1
Business models in Social Entrepreneurship and Social Business
Dr. Linda Kleemann 27/01/2014
2
Agenda for today
Introduction on business models
Options for social business models
Legal forms
Social business model canvas
What is your business model?
3
What is a business model?
The plan implemented by a company to generate revenue and make a profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs.
Answers the question: How are we going to make money to survive (and grow)?
>> builds on cost plan, product plan, market analysis (business language) >> builds on expected expenses, impact plan, stakeholder analysis, statement of need (social sector language)
4
The traditional business model process
5
The traditional business model process
Need? Customers? Costs? Demand? Competitors? Revenues?
6
The traditional business model process
Need? Customers? Costs? Demand? Competitors? Revenues?
7
The traditional business model process
Need? Customers? Costs? Demand? Competitors? Revenues?
8
The traditional business model process
Need? Customers? Costs? Demand? Competitors? Revenues?
$
9
The traditional business model process
Need? Customers? Costs? Demand? Competitors? Revenues?
$
10
The business model process today
11
The business model process today
Need? Customers? Costs? Demand? Competitors? Revenues?
12
The business model process today
Need? Customers? Costs? Demand? Competitors? Revenues?
( )
13
The business model process today
Need? Customers? Costs? Demand? Competitors? Revenues?
( )
14
The business model process today
Need? Customers? Costs? Demand? Competitors? Revenues?
( )
$
15
The business model process today
Need? Customers? Costs? Demand? Competitors? Revenues?
( )
$
16
Stylized social business models (1)
Traditional business model
$
( )
17
Stylized social business models (2)
Impact investor type with government, investor or public as interested third party
18
Stylized social business models (3)
Cross-subsidized model ( )
19
20
Bored by learning languages in school without much progress? Learn another language with a native speaker and do good at the same time. Whether you are interested in Spanish, French or Arabic or you want to learn something as exotic as Tagalog, Burmese or Pashto, our teachers fit their lessons to your needs! The money you spend improves the lives of teachers in Africa, Asia and Latin America.
21
Fairtrade is an alternative approach to conventional trade and is based on a partnership between producers and consumers. Fairtrade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. Fairtrade offers consumers a powerful way to reduce poverty through their every day shopping. When a product carries the Fairtrade Mark it means the producers and traders have met Fairtrade standards. The standards are designed to address the imbalance of power in trading relationships, unstable markets and the injustices of conventional trade.
22
VisionSpring has developed several innovative models for bringing high-quality, affordable eyeglasses to customers in developing countries. Through mobile optical units, optical shops, and Vision Entrepreneurs, more than 600,000 pairs of eyeglasses have been sold.
23
Social business model categories (1) Business category How it works Examples Key success factors
Entrepreneur support
Sells business support to its target population.
Microfinance organizations, consulting,
or tech support
Appropriate training for the entrepreneur
Market intermediary
Provide services to clients to help them access
markets.
Supply cooperatives like fair trade, agriculture, and handicraft organizations
Low start-up costs, allows clients to stay
and work in their community
Employment Provide employment opportunities and job training to clients and
then sells its products or services on the market.
Disabilities or youth organizations providing work opportunities in
landscape, cafes, …
Job training, appropriateness and commercial viability
Fee-for-service/product
Selling social services or products directly to clients
or a third-party payer.
Membership organizations, museums, and clinics, solar lamps,
microfinance, …
Establishing the appropriate fee
structure vis a vis the benefits
24
Social business model categories (2) Business category How it works Examples Key success factors Low-income client Similar to fee-for-service:
offering services to clients but focuses on providing
access to those who couldn’t otherwise afford it.
Healthcare (prescriptions,
eyeglasses), utility programs
Creative distribution systems, lower production and
marketing costs, high operating efficiencies
Cooperative Provides members with benefits through collective
services.
Bulk purchasing, collective bargaining (union), agricultural coops, credit unions
Members have common interests/needs
Market linkage Facilitates trade relationships between clients and the
external market.
Import-export, market research, and broker
services
Does not sell clients’ products but connects
clients to markets Service
subsidization Sells products or services to an external market to help
fund other social programs. The business activities and
social programs overlap.
Consulting, counseling,
employment training, etc.
Can leverage tangible assets (buildings,
employees) or intangible (expertise, network,
methodologies)
25
Social business model THEMES Business THEME How it works Key success factors
Education Provides additional or improved educational opportunities or advocates
for it
Quality of service, demand by beneficiaries, WTP of interest groups
Environment Provides or advocates environmental improvement in exchange for donations,
payments or grants
Measurable improvement, WTP of interest groups
Poverty Provides products or services to the poor, similar to low income client
Products or services offer relief and are demanded, cross-subsidization or
like low income client Disabled or
disadvantaged people
Usually self-help groups, advocacy groups or employment creation
Members have common interest, WTP of interest groups
Disaster relief Usually government and donations funded quick help
Fast response, efficient processes, ability to mobilize funds
For all examples: do the beneficiaries demand it?
26
Legal forms
27
Legal forms
Social enterprises can take various legal forms from non-profit to for-profit.
The legal form is particularly relevant for:
Tax Funding Liability
Legal forms differ from country to country
28
Legal forms for social enterprises in Europe
Europe Social enterprises take various legal forms in different countries across Europe, e.g. solidarity enterprises, co-operatives or limited liability social co-operatives, collective interest co-operatives (Italy, France, Spain, Portugal, Greece), social purpose or collective interest companies (Belgium), community interest companies (United Kingdom). A number of European countries have adopted national laws regulating social enterprises, e.g. Belgium, Finland, France, Italy, Poland, Portugal and the United Kingdom. Those specific laws include the definition of social enterprise, asset allocation, stakeholder and governance systems, and accountability and responsibility towards internal and external stakeholders.
29
Legal forms for social enterprises in Europe
…. Europe ctd. Roughly three different models according to organisational form: the “co-operative”, the “company” and the “open form”: no specific legal form but rather defines the criteria that need to be met to be considered a social enterprise (Cafaggi and Iamiceli, 2009), e.g. “Community Interest Company” in the United Kingdom benefits from improved tax treatment and other support. Germany: no explicit legal form (yet) New government is planning a “bureaucracy-free” legal form for social enterprises (Koalitionsvertrag) Until then: gUG, gGmbH, for-profit or non-profit or both
30
gUG, gGmbH
gUG= gemeinnützige Unternehmergesellschaft = mini gGmbH gGmbh = gemeinnützige Gesellschaft mit beschränkter Haftung
…are variants of UG and GmbH and fall as such under those laws …have tax advantages due to a charitable status … have to act accordingly to keep their charitable status … profits have to be used for the charitable purpose and cannot be distributed
unless its shareholders are themselves charitable organisations … are becoming more popular in particular due to restrictive regulations for
business activities of charities
31
Non-profit vs. For profit
non-profit Tax advantages Specific funding only available for
non-profits Funders don‘t expect financial
return Activities highly regulated in
particular towards income generation
Risk of being not sustainable financially
for profit Less regulated Stronger identification and
responsibility by owners due to financial involvement
Risk of turn towards (too much) focus on financial returns
More difficult to get funding for social purposes
Usually no tax advantage
32
Social Business Model Canvas
33
How to – (Social) Business Model Canvas
The Business Model Canvas is a template for developing new or documenting existing business models. It is a visual chart with elements describing a firm's value proposition, infrastructure, customers, and finances. (Alex Osterwalder)
Business model: helps to design and articulate how a business could work. Business plan: detailed document setting out the goals of a business and how
they are to be achieved.
Adapted social business model canvas (Burkett) Separation between ‘commerce’ and ‘impact’ to see how they interact. Neither the commercial nor the impact story is sufficient in and of itself – a
good business model story needs a coherent and sensible relationship between commerce and impact.
34
roughly
HOW?
WHAT?
WHO?
HOW MANY €?
35
HOW?
WHAT?
WHO?
HOW MANY €?
36
37
Value Proposition
Commercial Value Proposition Examples
Impact Value Proposition Examples
Tasty drinks with a new style made in Germany
Fair trade: quality products that improve producers‘ lives
Fresh seasonal food from the region conveniently delivered to the doorstep
Local economic development: revitalising the local economy Employment: good jobs for people with disabilities
38
Channels Awareness Evaluation Purchase Delivery After Sales
Questions raised by Osterwalder and Pigneur (2009)
How do we raise awareness about our company’s products and services?
How do we help customers evaluate our organisation’s value proposition?
How do we enable customers to purchase specific products and services?
How do we deliver a value proposition to customers?
How do we provide post-purchase customer support?
Additional questions for social enterprise
How does this social enterprise stand out in a crowded market? How do we raise awareness of products/ services AND impact?
Why should customers buy from us as a social enterprise (especially if we compete directly with mainstream businesses)?
How do customers find and access us? Who can we partner with to extend our sales reach?
Are there more efficient, effective or innovative ways we can deliver our goods/ services and/or impact?
How can we ensure that our customers will champion social enterprise?
39
Awareness Evaluation Purchase Delivery After Sales
Examples of where this can be important
There is a growing interest in social procurement - but many procurement officers are not aware of social enterprises. How could this change?
Many corporate and government customers are interested in the value proposition of social enterprises but are looking for evidence. How could this happen?
It can be difficult to build financial sustainability into retail focussed social enterprises. How could you address this challenge?
Some social enterprises turn their ‘customers’ into their ‘communities’. How could you connect your customers more directly?
Dissatisfaction can have a flow-on effect not just for repeat custom in this enterprise, but for purchasing from other social enterprises. How do we ensure satisfaction?
Channels ctd.
Source: Burkett: Using the Business Model Canvas for social enterprise design
40
Typical costs Business Operation Impact Rent and inventory Wages/salaries Equipment, machinery and tools Utilities Communication and postage Insurances Printing and Stationary Advertising /marketing Bank charges and interest Vehicles / transport Accountancy and other professional fees Tax Depreciation License and compliance costs Training
Support and participation costs (extra staff costs for people to support workers) Work readiness costs (licences, permits etc. for disadvantaged workers) Provision costs (for non-attendance, extra sick leave etc.) Impact training (eg. training for support staff) Opportunity costs (eg. reduced productivity) Fundraising costs Impact assessment costs Ethics costs (eg. premiums for fair trade goods)
Source: Burkett
41
42
It‘s your turn
…to develop your business model
What is your business model and why this one? On what points are you „blank“? What do you need to work on to turn it into reality?
Top Related