted from total value of assets. TOTAL ASSETS – sum of assets listed at purchase price minus accumulated depreciation

o Accounts payable – amount owed to suppliers o Notes payable –amount of principle owed on loans or borrowed money (commercial or soft loans) i.e. –such as mortgage. (some balance sheets separate notes into two categories—those due in less than one year, and those due in more than one year). o Interest payable - balance of interest due on borrowed money at period end but not yet paid. o Accrued payroll - salaries and wages currently owed, but not yet paid. o Taxes payable – taxes owed for real estate, pensions, income tax (and sales tax—subject to laws) TOTAL LIABILITIES - sum of all liabilities lists NET WORTH — is the total value of the enterprise, it is equal to assets less liabilities. o Contributions – donor or investor grants and contributions, or private NGO/PVO funds used to capitalize the social enterprise. o Reserves for bad debt - provision against loss for uncollectible loans (for social enterprises that makes loans). o Shareholder equity - investor stakes for for-profit social enterprises. o Retained earnings/loss - amount of income (surplus revenue) or loss (net deficit) accumulated since the beginning of the social enterprise. TOTAL NET WORTH Total value of the enterprise

GLOSSARY Business plan – is the road map of your social enterprise, it gives details on how you will achieve your mission and objectives. A business plan has two purposes. First, it’s the “users guide” for management and staff running the social enterprise operations. Secondly, a business plan is a sales document which communicates the social enterprise’s investment potential to prospective investors and donors. Balance sheet provides a snapshot of the financial health of social enterprise. It gives a picture of the social enterprise’s working capital and asset requirements and debt and equity positions, based on reasonable assumptions. Benefits are advantages or value a product or service offers the client. Branding - Developing the image, reputation and name recognition of a social enterprise is called “branding”. Branding is often done association with the products and services a social enterprise offers and/or its reputation. Capacity building - strengthening the social enterprise’s ability to implement its programs effectively and affect social impact. Capacity building is achieved through training, technical assistance and resource materials. Ceiling price is the highest price customers will tolerate before they stop buying from your social enterprise. Clients – also referred to as “beneficiaries”, or “target market”; clients are the people you are serving through the work of your social enterprise. Comparative advantages are factors within a social enterprise that give it an edge over its competitors. Competitors are those you compete against directly—in the same target market and offering same or similar product. Competition can also be indirect—like those offering substitutes for your products. Keep your eye on future competitors too— those with the same product in a different market that could enter your market or those with synergetic products in your market that could easily produce the same product. Contingency plan – alternative plan or strategy responding to a possible risk occurring. Customers - In this text we distinguish “customers” as outside purchasers of the social enterprise’s paid products and services. If the social enterprise is rendering fee-based services to its clients, then the clients are at once customers. © Virtue Ventures Business Plan Template

Decline—indicated by falling usage of a product or service. At this stage an enterprise must decide whether it wants to try to rejuvenate the product by investing in development and aggressive marketing or to quietly admit defeat and exit the market. Differentiate the emphasis a social enterprise places on it’s the benefits of its products and services to the client in order to distinguish the enterprise from its competitors. Features are the characteristics of a product or service. Floor price is the lowest price you can sell a product or service to customers and still meet your financial objectives. Focus group – a small group of people in a social enterprise’s target market that meet to give feedback about features and benefits of new or existing products and services. The group forum is efficient because it allows feedback from several people at once Growth—a period of rapid market acceptance of the product/service and dramatic increase in its use. During the growth stage competitors enter the market, costs of funding growth are high, marketing shifts to creating repeat clientele and strengthening the social enterprise image. Introduction—when a product/service is new in the market. During the introduction stage there are few competitors, costs may be high and the focus is on getting potential clients to try the product or service. Inventory – finished products on hand (in stock) for sale/distribution, or products in some stage of being competed (unfinished product inventory) that will be sold/distributed. Objectives -are mini-goals or tasks that support the achievement of a social enterprise’s mission. Opportunities - are current or future conditions that a social enterprise might use to turn to its advantage. Profit and loss statement - summarizes the amount of revenue earned and expenses incurred (historic) or projected by social enterprise over a period of time. The profit and loss statement is sometimes called a statement of activity or an income statement. Market Segmentation - means dividing your total target market into subsets or distinctive groups which share common characteristics. © Virtue Ventures Business Plan Template

Marketing vehicles - are the means for getting information about a social enterprise’s products and services to its target markets. Maturity— marked by stabilization of users and flattening costs. The market may become saturated and competition fierce. Marketing efforts concentrate on reaching new targeting market and increasing the size of the market reached or reintroducing the product. Methodology – a body of methods, rules, procedures and principles employed in a particular discipline or sector. Threats - are current or future conditions that present risk or might harm a social enterprise. Social enterprise - A nonprofit organization or socially-oriented venture that advances its social mission through entrepreneurial and market-based approaches to increase its effectiveness and financial sustainability with the ultimate goal of creating social benefit or change. Social entrepreneur - the change agents for society, seizing opportunities others miss, and improving systems, inventing new approaches, and creating sustainable solutions to change society for the better Sustainability – the social enterprise has the financial wherewithal and means, and technical know-how (capacity) to will continue to operate over the long-term after current investments are depleted. The ability to operate using endurable (sustainable) methods such as ongoing fundraising, income generation and enterprise management. Social impact-is the net positive effect on clients or beneficiaries due to changes in behavior, condition or quality or life resulting from social enterprise activities. Stakeholder – is someone who is committed to social enterprise and has taken a risk regarding its success or failure. Stakeholders are donors, managers and staff, board member, parent organizations, social entrepreneurs, etc. Strategic Alliance - is cooperation with a complimentary organization, social enterprise or company, that strengthens the social enterprise’s performance, enabling it to better satisfy its objectives and achieve its mission. Trend – shows a tendency or movement in a certain direction over time—i.e. prices increasing or decreasing, scale of social program larger or smaller. Unit is a quantity used as a standard measurement of “output” for a product or service. Units are used to measure volume, costs or price.

Value Proposition - the social value that a social enterprise creates—how the social enterprise serves as a vehicle to create a change in clients’ behavior, condition, or quality of life.

FAQ What is a social enterprise? A social enterprise is nonprofit organization or socially-oriented business that advances its social mission through entrepreneurial and market-based approaches to increase its effectiveness and financial sustainability with the ultimate goal of creating social benefit or change. Social enterprises can be nonprofit organizations or for-profit companies. Some earn a lot of money covering all their costs and others earn just a little to supplement the grants they receive. Incomegenerating social enterprises may be business-type programs like economic development or employment training programs. As well they may be health, education or more traditional social programs that have been created to diversify the social enterprises’ income and reduce reliance on grants. All social enterprises primary concern is achieving their social mission, however, some income generating activities maybe directly related to their social mission, whereas for others it is unrelated other than to earn income to support their social programs. •

Mission-related income-generation: microfinance institutions that earn income from interest payments while providing poor microentrepreneurs with access to loan capital. Another example is an employment-training program that teaches computer skills to disenfranchised urban youth, and then retains its best graduates to provide technology consulting service to other organizations for a fee.

•

Non mission related income-generation: the Nature Conservancy is an international conservation and environmental protection organization that has several retail stores in the US and Europe that sells products for naturelovers.

How is a social enterprise different from a development project or nonprofit organization? A social enterprise can be a nonprofit, a for-profit or a project. Social enterprises have characteristics of both nonprofits and for-profits. For example they are innovative and risk-taking, integrate business methods—like business plans—into development, require high standards for reporting and accountability, and efficient service delivery.

Why do social investors want a business plan rather than a proposal? In the same way that traditional donors rely on proposals to make funding decisions, social investors analyze business plans to make investment decisions. A business plan communicates to social investors how their money will be used and what social impacts will be achieved. What are the advantages of a business plan? In the long term a business plan saves time because, unlike proposals, you usually do not need to prepare different documents for different donors. Business plans are prepared for one to several years, during which time they are revised and updated, but the same business plan goes to all potential investors and donors. How is it useful? A business plan is an excellent analytical and planning tool. A business plan is based on your social enterpriseâ&#x20AC;&#x2122;s reality, not donor priorities. Preparing one requires a close look at your environment and social enterprise, and making decisions that respond to the actual situation you are working in. A business plan teaches you to focus on the needs of your beneficiaries and how you will best fulfill those needs. What are social enterprises products and services? Social enterprises offer products and services to create value for their clients. Most development organizations think of themselves as providing services, but many provide products as well. A health program may offer its clients services like clinic visits, lab tests, health education and products like health inputs and pharmaceuticals. Understanding the distinction between products and services is not as important as knowing the benefits your social enterprise provides to its clients. Try not to get distracted by vocabulary. Why a social enterprise rather than a development project or program? Social enterprises are a new and more dynamic approach to do development work. Because of their focus on beneficiary satisfaction, innovation, accountability and performance results, social enterprises are vehicles for high impact social change. The primary goal of a social enterprise is to create social value for its clients.

ÂŠ Virtue Ventures Business Plan Template