Social Effect

22 Questions You Should Ask Before Starting a New Social Enterprise or Non-Profit

2011-11-14T03:40:00.001Z

While in Northern Thailand last year, I was invited to the Payap University in Chiang Mai for a session with some budding social entrepreneurs. A group of University students that were starting a project on multi-lingual learning for one of the local communities they had been working with, needed help with understanding how to implement their ideas. This post is based on the questions we identified during that session.

As with many new projects, the solution here was pre-assumed and taken as given; based on their particular point of academic focus. In other words they had something they believed would be beneficial to local communities and set about finding a place to fit their solution, without first answering the difficult questions that need to be asked.

Having worked with over 100 social organisations around the world, I’ve found that this is a major reason why projects struggle to both survive and/or make any meaningful impact. Many ‘unexpected’ challenges can quite easily be extrapolated in advance if someone just bothers to model (think critically about) the implementation cycle before rushing in.

Truth is it’s not that the group or individual is being wilfully negligent. Since most people in this space mean well and start out with the assumption that their idea/approach will be useful…

There is a natural and understandable tendency to gloss over anything that might indicate the project is not worth starting.
For most new entrants without previous experiences of starting up and implementing solutions, the questions to ask are not always obvious.

So for all you budding social entrepreneurs out there, here's a list of some basic questions that you must be able to answer before starting a project, raising money, or writing proposals.

As I mentioned in my other post on the 20 Keys to Building a Successful Social Enterprise, vaguely ‘knowing’ the answer in your head is not good enough. You must be able to document at least half a page on each.

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3 Basic Steps in Starting a Social Project

Imagine the programme/project in detail to understand start-up design and cost.
Ensure you have a clear long term vision and expectations, plus a development plan to get there. These are critical for both credibility and sustainability.
Identify (research) the mechanism of fundraising and the type of funder based on the amount of funding required. Note that small funding has different criteria to large funding.

Overall, it is point 1 i.e. imagining the project in detail that most people have trouble with. The approach is usually to get started and see what happens, instead of doing the difficult diligence first.

So this post is about help with the first step in the start-up cycle.

Questions to help you flesh out and imagine your project in detail

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Solution/Project Design

What tells you there is a problem in the community i.e. What are the specific indicators of the problem and what is the size of the problem? (This is your Problem Definition and initial Benchmarking)
Which specific bit are you most worried about i.e. trying to improve/change? (This is your Mission)
How will you address those problem indicators? (This your Idea/Strategy/Solution)
What are the challenges you see i.e. Why might your plans fail? (These are your Risks)
How will you know if these are the right approaches? (This is your Pilot i.e. where you test your ideas with the community and/or ensure that you have involved them in the design)
How would you start, and how long would it take to get your idea working eg. How long to build and set up community support, or get planning permission, or train staff, or test/pilot your idea etc? (This is your initial Start-up Timeline)
How would it evolve from a pilot into a mature programme, and over what timeframe? (This is your long-term development Roadmap)
How and When would you know that the problem is solved? (This is your Vision and defines your Outcome Targets)

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Short Term Effectiveness and Efficiency

Who else is doing the same thing and can you just help them instead?
Who can you partner with?
What solutions can you copy?
What more do you need to learn to do this properly?
How can the community help and how can they stay involved?
How could you use volunteers?

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Costing and Budgeting

What infrastructure does the project need (physical, organisational, technological, logistical)?
What people/skills does the project need?
What other things like materials will the project use?
How much would it cost to start/set-up the project?
How much would it cost to maintain?
What might be the ideal size for your organisation, and what would you need to grow it to that point?

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Long-Term Sustainability

How would you make this sustainable either financially, or in terms of staffing and replication?
How could you pass the project over to the community?

When you can answer all of the above in some detail, you're probably ready to start your own project. The answers don’t have to be perfect. Most of what you come up with is unlikely to match the reality that will play out, but you absolutely have to try.

Until then, hold off and do the groundwork to ensure that you and your idea won’t just waste money that could be put to better use.

Finally, make the difficult decision – Go or No-Go.

Financing Challenges and Solutions for Non-Profits and Social Enterprises

2011-10-18T09:11:00.001+01:00

It's been a month since I returned home from my two year journey working with social enterprises and non-profits. This post is about new alternative financing options and the challenges they present to social entities around the world.

Along the way I worked with more than a hundred social organisations of all types. From ‘first storey’ ones running programmes to secondary and tertiary social institutions like funding intermediaries and foundations. The full list is here. Given the financial stresses that the world is currently under, I’m sure you can imagine that much of my time was spent in helping design new structures and approaches for reducing dependency on traditional fund-raising.

Traditional Fundraising

Donations from Friends and Family
Street level and online collection campaigns and donation drives
Larger scale hand-outs and Endowments from High Net Worth Individuals
Grants from Foundations and Funding Intermediaries
International Development Funds – Governmental (eg USAID) / Trans-Governmental (eg WorldBank)
Corporate Social Responsibility

The big challenge that non-profits, intermediaries and social entrepreneurs have been facing is that traditional funding has dried up with the recession, while at the same time the number of entities effectively vying for the same funds is increasing as the internet levels the global playing field. Couple this with the fact that most funders haven’t really got a clue what they’re doing and you’ve got a situation where organisations are forced into a pied piper situation. Follow the funder into whatever hole they dictate. This is both demoralising and unproductive en-route to any desired social impact.

In most countries around the world, there is also limited or no Government funding for social or non-profit enterprises, so organisations are having to consider other alternatives.

Alternative Financing Options

The following in no order of priority are rapidly growing in take-up all over the world

Revenue Streams
Sponsorship from large corporate or multinational entities
Crowd-funding
Social Loans
Social Investment
Hybrid Value Chains (Inclusive Business Models)
Self Financing Business Models (Social Enterprise)

1. Revenue Streams

Most people would have you believe that non-profit entities generally have no financial or business acumen. This is not true at all. Many mid-sized and large non-profits operate a range of activities that generate income. Social organisations can directly or indirectly monetise a range of things from Products to Services to Advice, Brand, Data and I.P. (knowledge, learning, methodology, tools). Thinking along business principles brings a range of operational benefits including agility and efficiencies. This is the option I usually recommend, but organisations have to be watchful to maintain priorities.

The simple reality is that transformative work can rarely be funded by revenue generating activities alone. It takes between 8 and 15 years to really transform the lives and environments of people and communities and that kind of intensive support and interaction can rarely be funded by peripheral revenue streams. If a social organisation in the transformation space is able to cover 15 or 20% of its operating cost through its own revenue streams, it’s usually doing pretty well.

The danger of revenue streams is that they often feel like high priority even though they are not the primary finance source. This means that they can often drain the time and energy of the leaders of the organisation away from the social mission, or worse still result in significant mission drift. The best way to take on revenue streams is to ensure that they have their own dedicated people and that they spin off from work that the organisation already does in delivering its social mission.

2. Sponsorship from large corporate or multinational entities

As social networks continue to humanise and change the face of brand perception, companies are ramping up their connections with social change. This presents an increasing opportunity to leverage sponsorship for social movements and campaigns. They can also provide a range of value from expertise to connections but often need exclusivity and/or adherence to their own set of conditions. The sponsor is usually looking for three things to make it worth their while: Reach, Scale and Impact. If your project can provide these, then this is an option worth considering. Here’s the basic proposal structure you will need.

Unfortunately, there's only a certain number of corporates large enough and interested enough to run social sponsorship programmes. In Mexico for example there were probably only about 20 obvious candidates... HSBC, AXA, Zurich Bank, Scotia Bank, Axtel, Kleenex, Kotex, Marti, Danone, Wal-Mart, Gamesa, Colgate, Novartis, Pfizer, Cemex, Bimbo, P&G, Cadbury, Kraft, Pepsi Co and Femsa - and only about 2 of these were actually local companies. What I found therefore was that social organisations, large and small, were all competing for funding from the same players. The small ones can't really compete with the bigger organisations, and the bigger organisations need more funding than is now available after the recession, so nobody wins except the funder, whose primary goal is brand kudos and audience recognition.

I'm not sure what the solution is, but I'd imagine that if all these companies and foundations co-operated to create a single fund, and then split this to cater for larger umbrella organisations and smaller grassroots organisations separately, there'd be a better distribution of funding. Specifying focus areas would still allow companies to be associated with the projects that fit the image they want to project, and they'd all benefit from the economies of scale and removal of duplication of administrative effort and cost.

3. Crowd-funding

Crowd-funding is simply a fancy word for getting lots of people to put in a small amount of money to your venture, typically online. In reality donation drives are an example of crowd-funding, but these typically only apply to projects and organisations formally registered as Charities. If you’re looking to set up revenue streams, finance local economic development or run a project without formal charitable status, your options used to be very limited. Today however there are a number of avenues to crowd-fund your projects. Some of them require a return on investment, while others don’t. Here’s some sites you can use

4. Social Loans

These may seem like an oxymoron, but they do exist, at least in the western space. Organisations like the Adventure Capital Fund provide development loans to non-profits and social enterprises which then have to be paid back the same as any other loan. These can be useful in moving organisations forward; come with a bit more flexibility than a standard bank loan; and usually involve useful coaching and business development support to help ensure ability to pay back. In principle this ought to work, but for all the talk of the triple bottom line, my experience has been that lending and investment entities do not weigh the social impact the same as financial return. Inability to pay back the loan will not be overlooked regardless of how much benefit is being provided to the community, and compromises to the social mission all the way down to liquidation will be enforced in order to ensure recovery of finance. In other words, be careful!

5. Social Investment

This is the big hype of the moment. The apparent answer to all our scaling prayers. Social Investment of course is really only an option for social businesses and not a viable funding strategy for general development work. Investors aren’t interested in non-profit or human transformation programmes. They’re looking to fund new technologies, utilities, energy, products, enterprise and saleable services. The typical IRR is still 30% and for many investors this is just another opportunity to make money, gain competitive advantage in an increasingly socially aware market, and look good at the same time. Aside from the few that are really trying to do something positive, I’ve already been pulled into extricating a series of social organisations from investors doing everything from under the radar land grabs, to fraud and brute exploitation in the sharing of profits. It’s all still too new and exciting for much of the negative aspects to surface, but be sure that it will in the next few years.

My usual advice is that if your organisation isn’t simply an alternative business, and doesn’t have legal, contractual and financial expertise equivalent to that of the investing entity, the power imbalance is too steep. However good it looks on the surface; best avoid.

6. Hybrid Value Chains (Inclusive Business Models)

The hybrid value chain model is relevant only to the limited spaces where social enterprises are working with local or indigenous producers or communities, and can connect these with commercial organisations looking to reduce production costs or to scale their markets; thus creating partnerships that should result in financial and social benefit for all parties. From my experience however, I find that the winner here is usually the corporation. They receive brand kudos and often a massively subsidised entry into new markets, while social and community players absorb the brunt of cost and complication. This is because they are usually entering new operational spaces without the expertise to cost, plan or deliver what they’re taking on. Not because they aren’t capable, but because their skills are differently focused. The result is usually a massive underestimation and under-costing of commercial deliverables by the social players, putting them at much higher risk than the commercial partner.

7. Social Enterprise and Self Financing Business Models

Self-financing business models are the obvious answer for complete independence, but it isn't really that simple for many social organisations. For starters, many of the founders don't have deep business skills or experience because their expertise is focused on human challenges. More importantly they don't have the spare time or resource available to identify and set these models up. The standard funder solutions all focus on up-skilling the people that run social organisations, but over the past few years I've begun to realise that while this is needed, it is not going to address the problem. The reason is that business model innovation in a social context is harder than simply starting with a business idea that sells. There are of course exceptions to every rule, but redesigning organisations to cope with these new practices is often more complicated than anything you could expect someone without significant experience to achieve.

Where organisations start out as social businesses or ‘social enterprises’ they may avoid the problem of managing business models in context, but immediately face the ongoing challenge of balancing out social impact and profit. This is simple enough with one-dimensional products or services like solar lamps or microfinance, but not so easy with long term transformative or development goals. The big myth being perpetuated by the sector is that impact and profit are not mutually exclusive, but in reality they often collide head-on. The ongoing exploitation and failures of Microfinance across the world are a good example of this. At some point the commercial entity’s priority typically shifts from social benefit to financial survival and/or growth. Without very clear ongoing definitions and regulation of priority, the grey area often blurs and we’ve ended up in a sector that is massively based on spin.

It is definitely possible and desirable to design transformative programmes so they can be self-financing, but the sector is neatly ignoring the fact that they take longer to break-even than equivalent businesses that don’t have to cost for ethical and development practices. These entities may be financially viable but are unlikely to ever make serious money for their owners, and the number of small and mid-sized social enterprises that operate at survival levels bears this out.

Out in the field and away from the ‘first world’, I found most social enterprises to maintain non-profit rather than commercial status. Their charity status usually goes a long way towards subsidising costs and provides them with alternate means of financing if their revenue streams fail to meet operating expenses in the pursuit of social impact.

Coping with Financing and Operating Challenges

One of the things I’ve been advocating for is for umbrella organisations to set-up Shared Service (Resource) Centres that add the skill and resource capacity that smaller organisations need in order to be able to innovate and grow. I've helped set these up for Local Government when I was working as a Consultant in the UK, and don't believe this would be difficult to set up for the social sector. I wrote a bit about them in my article on partnerships for the social sector (http://bit.ly/4BSu9y) and put up some scribbles from a workshop with UnLtd on designing Shared Resource Centres in a presentation here:

Designing Shared Service Centres For Social Enterprises V0.1

It’s specific to their context, but you’ll get the jist.

Some organisations like Sustentavia are also starting to provide this improved operating capacity as consultancies. They have clever business models which recognise that you can't really expect cash strapped social organisations to pay for services up front when they don't have the money, and hence aim for long term partnerships and investment in future financial success instead.

Overall, you could suggest that I paint a bleak picture, but this is the reality out there. We still have a way to go. Of course, as mentioned earlier, there are exceptions to every rule and laudable successes in every financing category, but exceptions aren’t going to solve problems on the scale we’re dealing with around the globe.

My usual suggestion is to understand the risks and challenges that the different options present. Then pick and choose the financing mechanism, or combination of, that your organisation is best able to manage and cope with. If you proceed sensibly then any of the above should work reasonably well for you.

The Definitive Guide To Scaling Social Enterprises

2010-03-02T09:02:00.002Z

I was recently asked to give a talk on scaling social enterprises to Oxford MBA students at the Saïd Business School via their partnership with the Skoll Centre for Social Enterprise, which prompted me to put together an outline of the different mechanisms of scaling that I've used or considered in the work I've been doing with social enterprises around the world.

The Definitive Guide to Scaling Social Enterprise

View more presentations from Rizwan Tayabali.

There is more detail and explanation in NOTES attached to many of the slides, but you will need to either download the presentation or view it on slideshare and click on the notes tab below the slides to read them.

The Case for Critical Thinking

2010-01-27T13:49:00.011Z

Somewhere along my recent Latin American journey I had a conversation with a friend who suggested that the big problem with people is that they use whatever hammer they possess to hit any nail they're presented with. In other words, management consultants will tell you the answer to your problem is strategy; marketing specialists will tell you it is presentation; IT consultants will chuck technology at it; sociologists will focus on impact; and business people will apply numbers.

This is a classic example of the lack of critical thinking seen in problem solving today. The trick is not to start solving the problem immediately, but to strip it down to it's root causes or underlying success factors and go from there, rather than defining the problem by it's surface presentation.

Marketing is the perfect case. Charities often tell me that they struggle to raise funds because their marketing is ineffective, or because they really can't afford any. When you strip it down however, you rapidly find that the problem is not marketing but what's attempting to be marketed. The vision is unclear, the services don't really fit together cohesively, outcomes are not compelling, and no one is really sure what this marketing is supposed to achieve. Your typical marketing person has no idea how to address any of these issues, and for the most part would never think to ask the questions - their skills are differently oriented. But the problem has been defined as marketing, so along comes the person with the marketing hammer and what you get is basically a paint job that doesn't stack up to closer look.

Here's a couple of real examples from the last three months. I have tons of these from the last few years of advisory work.

Simple Problem

Startup: We need to build a better looking website.
Obvious Solution = Web Designer + New Site
Real Solution = No you don't. Your organisation is too small to waste money and doesn't have the skills to manage a fancy website. Set your site up as a blog, using free platforms. What you really should do is to figure out how the web fits into your organisational strategy and then focus on creating more compelling content.

Complex Problem

Medium sized NGO: We need to scale into other countries.
Obvious Solution = Management Consultant + Business Plan
Real Solution = No you don't. Your organisation is not financially stable in its current location, doesn't yet have a neatly systematised model, lacks transferable skills/people and is still completely dependent on the CEO for direction. Scaling will spread limited resources even thinner, divert from delivering the core mission, and jeopardise both organisational survival and social outcomes. You should focus on developing a stable and replicable organisational model, both financially and systemically; and on developing human resource that can either run the organisation in the CEO's absence, or is at least capable of set up new entities without central direction.

But someone has already offered us the funding for it.
Turn it down politely and maintain the relationship until you're really ready to scale

So the million dollar question: If you are the CEO of a social enterprise, how do you approach these challenges?

The ability to look at root cause or key factors is a skill you must have in-house, or on your board. Only once you know what you're really dealing with, should you start looking for people to help you solve the problem.
Another other trick is to only contract help from people who question the validity of your problem definition.
Finally, if you can, try and find advisers that understand holistic/multiple aspects of organisational development (yes they do exist!).

Dummies Guide To Microfinance

2009-12-04T00:21:00.007Z

(From http://www.globosocial.org/: My global journey covering social enterprise)

While in Mexico I had the fantastic opportunity of spending time with Frida Ruiz Fernandez who worked in regulation for microfinance and banking for Peruvian Government for 4yrs, and Juan Ahedo who works with Fin Comun, a microfinance organisation based in Mexico. From Frida I learnt a bit more about Microfinance, much of which is summarised below, and through Juan I was able to accompany a couple of branch managers on their site visits around the city.

Fascinatingly for me, I learnt that microfinance is not just about lending to rural populations, but also a support system for tiny shops, restaurants and stalls all over low-income areas in cities too. The most fascinating thing was being transported back to a world of notebooks and hand-written accounts.

Microfinance in the City – Typical Clients

Introducing Microfinance

Traditional Banking

The mechanisms of traditional banking essentially function around monetising (investing/re-lending for financial return) deposits that people store with the bank; and on providing interest based credit that is offset either by collateral, or risk managed through the use of standardised credit rating systems for medium to high income populations.

Why Low Income Populations Can’t Use Traditional Banks

Low income populations typically have neither the collateral nor ratings needed to access credit, because their wealth base is too small for collateral and standardised credit rating systems are not designed to assess their circumstances. Traditional banks therefore have to invest in completely new mechanisms for managing these demographics, which isn’t worth their effort so they ignore the space altogether.

Finally, where low income populations do have savings, they generally don’t deposit their money in normal banks because

There is a lack of accessible infrastructure. i.e. no branches in their areas since it is not profitable for traditional banks to provide these.
Low income populations are not used to going into big banks. They feel out of place and intimidated by the experience.

The Critical Problem

Since low income populations often have greater immediate needs around borrowing money, the lending space has traditionally been covered by loan sharks, where exorbitant interest rates mean that people can end up paying many multiples of the money they borrowed, under threat of personal violence. This simply exacerbates their poverty.

The second problem is that without access to mechanisms of depositing, managing and growing money, these populations are typically excluded from opportunities to create the longer term wealth that can help them to escape the poverty cycle.

Microfinance

So microfinance is really just a fancy name for the mechanism of providing safe small (typically high interest) loans to people, groups or enterprises who’s incomes are too small to provide collateral or credit ratings, and are therefore risky and highly cost intensive to manage.

Microfinance organisations make it cheaper and profitable to provide these services by basing themselves and working in the same areas as these populations, and they have adapted their credit methodologies to lend to low income sectors in 3 ways

Their assessment model is very human intensive in terms of finding entrepreneurs, getting to know them personally, helping them with paperwork etc, typically by having branch managers which personally go out to meet clients rather than have them come into a branch, which means a much higher cost base than traditional banking.
They provide loans without collateral, and manage the risk by replacing collateral with information about the people they are lending to. Hence they are significantly more diligent than traditional banks about each individual being lent to. Branch managers establish close relationships with borrowers and work to understand their networks and personal circumstances.
They charge higher interest rates than traditional banks – anywhere between 25% and 40% for non-profits, which although high, is usually still less than loan sharks. Commercial microfinance entities, which are rapidly becoming the dominant form, lend at even higher rates of 40%-140% across fixed repayment terms.

The Goal

Enable people to exit poverty through profits from assets or activities enabled by small loans.

The Gap and Issues

Microfinance organisations however are typically not banks, which means that they still do not address the issue of saving and wealth accumulation. One reason for this is that lending entities (like store finance) operate without much scrutiny, but taking deposits makes you a bank, which requires compliance with a whole new range of costly financial regulations that can otherwise be avoided.

Since these organisations fall outside traditional banking mechanisms, in many countries they often exist without any regulation. This means they often grow too quickly and operate at very high risks of bankruptcy.

Another issue that is also now being recognised is that the mechanism of micro-finance still struggles to bring people out of poverty. The reason is to do with the focus on funding entrepreneurs rather than stable business models or even helping create enteprise for people who don't have any income streams, and because of the lack of education and understanding of money management in low income populations.

Finally, microfinance is a profit model, and many of the players are not in it for the social goal. They don’t always operate ethically, and are not necessarily interested in mobilising communities out of poverty. Education and health components added to the financing model, can cynically be seen as mechanisms to reduce the risk of default, but the really good ones invest significantly in the development and mobilisation of the communities they work with.

The exorbitant interest rates can often be equivalent to loan sharks, and more importantly, as the sector matures and costs of managing clients and risk reduces, these rates don't drop (see lack of regulation and monitoring). This means that after a while, commercial microfinance entities typically just mint money and will continue to do so. This is one of the reasons for the huge financing boom for these organisations and new startups, but goes entirely against the ethics that the public associates with social enterprise.

The real trouble in the end is that any development model whose sustainability/profitability is based on offering debt, and which has financers as the primary stakeholder, is likely to result in exploitation unless it is ethically run or strongly regulated. At some point any commercial lending entity will end up having to convince (manipulate) people to take loans regardless of whether they need it, just to keep its business model and profit margins going. As the market booms, more entrants seeing easy money are rushing in under the radar of public goodwill.

Solution 1: Regulation

Peru recently won an award for the creation of regulated environments for successful growth and scaling of microfinance. They minimise the risk of failure of microfinance orgs by enforcing a step by step system of growth by modules. Every step in scaling operations requires governmental approval, using a risk based approach covering 4 areas:

Credit
Market
Liquidity and Operations
Capital adequacy (i.e. having enough capital to support operations).

This approach prevents microfinance organisations from growing too fast or taking risky decisions, and unregulated Microfinance organisations are not allowed to take deposits.

Benefits of regulation

Access to ratings and ranking makes these organisations open to investment
They get feedback that helps them grow and get better
Regulation means they are better run, so they have access to better human resources
Access to guarantee funds up to a certain amount of deposit to help offset risk.
Protect against and reduce risk of exploitation of vulnerable low income populations.

Solution 2: Education & Community Investment

Microfinance organisations are now beginning to provide financial and health education, in order to offset risk (well educated and healthy populations are better placed to repay loans), but the really good ones also invest in education and community programs to transform civil society in low-income areas. Education must focus on savings and wealth management and not be used to encourage take up of more debt.

Solution 3: Microfranchising

Entrepreneurs are great at finding opportunities to set up ventures, but not necessarily so good at scaling or creating stable and repeatable business models. Since microfinance typically lends to small entrepreneurs in low income populations, the quality of enterprise is typically not suited to scale or growth. Your average tiny corner shop isn’t very likely to become 10 large corner shops. Results are starting to show that while microfinance has benefits, it isn’t necessarily mobilising communities out of poverty in the long term.

The solution may involve offering finance for proven micro-scale business models that can be scaled by franchising. Local product reseller models for example. The value here lies in the creation of new jobs as it does not involve funding existing enterprises. It would also open up economic possibilities for people who don't already have stable incomes.

Solution 4: Debt and Wealth Management

For any microfinance entity seriously interested in driving economic development for low income populations, there absolutely must be a focus on debt management and reduction, followed by support for creating and growing wealth. Cash in hand is not wealth. Assets are. A savings account with interest for example. It not only grows money, but also safeguards it. Another example is ownership of housing. A lot of poor people have historical debt that keeps them locked in poverty. Debt reduction systems are not necessarily profitable, but could be justified in the longer term of creating a base of clients whose wealth can be monetised without fear of exploitation. The key here is replacing short-term profit maximisation with long term profitability and social impact.

How To Write Successful Funding Proposals

2009-11-23T14:00:00.011Z

At it’s core, the goal of any corporate funding is Return on Investment i.e. what your project is going to do for them or their brand. Large corporations want mass recognition and kudos through their association with social projects, and clear indicators of social impact that can go into their stakeholder reporting.
So the first thing you need to remember is that corporate funders really only care about 3 things that underpin this

Scale (how big in terms of geography and replicability)
Reach (who are the audiences that will know about or benefit from the project)
Impact (what will it achieve for all the different stakeholders)

FOCUS!! on these 3 things in your proposal, rather than infinite details about the content, structure and cost of the project and it’s planning/delivery mechanisms. Corporates need enough detail to assess your approach and likelihood of success, but this does not cover their goals.
Finally if it is possible to demonstrate that you can use their money to create sustainable revenue streams that mean you won’t need to go back again year after year, you’re probably onto a winner!

Suggested Proposal Structure

Executive Summary

Introduce the structure of the document
Outline the project that needs funding
Summarise what you’re looking for

Context
(This is critical for sharing the big picture)

Introduce your organisation
Outline the problem
Outline your vision and what you believe can be done

Project
(Here’s where you cover details)

Repeat overview of the project / solution (more info than in the Exec Summary)
Describe the mission and goals
Discuss the mechanisms (strategies/tactics) it will use to achieve those goals

If there is a creative aspect cover it here.
If the funding will enable future self-financing, describe how

Describe the reach

Target audiences: groups you will impact; groups you will mobilise; and groups you will engage. Outline what this means in numbers
Geographies – Local, National and Global Networks you will mobilise; Locations of online audiences you will target e.g. US, UK; and the Offline locations for mobilising action and support.

Describe the mechanisms of engaging audiences across different channels

Offline
Online

Delivery Planning

Timelines and Milestones
Resources and Materials
Costs

Impact (This is IMPORTANT!)

Specify and reiterate what your project will aim to achieve for all it’s different audiences
Outline the metrics you will to use to monitor and report on the change you are creating

Funding/Sponsorship Proposal
(Here’s where you sell)

Outline the type/nature of Funding/Sponsorship e.g.

Number of funders
Focus area
Timeframe of association

Describe opportunities for Funder/Sponsor involvement e.g.

Signage (name/logo) on project material
Personal appearances for key staff
Events, Speeches, Talks
Opportunities to showcase product and brand
Engagement with project audiences
Engagement with web traffic
Potential opportunities to influence positioning and geographical location of advertising

Value of association with your organisation/project e.g.

Reiterate scale and nature of exposure
Exclusive/Non-exclusive rights to use project branding (subject to appropriateness with project mission)
Networking and recognition opportunities with key partners including Local or National Government, and/or other Corporates.
Other services you can offer them
Long-term value

Reason why you want this particular Funder/Sponsor
(Do your research and show you understand their needs and why you believe they fit)
Financials

Total you need to raise or want from them
High level reiteration of what the money will be used for and the impact it will have
Financial ROI for the Sponsor (try and guesstimate if possible, but don’t worry if too complicated) e.g. reduced costs of engaging audiences, brand value, new markets, product sale
Decision deadline if you need the money by a specific date, plus the reason why

Download Funding Proposal Template

For reference, here’s a real world brainstorm of a sponsorship pitch for a large corporation that should give you a quick overview of what you need.

Fundraising - Recruitment Strategies for Corporations & HNWIs

2009-11-18T18:27:00.002Z

One of the biggest fundraising mistakes that social organisations make is chasing anyone who might potentially have some money, without really assessing whether or not their goals or interests fit the project. This is why generic applications get nowhere, and why creating specific proposals often fails too. You absolutely must have some kind of selection criteria to filter the right organisations to approach, before you spend time on funding proposals.

The next mistake involves assuming that presenting the social need and tugging on heart strings is enough to get people (HNWI = High Net Worth Individuals) or organisations to part with their money. This is a hit and hope affair – you might get lucky, or you might not. The real trick is to understand what your target audiences needs are, then make sure you are actually able to deliver the benefits they might want from their association with your project, and finally, stay true to your promises.

Above is a real life example of how to select your fundraising targets and then work out the benefits that might attract them. Once you understand these you can then create the messaging and marketing needed to attract them, and the engagement plans to manage the relationships over time.

Fundraising In A Nutshell

2009-09-29T09:41:00.002+01:00

This is more for social enterprises and charities that are raising funds in order to continue to operate and/or grow rather than for startups.

The trick is to do these in parallel. Start your research and network to build relationships with potential funders, while simultaneously putting the platforms in place. This means that by the time you've built your relationships with the people interested in your work, you've also got all your messaging sorted out and ready to go.

Additional notes:

Networking = emails and conversations (phone and face-to-face meetings)
Recognition = not just for brand but also methodology in terms of getting accepted as experts in the type of work being done
Shareability = having the technical ability to share your content in social media, as well as creating and chunking it so that it is valuable and motivates people to pass it on.

Managing Projects: An Overview for Social Entrepreneurs

2009-09-22T15:56:00.003+01:00

I put together the following presentation for the UnLtd Network Plus training and networking day for the social entrepreneurs they fund. It provides an overview of all the different elements of managing projects. I've kept it a very high level with just one or two key points to remember for each area. If you want the notes for each slide, either view it on the slideshare.net website or download it and view it on your computer.

I hope you find it useful. Feel free to comment with feedback or questions below.

Managing Projects - An Overview

View more presentations from Rizwan Tayabali.

Why Brand Recognition Matters for Social Enterprise

2009-09-12T14:30:00.009+01:00

Here's a quick snapshot of how brand awareness impacts the different audiences for Social Enterprises, NGOs and Non-Profits.

If you ever wondered why your organisation should be devoting time to building mass recognition, this should clue you in.

* HNWI = High Net-Worth Individuals (Philanthropists, Investors)

Why Social Enterprises Need Strong Brands

2009-09-07T15:08:00.007+01:00

Having problems loading? View this presentation on Slideshare

Here's the jist of it...

A brand is what your audience feels , thinks , and remembers about your enterprise.

Brand used to be ‘ offline ’ and ‘ online ’ Now it is seamless , and primarily driven by how you are perceived via the web.

And now that organisations can create their own profiles , brands can effectively function as ‘ people ’ i.e. In the interactive web 2.0 world, your brand has a personality.

So… Brand used to just be about image, but now its about image AND personality!

Before the web, niche brands could only engage niche audiences. They relied on costly traditional PR and push marketing, which meant that their audiences were tiny and their budgets high. Now niche brands can engage mass audiences at low cost.

Social organisations sit in a niche that typically does not sell product. They are competing for attention. And when you're competing for attention, your competition is everything. You have to stand out to be noticed.

A strong brand is a core factor in being noticed, and therefore heard, which is why it critical for social organisations to get their branding right.

Guest Post: Success Criteria For Social Enterprises

2009-09-03T12:19:00.005+01:00

(This post was written by Imtiaz Kaderbhoy - a friend and ex-colleague of mine, who does a lot of pro-bono work with social enterprises and charities in an advisory capacity.)

I recently had the pleasure of meeting Tim Cornah last week, whose latest social project, a community interest company called “Third Way” generates funds and provides accommodation for a rural youth project called PYC youth services and is based in Parbold, Wigan. PYC youth services is aimed at empowering young people to improve their communities through entrepreneurship and partnerships. Whilst speaking with Tim at length about PYC youth services, Tim explained his key criteria to ensure success with social enterprises.

Success Criteria

Discover the Need

There are groups of people in need everywhere
Identify who they are and what they need
Tim discovered a masked social need in what initially looked like a wealthy rural village called Parbold, and through identifying the opportunity, is developing a compelling social proposition that can be packaged and replicated.
Rural communities generally hide their social needs quite well as many are “dormitory villages” with the highest earners merely using them as “lodgings” at the expense of the locals.

Simplicity

Don’t overcomplicate the idea
Deliver what is required
The benefits will flow
Then expand and grow if required
Lead project is the development of a community centre to address a specific community need

Financial Sustainability

It is very important to establish an independent revenue stream as early as possible Sponsors, partners, and fundraising activities will be more successful as a result
Third Way are building a fair trade coffee shop to support PYC. The idea is simple, and will provide a constant revenue stream.
They want to branch into training as soon as possible and link into real employment or create businesses for their trainees.

Ownership

Your target audience should own the project, not the founder, the board or the consultants
They should be involved from day 1
And given real responsibilities in all areas including budgets, strategy, decision making, and management.
Coach and mentor individuals to enable them to achieve their passions
PYC has given young adults real responsibilities of a facility that provides employment, training and generates finance to help others

Opportunity

Provide lifetime support value
Offer real opportunity once the individual has benefited and maximised their opportunity from the project
This level of engagement will prove to become a key component for long term survival and success
PYC will be providing real hope and opportunity for young adults in the public and private sector

Repeatability/Scalability

Ensure the project can be scaled, adding products and services will aid success
Ensure the project can be repeated, this will enable more groups/people to benefit.
Once Third Way and PYC have successfully launched and run this project, the concept should be scalable to include new opportunities and repeatable to launch similar projects across the UK.

Project A - Journeys into the Social Unknown

2009-08-27T09:02:00.015+01:00

Over the past few years I've slowly been moving more and more towards a focus on social enterprise. Along the way I've worked on grassroots projects, run initiatives, joined and chaired charity boards and provided advisory help and input to social enterprises; all with the end goal of covering enough ground to be compelling as a consultant in the social space.

However, as I began to understand the UK social sector, I began to develop a curiosity about how things work in other parts of the world. How relevant is UK best practice to other regions? What impacts do different cultures and economies have on social and charitable enterprise? What new and exciting social innovations and approaches are budding in countries outside the western sphere?

Since there's only so much you can grasp from books and blogs, I figured the fastest and most effective way to build a global picture of social endeavour would be to travel through different countries working with social or charitable enterprises, helping address the challenges these organisations face.

So here I am. A few years and much saving later, ready to make it happen.

The plan so far is as follows:

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Project Bio/Summary

I am planning a year's self funded journey to travel to different countries, working with and understanding social enterprise and social innovation in different cultures and economies. I'm interested in understanding the relevance of UK best practice in other contexts and also the cultural and economic impact on scope and success of social enterprises.

My broad areas of focus will be as follows:

Local (Best) Practices
Developing Global "Health-Check" Toolkits for Social Enterprises (based on http://tinyurl.com/l63og5)
Governmental Policy and Support
Funding mechanisms
Business innovations
Social innovations
Challenges
Working partnerships
Similarities and differences with the UK model
Key social entrepreneurial hubs and networks

The basic methodology is simple and for every country visited will involve

Spending a few weeks with 2 or more social enterprises, providing pro-bono generic consulting skills to help them address any organisational or developmental challenge they are facing (see skills profile below)
Connecting with local arms of global SE umbrella organisations (eg. Ashoka) and local Social Enterprise or Third Sector support organisations
Connecting with local Social Entrepreneurs

I am currently looking for

Organisations that might be interested in commissioning comparative outputs
Suggestions for local organisations that might need help in terms of advisory / guidance etc. in the following regions

East and South Africa
India
South East Asia
China
South America

Potential funding avenues / support with travel and accommodation costs

I will be blogging about my journey at http:www.globosocial.org

My Skills Profile i.e. where I could help you or organisation:

Management and Social Enterprise consultant specialising in Financial Sustainability, Start-Up, Scaling and Business Models for Charities and Social Enterprises. Areas of focus include Strategic Development, Social Design, Business Model Innovation, Organisational Scaling & Transformation, Project Management, Raising Investment, Branding, Marketing & PR, Web 2.0 and Social Media.

Social experience and achievement includes direct involvement with grass roots projects covering issues ranging from youth exclusion to literacy, discrimination, conflict, civil rights and disabilities; advisory input to a wide range of charities and social enterprises; board membership as Chairman of the London charity BANG Edutainment and Director of the communications charity Imediate; and Fellowship of the Royal Society of Arts.

Commerical experience includes large scale management, technology and digital consulting; at Charteris and Conchango to the UK's top 100 Retail and Financial Services organisations; and strategic transformation and change at Logica to Government and the Public Sector.

More information @ http://www.rizwantayabali.info/

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If you know any organisations that could use strategic help, or you want to be part of the journey, follow what I'm doing, help fund me or simply provide connections, drop me an email at rizwan.tayabali@gmail.com

Social Entrepreneurs, Build Your Website For Free!

2009-07-29T11:53:00.027+01:00

A year of working with different social startups and growing enterprises has highlighted one very unfortunate trend. Too many social entrepreneurs are wasting precious resource on building websites for their startups. If you're about to hand over a few thousand pounds to a designer somewhere to create you a logo or build you a few pages, STOP!! Read this first...

Here's a few key fundamentals you should grasp before we get started.

A Logo is NOT the same as a Brand.
A brand is what your audience feels, thinks, and remembers about your enterprise. The logo is simply an iconic representation that should be able to adapt and change without affecting your brand. Define your brand first, then design the logo.

A Website is NOT just a set of Pages.
It can be any web-space you control, which allows you to showcase what you stand for and what you do. In today's inter-connected Web 2.0 world, you must think of websites as broad linkages of organisational content on multiple platforms, in multiple conversations and in multiple contexts. Whatever 'website' you have must therefore function as a content sharer/aggregator allowing subscription (RSS) and interaction (commenting), and NOT just as pages or brochureware (HTML).

A Blog is NOT different from a Website.
It is simply a type of website with rich content management features and the ability for readers to automatically subscribe to content and updates. You can easily use a blog as your organisational website with the various pages as linked articles.

That cleared up, here's the 5 STEPS you need to follow

Make sure your mission is simple (memorable), clear (followable) and focused (accurate). If it's open, vague, wordy, or all-encompassing, then rewrite it.

Develop your brand in a way that makes it a key strategy for achieving your mission, and NOT just as a marketing tool.

Focus on creation of content worth sharing, and on categories that support your mission.

Use your branding to define how you present this content in terms of tone, style and use of visuals.

Use FREE blogging platforms on which to build your new 'website'. Don't spend a penny on building it. You may have to compromise a little on layout, but you gain so much in richness and flexibility for zero cost that the trade-off is a no-brainer. I recommend Blogger for your website and Ning for your community.

If this makes sense but you're still a little unclear about how to put it into practice, feel free to contact me for a chat. Drop me a line at rizwan.tayabali@gmail.com

Best Twitter Apps for Novices

2009-07-29T11:26:00.000+01:00

I've just been doing some research into how best to manage tweets while traveling, partly for making and managing connections and partly because I probably won't have regular access to the net so I may need to start scheduling tweets. There's a massive number of Twitter applications available so I thought I'd share my recommendations.

Here's the full list of Twitter Apps available
http://twitter.pbwiki.com/Apps

I went through quite a few, but they either had too many limitations (like Twuffer) or were too much hassle to operate (like SocialOomph). Anyway here's my choices:

For accessing Twitter
Tweetdeck - http://tweetdeck.com/

For scheduled tweeting
Future Tweets - http://futuretweets.com/

For managing followers
Tweepular - http://www.tweepular.com/

For finding people to follow
Tweepz - http://www.tweepz.com/

For automatically tweeting your blog posts
TwitterFeed - http://twitterfeed.com/

For great profile backgrounds
Pattern8 - http://pattern8.com/

For reducing link lengths
Ow.ly - http://ow.ly/v

3 Reasons Why Your Great Idea Doesn't Yet Exist

2009-07-03T11:11:00.009+01:00

I've recently had a number of people with ideas for startups come to me for advice on how to get these ideas going. In each case the idea has appeared to plug a perceived need in the market, suggesting a no-brainer that the 'inventor' is therefore about to take risks to pursue.

After a little investigation however, I'm usually able to find equivalents that already exist, or good reasons for why it's not already being done. So I always urge caution, as there are some obvious reasons why an idea you've had does not already appear to exist

You haven't done your research properly.
This is by far and away the primary reason people think their idea is unique. Don't just search for the most obvious term that reflects your idea. Look for words and phrases that mean something similar. Also look for news or releases that suggest that something similar is already under development.
Someone has thought of it, looked at all the angles and decided the ROI isn't worth it.
This is also very likely. Stay wary of your idea until you've covered these bases yourself. If the idea requires set up and development well outside your personal areas of expertise, you should know that many ideas that seem entirely obvious to the naive, often involve prohibitive execution, set up and development, or simply don't have the scale of market first imagined.
Someone thought of it, built it, and it failed.
Lots of companies, services and products come and go. Don't just focus on things that are out there. Make sure you've checked if anyone has tried it before and failed. Investigate why they weren't successful and be honest about whether or not you are really likely to do better.

Finally, if you get past all of the above you are in the fantastic position of being confident that no one has thought of it. Yes it's rare, but it happens. Protect your IP and get busy!

3 Reasons Why Finding Equivalents Shouldn't Stop You

On the other hand, just because products or services exist, doesn't mean that you should drop your idea right away for the following reasons

The market has already been primed and created (just make sure it isn't saturated).
You can easily evaluate what does and doesn't work, and you might thus be able to improve on existing products and services.
You could go niche in terms of design or target market, and focus on developing a specific variant of the idea instead.

Community Communications 101

2009-05-06T18:42:00.021+01:00

I recently had a very illuminating chat with Caroline Jaine, the Director of imediate, around community communications, so I thought I'd share some of what I learnt.

Always start with a clear strategy,
Followed by an implementation plan, and
Finally outcome monitoring.

Key point: Do NOT just rush into comms activity. There are lots of risks and sensitivities, and consequently these programmes often fail. Plan first!

The following are the key steps in developing communications for social change.

Comms Strategy

Gain clarity of purpose first, by validating the overall mission that the comms fits into.
- Research community and environmental factors for insights into what the real problem is and what is realistically achievable.
- Identify and understand risks, and develop clear mitigation strategies.
Comms strategies are about behaviour change, so
- Identify the specific behaviours that need to change.
- Use it to define and focus on the correct target audience.
Identify approaches and ways you might change these behaviours.
- Identify key points of influence.
- Identify the key channels of influence and communication.
- Define key themes and messages.
Evaluate how the audiences perceive the communications provider.
Use these insights to identify the most credible person/organisation/partners/network to provide the message. This is the basis of psychological operations, which are as follows
- White - Communicator takes direct ownership of and association with comms.
- Grey - Comms are provided with no direct ownership.
- Black - Comms are attributed to a third party without their knowledge. Unethical and not recommended.

Comms programme creation and delivery

Know what you have to work with.
- Assess budget.
- Assess resource.
- Assess potential partners for delivery.
Define timelines.
Define success criteria.
Create implementation plan.

Post Implementation

Monitor success.
Maintain relationships.

(For more on community communications keep up with Caroline's thoughts on the imediate blog.)

20 Keys to Building a Successful Social Organisation

2009-04-17T10:44:00.024+01:00

Over the past few years I've looked at problems faced by a number of different social organisations, including new startups, developing organisations, and fully established ones. I typically see one common underlying factor; many of the issues stem from a failure to define some key points with the clarity and simplicity needed to make those definitions useful.

Before we continue, let me just say that this is not going to be one of those articles with 20 tenets or pieces of pithy advice. It is about 20 key things that you can and should work out for your social organisation.

At its core, everything I outline below can all be summarised into one overall key to success...

...FOCUS!!

Until you define your key points of focus, your limited funds and resources are continually wasted on attempts to cover all bases and do too many things. You end up with a Brownian motion of people’s activities; lots of ad-hoc decisions made around on a host of assumptions. It all heads in one general social direction, but with a lot of wastage and pain along the way. Prioritising becomes impossible and core platforms of long term development get missed. Over time, this leads to many of the problems and fire-fighting that social organisations face.

Here’s my list of 20 key things all social organisations should have written down.

Mission
The real reason you set up.

Goals
What you want to achieve & How.

Potential Revenue Streams
Split into core, supplemental and potential revenue. Think business model innovation.
- Strategy for long term Financial Sustainability.
- Core revenue – Grants, donations, and products or services you charge for.
- Supplemental revenue (opportunities for monetising your organisational brand, IP, audience and assets).

Target Audience
- Groups that you’re trying to impact.
   Primary, secondary and tertiary.
   Outline needs of each group.
- Recruitment strategies.
- Long term value for beneficiaries.

Services & Offerings
Make sure they are what your audience really needs, and not simply what you can or want to offer.
- Core.
- Peripheral.

SWOT Outline
i.e. A quadrant grid showing Strengths, weakness, opportunities and threats.

Vision
Where you plan to be in the Short, Medium and Long Term.
- Realistic short-term (1yr).
- Challenging medium-term (3yr).
- Inspirational long-term (5-10yr).
All your strategies must work towards this long-term vision. You must know how your org can best act as a springboard for long term value to the individual or community.

Development Strategy /Roadmap Plans
These need to be created specifically to achieve the vision – ideally for a 3yr timeframe. Include yearly changes for organisation size and structure, development focus, and revenue needed.

Cost/Revenue models
These must directly fit your roadmaps.
- Detailed costs of services inclusive of all overheads.
- Profit margins over and above cost. It is surprising how often organisations get profit assumptions completely wrong.
- Cost / Revenue grouping for ongoing comparison.
- Realistic funding needed and how it will be distributed.

Risks and Mitigations
Growth and Development challenges & how you’re going to address them.

Plans for ensuring long term value to your end audience
For example, alumni community platforms to enable interaction and ongoing engagement between beneficiaries.

Competitors and Similar Organisations
Regionally and globally (now that we’re all connected by the web, you are competing for recognition, funding and audience with organisations from all over the world). Knowing these can also help you build great collaborations and make a bigger difference (see 16).

Unique Selling Points & Differentiators
If you don’t have any, make sure you create them. Without these there is no good reason for funders to pick you over the myriad organisations out there.

Potential Funders
- Identify sectors and prioritise – typically
   Corporate CSR,
   Commercial Brands that want the association,
   Trusts,
   Government,
   Individuals,
   Community.
- Identify specific targets.
- Identify what value they would gain from being associated with your org (conversely rethink what you do to ensure that funders get clear value from their engagement with you).

Framework for displaying Social Return on Investment (SROI)

Support Networks
Organisations that you could partner / affiliate with:
- Social sector funders and developmental organisations
- Charities and NGOs
- Other organisations doing similar things – collaborating is a very fast way of scaling your outcomes and your reach.

Targets & Performance Management
Anything you’re trying to develop must involve something to aim for. Your vision roadmap should essentially define your targets for you.
- Short term activity targets that roll up into long-term impacts.
- Strategies or mechanisms for monitoring long-term impacts. In the long run this is going to be your best selling point for raising investment and support.

Brand Strategy
Brand associations drive both individual and corporate engagement.
- What image and personality you want to project
- Core themes and messaging

Marketing & PR Strategy
- Channels you’re going to focus on
- Messaging
- How you plan to involve/engage press media (online and offline)

Community & Social Media Strategies
The web is now ubiquitous and a global connector for communities. It can also drive funding and support from sources you never dreamed you could access. Social media refers to the free and open platforms that already have huge connected audiences, like Facebook, Twitter, Ning and Youtube. All you have to do is surf the wave.
- Plans for building global and regional support communities using the web
- Social media strategy
   Social media platforms and goals for each
   Codes of engagement and responsible resource

Once understood and defined, many of these points of focus roll into one another and can be prioritised, developed and managed with very little effort. You don’t have to be gung-ho and try and get everything achieved in one massive effort. Social issues are typically long term and have few quick fixes. As a social organisation you should be planning to be around for a long time so continual small steps in a clear direction are often all you need to be successful in the long run.

For each key driver, the trick is to avoid lots of words or huge business plan style documents that cannot be easily read or updated. Instead aim to have single PowerPoint slides or 1 pagers with short descriptions or a list of bullets that clarifies the essence of what you’re trying to achieve. Do NOT waste time debating semantics or making it perfect. Just brainstorm what you know, identify the gaps and dedicate some time to defining the answers. All you need is enough to provide clear direction and some decent guidelines for ongoing decision making.

Always think practical and focus on communicating simply and effectively. Check the following:

Can the definitions be used by people within your organisation?
Can they be reviewed and updated easily?

If the answer is no, make them simpler. Here are some 1 page outputs that you can easily pass around, stick up on walls, and review on a running basis...

Mission, Strategy, Tactics Pyramid.
3 year Vision and Strategy Roadmap.
SWOT grid
High Level Stakeholder Analysis (covers audience, funders, support networks).
Summarised Cost vs Revenue Charts.
USPs.

Create a review point every 6 months, plan in the resource and effort to make sure it happens, and away you go!

If you want help with any of this drop me a line and I’ll talk you through it.

3 Types of Partnership For the Social Sector

2009-04-11T16:10:00.005+01:00

In my previous post on whether Partnerships and Collaboration might save the third sector, I suggested that one reason why small charities are failing is the nucleation of the sector caused by self interest in raising funding. However, beyond a point they all have the same collective goal, which is to effect positive social change. Unlike businesses which are just out for themselves, this commonality of higher purpose means that charities and social enterprises are perfectly placed to cooperate and collaborate to survive.

I see 3 forms of partnership that are immediately viable for most small social organisations, none of which are being fully explored

Sharing operational costs and services
Collaborating with competitors to develop better and larger scale joint-propositions
Developing complementary partnerships with non-competitors to reach new audiences

Type 1: Shared Services

One of the biggest problems that small organisations have, especially when transitioning into the mid-sized space, is covering the cost of operational overheads

Physical space
Human Resources and Payroll
Finance and Accounting
Marketing & PR

You've got 3 options here.

Outsource all these activities, but not to multiple consultancies or commercial companies like some charities do, but to some kind of Shared-Service Centre dedicated to centralising and performing activities that don't really need much flexibility in decision making - like for example Payroll, Production of marketing materials, Execution of marketing campaigns, Street Fundraising, and Raising awareness through Social Media.

A few years ago when I was consulting to Public Sector, there was a huge drive to get local governments to band together and exploit shared service centres for exactly these reasons. Improved efficiency and effectiveness.

However, unless I'm missing something, I don't think anything like this exists for the social sector, which means that right now there's a gap in the market. I suspect that the reason for this is not that there isn't a viable business model here, but that no-one's really invested time in taking the idea to execution. I'm sure this service could be set up as a Charity so that fees do not become prohibitive, and I don't imagine it would be too hard to raise government funding to set it up either.

A point to note here is that one of the issues with outsourcing or sharing back office functions in the UK lies in tax (thanks Cliff for pointing this out). The Government actively encourages charities to collaborate to reduce cost, but the VAT system penalises those that do. If one charity supplies services to another it has to charge VAT on the supply, and the charity paying for the services cannot recover this. Apparently there is a lobby to get the Government to address this disincentive to efficiency but extending the Charity VAT exemption appears to be a no go zone for Treasury. All things considered however, I'd still suggest that even with the 15% VAT, charities could see benefits from sharing/outsourcing their operational costs.

The other option is to set up a collective of local charities and social enterprises, and for the collective to either share resource, or co-fund and set up an equivalent shared service centre with dedicated teams that perform these functions. These organisations will gain from efficiencies in use of space, resource, and shared best practice and if they take a risk and trust each other the way they should, it will simultaneously create a space for cross-fertilisation of ideas.

If you're starting up a social organisation, or are about to grow/scale yours, plan your restructure to split out your operational functions. Create a new revenue stream by using your team to offer these services to other smaller charitable and social organisations. It requires some strategic thinking and sensible management, but is neither as difficult or as complicated as it sounds. You may even be able to raise funding to offer this service.

Type 2: Joint Offerings with Competitors

Any social issue you're trying to address will have other organisations that do similar things to you. Typically you're going to compete with them for the pots of funding out there. However there really is little or no reason for this. If you're all working together to effect the same greater good, you've immediately got a clear commonality of purpose. If you collaborated and pooled your skills and resources you might be able to achieve much bigger things.

A collaborative network of organisations driving towards the same goal is significantly more powerful than a disparate group of small entities all pulling in different directions. Imagine how much more funding you would attract as an industry, rather than as single companies.

So instead of pumping money into Marketing and PR and networking to make your profile stand out from the competition, you should be putting your energies into building relationships and working protocols with other organisations like yourselves so you can set up joint propositions and pitch for bigger funding.

This is not a short-termist approach. It takes time and needs learning. Start by building relationships and connections with your 'competitors', and create forums or events where you talk and find out about each other. Focus on building trust. Find one other organisation that does what you do, and then pitch for larger projects and funding together. Evaluate and learn from your experiences, and then grow your network. At some point you will have created the basic framework that allows you to rapidly add new connections, and to help them slot in easily.

Be aware that there will be challenges you should expect to face, including

Trust
Personal and organisational egos
Contractual and legal definitions around distribution of finance and delivery of outputs
Programme management challenges across organisational boundaries
Quality control

Type 3: Complementary Partnerships

There are two sub-types here. One is complementary partnerships in a causal chain and the other involves partnerships to improve the impact and quality of services offered.

Full Chain (End-to-End) Partnerships are particularly useful for organisations that offer niche services, or focus on a particular aspect of a bigger social problem. What typically happens, is that as niche organisations grow, they keep trying to add the offerings that are needed to create the broad impact they really want, instead of looking for ways to plug the gaps more efficiently.

Taking the issue of youth social exclusion for example, the journey from exclusion to successful reintegration within the system involves transition through and from social care, into learning, and finally successful employment and stability. The learning bit alone involves literacy, numeracy, life skills, specialist skills, and entrepreneurial skills and ranges from drop-ins to accreditation. A plethora of organisations exist that support different bits of the chain, and yet they often work in isolation from each other, or try and grow to cover the entire spectrum.

A better approach is to identify and build relationships with organisations that aren't your direct competitors. Similar logics and challenges apply as in the previous point, but this is easier because you don't have a history of direct competition. Plugging each other's gaps will help you create broader, more compelling services and pooling together will make you significantly more effective across the board.

Gap Partnerships are ones where you look for ways to improve the quality and effectiveness of what you do by teaming up with organisations that have a complementary focus, products, services or skills that save you from having to employ or develop them yourselves. You can offer each other all sorts of value, from access to different audiences to new skills and capabilities and most crucially, credibility through association.

This form of partnership is particularly applicable to connecting and working with commercial organisations that are interested in your target audience, or could gain brand kudos through their association with your social cause. Their involvement may include financial support, access to commercial networks and platforms, specialist skills, operational services or progression pathways.

The trick for social organisations is to identify and develop their audiences, services and brand image in a way that makes them attractive to other organisations. Note that contrary to assumption, this has no correlation with compromising core purpose, and typically is only achievable by staying focused to the social cause and social outcomes.

Could Partnerships And Collaboration Save The Third Sector?

2009-02-26T13:00:00.005Z

In a recent post on whether the Retail Industry Could Save Itself Using Game Theory I discussed how retailers have exhibited classic non-cooperative behaviour, which has significantly damaged their abilities to survive the credit crunch. By focusing only on individual interest and survival, their collective hyper-competitive actions have likely damaged their entire industry's market size.

The charity sector is becoming similarly nucleated by self interest in raising funding. In my previous post on Small Charities Struggling To Survive The Crunch I discussed reasons why small charities are struggling to adapt in the current climate. What I didn't go into is the fact that there is a plethora of small and mid-sized organisations out there, all competing against each other for diminishing funding, and this is only accelerating their slide towards closure.

The trouble is that the funding they are competing for tends to be governmental or Trust based, or small scale social funding for Social Enterprises. This is because their small sizes mean that they struggle to tap into large scale CSR philanthropy or investment, because their brand recognition and localised outcomes are too negligible to return any associative value back to big corporations. The top 400 UK organisations handed out nearly half a billion pounds in 2008, and small charities and social enterprises probably saw very little of it.

However there is no need for things to be this way. More than commercial industries, the social sector is perfectly placed to cooperate and collaborate to survive. Partnerships can help reduce costs and increase the scale of funding that can be accessed. More importantly however, they can create connected support networks and buffers to keep each other going through difficult periods.

As the Chair of a medium sized youth charity, I can see potential in 3 forms of Partnership that could save many small charities and social enterprises from going under over the next few years.

Sharing operational costs and services
Collaborating with competitors to develop better and larger scale joint-propositions
Developing complementary partnerships with non-competitors to reach new audiences

More on these in my next post discussing the 3 Types of Partnership

Small Charities are Struggling to Survive The Crunch

2009-02-19T09:00:00.007Z

Children England, the umbrella group for children's charities just published results of a survey of small charities (under £250,000). Turns out 4 out of 10 are now in a vulnerable state and could be facing closure if their fundings don't come through. This is up from 1 in 10 in 2007, which is a clearly indictment of the current situation.

Unfortunately this is something I'd predicted a little while ago in my post "Will Charities Survive The Credit Crunch?"

The charities closer to this size are feeling it worst. It's a problem I'm seeing with BANG Edutainment too. The underlying issue that the funding needed directly reflects operating costs, which are based on contracted outputs or services. Raising funding in the quarter to half million bracket is very hard right now, because typically it relies on lots of small sources rather than one massive one. If even a small number of the sources of funding are impacted by the credit crunch it means that operating costs cannot be met and without the reserves of profit making organisations, debts pile up very fast.

Scaling down unfortunately is not as easy as you might imagine either. To do this in advance of a financial crisis requires significant strategic pessimism; which commercial organisations typically dont have, let alone charitable ones. If you haven't already anticipated problems, the tightly stretched capacity of charities means that there is little or no room to adapt, and their close knit nature means that letting staff go is an absolutely last ditch choice; one that is usually held off in the hope of new funding coming through and rarely made until its too late. The result is a pile up of salary, overheads and tax debts by this point, leaving the organisation little option but to close.

A survival strategy that is not being considered carefully enough by many small charities is partnerships. I'll discuss these in more detail in my next post.

Future Trends in Social Enterprise

2009-02-03T09:00:00.002Z

In my previous post I talked about Social Enterprise Trends to expect in 2009. I outlined 5 key ones:

Rise in social startups and skills available to the sector
Higher expectations from funders
More support for big ideas
More partnerships and collectives
Blurring of lines between Charities and Social Enterprises

The trends outlined below however, are not time-boxed to just 2009. These are shifts I believe will happen at some point between now and the next few years, and are therefore worth considering in your future planning.

Future Trends in Social Enterprise - 2009 onwards

Disruptive innovations will continue to flourish as commercial sector skills are turned towards solving social problems.
Social innovation from the developing world will begin to drive developed world commercial innovation. We are already seeing this in the way western banks are looking at micro-loans and telecoms firms are looking at mobile payment systems.
Corporate Social Responsibility departments will have to adapt and revise their policies, because social enterprises are redefining the parameters of giving and support as they continue to effect major social change.
Increasing pressure on social sector to become business viable will result in more social startups emerging as social enterprises rather than charities.
Charities on the other hand will get smarter in their trading setups, further confusing the definition of Social Enterprise.
As the Green movement embeds further into the global cultural psyche, both social enterprises and charities will face increasing expectation to be green just to be credible.
Social Enterprise will mobilise more people to enter the social sector by making it more competitive, responsive and modernised.
The CIC will start to come into its own, and will evolve into a more viable organisational definition.
As more organisations begin to deliver both financial return and social change, a more practical measurements of Social Return On Investment will arise. Over time we should expect to see clear standardisations of SROI for comparative purposes.
As SROI measurement standardises we should see increasing numbers of Social VC's, philanthropists or Trusts whose funding has social conditions. Some of these currently exist, but regardless of their mission statements, returns are still predominantly measured on financial profits or ability to repay these social loans and investments.
New business models monetising social need will continue to arise, as social entrepreneurs look to innovate under pressure of financial difficulty and social demand.
If social collaboration really does take off, we should also see an increase in collaborative shared services that let small social enterprises and charities focus on their core goals without worrying about peripheral activities like HR, accounting and fundraising.
As the social sector evolves down the commercial route, and as more commercial sector staff enter the social space, the general quality of skills expected from CEO's and managers is going to increase.
Consequently I'd expect a trend towards higher wages for nonprofit workers as demands cause skills profiles to increase.
Finally we should also expect to see more courses and better training for social entrepreneurs, with something like the IOMBA specifically for social entrepreneurs.

Social Enterprise Trends 2009

2009-02-02T17:42:00.011Z

Every January people typically start to wonder what's coming up in the year ahead for their industries. The social enterprise and the non-profit sectors are no different. It's just that fewer people publish anything of value, mostly because these sectors are not awash with analysts in the way the private sector is. Anyway in case you're curious, here's my thoughts on where things might be headed for social enterprise.

Let's start with immediate trends to expect in 2009. Most of these are inevitably going to be defined by the impact of the credit crunch and the increasing ubiquity and impact of the social web.

5 Trends in Social Enterprise for 2009

Rise in social startups and skills available to the sector.

Increasing numbers of highly skilled private sector employees are being made redundant, and many of these are looking for ways to keep their skills sharp and occupy themselves positively and productively. Some will join the existing wave of social and third sector enterprises, and others will take the entrepreneurial route. I'm seeing this trend already with one of the charities I'm involved with.
Higher expectations from funders

As the markets suffer and investments fail or continue to provide lower returns, many of the large trusts and social funders will rapidly find their liquid funds diminishing. While I doubt this will stop them continuing their missions, I would in turn expect them to become significantly more focused on quality and viability of financial and social return.
More support for big ideas

As social enterprises continue to leverage the web and mobile to effect social change, social funders like UnLtd will have to start catering for big ideas rather than simply grass roots start ups. Google has already upped the ante with its Project 10^100.
More partnerships and collectives

These should emerge as more forward thinking Social Entrepreneurs look for ways to partner together to stay afloat in the face of financial pressures. I'd expect to start seeing more collectives like the Hub bringing small startups together, and more web services dedicated to letting groups collaborate.
Blurring of lines between Charities and Social Enterprises

We already know social enterprise is blurring lines between the profit and not-for-profit sectors, but the rise in success of social enterprise in both social and financial terms is also increasing the pressure on more and more charities to become financially sustainable through commercial revenue streams. Conversely I'd expect to see a number of social enterprises abandon their financial goals under pressure of the credit crunch, and look to use their social impact to gain charitable status in order to survive.

(Note: I've explored some more trends in Social Enterprise in my post Future Trends in Social Enterprise, which covers developments to expect beyond 2009.)

What's in Store For Social Enterprise in 2009?

2009-01-29T13:31:00.000Z

As far as I can see, in the UK at least we're entering year two in the growth of social enterprise. Before 2008 I'm sure there were plenty of organisations doing good things sustainably, but the concept of social enterprise really seems to have become mainstream in 2008.

CICs are becoming more common, the concept of Social Return on Investment started to take hold, different models of Social Enterprise were identified, and we even saw the release of a new Self Assessment Framework for Social Enterprise. I no longer see discussions in the blogosphere around what Social Enterprise is and whether it is doing social things sustainably or making money with social or community benefits. I think that's been cleared up as closer to the former... "Enterprises effecting positive social change, independently and sustainably".

I reckon Social Enterprise will continue to embed as a way of life in 2009, and both new social startups and existing charities will feel increasing pressure to set up financially sustainable operations. I also reckon we're going to see more organisations leveraging the web to effect social change. In combination it feels like we're heading towards an exciting and dynamic future in the social space, where we're able to innovate without being dependent on hand-outs.

For me too, 2009 feels like it might be an interesting one. I got involved with a lot of different things in 2008, all of which have possibilities ahead. First and most importantly the Urban Survival Project, which evolved into iVolntr.org for which I'm still hoping to hear back from Google around the results of their 10^100 funding project. We hear back at the end of Jan, and even if iVolntr doesn't make the shortlist I will start a more dedicated effort to get the Google Foundation behind it, or maybe see if I can exploit the new networks available to me through the Fellowship to the RSA I was offered a couple of months ago.

Having managed to raise the funding needed to stave off insolvency, I'm also expecting to be heavily involved with the development of BANG Edutainment and BANG Radio for the next couple of months. Finally if things get worse with the credit crunch and I get signed off, there's always the possibility of getting involved with the development of social enterprise in Thailand or maybe even India with Trn Labs or UnLtd India.

So all in all, the future's looking bright, and here's to a top year ahead. Hope you're having a good start to 2009 wherever you are!!

Will Charities Survive The Credit Crunch?

2009-01-28T09:23:00.001Z

I recently wrote a post on whether or not social enterprises would survive the credit crunch, where I suggested that many would pull through as I believe the crunch will only help drive social innovation faster. It will embed the recognition that we have to be able to help each other, and create not just environmentally sustainable businesses, but also financially sustainable ones.

Unfortunately I'm not sure this ability to survive will extend to charities that are entirely dependent on individual, organisational or governmental funding.

Charities often start small and very community focused. Their goal is clear and staff voluntarily make it happen. They have a small number of funders, if any. At this stage they are agile and able to cope with change easily.

But as they get recognised, other people and bodies become interested and the charity starts raising more funds to increase the scale and quality of their impact. The organisation thus solidifies and formalises, and their ability to adapt and control their own destiny decreases – in a large part due to the way they have to be set up.

In the UK, Charities differ from commercial organisations in that they are exempt from all taxes except VAT. However, the tax structures for charities means that they cannot engage in any overtly commercial activity as profits made will become taxable and, at worst, the organisation may lose its charitable status altogether.

Members also cannot take any benefits and no dividends can be paid to them. Any funds must be applied for charitable purposes only, and if it is wound up, the funds must be transferred to another charity.

In small charities, this classically drives organisational and human structures that do not look to create or exploit commercial revenue streams even though they often have a range of intellectual and physical assets that can be monetised. At some point in the growth cycle, incoming funds stop adequately covering operational cost, and from then on it becomes an ongoing battle to raise money to survive. The social imperative of the organisation starts becoming secondary to the need to raise money.

What the organisation achieves starts becoming driven by what likely funders are looking for, rather than the core social impact it was set up to make. Over a period of time this often results in a dispersion of activity and diminished quality of outcomes - lots of small impacts rather than any major core difference. The diminished quality of outcomes then adversely affects the ability to raise funding, and alongside growing operational costs, forces the charity further into the spiral of doing whatever it can to raise money to survive.

Now that we're faced with environmental recession, the negative impact on grants and funds available might just mean that a lot of medium sized charities will simply go under as their funding dries up and they run out of revenue streams.

The sad part is that this does not have to happen. There are ways that charities can commercially generate their own revenue through the use of trading subsidiaries. I’ll explore this further in my next post, along with some thoughts on the need for new charitable structures that automatically work this way, rather than being designed to exploit structural loopholes.