Welcome Impact Entrepreneurship!

Adam Levene’s Wired article puts it brilliantly: while pitching, presenting or just thinking on their idea, many entrepreneurs include a “for a better world” stance. But many products and services that eventually arise do not have a major influence on a social well-being scale. For that reason, those good intents cannot be taken as the actual purpose of the project (and there is nothing wrong with it, other stating that you are saving the world when the reality of the project is different).

Still, those statements are an evidence that the concerns with the surrounding world are becoming ever more relevant, particularly for younger generations. Today’s businesses are not valued only by their products’ characteristics, but also by their message. We no longer see that a business is successful seldom by its profitability, but also by its positioning regarding society. Innovation, disruption, tech (and all other nice terms linked to entrepreneurship) are a mean to act and to create solutions for problems that affect our societies such as social inequality and climate change. So entrepreneurship communities are, more than ever, embracing the concept of Impact entrepreneurship.

Impact

Impact combines a project that aims at providing a service or product that may be deemed with social well-being, whilst also seeking to attain profit. Whereas a social entrepreneurship may be fully funded by donations and contributions to provide a service for free, impact entrepreneurs will create a company that focus on developing a self-sufficient business. But that product or service has a social effect. Another difference is that social entrepreneurship usually takes a form of a NGO or some other sort of social association/organization with a not for profit purpose (or non-profit), whereas the Impact takes the form of a company, just like any other business.

To distinguish what is impact, what is social, what is “not for profit” is a bit foggy (as in so many other things in life). It is common to see uses of impact that are closer to the pure social entrepreneurship, depending on the author’s views. What really matters is that there are many options on the table and it’s up to you to make a good blend!

And if your project does not have a social effect, that is ok. Many projects out there don’t; and we still need good solutions that solve our day-to-day needs.

Either way, be innovative!

Funding in social entrepreneurship projects

Funding opportunities for social innovators are endless. So if you have a good social project idea or a ongoing initiative already, you should know where to look for.

These are some financing forms that a social entrepreneurship project can obtain or compete to obtain:

Government Grants

A government grant is a financial reward given by a state or a local government authority for a project. Normally, a grant does not include technical assistance or other financial assistance, such as a loan. Effectively a grand is a “gift” and the grantee is not expected to repay the money.

Impact Investors

Impact investors invest into companies and funds with the intention to generate a measurable beneficial social or environmental impact alongside a financial return.

Crowdfunding

Crowdfunding is an important source for individuals to raise donations and investments for the developing of business ideas or new ventures. People interested in the method can use online platforms to pitch their ideas on a proposed project and get investment from backers (online audience).

Can a social entrepreneurship project implement itself as a company?

To answer the question, yes it can! As a social entrepreneur eager to change the world and jumping to the next big screen you have multiple options to implement your project. Even if your project has a social nature, it does not mean that you cannot profit from it: you can conciliate both goals and help resolve critical issues. There is not only one way to be a social entrepreneur. There are several business statutes and models that suit different types of business and goals.

Non-Profits

A non-profit organization generally is a organization focused on a specific cause, like child protection and should not generate revenue for shareholders and stakeholders, because the money they generate is used for the cause. Normally, these organizations obtain money through donations and some even sell products or services.

Regular business

Sole Proprietorship, Partnership or Corporation: the good new is that you don’t have to be organized as a non-profit to be a social entrepreneur. You can simply make it a part of the way you do business.

Benefit Corporations

The benefit corporations status is exclusive to the United States of America and is a recent type of entity that allows companies to be socially responsible while still generating profit. This type of company has an positive impact on society and environment at the same time that can profit.

Community Project

A community Project is a relatively small-scale project that addresses an issue within a specific community. Most community projects focus on social, environmental and economic issues.

Co-operative

A co-operative is an independent association of individuals unified voluntarily to meet their common economic, social and cultural needs via a jointly held enterprise. They can operate on either a non-profit or for-profit basis. The associates of the co-operative may be expected to pay a participation fee to cover operating costs.

So there are several options available for the legal nature of your social project. You just need to choose the one that suits your intents the best!

 

“Not for profit” does not mean “no profit”

We have heard it before and we will hear it again (somewhere, sometime in the future). Many people mistake the term “not for profit” with an organization that does not sell anything at all or that does not have profit. That is untrue, so let’s clear it out.

Companies have profits and those profits can be 1) kept in the company, increasing the value of equity or, 2) paid as dividends to the owners of equity. When paid, the dividends can be in the full amount of the profits or partial as part of the profits is paid as dividend and the rest is kept in the company. If an organization is not for profit it means that in its governance there is not the purpose of paying dividends to equity holders. For instance, associations are not even held by equity holders, so there would not be equity holders to whom to pay dividends. But not for profit organizations can have a profit.

Not for profits organizations can sell services or products

Any organization or company can sell products or provide a service and charge a price for it. Whilst it is true that many not for profit organizations’ operations may be funded by contributions, donations and government subsidies, it is common to see organizations that combine these sources of money with sales of products and services. Hence, organizations can have a revenue stream, just like a regular company.

Not for profits organizations can have profits

Just like companies, NGOs and other types of social purposed associations have sources of income and expenditures. And as you can imagine, it will be extremely difficult to spend exactly the same amount of income. Therefore, these organizations can have profits (or losses). Again, as in normal businesses, organizations must have an organized accounting that asserts the Net Income for each year of operation.

The major difference between a company and a not for profit organization is that, while both have profits, only companies can pay dividends. Not for profit organizations are obliged to accumulate the yearly profits. The organization may use the funds of accumulated profits to reinvest in its operations or to support expenditures in the following years.

 

Social Entrepreneurship?

We welcome a series of posts about social entrepreneurship. Two weeks ago (from the date of publishing this post) we took CASFLO for a workshop at Instituto Superior Técnico in Portugal for a class where students had to take on a social entrepreneurship project. Whilst debating with the class it came to us that this exciting approach to entrepreneurship would be great topic for our blog, particularly from a business model perspective.

So, along with this post these complement this series:

What is social entrepreneurship?

Social entrepreneurship is a form of entrepreneurship that has the objective of producing goods and services for social benefit. These initiatives usually have different goals than a common entrepreneurship project, as social entrepreneurship seeks to help people by generating social capital and inclusion, whilst acting at different geographic scopes such as local, regional or global scale.

Differences between Entrepreneurship and Social Entrepreneurship

The main difference between these forms of entrepreneurship is the “profit”. For a normal entrepreneur, reaching profit is one of the goals of the entrepreneurship action (and can be the most relevant one, albeit it seldom is). But the social entrepreneur does not have financial profit as a priority, as his or her project seeks to respond to social and environmental challenges. The social entrepreneur seeks to maximize the social capital in each project in order to ensure the growth of more initiatives, programs and actions for the communities.

Another common difference is the ownership of the idea/product/service. As a entrepreneur you will not want anyone else to use your idea at all. However, as a social entrepreneur you may create ideas that can be used or replicated by others, as the main objective is to disseminate the idea or product so that it is applied in other locations to help out those local communities.

Planning a social entrepreneurship project is, in many ways, similar to any other entrepreneurship project. But, there are differences that should be accounted for. So check out the following posts about the altruistic route!

Business Model Canvas

If you need a Business Model Canvas template for your feasibility analysis and business plan, feel free to use CASFLO APP’s template in PowerPoint .pptx format. You just have to fill in the form.

There are two templates available:

Why is it important to have a feasibility analysis?

We know that entrepreneurs usually do not like to look at numbers.

They don’t like the fact that they have to deal with such dull things as estimating revenues, figuring costs, what is going to have to be invested, where is money coming from. Their product or service is going to be just awesome and there is still plenty to be done until it can be launched. Ohh… and of course: they just got some great feedback from their friends and family and in that presentation they made a couple of weeks ago, quite a few people complimented the idea.

But there are several reasons for an entrepreneur to use some of hers or his time on the feasibility analysis.

Ponder about what you will sell

When you start estimating numbers one of the first questions that needs to be answered is how much will it sell?

That simple question will force you to think of what your target audience is, how many individuals (or companies in B2B) can be accounted for and are for how much are they willing to buy. By doing so, you most likely will start to realize the there are some changes that must be done to your initial idea.

Learn the risks

You will have to combine revenues, costs, investment and financing. While considering the best estimates for each input you will also become aware of the risks that are inherent to each item and how mitigate them. That means you will be more prepared for the future.

Is it worth it?

Without a feasibility analysis you will never have the capacity to understand if your project is viable. People do not like to lose money and if that is your case, it is better to have a proper understanding of how the project may fair in the end.

The check of the business plan

The feasibility analysis is the reflex of everything else on a business plan. There are plenty business plan models, templates and processes. But there is one thing that must be common to every business plan: it has to make sense. The feasibility analysis is how you can assess if the considerations of the business plan are adequate. Simple example: If the strategy for a new cloth store is to set establishment in hip zone, the rent costs will be higher than in less busier zones. Hence the feasibility analysis must reflect that.

Stakeholders

If you are looking for investors, banks or partnerships then you better have a strong case about what your project is going to be. And while initially you may not get some sharp questions about the financials of your project, inevitably those questions will come. And when they do come, you should be able to answer them well otherwise your chances will be significantly lower.

 

So let’s do it!

Even if it is not the most interesting thing that you will have to do for your project, even if you feel unease with financials or accounting, go ahead and carry out a feasibility analysis of your project. It will help have a better understanding of the future.

By the way, doing it does not have be that difficult… CASFLO APP makes it much easier to do feasibility analysis and whenever you feel unsure about something you can always check the learning center for help!

Entrepreneurship and startups

Before entering the post’s subject, we would like to share what is our intent with this blog. As the first post, it marks the launching of our new app. The blog is not meant to convey a strict education perspective as the Learning Center, but more of a combination between what is our opinion, built on our professional experience, with technicalities of business planning. Of course, some of the information that you will be seeing here will naturally have its correspondence with some of the content of the Learning Center.

Since CASFLO APP was constructed for business plan development and this is the first post, it came to us that the natural thing would be to start by the concepts of entrepreneurship and startups.

Are all entrepreneurship ventures a startup?

Are all startups an entrepreneurship project?

Are these the same concept that people just discretionally?

The answer is: although these are related concepts, they are not quite the same.

An entrepreneurship project can be defined as the act of creating any type of business venture (whether for profit or not) by an individual or group of individuals. We will leave out of this definition the new businesses created by already existing organizations, as it can be mostly taken as an extension of the current business under the company’s standing strategy. So, the concept of entrepreneurship applies to John who opened his local coffee shop, to Amanda who decided to start her HR consulting business with a former colleague, or to Christian who teamed with some college friends to develop a new social media app and is currently in a startup incubator.

The bottom line is: no matter how large your venture is. It is an entrepreneurship project.

We all listen to someone talking about startups and most of us would recognize a startup as a business that is starting, so one would be understandably taken to think that a startup is simply just the same as entrepreneurship. But in fact, it is a special form of entrepreneurship, one that usually fulfills these characteristics:

  • It is based on a new technology or on an innovative use of technology. In simple terms: the technology has not been used in such manner.
  • Startup projects usually imply new range of services or products or a disruptive business model within an already existing service or product industry. In simple terms: at the moment no potential competitor holds the exact same features.
  • Because it is based on new use of technology and on a new business model, there is no certainty that the market will embrace the product or service. Although, in most cases it is highly believed that the public will accept the product. In simple terms: the market response is unknown.
  • The development chronogram can be quite long. Many startups are launched just as an idea of something that can be or when the needed technology has not be fully developed yet. It is common to observe a long timeline since the startup’s first stone is deployed until it enters a “business as usual” standard.
  • Due to a usually intricate technological development, the amount of cash that will have to be invested before the first unit of service or product is sold can be quite substantial and well beyond the financial capacity of the startup founders. In most situations, even a bank loan would not be a feasible solution.

Most of startups feature all these characteristics.

It is now easier to understand the differences between entrepreneurship and startups: all startups are an entrepreneurial project, but not all entrepreneurial projects are startups. Looking back at the previous examples: John’s coffee shop and Amanda’s consulting business are simple entrepreneurship projects. Christian’s company is a startup.

The reason why it is important to distinguish between these concepts is the fact that they have different implementation requirements.

Simple projects should focus on understanding the market they are about to enter, research the major competitors, study the viability of the business with detail and sketch a comprehensive plan of implementation; one that clearly sets out the complete financing, investment and human resources needs.

Startup projects should focus on creating a good base for future progresses. The first analysis and business plans versions tend to be quite different from what will be executed. Early hypothesis are diffuse and meant to be tested, just like the minimal viable product (MVP) is commonly used to test the market adherence and functionalities. In startups, the business plan is always a “work in progress”. As the project advances, the team will be more able to have a better understanding of the relevant variables that will be dealing in the future.

Since there is more predictability in simple projects than in startups (at least in what concerns to the early stages of startup projects), if you are preparing a business plan for a simple project you should be as detailed as possible, as you will have a better grasp of the real prospects for your project or company. More, the business plan is also an instrument that you should you use to compare to implementation. The better the plan, the better the comparison.

In a startup project you should use a model that gives you enough flexibility to change it quickly and efficiently. In most cases, the project ends ups changing substantially from the early thoughts and many different scenarios end up being tested. Hence it is good to have the adjustability factor on your side, which means that you do not need an extensive detail in the early stages, just an instrument that will help you understand if the route you are taking is correct or not.