INSEAD Library

Includes bibliographical references and index

Digitized

Contents Social Entrepreneurship Social Entrepreneurship About the Author / xv Acknowledgments / xvi Chapter 1 Introduction / 1 A. The Need for Social Entrepreneurs in a Mission-Based Organization 1 1 B. The Intended Audience for This Book / 4 C. The Benefits of Reading This Book 1 5 D. Chapter-by-Chapter Overview / 5 E. How to Get the Most from This Book / 8 Chapter 2 The Benefits of the Social Entrepreneurism Model / 11 A. Defining Social Entrepreneurism / 1 1 B. The Link between Social Entrepreneurism and Business Development / 15 1. The Starting of an Entirely New Product or Service / 16 2. A Major Expansion of an Existing Product or Service / 17 3. The Expansion of an Existing Activity for a New Group of People / 18 4. The Expansion of an Existing Activity into a New Geographic Area / 19 5. The Purchase of an Existing Business / 20 6. The Merger or Partnership with an Existing Organization 1 20 C. The Uses of Social Entrepreneurism to Do More Mission / 21 D. The Benefits to the Organization / 22 E. The Risks of Not Using the Model / 24 1. You Just Chase Dollars / 24 2. You Make Poorer Resource Investment Decisions / 25 3. You Don't Keep Up with the Changing Needs of Your Market / 26 4. You Are Less Competitive / 26 5. You Are Less Mission-Capable / 26 Chapter 3 The Business Development Process I 31 A. The Seven Steps of the Not-for-Profit Business Development Process / 31 I . Review Your Mission / 32 2. Establish the Risk Willingness of Your Organization / 33 3. Establish the Mission Outcomes of the Business / 34 4. Idea Generation / 35 5. Feasibility Studies (Preliminary and Final) / 36 6. Business Plan (Including the Financials) / 36 7. Implementation Plan with Accountability / 37 B. A Social Entrepreneurship Readiness Assessment Tool / 39 Chapter 4 First Steps: Mission Outcomes, Risk, and Idea Generation / 43 A. Is the Venture Idea Consistent with Your Mission? / 44 1 . Review the Mission for Currency / 44 2. Review the Mission for Flexible Language / 45 3. If Needed, Update the Mission Statement / 45 4. File the Mission Statement with the Internal Revenue Service / 47 B. How Much Risk? / 47 C. What Will the Mission Return Be? / 49 D. Generating Business Ideas 1 50 Chapter 5 Feasibility Studies I 57 A. The Purpose of Feasibility Studies / 59 B. Preliminary Feasibility Studies / 59 1. Define What Your Product or Service Is / 60 2. Determine Whether Your Target Customer Will Want This Service or Product / 61 3. Explore the Industry of Which Your Service or Product Is a Part / 62 4. Make Sure That Your Organization Has the Core Competencies Necessary to Do the Job Well from Day One / 63 C. The Final Feasibility Study / 64 Final Feasibility Study Contents / 65 Chapter 6 The Business Plan / 71 A. The Need for a Business Plan I 71 B. The Contents of the Business Plan I 73 C. A Sample Business Plan I 75 Background Information I 76 I. The Summary I 81 The Organization I 8 1 The Service I 81 The Markets I 81 The Marketing Plan I 82 Financing Required I 82 11. The NFP, Enterprise Janitorial Services, and Its Business I 82 The Organization I 82 The Service I 83 The Target Market I 83 Potential Customer Reactions and Need for This Service I 83 The Sales Strategy I 84 111. The Market Description I 85 The Target Markets I 85 The Competition / 86 Price Comparisons I 87 IV. The Marketing Plan / 87 The Markets I 87 Customers I 88 Competitors I 88 The Macroenvironment of the Business I 88 Potential Pitfalls I 90 V. The Financial Plan 1 91 VI. Goals and Objectives 1 91 VII. The Appendix I 92 Chapter 7 Business Plan Financial Projections / 95 A. Getting the Numbers Right I 95 1. Use an Electronic Spreadsheet I 97 2. Consult Your Financial Manager I 97 3. Include All Your Costs I 97 4. Have an Outside Reviewer I 98 B. Developing Your Projections 1 98 1. Sales Target for the First Three Years 1 98 2. Pricing Information 1 99 3. Start-up Costs / 102 4. Operating Expenses / 102 5. Start-up Costs and Working Capital Needs / 104 6. Break-Even Analysis / 104 7. Pro Forma Profit and Loss Statement / 106 8. Pro Forma Cash Flow Analysis / 106 C. Sample Financials for Enterprise Janitorial Services / I08 Financial Objectives / 108 Financial Condition of Owner / 108 Notes to the Financials / 110 Break-Even Analysis / 1 10 Explanation for Income Projections / 110 Chapter 8 Applying the Lessons: A Step-by-step Business-Planning Exercise / 117 A. Getting Ready / 1 17 1. Product/Sewice Definition / 1 18 2. Definition of the Market / 123 3. Definition of the Target Market(s) / 123 4. Listing of Five Core Wants of the Target Market / 124 5. Listing of Core Competencies / 124 6. Reaching the Markets / 124 7. The Mission Outcomes of the Business / 125 B. Key Financials 1 1 25 1. Start-up Costs / 125 2. Initial Size of the Business / 125 3. Fixed Costs / 126 4. Variable Costs / 126 5. Volume Projections / 127 6. Cash Flow Projections / 127 7. Pricing-Single Item / 133 8. Pricing-Multiple Services / 133 9. Breakeven / 133 10. Income and Expense Projections / 136 1 1. Working Capital Needs / 136 C. Business-Planning Sequence / 136 Chapter 9 Financing Your Entrepreneurship / 147 A. Assessing Your Financing Needs / 148 1. What Are Your Start-up Costs? / 148 2. Working Capital Estimation / 149 3. Checking with the Cash Flow Projection / 151 B. Methods of Financing / 153 1. Before You See the Lender / 153 2. Kinds of Debt / 157 3. Other Sources of Capita1 / 161 C. Sources of Financing / 162 1. Commercial Banks / 162 2. Savings and Loans / 163 3. Credit Unions / I63 4. Program-Related Investments (PRIs) / 164 5. Tax-Exempt Bond Issuers / 164 D. Rules for Financing / 164 E. Dealing with Lenders / 167 1. How Lenders Think / 168 2. How Lenders See Not-for-Profits / 168 3. Seeking the Best Lender for Your Organization / 169 4. Developing and Maintaining a Good Relationship with Your Banker / 171 Chapter 10 Technicalities: Unrelated Business Income Tax and Corporate Structuring / 175 A. The Unrelated Business Income Tax / 176 1. The Definition of Unrelated and Related / 176 2. Exceptions to the IRS Rules / 178 3. A Profit Tax, Not an Income Tax / 179 4. Deciding Whether Your Business Is Subject to UBIT / 181 5. A Decision Checklist for the Unrelated Business Income Tax / 183 B. Uses of Corporate Structuring in Social Entrepreneurship / 183 1. Rules for Corporate Structures / 186 2. A Second Not-for Profit / 188 3. A For-Profit Subsidiary / 191 4. An Umbrella Corporation / 195 5. A Cooperative / 195 Chapter 11 Social Entrepreneurism for Funders / 201 A. Why Funders Should Embrace Entrepreneurism / 202 1. What Is Social Entrepreneurism? / 202 2. How Does Social Entrepreneurism Help Make Not-for-Profits Better? / 203 3. Why Should Your Organization Support Not-for-Profit Entrepreneurism? / 205 B. What Funders Should Do to Encourage Entrepreneurism / 205 1. Encourage Innovation / 208 2. Understand That Not All Ideas Work Out-Even Yours / 208 3. Provide Funding for Entrepreneurial Activities / 209 4. Encourage Lifelong Learning / 209 5. Go to Contract for Services / 209 6. Bid Stuff / 210 7. Don't Punish Efficiency or Good Management / 2 10 8. Fund Overhead / 2 1 1 9. End Match / 2 1 1 10. Don't Worry about What's Not in the Contract / 212 1 1. Encourage Competition, Not Just Collaboration / 2 12 Chapter 12 Final Thoughts / 21 5 A. Holding on to Your Core Values / 2 16 1. Markets That Move Outside of Your Values Envelope / 2 16 2. Customers That Demand Truly Unreasonable Changes in Policy or Program / 2 17 3. Chasing Dollars Instead of Mission / 219 4. Going for Short-Term Returns Instead of Long-Term Gains / 22 1 B. Making Sure That Mission, Not Just Money, Is the Bottom Line / 222 C. Final Thoughts / 224 Resources for Further Study / 229 Index / 233