social entrepreneurship topic 6

Dr Anis Amira Ab Rahman 2015

SOCIAL ENTREPRENEURSHIP

ACS 3063

SOCIAL ENTREPRENEURSHIP MANAGEMENT:

Financial management


Earned income strategies

~ Earned income refers to revenue generated by commercial exchange of a product or service between a buyer and seller (Dess et al., 2002)

~ Earned income is distinct from grants and other charitable donations.

~ An earned income strategy is any coherent plan of action that generates earned income, even if that income does not cover all the costs associated with producing it (Dess et al., 2002).


Principles of earned income

Not an additional revenues to improve the financial health of the social organisation. Earned income strategies require financial stability for successful execution

It is not inherently stable. Your commercial activities will not be immune to market forces just because you are a non-profit

(Dess et al., 2002)


It can help to diversify your funding base. Not diverse sources of income but different sources of income – not costly

Build on some strength or assets of your organisation

Market discipline is healthy for your organisation only when the market is well aligned with your social mission

(Dess et al., 2002)


Earned income strategies

Getting paid for what you already do

Launching a new business venture

Building revenue relationship


Getting paid for what you already do

o Find people who will pay you for it (common in health care, education and art sectors)

o 3 options of charging fees:

Charging their primary beneficiaries-eye

care

Charging an interested third party-clinic

Creating a hybrid pricing structure that

collects fees from both primary

beneficiaries and third parties- Green saver

(Dess et al., 2002)


Launching a new business venture

Factors influence the non-profit business venture:

Organisation’s competencies –

competencies-based ventures

Assets- asset-based ventures

Relationships - relationship-based

ventures

Mission – mission-based ventures(DESS ET AL., 2002)


Building revenue relationship

Non-profit/for-profit revenue relationships categories:

Cause-related marketing – sales trigger a

payment to the non-profit for seller

Joint ventures-collaboration to produce product

by capitalising on the strengths, assets and

capabilities of each

Licensing- a partnership-sell right (logo) to

corporation to promote product (Dess et al., 2002)


Earned income tactics (EIT)

Case: running a homeless shelter for teens and have decided to provide job training to your residents.

EIT: Charge fees to the corporate employers who benefit from your training, placement, and retention services


Earned income tactics (EIT)

Seek a government contract to provide training for teens who have been in court system

Start your own business that will serve as a training ground and as an income generator at the same time

Partner with establish brand to open a franchise that would provide training and employment opportunities for your clients and income to your agency

Cut a deal with a credit card company that wants to use your organisation’s good name and reputation to market its cards to socially conscious people

(Dess et al., 2002)


FUNDING


Financing Options – Over The Social Entrepreneurship “ Life Cycle”


Another Way To Think Of Financing Options…


Aligning Supply And Demand…


Level of funding

Growth of social

enterprise

Bootstripping


Founder, Family and Friends

Use of saving, redundancy package, mortgage the family home, continue in employment, personal network of friends

Adv: security unlikely to be required

Disadv: can strain family relationships if repayments are not made as expected


Bootstrapping

~ Strapped for cash, look to other ways of acquiring the necessary resources

~ Harrison et al. (2004:308) define bootstrapping as involving, “imaginative and parsimonious strategies for marshalling and gaining control of resources”

~ Two strategies: using creative ways of acquiring finance without recourse to banks or raising equity from traditional sources

Minimising or eliminating the need for finance by securing resources at little or no cost


Bootstrapping

Adv: spend wisely and learn to manage money efficiently

Disadv: typically takes a much longer time to grow a company without an investment, which

could mean that you will not be earning any money for quite a while


Foundation/Trust

A foundation is a legal categorization of non-

profit organisation that will typically either

donate funds and support to other organisation

or provide source of funding for its own

charitable purpose

Adv: donors are able to make tax deductible

donations

Disadv: ongoing effort


Grants

A grants is an amount of money given to an

individual or business for a specific project or

purpose

Grants are non-repayable funds disbursed by

one party

Get the grants funding through grant writing

Adv: do not have to pay back the grant or

interest

Disadv: lot of competition


Social Angles Investment (individual venture capital)

Business angels are high net-worth

individuals seeking capital and social gains over

the life of their investment in a company

Adv: investment based on business plan

rather than security

Disadv: Hands-on expertise may be seen as

interference in the business


Social venture capital funds

Form of venture capital investing that

provides capital to business deemed socially

and environmentally responsible

Investor and social return

Adv: not normally involved in day to day running of business

Disad: investors will want to sell on their stake in the business at some point in the future to realise their profit


What do social investors care about?

Ability to tell your stories in clear, simple and compelling fashion

The ability of the individuals undertaking project

Who is giving your guidance, what resources and experience you are drawing on


What do social investors care about?

Whether you can present a sound, realistic, understandable business case

That you have considered ways to mitigate risk to investor

That you have multiple and sufficient sources of capital

That you have mapped out all aspects of the business/ operations, and that they are getting the attention that they need.


REFERENCEShttp

://www.slideshare.net/soaim/resource-based-view-of-firm?qid=65dd6d92-6ba4-4ff5-817d-4b17b0db423e&v=default&b=&from_search=2

http://www.slideshare.net/socialentrepreneurship/entr4800-class-9-managing-for-social-impact?qid=407f9705-6939-4a42-82a1-ecaacfe4cd50&v=default&b=&from_search=2

http://www.slideshare.net/socialentrepreneurship/07-entr-aps-1015-h-class-7-business-model-considerations-for-social-enterprise?qid=ad96cbb9-33e3-4b75-a965-6f23d22dbbdc&v=qf1&b=&from_search=4

http://www.slideshare.net/soaim/resource-based-view-of-firm?qid=65dd6d92-6ba4-4ff5-817d-4b17b0db423e&v=default&b=&from_search=2











social entrepreneurship topic 6

Small Business & Entrepreneurship

income strategies

income generator

earned income strategy

nonprofit dess

product dess

seller dess

social mission dess

different sources of