1. Social Enterprise: What is it and how can my organization consider it? Break for Lunch, December 3, 2009 Debbie McKeon, Executive Director NorthSky Nonprofit Network © Copyright 2009, NorthSky Nonprofit Network. All rights reserved.

2. Acknowledgements Social Enterprise Alliance Fieldstone Alliance LaPiana & Associates Center for Nonprofit Excellence National Center for Nonprofit Enterprise

3. Workshop Objectives Define social enterprise and how nonprofits can use it Identify organizational capacities that enhance success Review tools to develop social enterprise options –Revenue diversification matrix –Business plan –Expert advice –Strategic structuring or restructuring Describe how to launch a social enterprise Define potential risks to your nonprofit

4. What is social enterprise ? An organization or venture within an organization that advances a social mission through entrepreneurial, earned income strategies ( Social Enterprise Alliance ) For purposes of today’s discussion, we will focus on a nonprofit organization considering social enterprise It begins as a way of thinking.....

5. Examples of Social Enterprises Chicago Children’s Choir Ben & Jerry’s Franchise Good Grief Center: Good Grief Care Package Central Dallas Ministries- Dallas Housing Authority Curriculum Sales, Education & Training, Publishing

6. Org. Capacities that enhance success Leadership: focused, positive, strong, excellent communicator, ability to evaluate objectively Adaptive Ability: innovative, inspire creative thinking, measured risk-taking Management: good systems, processes, lines of communication- organization is functioning well Technical: Program/service expertise, execute well

7. Tools to Develop Social Enterprise ProcessTools Brainstorm possibilities, evaluate org. assets, develop criteria for successful social enterprise, rate options Revenue Diversification Process developed by Fieldstone Alliance, NorthSky approved administrator Develop business model for each social enterprise option CFNE/NECE Business Planning Tools-in NS Resource Center Determine legal and tax implications- strategic structuring or restructuring Lawyer, CPA-bring outline of business plan Better the information-more tailored the advice Launch social enterprise: anticipate start up characteristics Utilize internal systems and tools and templates in NS Resource Center to minimize start up needs Operate-evaluate-modify Evaluation tools, strategic initiatives process

8. Brainstorm options Consider organization’s assets Intellectual property-license curriculums Systems expertise-TREAT Management expertise-manage another entity Facilitates & equipment-wind generator/cell tower Brand/ reputation-social marketing Human assets: staff, board, volunteers, supporters, clients-market access Mission assets-healthy snack kiosk in patient waiting area

9. Evaluate SE options Determine criteria to compare options Mission alignment Reliability of revenue stream Existing talent and availability Cost to launch Risk assessment Impact on existing organization Control Real Demand A Market

10. Revenue Diversification Matrix Revenue Source1234567AvgRank Earned Income Michigan XXX sales20221 1.1 National XXX sales22-212221.7 Sales of other curricula to schools 2 0.0 Online educational programs 3 21022202.0 Pre-school program 0.0 Evaluation & Assessment (includes scantron) 4 0.0 Membership Revenues Core member dues (incl. PE teachers)2101100.9 Affiliate member dues 0.0 Contributed Income Corporate/Commodity contributions & sponsorships12002111.4 Foundation grants for specific programs 0.0 Public Sources Federal or state earmarks 0.0 Dedicated tax source revenues 0.0 Misc Revenues Debt (incl. PRIs) 0.0 Leases/subleases 0.0 Quasi-equity (tax credits, EQ2s, etc) 0.0

11. Develop the business model Business planning tools: Business Plan is a comprehensive financial document that justifies the proposed venture by introducing its economic impact on the organization Has a narrower, more specific, focus than strategic plan-analyzes financial viability

12. Why do Business Planning? Creating a business plan helps to clarify whether the proposed venture makes sense before risking financial and/or people resources can serve many functions, from providing a comprehensive outline on implementing a new service to utilizing the plan to obtain funding for a social enterprise

13. Business Planning Tools www.northskynonprofitnetwork Resource Center Sustainability and Planning Business Planning Tools Venture Plan Template

14. Seek Legal & Tax Advice Explain intended business model-share your preliminary venture business plan Discuss –Mission compatibility –Start up capital and anticipated revenue model –Likelihood of net revenues –Risk management needs –The motive/s for initiating the venture- diversify existing charitable organization’s revenues, fulfill community need, leverage expertise of existing organization

15. Strategic Structuring/Restructuring Types of Structures Contractual Relationship Lease Management Agreement Corporate Sponsorship Commercial Co-Venture Active Partnership or Co-Venture, L3C Passive Investment in LLC, L3C or Partnership Nonprofit forms a subsidiary Note: NorthSky does not provide legal advice. Seek legal and tax counsel to determine the appropriate structure.

16. Launching a Social Enterprise Recognize and accommodate characteristics of start up in life cycle stage Leverage existing resources to bridge work during start up: systems, processes, human capital Recognize the amount of work it will take to launch a new initiative Work the business plan—critical to have well defined plan Prior to the launch, commit to periodic evaluation and process for appropriate modification

17. Launching a Social Enterprise Utilize tools and templates that represent best practices and successful strategies Visit the NorthSky Resource Center to find them www.northskynonprofitnetwork.org Meet with NorthSky counselors to get connected to resources specific to your needs Engage in strategic planning to achieve the business plan goals

18. Operate, Evaluate, Modify Start up is challenging for all businesses Increase potential for success by properly capitalizing the venture Very unlikely all aspects of business plan will perform as intended-key is to recognize when change is needed and to act strategically The pace you can adapt influences success: recover from failure=adapt to succeed Business planning is continuous process

19. Some lessons learned Just because it is a good business opportunity doesn’t mean your organization should be doing it Plan for impact the new venture will have on the existing organization Assure the appropriate expertise exists within the team launching the SE Be prepared to work very hard

20. What are some of the risks? Unrelated Business Income Tax Risk management exposure Partnership Taxation/controlled corporation Negative affiliation- - - brand/reputation Risk to charitable status Actually drains capacity of existing org. instead of enhancing Mission drift

21. Shared experiences, Questions Your experiences Questions

22. Thank You Contact NorthSky at: www.northskynonprofitnetwork.org 231.929.3934 Debbie McKeon Extension: 207 dmckeon@northskynonprofitnetwork.org www.northskynonprofitnetwork.org NorthSky Nonprofit Network, a program of: Special Thank you to: