APS1015H Class 5 - Business Modelling and Assessing Business Potential for Social Enterprise

APS 1015H: Social Entrepreneurship

Class 5: Business Modeling and Assessing
Business Potential for Social Enterprise

Wednesday, October 12, 2011
Instructors:
Norm Tasevski (norm@socialentrepreneurship.ca)
Karim Harji (karim@socialentrepreneurship.ca)
1


Agenda

•  Centre for Social Innovation
•  Idea Jam – Recap
•  Business modeling your social venture
•  Assessing business potential
•  What did we learn – Today?
•  Next week

4


Recap

5

Business Modelling for Social
Enterprise…

6


A Caveat…

When we business model for social enterprise, we
focus on the “business”, not the “social”…

But don’t worry, we will come back to the “social”
later…

7


A Second Caveat…

“Business

“Business Form/Legal

Model” Structure”

8


A Third Caveat…

“Business “Business

Model” Plan”

Business
Model
1st!!!

(Business
Plan
2nd)

9

Why business model 1st and plan 2nd?

10


Because…

It is a cure for “We Need a Plan-itis”

11


And…
It is a Quick way to assess Profitability/Sustainability
–  Why spend months building a plan if you don’t have a real
sense of profitability/sustainability?
–  If your model doesn’t make money, even with the most
ideal conditions…

…STOP! (…and rethink your business model)

12


One More…
It breaks down highly complex business ideas into
easily digestible (and visual) chunks
–  Gets to the heart of what you need to know to:

Make a Go No-
Go Decision
Set Strategy

Make Potential
Investors/funders
(and business
partners) Happy :)

13

Business Plans
Business Models
Are big and complex
Are small and visual
(often 50-100+ pages)
(1 page with about 10 supporting
pages)

Cover many topics
Focus on a few topics
(business description, ﬁnancials,
marketing strategy, HR strategy,
(Will you make $$? How do the
Operations Strategy management team, pieces ﬁt together?)
etc, etc, etc)

Take weeks/months to Take a few days (possibly
create
hours) to create

Are necessary for Feed the business plan!!
investors, funders,
business partners, etc
14


Our Goal for Today

We’ll be building business models for YOUR business
idea…

15


16


Some Definitions
•  “A business model describes the rationale of how an organization
creates, delivers and captures value – economic, social, or other
forms of value”
Wikipedia

•  “A description of the means and methods a firm employs to earn the
revenue projected in its plans. It views the business as a system and
answers the question, “How are we going to make money to survive
and grow?”
BusinessDictionary.com

•  “A business model describes the specific way the business expects to
make money. While a business plan is on paper (lots of paper!) a
business model should be small enough to stay in the heads of the
owner and staff. If a business model is on paper, it should be one
page, and it would be more clearly shown as a diagram than as
words.”
AudienceDialogue.net
17


18


Customer Segments

What you need to care about is…
–  Customer “Pain”
–  Difference between a “customer” and a “client”

19


Empathy Mapping


Who are your customers?

What does their Empathy map look like?

21


Value Proposition (the “Offer”)

–  The “value” you are creating for customers (in terms
of products/services), and the “pain” you are
alleviating
–  An exchange of value 22


Quick…

What is the last thing you bought?

23


Customer Utility

24


What is your value proposition?

25


Channels

–  How the customer receives the offer/value prop
–  The physical “movement” of the offer into the hands
of the customer
26


Relationships

–  Personal and impersonal interaction with the
customer
–  The “movement” of information (e.g. marketing,
communication) 27


What Channels will you use?

What relationships will you make with your customers?

28


Revenue Streams

–  Cash!!! (specifically, how cash flows into the
enterprise) – “Money In”
–  Pricing models
29


Key Resources

–  Assets…
–  …and how these assets create value
–  Includes human, physical, intellectual, and financial
resources 30


Key Activities

–  Actions (specifically, the actions you plan to take to
generate value)
–  Both “direct” and “indirect”
31


What are your key activities?

What are your key resources?
32


Key Partners

–  People/organizations that are integral to enabling
you to do business
–  How you partner, and what you partner on
34

What makes a good partnership?

35


A
Common Commitment
Vision! to Invest in
the
Partnership!

Same Core
Values!
Discreet
Missions!
36


Who do you need to partner with?

37


Cost Structure

–  Fixed costs, variable costs, economies of
scale…“money out”
–  At this stage, focus on your cost assumptions! (don’t
worry about actual $$) 38


39

So…what
does a
completed
Business
Model
Look
Like???

40


Lending and Personal
collecting $$
s
$$ Microloan
Government
BOP
rs
Entrepreneu

Branches
-Branches
-Brand
-Capital

-People
Interest rates
ts
-Capital Cos
41


Tip…

•  Be a Business Model “Alchemist” – You need to go
through the business model process many times in
order to figure out which model best fits

42


“Sticky Ideation”…

What we know! What we Don’t
Know!

Bridging the Gap!
!
(turning what we
don’t know into what
we know)!

43

Assessing Social Enterprise Business
Potential…

44


A Caveat…

When we assess
business potential, …we also care
we don’t just care about…
about…

…and…

45


Our Strategy…

1.  Assuming the perfect scenario, does our business
model generate money?

If yes…

2.  Does the model still make money once real world
conditions are factored in?

46


What is a “Perfect” Scenario?

–  Porter’s 5 Forces line up perfectly (i.e. low to no entry
barriers)

–  You operate absolutely efficiently (e.g. resources used to
their maximum capacity)

–  The business runs flawlessly (i.e. no mistakes are made
anywhere along the value chain)

47


Why Use a “Perfect” Scenario?
Most Importantly:
–  If you can’t make money even with the most ideal
conditions…

…STOP!
(…and rethink your business model)

Also:
–  The perfect scenario is often the easiest to build a financial
model from
–  It provides a baseline – All other scenarios can be
measured against this ideal case
48


Step 1:
Identify Cost Drivers and Revenue Sources!

50


Step 2:
Calculate your margin!

-???!
-???!

51


What Do You Need To Calculate Your
Margin?

Data!!!!
52


Data Sources

Call key industry players
(suppliers, competitors, etc)
Search databases
(industry, scholastic, etc)

Ask people!!! Conduct web search
(friends, potential customers, etc) 53
(Google, etc)


A point on “asking people”…

There are…

Lovers Haters Don’t give a
%&$#ers

Listen to HALF of what they say!!! 54


What did we learn?

55

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