APS 1015 Class 7 - SE Considerations

APS 1015: Social Entrepreneurship

Class 7: Considerations for Social Enterprise

Wednesday, May 28, 2014

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Instructor:Norm Tasevski ([email protected]) Alex Kjorven ([email protected])

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Agenda

• Marketing for social enterprise• Break• Operational considerations• Legal Considerations

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A note on your business cases…

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Presentation guidelines• Due Dates

– Presentations: 5pm on Thursday, May 29th • Format

– PowerPoint deck• Time Allotment

– 12 min presentation (strict) – will give you 5 and 2 minute warnings

– 6 min Q&A• Grading

– To be done by Alex and Norm– The entrepreneurs will inform us, but not assign your

grades• Feedback from Judges

– Alex will email feedback shortly after the class

© Norm Tasevski

Pitching to the Social Entrepreneur1. Vision/Mission of the enterprise2. Your understanding of the social system they

operate in3. Problem/Pain being experienced (and by whom)4. Current solution (today’s business model)5. What you heard from the social entrepreneur6. Your suggested adjustments to the business

model (i.e. tomorrow’s model)7. “Here’s how it works…”8. Why should they adopt your model?9. Business Considerations (financial, legal,

operational)5

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Advice for your pitches• Focus on the key components of the business

model, and highlight the key financial #s– Can you clearly explain how the business works? How it

makes money? How it generates social/environmental change?

• Comfortably stick to the time allotment– In your practice, aim to deliver your presentation in 10-

11 minutes

• Anticipate the entrepreneur’s questions– If you were running this business, what would you care

to know about the business model?

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An Example…

http://www.youtube.com/watch?v=wyrFWbGiGOc

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A note on Part 3 (tomorrow)…

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The Business Case (the APS 1015 version) • The Business Model (10%)

– Describe the 7 elements of the model (1 slide per element), excluding costs and revenues

– Highlight the elements in the model you are suggesting the entrepreneur make revisions to (i.e. your recommendations for adjustment)

• The Financial Model (5%)– Highlight the key financial considerations the entrepreneur will need to

keep in mind given your recommended adjustments– Highlight the assumptions you are making to both the revenue model and

cost model• Business Targets (3%)

– List both the financial and social targets you suggest the entrepreneurs adopt

– Focus on the appropriateness of the targets i.e. SMART)

• Overall grade: 20% (remaining 2%: overall level of clarity and succinctness)

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© Norm Tasevski

The Business Case (the APS 1015 version) • The form:

– PowerPoint (or Keynote, or Prezi)– Up to 10 slides (with notes)

• Tips:– Make it visual!– Use the “notes” section to explain the content of each

slide

• Timing:– Complete first draft by 9am tomorrow!– During class, you will have opportunity to improve/refine –

final submission therefore due by end of class

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Marketing for Social Enterprises…

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© Norm Tasevski

A caveat…

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“Social Media”

“Social Enterprise”

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A Second Caveat…

Marketing

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Sales≠


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Where does Marketing Fit?

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Some Definitions• Social Marketing is the systematic application of marketing, along with other

concepts and techniques, to achieve specific behavioral goals for a social good.– The primary aim of social marketing is "social good", while in "commercial marketing" the aim

is primarily "financial". This does not mean that commercial marketers can not contribute to achievement of social good.

Wikipedia• Cause Marketing (or cause-related marketing) is a mutually beneficial collaboration

between a corporation and a nonprofit in which their respective assets are combined to (1) create shareholder and social value, (2) connect with a range of constituents (be they consumers, employees, or suppliers), and (3) communicate the shared values of both organizations.

Jocelyn Daw (Marketing Consultant)– Cause marketing differs from corporate giving (philanthropy) as the latter generally involves a

specific donation that is tax deductable, while cause marketing is a marketing relationship generally not based on a donation.

Wikipedia• Sustainable Marketing is the process of planning, implementing and controlling

the development, pricing, promotion and distribution of products in a manner that satisfies the following three criteria: (1) customer needs are met (2) organizational goals are attained, and (3) the process is compatible with ecosystems.

Donald Fuller (Sustainable Marketing Consultant)– Sustainable Marketing encourages the process of innovation by turning the marketing process

into an experimental, iterative process that has close ties to the customer. Individuals and interactions on a daily basis are important. Customer Collaboration over customer transactions. Responding to change over blindly following a plan.

Ivan Storck (founder, SustainableWebsites.com)15


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Social Marketing

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Deliver Satisfaction

Realize Aspiration

Practice Compassion

ProfitAbility ReturnAbility

SustainAbility

Be Better Differentiate

Make a Difference

Individual

Social Enterprise

Mind Heart Spirit

Mission

(why)

Vision(what)

Values(How)

© Norm Tasevski

Examples of Social Marketing…

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Examples of Cause Marketing…

One of the first…

1983 – American Express & the Statue of Liberty Restoration Project

2006 – Bono & Product (Red)

Another…

2010 – Pepsi & the Refresh Project

Most Recently…

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Another Example of Cause Marketing…

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http://www.thefuntheory.com/

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Sustainable Marketing…

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Sustainable Marketing…is tricky…

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Sustainable Marketing ToolkitChecklist 1

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Break

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HR Considerations…

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Where does HR Fit?

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A Caveat…

Think of your HR from the perspective of “running a business”, not “running a charity”


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A Second Caveat…

Your HR Strategy must align with your business model and align with organizational values


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What if you were a…

Product-based Social Business…

Tethered Social Enterprise…

Employment-Based Social Business…

Accessibility-Based Platform…

© Norm Tasevski

A business/business model that providesproducts or services with social benefit.

1. Product-Based

© Norm Tasevski 2. Employment-Based

A business that hires marginalized people in good employment opportunities.

© Norm Tasevski 3. Tethered An enterprise started by a charity or non-profit

that generates revenue for the organization.

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A business that maintains a purposely low profit margin to make their products accessible.

4. Accessibility-Based

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Other HR Considerations…

• Who/what do you need?

• How do you find the right people?

• How do you define what they do?

• How (and from where) do you pay them?

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Operational Considerations…

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DAY 1

What do you do first?

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DAY 180

What does your average week look like?

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Legal Forms Applicable to Social Enterprise…

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For-Profit Corporation

Non-Profit Corporation

CharityPartnership

Sole Proprietorship

Co-Operative Corporation

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For-Profit Corporation• Incorporated under the Business Corporations Act (Ontario) (the “OBCA”) or

the Canada Business Corporations Act (federal) (the “CBCA”)• With share capital

• Most flex in terms of profit-making activities

• Can access all forms of investment (debt, equity, etc)

• Provides clarity of purpose (i.e. the financial bottom line)

• Limited personal liability

• Pay corporate tax• Cannot access grants• Cultural/psychological

barriers with operating a “for-profit social business”

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Charity• Incorporated via Letters Patent under the Corporations Act (Ontario) or

Canada Corporations Act (federal)• Without share capital

• Don’t pay corporate tax on earnings

• Can issue tax receipts

• Can access many government/foundation/corporate grants

• Least flex in terms of profit-making activities

• Limited in the types of investments you can access (e.g. equity)

• Time-consuming!• Psychological barriers

with operating a “social business”

• An aversion to “risk taking”

• Can lose status if “too successful”

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Sole Proprietorship• Registered via Business Names Act (Ontario) or Canada Corporations Act

(federal)• Without share capital

• The simplest (and quickest) legal form

• You have full control of business decisions

• Flexibility to make business decisions quickly

• No separate filing for income tax

• Unlimited liability!!• The business is the

entrepreneur• Hard to find investors• Limited creative input

(i.e. you’re the only one with ideas!)

• Less “professional” than other forms

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Non-Profit Corporation• Incorporated via Letters Patent under Corporations Act (Ontario) or Canada

Corporations Act (Federal)• Generally without share capital

• Can access grants• Can access debt

financing• Tax exempt as long

as organized and operated for defined social/community benefit

• Some NPs are more open to (limited) risk-taking

• Can’t issue tax receipts

• Limited in the types of investments you can access (e.g. equity)

• Psychological barriers with operating a “social business”

• Can lose status if “too successful”

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Partnership• Registered under the Partnerships Act (Ontario)• With or without share capital• Usually organized using a Partnership Agreement

• Similar benefits to sole proprietorship

• Combines skills/competencies of two people

• Can sign contracts and borrow money in its own right

• For most partnerships, unlimited liability! (at least in Canada…)

• Acrimony between partners is common

• Difficult to find investors

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Co-Operative Corporation• Incorporated under the Co-Operative Corporations Act (Ontario) or Canada

Cooperatives Act (Federal)• Wither with or without share capital

• Well-established structures

• Integrates the concept of “community benefit” already

• Cannot issue tax receipts

• Generally not exempt from paying tax

• Psychological barriers with operating a “social business”

• Difficulty making decisions (too many people at the table)

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Legal Innovations…

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Legal Innovation: CIC (UK)• Established to trade (goods or services) for the

community good• Requires “community interest statement”

application to the CIC Regulator. Publically-available annual reports required to confirm (adherence to) community interest requirement

• May issue shares in order to raise capital• Cap on returns (dividends paid) set by the Regulator• Subject to an “asset lock”

– Assets and profits must be permanently retained by the CICs for community benefit, or transferred to another CIC subject to an asset lock, or to a charity

• Taxed in the same manner as other businesses

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Legal Innovation: L3C (US)• Variation on American Limited Liability Companies (LLCs)• LLC investors are members rather than shareholders• Terms of the operating agreement guarantee the public

benefit nature of the entity’s work• Like LLCs, L3Cs are not subject to federal income tax

themselves, but the income they pay to members is taxable according to the rates applicable to each member

• Able to attract private capital through the sale of shares and other securities, various forms of loans, or other commercial financial arrangements.

• Ability to receive Program Related Investments from foundations

• No asset lock and no dividend cap

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Legal Innovation: B Corp (US)• To be certified as a B

corporation under the B Lab system, the corporation must:– Achieve a minimum score of

80 (out of 200) on the B Ratings System, a tool to assess a company's social and environmental performance.

– Agree to make legal changes to its articles of incorporation to expand the responsibilities of the company to include consideration of stakeholder interests.

– Pay B Lab an annual licensing fee.

– Recertification is required every two years.

APS 1015 Class 7 - SE Considerations

Leadership & Management

Transcript of APS 1015 Class 7 - SE Considerations