Presentation on theme: "PSU Social Enterprise Magic Bus India 2010 1 Sustainability Part Five."— Presentation transcript:
PSU Social Enterprise Magic Bus India Sustainability Part Five
PSU Social Enterprise Magic Bus India
3 Double Bottom Line Financial Viability Financial Viability Social Impact Social Impact Social Enterprises must balance their social and financial objectives
PSU Social Enterprise Magic Bus India SE Earned Income Strategies Fee-for-Service Fees that paid directly by clients and beneficiaries such as tuition, housing, clinical services, interest on loans (microcredit). Fees may also come from a third party who is paying for services for the client or beneficiary. The third party may include: a donor, public welfare from the state, or nonprofit insurance fund Sales social enterprises may sell products, for example handicrafts made by clients or fresh fruit grown by small holder farmers. Services rendered by clients such as janitorial or landscaping done by mentally disabled people.
PSU Social Enterprise Magic Bus India Program – Related Revenue
PSU Social Enterprise Magic Bus India 2010 Revenue model What is the revenue model of your SE? What is the social purpose of your enterprise? What type of impact are you trying to achieve? Who benefits and how? What products or services are you selling? Who are your customers? How is your social enterprise positioned in the market and community? Diagram your SE revenue model 6
PSU Social Enterprise Magic Bus India Financial Management & Accounting What do you think?
PSU Social Enterprise Magic Bus India SE Financial Management Problems Low financial management acumen Driven by donors (fund accounting) Misallocation of expenses Hidden assets / hidden subsidies Do not give an accurate picture of financial performance Overstates financial performance Understates financial performance Can drive managers to make the wrong decisions Growth Capital needs and requirements Investment/divestment
PSU Social Enterprise Magic Bus India Subsidies Volunteer time In-kind Infrastructure, professional fees, products Low performance (to industry standard) Social program costs Staff time spent on enterprise and allocated to other budgets Overhead and back office Embedded social costs Grants – reflected in subsidize prices R&D
PSU Social Enterprise Magic Bus India 2010 SK OLL CE NT RE FO R SO CIA L EN TR EP RE NE UR SHI P 10 True Cost Accounting Quantifying Social Costs Quantifying subsidies
PSU Social Enterprise Magic Bus India 2010 SK OLL CE NT RE FO R SO CIA L EN TR EP RE NE UR SHI P 11 Financial Projections SE RevenueSE ExpenseBusiness ExpenseBusiness revenue $$$ Years Social Enterprise Breakeven Point Private Business Breakeven Point
PSU Social Enterprise Magic Bus India Social Enterprise P&L IncomeIn 000s Sales$515 Expenses Wages (clients)$200 Training$30 Job coaches$60 25% ED$20 Rent + utilities$60 Back office expense$40 Business manager$80 Marketing$20 Supplies$10 Total Expenses$550 Profit/Loss($35) Consulting$45 Health services$100 Social costs$145 Total social costs + exp$695 Required Subsidy$180 IncomeIn 000s Grants$695 Expenses Training$150 Job coaches/mentors$120 Staff$160 Rent + utilities$60 Consulting$45 Health services$100 Fundraising$50 Total$695 Required Subsidy$695
PSU Social Enterprise Magic Bus India IncomeIn 000s Sales$515 Socio-economic expenses Wage premium to clients$40 Soft skill training$30 Job coaches$60 Shared expenses 25% ED$20 Rent + utilities$60 Back office expense$40 Business expenses Business manager$80 Hard skill training$30 Marketing$20 Wages$160 Supplies$10 Total Expenses$515 Profit (loss)($35) Social program costs Counseling & Health services$145 Social costs$180 Required Subsidy$180 A closer look: socio-economic costs are social program costs covered by running a social enterprise; objective is NOT to make profit but cover more social costs through biz activities Share expenses enable parent organization to leverage assets and have unrestricted income Business expenses pure business cost, but also underwrite social objectivesi.e. wages to client workers Social costs can be allocated separately and subsidized with grant funding.
PSU Social Enterprise Magic Bus India Results Share costs converts restricted income into unrestricted income regardless of revenue Sustainable program strategy Shifts financial paradigm from 100% deficit to revenue generation/declining deficit Marketing/grant raising vehicle for supplementary social costs Increases financial rigor and business acumen Leverages social programs and assets (trained clients)
PSU Social Enterprise Magic Bus India External Profit used to fund social program activities and/or parent organization Breakeven Point $£ Time
PSU Social Enterprise Magic Bus India Develop idea & model Grants Proof of concept Start-up, capacity building Early Growth Scale Replication Exit Forgivable Loans Market-Rate Debt Below-Market Debt SRI Funds Social Venture Capital Funds PRI / Recoverable Grants More equity-like More debt-like Implications for Financial Management Venture Capital
PSU Social Enterprise Magic Bus India 2010 SK OLL CE NT RE FO R SO CIA L EN TR EP RE NE UR SHI P 17 Social Investment Choices A Job Hard Skills Soft Skills Client Productivity Return on Investment? Credit/Insurance Literacy Heath Housing $ $$$