Earned Income as Means of Resource Mobilisation
Ideation
Business Model Development
Business Plan Development

Earned Income as Means of Resource Mobilisation

Sales of goods and services are increasingly popular among organisations as a means of creating income. There are two ways to mobilise resources through sales of goods and services – by commercializing existing programmes or activities or by creating new income generating activities. The process of developing a strategy for selling goods and services includes the following: Ideation, business model development, and business plan development.

Ideation

The first phase of a social enterprise development is called ‘ideation’, the development of broad business ideas. To identify which business idea ‘fits’ the organisation, the organisational strengths, core competencies and assets can be summarized and discussed in a joint workshop with all team members (ideation workshop).

Starting a business based on the organisation’s core competencies and assets reduces costs of establishing and running a business where critical knowledge and skills need to be acquired. Growing from existing strongholds drastically increases your rate of success.

Consider the following key questions:

• What is your organisation’s core area of expertise?
• Which skills and expertise are available in these core areas?
• What is really going well, what makes your organisation stand out?
• What assets does your organisation have (including network, human resources, physical assets) to build on?

Alternatively, ideation can also start the other way around from analysis of beneficiaries and partners, looking at what they value in your organisation and which additional needs they have.

See Tool 7: Partners and Beneficiaries Analysis for Social Business

Having collected the organisational strengths, the next part of the ideation workshop is a brainstorming session. The brainstorming can be structured with the help of ‘What If’-questions applied to either transforming existing activities into revenue-generating activities or to develop new, interesting revenue-generating activities.

’What-If’ questions help us think outside the box and challenge existing, old patterns and models (Osterwalder, Alexander, Yves Pigneur, Tim Clark, and Alan Smith. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. 2010, MLA (7th ed., p.140).

Examples are: “What if we start charging our beneficiaries for our services”, “what if we start offering our services to third parties”, to more detail: “What if we start renting out our equipment”. Ideas are individually written on post-its and discussed in the plenum. Discussion continues until 3 to 5 exciting business ideas have been found.

 

Business Model Development

Once the business ideas, which the team is passionate to go for, have been established, your team can proceed with a workshop for business model development.

Tool 1: Business Model Canvas (BMC) is a tool where the business model is divided into nine building blocks that are filled jointly in an interactive process. The ideal business model is flexible and can be modified and adapted as you progress in your planning. It is best to keep it visible on a flipchart.

At the heart of the Business Model Canvas are customer segments. For a business venture to be profitable, it is indispensable to satisfy customer needs and hence the first guiding question is: Who are your customers and what are their needs?

You can use Tool 5: Creating Donor Personas to design model customers who would be interested in your product or service with as much detail as possible.

The next step is to define your business’ value proposition describing the specific aspects of the proposition and to explain how they add value for the customer: “Why would the customer buy from you and not someone else?”.

The third step is to identify channels to communicate the identified value proposition to the potential customers. Ideally, the direct and indirect channels that your business uses will be applied.

The fourth step is to identify the desired relationship which your business wants to establish with each customer segment. In the fifth step, revenue streams are identified representing the earnings yielded from every customer. This includes one-time transactions through sales as well as recurrent transactions in the form of lending, subscription, usage fee or licensing.

The sixth step describes key physical, intellectual, financial, or human resources needed to make the business model work. Then, the key business activities and most important actions needed to make the business succeed, are recorded before we describe the key partnerships and networks your business must have in order to make the business model work. They range from suppliers to competitors to the government.

Last but not least, the ninth building block and last step is your business’ cost structure where the most important operational costs are described.

More information on the BMC can be found in Osterwalder et. al. (2010). Developing a business model will give you more indication whether your business might be feasible or not. It is the first step before venturing into developing a business plan.

During business development, it is important to get as many different views and advice as possible. However, it needs to be considered how to get input from experts without giving away the essence of your business idea so that it is not taken off your hands. Only discussing elements of the business model with selected experts to get a better idea if your assumptions are correct (e.g., on customer needs, operational costs, partnerships) is a way to do the consultations. The expert contacts will also help you when it comes to business plan development.

 

Business Plan Development

A business plan is a step-by-step guide to establishing your business and it is important to remain as practical as possible. A good starting point is to use the BMC and work into more depth in each of the building blocks. Same as the BMC, a business plan should be a living document that needs to be adapted again and again as your planning and implementation progresses. The process of developing a business plan can be structured by assembling a core team and developing a roadmap to business plan development in a kick-off workshop.

In order to do this, each building block is examined and evaluated for uncertainties. All open questions are written down and researched by members of the team within an agreed time frame. This will result in comprehensive customer and market as well as environmental analysis. All information gathered will inform product development, a detailed operational analysis (“how to make it work”), and informed financial modeling. Once more, it is important to get expert opinions throughout the process.