1) Preparing the Ground
Putting your enterprise through the ‘stress test’.
It is a good idea to put your cause and business solutions through the ‘stress test’ so it is your ‘case study’.
Don’t worry if your plans and ideas change along the way. That is quite natural and evolutionary!
i) Criteria for an Activist Enterprise:
- 1) Purpose. It should involve a product or service that works towards addressing a pressing social need such as women’s rights, freedom of speech, prison reform, etc. And we are not talking about just selling T-shirts! You want to create genuine products and services that make the change you want to see in the world.
- 2) Planet. It should incorporate efficiency and environmentalism in every aspect of it’s business operations. Saving resources is not only green, it also saves money. Which is also ‘green’!
- 3) Profit. It should generate an income that allows at least a living wage for it’s owners.
- 4) People. It should always strive for fair working arrangements for anyone who helps in business operations such as volunteers, paid workers
and private contractors. The operating principle is fair trade, it does not have to involve money. At Hedonisia Hawaii we cannot afford to pay salaries. So we have an Intern Manager Program that allows lots of time off!
ii) PUT IT TO THE TEST: What Factors to Consider with your Social Enterprise
When creating and then testing your Social Enterprise, it is important to critically examine the internal and external environments around your social enterprise.
Internal Environmental Factors are directly linked with your product, so if there is something wrong, you can easily try to control and improve it as much as possible. May include:
- Organizational Structure
- Human Resources
- Organizational Culture
- Cash Flow
- Physical Assets
External Environmental Factors are outside of your immediate business or community in the short term. Internal factors impact your immediate business or community operations, so you do exercise some short-term control.
They may include:
- Political/ Regulations
Three analyses we can utilize are the SWOT Analysis, the PEST Analysis and the Stress Test. The
first two are related so you can choose the one you are more comfortable with.
iii) S.W.O.T. ANALYSIS
The first analysis includes both internal and external factors; Strengths, Weaknesses (internal) and Opportunities, Threats (external). A SWOT analysis allows you to gain insight on different aspects of your business, and organizes the studies and surveys that you have performed to obtain this information.
Strengths can be a part of your business’ identity. They are originally related to your product. Strengths can be based on your product or service, reputation, knowledge, geographical location, resources, experience, leadership, growth, unique character and originality or market position. Your business’ strengths help you to distinguish your product and establish it deeper and longer. These are your best practices, the things that put you above the competition; and they are what you must utilize to establish market share.
Weaknesses. Can be related to a gap in skills, poor location, unreliable product, negative involvement and motivation, financial issues and anything else that may slow down your project’s development. All the factors of your product that prove to be negative for its development have to be fixed step by step.
It’s important to note that some weaknesses are unavoidable or may be part of the product idea. You have to keep these in mind when determining the feasibility of your idea as a business. Things like this MAY make you want to reconsider your business idea. However, it is imperative to look at these problems thoroughly and creatively to determine if solutions are available. Sometimes if you are able to just avoid a weakness by tweaking your idea it might be a better solution than facing it head on!
Opportunities involve elements that the business could exploit to its advantage. Opportunities come from the external environment. You have to take advantage of them as much as you can in order to make them a strength. For instance, government could reduce cost on the raw materials you use for your product. As a result you have the opportunity to diversify your business, enter new markets, make
a strategic alliances, take advantage of new trends (an implied reference to the organic lifestyle), enjoy innovation and technology development.
Opportunities can also stem from your strengths. And even sometimes a weakness can become an opportunity! For example, say your weakness is being a small company operating amongst large companies that are able to achieve economies of scale. The advantage you have over these companies is the ability to change/ adapt quickly; incorporating new technologies first and appealing to new markets becomes an opportunity to you. Being the ‘first to market’ is a great advantage you can have over your competitors
Threats are all elements in the external environment that could cause trouble for your project. As they are external, they are difficult to handle. These range from political policies (policies that go against your business, tax and cost increases) to changing technological developments, sustainable financial backing, closing of geographic markets and so on. Competitors are also an important factor to look at in terms of threats.
iv) P.E.S.T. ANALYSIS
If you want to focus more on the external environment, utilize the PEST analysis which stands for: Political, Economic, Socio-Cultural, and Technological.1 This analysis is looking broadly at the factors which are out of your control (in the short term–see 5a. Perserverance). In each of these areas, you want to ask questions of your plan and see how they hold up. Be as critical and honest as possible, sugar-coating your answers here will only hurt you in the long run. Below are a few questions you can ask yourself in these areas, but the more questions you ask, the better.
- Can you operate in this place? Are you in the right location with respect to zoning and building codes to legally and effectively operate your business? Will you have to move?
- Is the current political tide diametrically opposed to your product or goals?
- Is there corruption and nepotism in the political arena?
- Is it legal? Are there any regulations that might stop you?
- Are prices rising for materials you will be using continually throughout your process?
- Is it possible to make money from the product or service?
- What is the local labor climate? What kind of people-power does your enterprise require? For example, running a Sustainable Community like Hedonisia normally requires a great deal of people-power. We solved this economic problem with our intern-manager program and fair-trade volunteer program.
- Does your idea truly have the potential to make a difference?
- What steps can you take to minimize the impact of your product or service on the environment?
- Is there enough of a social and cultural backing to put momentum into your enterprise?
- What groups or parties will be most opposed to your enterprise, which will be most supportive?
- Are there radical elements or ‘bad fruit’ that can, by association, add or remove value to your movement?
- Are there new (or old) innovations which you can utilize to add value to your enterprise?
- Are there new products appearing which catalyze or hinder your future growth?
- Do you have the know-how to undertake this enterprise? A technological question does not necessarily mean ‘high-tech’, it can also ask simple questions like this one about ability and skills.
The next analysis to consider is a stress-test. There are a variety of stress tests available to businesses and social enterprises alike. A simple stress-test to utilize is to take elements of your internal environment and consider what would happen if you only met 90%, 75%, and 50% of your goals.
When starting Hedonisia we had to look at several internal factors and ask these types of questions. We had to build a physical location in order to host volunteers, managers, and guests. In this area we asked, can we obtain the materials we need? Then examined, what if we only obtained 90%, 75%, and 50% of the materials we needed. What other options are available to us, can we still continue?
Another area we examined was our people power. As stated above, in the Economic section, running a sustainable-community requires community–people! Some times, things like people-power are both an external factor and an internal factor. Generally people-power is the largest item of any enterprises operating budget. We asked, what would we do if we only had 90%, 75%, and 50% of the people-power we anticipated.
A large challenge, of any enterprise, is income and expenses. What would happen if your income was 90%, 75%, and 50% less than expected–and for how long could you sustain this? What would happen if your expenses were 10%, 25%, and 50% higher than expected?
PROCEED OR PASS?: Is the Idea Viable Enough to Move Forward With?
- Is the idea viable or does it need to be scrapped or revamped in someway?
- Is there something you can do to overcome the obstacles in your way?
- If you have to go back to the drawing board that is quite okay! Better a truly viable product or service that really makes a difference than some sort of ‘green washed’ idea!
The key term in both these analyses is to understand that they are looking at the short-term environment. Remember, in the long-run nothing is fixed. It is also important to remember that answering ‘no’ or seeing obstacles as a result of these analyses is not a reason to stop. These analyses are meant to clarify the environment for you. Is there a lack of social and cultural backing right now? Maybe you need to adjust your short-term goal, not entirely quit your enterprise. Is the cost of labor too high right now? Maybe you need to consider a fair-trade strategy like volunteerism or bartering.
- Friesner, Tim. “PEST Analysis”
- Benford, Robert D., David A. Snow. “Framing Processes and Social Movements”
Getting Started means being Prepared!
While today technologies when utilized well can offer enormous advantages there is still no substitute for good old fashioned preparation!
The following sections deal with the more ‘traditional’ aspects of preparing to launch a business venture.
Mission Statement and goals: Before you think about buying anything, hiring anyone, or marketing make sure you have a clear mission.
What do you want to fix, change, or create that will make the world a better place?
Your mission statement should be broad enough to last the test of time but specific enough to direct your work.
A mission statement of “Make the world better” will always be relevant, but too broad to have any specific actionable goals. Find a healthy medium.
- What are you actually producing/selling?
- What do you need? Space, permits, tools, training, etc.
- How will you turn raw materials or labor into your product or service?
- How can your product be more sustainable than other products on the market?
- What are your social responsibilities?
- What is the bottom-line when you incorporate environmental and social good?
- How does the product/service fit the owner’s personal mission?
A mission statement should cover three cornerstones; product, customer, and strategy.
- Product – What are you selling?
- Customer – Who are you selling to? May be individuals, other businesses, etc.
- Strategy – How are you going to sell your product to your customers?
Translate the mission into measurable terms.
Objectives are quantifiable statements that include short, intermediate, and long-term time frames.
- Increase sales by 30% in the next year through value added markets
- Adapt technology to reduce labor cost by 25% in the next five years
- Increase production by 40% in the next three years
- Implement a new product/service that addresses another social issue within the next year
Business goals and be categorized into long-term DRIVE and short-term SMART goals.
- Long-term goals
- Shows where your business is going
- Can you accomplish it?
- Is it a “stretch” goal? Are you going for something greater?
- Like measurable, but with less rigor
- Whole business, not just one segment
- Long-term goals
- Short-term goals
- Something you can act on
- Actual quantifiable number
- Can you accomplish it?
- Like realistic in DRIVE
- Can you accomplish it?
- Is it a “stretch” goal? Are you going forsomething greater?
- Like inspirational in DRIVE
- Is it a “stretch” goal? Are you going forsomething greater?
- Date when it is evaluated
Create a business plan!
Even if the idea is crystal clear in your head, writing it down and putting it into a structure will help with three things:
(i) it will further help develop the idea.
(ii) it will breakdown the larger project into manageable portions. And finally,
(iii) it will give you a concise and tangible synopsis of your business idea to show to lenders and prospective investors.
“But I don’t have an MBA! I never went to business school!”
A business plan is simply your idea put into a concise, strategic structure.
There are numerous tools online that can help you in this area, such as this template from the Small Business Association : SBA Business Plan Template.
It’s also good to keep your Business Plan concise but informational. Not only will this help you organize your idea but it is also what you would show to banks or other lending institutions if you need to get a loan or investment support.
A little showmanship can definitely aid in this area, graphs and financial projections are a must. The idea is to find a balance between marketing your idea to help you get a loan and being realistic so that you can actually back up your idea too! You want the loan officer to believe in your idea, but also to know that this is a smart financial investment for the bank or investor.
This is our guide to get you started on your Activist Entrepreneur Business Plan!
- The Problem & the Opportunity: What is the problem that you are passionate about? What idea do you have to solve this problem & make a living from it?
- Your Mission: What do you wish to achieve in the long run by creating this product or service? (Must be memorable, manageable, measurable, motivational)
- Theory of Change: What actions & resources will you use to achieve the results that you would like to accomplish? Convert your theory to action (your solution to the problem)
- Product Description: Describe your product or service. Be concise but detailed, you want someone to read your description and have a complete understanding of what you are trying to accomplish. This section should include relevant details about sourcing parts, labor, or knowledge. A key aspect to the product/service description should be what makes you unique.
- Your Team: Who will help you execute your business plan?(what kind of skills and expertise will they need)
- Context: What approaches have already been attempted to solve the problem? Who are you ‘competing’ against? Why will your approach solve the problem more effectively? What makes your product or service unique?
- Scaling Strategy: How will you grow to maximize your business impact on society?
- Market Analysis: Who are you trying to appeal to? Can you expand this market? Does the market have a disposable income and a willingness to purchase your product/ service? How are you going to appeal to your market? How will you assess the effectiveness in achieving your mission?
- Risks: What risks are you taking by creating this product or service?
- Financial Plan: How will you finance your business plan? What strategy will you use?
The last part of your business plan is arguably the most important, it should be done last but shown first. This is your executive summary. It is a short (one or two pages max) summary of your entire business plan. Someone should be able to read just your executive summary and have a strong working knowledge of your plans. It is also your pitch. This is the first item viewed on your business plan and you know what they say about first impressions. Make it memorable!
Market Analysis & Finances Defined:
Market Analysis: Although it sounds very corporate, a Market Analysis is something many entrepreneurs and social activists do on a daily basis.
It’s taking a hard, critical and analytical look at the broad environment. This analysis is, putting into words, many of the observations that you have already made which brought you to the conclusion that there is a need for your enterprise. The goal is to show that there is a need for what you are offering.
The market analysis is one of the most important parts of any business plan, because it will show a need for what you are offering.
Although you may have a great idea for harvesting space-berries on Alien planets, currently there is not a market for your product and, as a result, few investors would probably be interested. But turn your alien space-berry harvester into a harvester that works on mountain-terrain and suddenly you may have investors in mountainous/agrarian countries that may be interested in your product.
In creating your market analysis focus on the size, needs, and trends within your own market, customers, and suppliers. In the mountain-berry harvester example, you will want to look at the market for harvesting and agriculture equipment, the need for mountain-berry harvesters (customers) and the trends in those areas, as well as the trends and growth of people who make the parts you will be buying to assemble your harvester.
The willingness to pay/ adapt to a new system is something to examine and can be done through the use of Focus Groups. Focus groups are clusters of people usually ranging from 3-7 that are brought together as a sample for the entire market. Focus groups have been found to be very effective in predicting the market.
Things to consider:
- Are there new technological advances in any of those markets that will impact your enterprise?
- Are there outside factors to consider? Is Oprah promoting eating mountain-berries?
- Are there competitors or allies to consider? What are their operating profits? How are they running their businesses?
Finances: Another corporate sounding term, but very necessary to clearly communicate your enterprise idea to investors. There are three major financial statements you should know how to create and update throughout running your social-enterprise. Consider picking up a book on basic business finance or using a program like Freshbooks or Quickbooks to help you.
There’s no need to reinvent the wheel, as there are numerous resources available to help you construct these statements, but a basic overview is:
- Balance Sheet: This shows that what you have (Assets) = What you owe (Liabilities) + What you own (Equity)
- Statement of Cash Flows: This statement shows where your cash came from during a period of time.
- Income Statement: This shows your income and expenses in a given period of time.
When creating these statements, it’s important to document and research where your figures are coming from. If you haven’t started your enterprise yet, you will be estimating many of these figures. This is the strength of starting a social enterprise, most other social enterprises will see you as an ally against corporate and non-social entities and will be more than willing to help you out. Look for social enterprises which are doing similar work in similar areas and ask about their finances.
What you should remember when creating these financial statements is the triple bottom line of a social enterprise1. The triple bottom line was a term coined to express the way a social enterprises measures profitability. Rather than just an accounting bottom line (Revenue – Expenses = Profit) it adds two more items or lines of expenses. The environmental value and the social value. You can read more about this in our Profit & Purpose chapter.
What You Will Need to Get Going: Money, Labor, Space (land, office), Training, Permits
- If your business idea truly does make the world better and you build a reputation for honesty and integrity then you will attract workers and investors.
- Partners. What will be the leadership structure of your social enterprise? Will you have partners, investors or be a sole enterprise? Advantages and disadvantages to each.
- If you are starting with no money or resources then you simply begin by articulating your vision. Every single aspect that needs to be addressed before it becomes a reality.
- Work out a budget that includes volunteers and donations as well as money.