A focused business model

One simple recommendation is worth making at the outset of your business modelling process. Social enterprise strategies are generally most effective when the organisation has focused clearly on the value that it delivers to its customers and beneficiaries, and when its activities are defined narrowly towards delivering that value.

This focus is related to understanding to a sufficient level of detail the needs of your customers/beneficiaries and also the key strengths, skills and knowledge that make you best placed to address those needs.

Every time you think about extending or expanding your business model to do more, think about whether this is really necessary (and if it is, then whether someone else could do it better, perhaps in partnership with you).

Startups that set out with a fairly narrow definition of what they do can sometimes seek to add complexity and activities to their business model in a reactive manner in the belief, for example, that it will lead to more rapid growth. Try to ensure that you keep some degree of simplicity in what you offer, particularly through the pilot period when you are testing your initial concept. Later down the line, when you have a proof of concept, refining your business model will be a much more strategic and informed process.

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Defining your offer and mapping your stakeholders

Before your project begins, make sure that you have adequately articulated your offer to the market. Regardless of whether you are offering a product or a service, it will be important that you have clearly and simply defined:

• What it is that you are offering
• Why it will address the needs of your audience
• Why you are best placed to deliver this offering

Early stage entrepreneurs can sometimes focus too much on the first of these three components; later down the line when they start engaging with other stakeholders, they find it difficult to sell the idea/product/service successfully because they can't articulate the second and third elements adequately.

Notice that we have referred to your 'audience' rather than your customer. That's because, in the social enterprise context, you are likely to have a range of stakeholders who you need to communicate with and 'sell' your project to for one reason or another. Although what you offer may be constant, you may find that the way to best define it may depend on who you are speaking to and what their needs/circumstances are. A grant-making investment panel, for example may need to know how your project addresses their priority criteria and targeted outcomes in a particular area; whilst one of your beneficiaries may just want to know how your product or service will benefit them personally.

As you can see, you may find it necessary to have different definitions of your offer (i.e. different value propositions) to different stakeholders; these are likely to have many things in common, but will also speak to the specific issues that are relevant to each. Value propositions for your various stakeholders are discussed in more detail in our guide on Understanding your target audience and defining your value proposition.

Here are a few tips to bear in mind as you define your offer:

• Don't make assumptions about what people will or won't know about your project. But at the same time, your definition should be simple and focus on concise statements addressing the three areas above.

• Avoid jargon, technical terms, etc. (except if you define a set of stakeholders who will be used to this language, and who may even expect it in your definition).

• View it as a work in progress. Learn from the reactions and feedback of those you engage with and adapt your statement accordingly.

• Make sure your various value propositions across your set of stakeholders are consistent and don't contradict one another.

• Look at your competitors and start to think what they offer and the reasons why your solution is better - being able to differentiate your project will be valuable in helping you sell it to others.

• Be focused in what you offer; don't try to take on too much from the beginning. As you went from idea to concept and design, you are likely to have had lots of ideas around parallel and complementary products and services. This is a valuable part of the early stages of the process and will have helped you refine and define your business model; but now that you are at set up stage, it will be essential to narrow back down and focus on the core element of your final project design. This could be:

  • What you do best
  • Where there is the most urgent need
  • Or the starting point that gives you the best chance of growing into other related areas in the future.
  • Whatever it is, make sure that what you offer reflects a focused and well-articulated solution to a well-defined set of needs.

  Your stakeholders

  Finally, it is worth discussing your stakeholders in a little more detail. This encompasses anyone or any organisation that will impact your project and those that will be impacted by your project. The diagram below shows the potential range of stakeholders for a social enterprise. Your particular project will have emphases on different groups, depending on what it is you will be doing and how you will be doing it:

  

  Stakeholder engagement is common to any business, but it's particularly important and complex for social entrepreneurs.

  For example, the separation of beneficiaries and paying customers, typical for many social enterprise business models, is rarely seen in the commercial context. Similarly, social ventures have a broader range of potential funding sources than a typical charity or commercial business.

  Understanding who your key stakeholder groups are and what their needs and priorities are is an essential element of the business model / business planning process, and an important input in helping you to define your value proposition statements.

  Note that a social venture may have other stakeholder groups to the general ones shown above and may find it beneficial to break out some of the groups shown further for the purposes of how you will engage with them.

  Our guide on how to communicate your value proposition effectively with external stakeholders may be helpful. Our guide on stakeholder engagement discusses your engagement with a specific and important group - funders and investors.

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  Defining the parameters and targets of your pilot phase

  Before turning your plans into an operational organisation or project, it is also worth defining as best you can the initial pilot phase, the overall aim of which should be to demonstrate that your project is a viable (i.e. sustainable) social venture that can deliver effective change in a specific area.

  The first step is to think about the parameters of that pilot. By this, we mean the headline features of your start up project that will define exactly where you operate. Often, 'where' is geographical for many startups. For example, in the pilot period you may focus on providing services and support to homeless people in one local area, with a view to replicating your offer in other locations later down the line. However, for some social enterprises, 'where' may also be about focusing on a particular segment of a larger target group; after the pilot phase, your aim may be to rollout your offer to other segments.

  Another key feature of the pilot phase is timeframe - i.e. how long do you think you will to prove your business and social models work? Often at start up organisations will put three year plans in place, with the implicit assumption that they will deliver their 'proof of concept' within that timeframe; but your project may have very different timetables and so it's worth thinking now about how you are likely to grow. This thinking will translate directly into your thinking around things such as organisational development (e.g. timing for recruiting staff) and financial planning (i.e. revenue and cost projections).

  As well as the parameters of your pilot, have a think about the targets that you'd like to achieve during this period. It's useful at an early stage to distinguish between two broad categories of target:

  Operational targets (aka outputs, objectives) address the 'amount' of your product or service that you want to deliver, e.g. delivering the first 1,000 training sessions to service providers, building the first two clinics or capturing 10% of the local market share for a product.

  Start by thinking about targets at a high level:

  • For example the number of people that you want to deliver your service to

  Then drill down into underlying operations-specific targets; for example, if you want to reach that many beneficiaries, then:

  • How many average size service contracts do you need to win with local authorities?
  • What size pool of freelance personnel will you need in order to offer that size of service?

  Your choice of your key operations-specific targets should mirror the operational map of your organisation.

  Social / environmental impact targets relate to the ultimate benefits of delivering your operational targets, e.g. improvement in the quality of public services received by refugees in your location; enabling more elderly people to access healthcare services in the community; reducing the carbon footprint of the local community. More information can be found in our guide on developing your social model.

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  Your critical success factors

  Having defined your offer, your pilot phase and what you want to achieve during that phase, it's now time to start translating that thinking into concrete plans across a range of areas. This will, ultimately, become your project / organisation business plan. A good first step is to think about the critical success factors (“what are the top three to five things that I have to achieve?”) across each of the following areas of your enterprise:

  As you can see, this is the jumping point into a range of other areas addressed in our other guides and once again demonstrates the role of your business model (and business planning) as encompassing all aspects of your social venture.

  A final, important point is worth making here. Thinking through all of the above will be a long process, if done comprehensively. As mentioned, it is effectively the first step towards full business planning. But it is highly recommended that you not only think about your critical success factors in the areas above, but that you also document this in one place within a document that will ultimately become your business plan and a roadmap, both internal and external, for how you work.

  Download our business plan template to get an idea of how your emerging critical success factors can be organised into a single business plan document.

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  Using strategic management tools

  At this stage, it may also help you to use some of the well-established strategic planning tools to help in one or more of the areas introduced above, for example:

  • Social change model - a single framework for linking your business strategy to your social impact targets.
  • Skills audit - helping you identify your skills gaps and plan for how to fill them
  • SWOT analysis - defining where your project / organisation's strengths, weaknesses, opportunities and threats lie.
  • PESTLE analysis - defining the external factors (political, economic, social, technical, legal and environmental) that will impact your project/ organisation.