Marketing plans, milestones, financial statements – core elements of business plans

– are no longer just the talk of for-profit entrepreneurs. Today, many funders in the hu-

man service sector view grants as investments, which requires that human service manag-

ers develop sustainable business plans for social programs. Commonly referred to as social

enterprise or social entrepreneurship, the practice of infusing business planning into the

management of human service programs is a relatively new phenomenon, but has quickly

become a popular practice as human service managers seek new and sustainable revenue

sources for programs. This paper will introduce the concept of social enterprise as well as

explain how to write a business plan that maximizes social impact. The key components of

a social business plan will be discussed such that readers will have a framework from which

to write a successful business plan to achieve social impact.

Research Report #3

September 2012

Exploring the Social Enterprise Business Model: How to Write a Business Plan

by Andrew J. Germak *

* Executive Director of the Institute for Families at the School of Social Work, Rutgers, The State University of New Jersey. Contact: agermak@ssw.rutgers.edu.

The author presenting an earlier version of this paper at Beijing Normal University’s China Philanthropy Research Institute on May 31, 2012

1

Introduction

Amid constrained budgets and

dwindling sources of traditional reve-

nue, social work managers and others

that lead human service organizations

and programs are increasingly being

forced to behave in business-like ways

(Germak & Singh, 2010). To be sure,

foundation and individual charitable

giving markedly decreased during

2008 and 2009 (Banjo, 2010) as donors

evaluated where best to invest their

discretionary dollars during the recent

recession. Although charitable giving

ticked up slightly during 2010

(Chicago Sun-Times, 2010), competi-

tion for funding by charities has re-

mained unusually strong, which has

put tremendous pressure on human

service organizations to sustain their

essential human services in a post-

recessionary environment (Thomson,

2011).

It is clear that the game has

changed in how social agencies are

funded. In addition to individual do-

nors pulling back as described above,

governments are significantly cutting

back support that has traditionally

propelled human service organizations

(Nonprofit Finance Fund, 2011; The

Center for Nonprofits, 2011). Addi-

tionally, there are proposals presently

being debated in the United States con-

gress that could dampen charitable

giving through capping the tax-

deductibility of donations made to

American charities (Germak, 2012). In

light of this “new normal” economy, it

is clear that a viable option for human

service managers is to embrace a more

entrepreneurial orientation in carrying

out their missions. In turn, such an

approach, if done appropriately, could

provide for enhanced social justice,

access to services, and equity across

populations of service beneficiaries.

Indeed, many grant-making

foundations that traditionally made

grants to organizations year after year

with little emphasis on sustainability

now require that grantees develop

plans to sustain programs even after

the initial grant period has ended and

further grant funding is not available.

In fact, some funders – including foun-

dations, government, and individuals

– describe their grant making as in-

vesting in which the funder expects a

social return on investment (Grace,

2002; Firstenberg, 2003; Frumkin,

2003). In some cases, funders may

even require a financial return in addi-

tion to a social one, a so-called double-

bottom line financing scheme. Essen-

tially, human service managers must

increasingly view their programs as

social businesses in order to sustain

high-quality services going forward.

A business plan is a tool with

which a human service manager can

demonstrate capacity for sustainable

program management and therefore

raise funds from investment-oriented

funders. In addition, a business plan

can serve as a roadmap with which the

manager can launch a new social pro-

gram and navigate its success based on

milestones or benchmarks (Score

Foundation, 2010). In an attempt to

communicate this relatively new pro-

cess to human service managers, the

objectives of this paper are to familiar-

ize social workers and human service

managers with the concept of social

enterprise, introduce the thought pro-

cess behind business planning for so-

cial impact, and explain how to write

an effective business plan for this pur-

pose.

Background on Social Enter-

prise, Entrepreneurial Orienta-

tion, and Entrepreneurial

Human Service Management

According to Germak and

Singh (2010) and Germak and Robin-

son (2012), social enterprise (also re-

ferred to as social entrepreneurship or

social innovation) is a practice in

which an entrepreneur – either a tradi-

tional one or an individual that emerg-

es from the public or nonprofit sectors

– sets out to solve some social problem

2

by way of combining business man-

agement skills with social sector acu-

men to yield a sustainable enterprise

that produces both financial and so-

cial returns (a so-called double-

bottom line). In some cases, environ-

mental returns may also be sought

resulting in a so-called triple-bottom

line. These entrepreneurs can operate

alone or as part of a special project

borne out of a larger organization.

There is a growing body of

literature related to so-called social

enterprise in the nonprofit sector, spe-

cifically in the human service arena,

and organizations’ implementation of

earned-income profit strategies

(Anderson, Dees, & Emerson, 2002;

Firstenberg, 1986; Germak & Singh,

2010; Ridley-Duff and Bull, 2011).

Ironically, for human service organi-

zations, the shift toward entrepre-

neurship over traditional revenue-

generation models is the reactionary

result of increased competition for

funding and the associated budget

constraints in the sector (Jaskyte,

2004) whereas, in the for-profit sector,

entrepreneurship is the norm and suc-

cessful entrepreneurs are often re-

warded by investors that contribute

capital to innovative enterprises. In

other words, entrepreneurship in the

for-profit sector is a proactive process in

which funding often follows it. In con-

trast, for nonprofit or non-

governmental (NGO) human service

organizations, when traditional funding

dries up, entrepreneurial activity is uti-

lized as a reactive process in order to

find other revenue streams (LeRoux,

2005; Morris, Webb and Franklin, 2011).

Entrepreneurial orientation

among top management has long been

studied by management scholars and is

in practice associated with firm perfor-

mance in the for-profit sector (Rauch et

al, 2009; Lumpkin and Dess, 1996). In

fact, a whole industry of investment –

venture capital investing – has revolved

around the success (and sometimes the

failure) of entrepreneurial companies

such as Apple, Microsoft, and various

pharmaceutical firms of all sizes. Ven-

ture capitalist investors seek companies

with a talented management team, a

promising outlook for entrepreneur-

ship, and viable avenues for business

development and growth (Cardis et al,

2001). All of these ingredients are be-

lieved to result in high levels of firm

financial performance thereby reaping

profits for the firm’s management team

and the outside venture capital inves-

tors.

In the academic literature, en-

trepreneurial activity within an organi-

zation has been conceptualized as the

process by which an entrepreneur or a

team of entrepreneurial leaders in a

given company implement innovative

ideas for new products or services

(Covin and Slevin, 1991). Most of

these ideas start with a business plan

as the foundation for funding and

management of the project. Some

scholars argue that organizations can

also be entrepreneurial in their internal

processes, such as human resources

practices, which can often lead to a

more entrepreneurial culture within an

organization (Kim, 2010; Fayolle, Bas-

so, & Legrain, 2008). The drive toward

entrepreneurial activity is related to

the shear competition of the industry

in which a company operates; manag-

ers are forced to partake in entrepre-

neurial activity in an attempt to out-

perform rival firms in the industry.

According to Porter (1980), competi-

tion and rivalry are key forces that

drive performance of companies in any

given industry; those that can out-

compete their rivals will thrive while

others will fail if they do not find ways

to beat the competition. Likewise, Os-

ter (1995) points out that a similar com-

petitive landscape also exists for non-

profit organizations. Thus, it would

behoove human service managers to

embrace an entrepreneurial orientation

especially in this economic climate.

Indeed, certain human service

organizations have begun to partake in

entrepreneurial activity as a means to

an end in this difficult economy

(Cooney, 2011). Thus, marketing

plans, outcome milestones, and earned

-income strategies have become part of

everyday business – just as they would

be in a for-profit enterprise.

3

Additionally, according to Dart (2004)

and Brewster (2006), in recent years,

some NHSOs have even engaged in

business lines unrelated to their social

missions in order to raise revenue to

sustain their programs. There is noth-

ing wrong with a human service or-

ganization launching an unrelated

business venture for the purpose of

raising funds as long as the venture

does not detract from the original hu-

man service mission. Importantly,

unlike the for-profit mentality de-

scribed above, nonprofits and NGOs in

the human service space have a social

mission, which is paramount. Such

organizations are allowed by law to

earn a profit, often referred to as a sur-

plus, but these profits cannot inure to

the personal benefit of any stakeholder

and must be reinvested into the pro-

grams and services of the organization

(Hopkins, 2009).

Components of a Business Plan

Given the importance of entre-

preneurship within the human service

sector as described above, managers

would benefit from being able to de-

scribe social programs as businesses

and to plan for new programs in a

business-like manner. To this end, the

following are descriptions of the key

components of a business plan, which

is quite similar to a plan used by for-

profit firms. The ideal business plan

has eight sections: Executive Sum-

mary, Venture or Program Concept,

Market Analysis, Marketing Plan, Op-

erations Plan, Financial Plan, Manage-

ment Team, and Appendices. The fi-

nal plan should be approximately 30

pages in length, including all of the

components as described herein.

Executive Summary

The executive summary is an

opportunity to make the initial sales

pitch for a particular social program

idea. It should be no longer than two

pages. This may often be the only sec-

tion that investors or funders will look

at in the plan. If the executive sum-

mary sparks some interest, they may

read further. Often, it is easiest to

write this section last after all the other

business plan components have been

completed and understood. Nonethe-

less, it is essential that the executive

summary include the following com-

ponents written in a concise and en-

gaging style:

Basic program concept

Market size and opportunity

Key competition

The general plan to make money

and achieve impact

Brief management biographies

Venture or Program Concept

In this section, there is an op-

portunity to delve deeper into the de-

tails of the program concept. For those

interested in launching products in-

stead of services, this section would be

similar but would be used to describe

the product concept instead of the ser-

vice. It is important to understand the

program concept in the context of the

entire market. That is, there must be a

demonstrated and strong grasp of the

industry in which the social program

resides as well as knowledge of the

history of the particular service and its

success or failure and why it did or did

not succeed. The following compo-

nents should be included in this sec-

tion, which should be between two

and four pages in length:

Description of program service, or

product in some cases

Description of industry

Overview and capacity of organi-

zation

History of program service or

product

Description of market opportunity

Explanation of milestones: How

and when will venture achieve

financial (sustainability) and social

4

(impact) success?

Market Analysis (Needs Assessment)

This section differs considera-

bly from what some human service

managers may have experience writ-

ing in more traditional grant pro-

posals. The key idea here is that a

business plan is based on customer

demand, which is dictated by looking

at the potential market for a particular

service and making some estimate of

demand for the service: why should

people want this service and what

would they be willing to pay for it?

This is different from a needs assess-

ment in which a professional deter-

mines what a population needs based

on secondary data. Here, the emphasis

is on what a customer wants and is

willing to pay for, which may not al-

ways be the same as what the custom-

er needs (and may not be willing to

pay for). Very often, this section is

based on surveys and primary data

collected from the prospective market.

The following should be expanded

upon in this section:

Demonstration of market need

Who are the customers (these are

the clients in a traditional sense)?

Market share, size, and trends

Willingness of customers to pay

(or investors to fund)

Value-added, customer benefits,

problems solved

Analysis of competition

Statement of competitive ad-

vantage

Marketing Plan

In this section, a plan or a

roadmap should be presented as to

how the social program idea will be

brought to market. In other words, the

business plan up to this point should

have successfully presented the pro-

gram concept and explained the need

that exists in the marketplace for the

particular program concept. Now, the

business plan must effectively explain

how the idea will connect with the

market and fill the market demand. A

marketing plan can take a variety of

forms. Some marketing plans alone

may be dozens of pages for very com-

plex products in global markets! How-

ever, to keep things simple, a concise

marketing plan for a social program

idea housed within a business plan

document should discuss the follow-

ing frameworks in two to three pages:

Segmentation-Targeting-Postioning

(STP) Framework

Segmentation – the breakdown of

the market – what are the various

groups?

Targeting – selection of segment

on which to focus – who is the tar-

get?

Positioning – establishment of

competitive advantage – why is

this idea the best?

The 4 P’s Framework

Product (or service) – what is be-

ing pitched to the market?

Price – how much will it cost?

Place – where will it be offered?

Promotion – how will customers

know about the service?

Operations Plan

So far, the business plan has

not focused on how the manager or

organization will actually execute the

program concept. Up to this point in

the document there should have been

ample discussion about what this con-

cept is, how the marketplace looks for

the program concept, and how the

concept will be effectively marketed

(e.g. sold) to the marketplace. But,

what are the mechanics of the actual

program? How does it work? How

does the organization execute the pro-

gram? These questions need to be an-

swered succinctly in this section of the

business plan, which should be about

two to three pages in length, and

should include the following:

Description of how venture or pro-

gram works

Operating cycle (timeline and

schedule)

Logistics (locations, delivery of

product or service, manufacturing

process, etc.)

Human resource strategy and plan

for acquiring talent

Discussion of regulatory and legal

issues as necessary

Financial Plan

The financial plan section of

the business plan document is proba-

bly the most important section. To-

gether with the executive summary,

the financial plan may represent a key

decision point for investors and fun-

ders. It is not uncommon for an inter-

ested investor to flip through the busi-

ness plan – before reading anything

except the executive summary – and

take a look at the financial viability of

the proposed idea. The financial plan

section should be presented with both

financial projections in the form of a

spreadsheet (see Figure 1) and with a

narrative explaining the numbers in

the spreadsheet and how they were

5

derived. Altogether this section

should encompass two to three pages

of the entire business plan. Some in-

vestors and funders will require more

detailed financial statements once they

express some initial interest in a pro-

ject. For the initial business plan, how-

ever, remember to always include the

following key elements:

Start-up funds required and

planned use

5-year summary projections for

new venture/program

-Income statement

-Statement of cash flows

-Balance sheet

Figure 1. Sample spreadsheet with 5-

year summary projections :

Management Team

Almost always, funders and

investors want to know more about

the key managers and personnel that

will be the custodians of the financial

investment. It is important to inves-

tors to understand that the manage-

ment team is not only entrepreneurial

and innovative but also capable of

managing investments, which in many

cases are large sums of money that

need to be managed appropriately.

Therefore, a business plan should in-

clude bio sketches of all of the key per-

sonnel, including the board of direc-

tors and top management team. In

addition, if there are program person-

nel further down in the agency struc-

ture, they should also be included in

this section. Investors will be interest-

ed in what type of compensation is

being offered to the management,

which can help them understand

whether the funds that are being re-

quested are sufficient enough to sup-

port the necessary talent for the ven-

ture. Finally, an organizational chart

can help to pictorially explain report-

ing relationships in more complex or-

ganizations. The following is a list of

what should be included in this section

not to exceed five pages in length:

Biographies of key personnel

Board of directors listing/

biographies

Management and key personnel

compensation (and ownership

structure if for-profit)

Organizational chart

Appendices

Finally, a business plan may

require that certain documents be ap-

pended to the back of the document.

When possible, this section should be

limited to five pages so that the entire

business plan is approximately 30 pag-

es in length. Some items that may be

important to include as appendices are

the following as appropriate:

References/Bibliography

CVs of key personnel

Media articles

Product specifications

Geo-spatial mappings

Miscellaneous charts and tables

6

Conclusion

The aims of this paper were to

introduce the concept of social enter-

prise to human service managers,

which is essentially the process of

merging business practices with the

management of human services. Spe-

cifically, this paper introduced the con-

cept of business planning and provid-

ed a framework for writing a business

plan for a social program concept. It is

clear that today’s social problems re-

quire new management solutions amid

a constrained economic environment.

Social enterprise and business plan-

ning are ways to ensure sustainability

of social programs. Social workers and

others that lead human service organi-

zations are inherently well prepared to

be entrepreneurial social change mak-

ers. If managers lack the skills neces-

sary to behave entrepreneurially, such

skills can be learned through further

training and education.

Helpful Online Resources Ashoka – global organization supporting and promoting the

work of social entrepreneurs: http://www.ashoka.org

Stanford Social Innovation Review – magazine with cutting-

edge articles on entrepreneurship in the social sector: http://

www.ssireview.org

Social Enterprise Alliance – membership and networking or-

ganization based in the United States: https://www.se-

alliance.org

NJ Social Innovation Institute – training program and sym-

posia sponsored by Rutgers Business School-Newark and

New Brunswick: http://www.njsesummit.org

7

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