The social enterprise model being contemplated must be scalable and sustainable.
The ChallengeTo be viable, the social enterprise you choose must be scalable beyond the break-even point, and should grow to a target profit level your nonprofit organization can manage and sustain. Profits earned will help augment or replace funding from the government and other sources that continues to shrink, or becomes harder to qualify for.
Assuming your social enterprise model meets the first 5 critical success factors we discussed in earlier posts:
- It supports and is consistent with your mission
- It has market viability
- It differentiates in its competitive space
- The nonprofit organization can cost-effectively build the financial, staffing, management and infrastructure to launch, manage and grow it
- It does not require a disproportionate allocation of resources which would impair mission
…then, the next step will be to develop financial projections to determine the break-even point and set target growth expectations.
Sustainability is also impacted by changes in the market which your enterprise will serve and compete in. Beyond internal strengths (e.g. financial, staffing and infrastructure), the model’s sustainability will also require adapting to developments in your market such as changing customer needs, tougher competition or shrinking margins. These threats need to be anticipated through some “what if” thinking. This exercise is part of a SWOT analysis which is designed to identify your enterprise’s internal strengths and weaknesses, and external opportunities and threats, see: http://en.wikipedia.org/wiki/SWOT_analysis .
The importance of a SWOT analysis and business plan
As with any new enterprise, a business plan needs to be developed. The plan will serve to state, among other things, your social enterprise’s mission and goals and the means by which they will be reached. It is best do the SWOT analysis first so that the business plan reflects your strategies for building on strengths, overcoming weaknesses, leveraging opportunities and mitigating threats.
I will be devoting the last post in this 9-part series to discussing business plans in greater detail and providing some additional resource links to assist you with your plan.
My next post will cover Critical Success Factor #7: Reaching break-even in a “reasonable” time frame.
So stay tuned and please post your comments or questions!