Rolfe Larson – Page 11 – Management Library

January 3, 2011March 22, 2023

Seed Money From Crowdsourcing?

In the old days, people raised money for their start up ventures in traditional ways. They put in their own money and sweat equity. They borrowed against home equity, insurance policies, and credit cards. If they were lucky, they also got money from friends, family, even “angel” investors. They collected gifts, loans, forgivable loans (“pay me back if you can”), or even equity in an informal sense. Sometimes banks helped out, but usually only with personal property or personal assets as collateral. A very few received support from venture capitalists.

Flash forward to today, and while all of those sources are still commonly used, new possibilities have opened up. New funding strategies have emerged via the Internet such as crowdsourcing or crowd funding.

The basic idea is that instead of just asking your friends and family to seed your business, you ask The World. No longer are you limited to whom you know, or defined by the whims of conventional financing sources. Moreover, by getting the word out online, you can start that all-important word-of-mouth marketing campaign before you open your doors.

While hardly widespread, this approach is emerging as an option for some entrepreneurs.

Two noteworthy examples are Kiva, which allows people to make loans to small businesses in the US and abroad, and Indiegogo, which has raised millions of dollars in 150 countries for worthy causes. Awaken Café is a start up business launched with this kind of help.

But do your research before going too far with this. While asking for donations is generally fine, soliciting investments from the general public without proper registration with the appropriate regulatory authorities can get you into deep, deep legal trouble. I’m not a lawyer, but I’ve been told that virtually any solicitation that includes offering a share of the profits is considered a regulated security. Beware!

Here are some places to get more information about crowd sourcing and crowd funding: SocialEdge, Wikipedia, YouTube, or Indiegogo. Good luck!

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For more resources, see our Library topic Business Planning.

December 30, 2010March 27, 2023

Social Enterprise Goes to Graduate School

A man presenting at a social enterprise summit

In case you haven’t noticed, there’s been an explosion of colleges and universities offering social enterprise or variations of that theme at the graduate level.

Many of these programs are tied to a business school, which can really help when you bring your great social change idea to the marketplace. And if you’re already mid-career seeking an advanced degree in social enterprise, there are many opportunities to do that as well.

Here’s a sampling of some well-regarded programs:

Stanford University’s Graduate School of Business has an Executive Program in Social Entrepreneurship. Details at http://www.gsb.stanford.edu/exed/epse/index.html

Harvard University’s MBA program has a social enterprise component and several CEU programs that specialize in social enterprise. Details http://www.hbs.edu/socialenterprise/

Duke University’s Center for the Advancement of Social Entrepreneurship (CASE) at the Fuqua School of Business has what I consider to be the best professor in the field, Greg Dees. Details at: http://www.caseatduke.org/

Pepperdine University’s Graduate School of Education and Psychology (GSEP) has a Master of Arts in Social Entrepreneurship, with a mixture of classroom and online education. Details at: http://gsep.pepperdine.edu/masters-social-entrepreneurship-and-change/

Bainbridge Graduate School specializes in online programs with short stints, with an MBA program emphasizing social justice and environmental sustainability. Details at: http://www.bgi.edu/

Indiana University’s School of Public and Environmental Affairs and the Kelley School of Business offer a Social Entrepreneurship certificate program. http://kelley.iu.edu/mba/academics/socialEntrepreneurship.cfm

Washington University’s Brown School of Social Work offers an SE specialization track as part of its MSW program that includes courses co-listed with the Olin Business School. For details http://brownschool.wustl.edu/Pages/Home.aspx

New York University’s Stern School of Business and Wagner School of Public Service has a well-regarded and well-funded social entrepreneurship track. Details at http://www.nyu.edu/reynolds/index.flash.html

Finally, some general resources to help you evaluate programs:

Aspen Institute does a periodic study of MBA programs that address social and environmental stewardship. Details at http://www.beyondgreypinstripes.org

ASHOKA lists a group of American universities offering courses social enterprise that are “committed to setting the global standard for excellence in social entrepreneurship education.” Details at http://ashokau.org/changemaker-campuses/

Good luck!

Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010
Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own
Read my weekly blogs on Social Enterprise and Business Planning

December 27, 2010March 28, 2023

Business Plan Competitions

One way to develop and test your plan is to submit it to a business plan competition. These competitions are mostly associated with business schools. Most offer winners consulting assistance and in many cases seed money. But here’s the catch: in most cases, only students can apply and competition can be stiff. But check out the fine print; for the Skandalaris Center at Washington University ($150,000 cash pool) or Rice University ($225,000 to the winner), nonstudents can apply as well.

So, for students and nonstudents alike, this can be a great way to move from idea to solid plan. Here are more examples: MIT’s Clean Energy Prize ($200,000), Wharton ($30,000), and Columbia University ($7000). And while the goal is to win first prize, the motivation and discipline that comes from competing will lead you to a stronger plan, even if you don’t win. In a sense, everyone wins.

Speaking of winning, here are some quick tips to increase your odds of success:

1. Get started early.

Winning plans take months to research, adjust, strategize, and hone. Not to mention prepare the “pitch,” possibly the most important component of most business plan competitions.

2. Build a strong team.

One of the first things judges look at is whether the right team is in place. Make sure you have all the important skills lined up to succeed with the business. If there’s a gap, be explicit about it; indicate that person will be hired once funding is secured.

3. Understand your customers inside and out.

Just as important to judges is how well you understand your target customers. Thorough research is essential, of course, but just as important is clarity on what your customers’ needs, alternatives, and preferences are. Become experts in your niche. Oh, and never say your business has no competition; it’s not true and the judges won’t believe you. Also avoid staking your claim on being the low cost provider. That kind of differentiator will not last. Instead, offer a sustainable advantage that others will have difficulty replicating.

4. Get feedback, revise, get more feedback.

Study the judges, then get people “just like them” to evaluate your plan and your pitch. Revise as many times as it takes to get it right. You won’t get a second chance, so make the most of the few minutes you’ll have to present your plan.

Good luck!

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For more resources, see our Library topic Business Planning.

December 16, 2010March 27, 2023

Last minute social enterprise gifts

There’s still time to pick up some holiday gifts that also help social enterprises. If there’s a restaurant or coffee shop in your town that’s a social enterprise (and the odds are there’s more than one), give them a call to see if you can purchase a gift certificate. Many of them will let you do that over the phone, saving you an extra trip during this busy time of the year. Or stop by your nearby nonprofit thrift store and pick up something for yourself or someone else. It’s not regifting if it’s for a good cause!

Or you can go online to find some great social enterprises to support during this holiday season, not by a donation but by a purchase. Here are a few that I can think of at the moment, but the possibilities are endless, even if the timeline is not. Well, and of course, you can always give gifts after the holidays — your friends/family will still appreciate them, as of course the social enterprise will as well.

First, check out the Social Edge Gift Guide for Social Entrepreneurs, which offers several suitable items from around the world. Another great example is Relief International, where you can make a gift of $35 to help a women start her own business to grow her own food (in Darfur, for example), AND as a holiday gift, they will send you or your loved one a unique “Relief Beads” bracelet, hand-crafted by women in Africa. But the deadline is today if you want to receive that bracelet by December 24!

And then, finally, there’s my own favorite, here in Denver, the Women’s Bean Project, which sells both food and jewelry to help women break the cycle of poverty and unemployment. They are offering free shipment for any orders tomorrow, December 17, so that would be good deal not to miss.

Happy Holidays!

October 29, 2010January 26, 2022

Halloween Special: Five Business Plan Tricks

Here are five tricks from business planning expert Tim Berry. Excellent advice to follow to avoid getting spooked by your business:

1. Keep the planning simple and practical.

Your plan should be measurable, and include strategy, dates, deadlines, metrics, and basic projections, plus a review schedule. This is critical: when will we review and revise? The goal is to keep the plan alive.

2. Grow it organically.

The worst thing you could do is avoid taking any action until you’ve developed a complete plan. Don’t put anything off for planning; plan as you develop your business.

3. Think it, plan it, test it.

Stay on top of your quickly-changing plan and manage your assumptions as the reality emerges. You’ll continually be going back to the plan, looking at how everything is related, and making adjustments as needed.

4. Use agile planning.

Real-world business planning, particularly in periods of rapid change, should be pretty darn agile. And rapid. Plan it, build it, revise it, plan it again. That’s the planning process, and without it you don’t control your destiny.

5. Lather, rinse, repeat.

Planning has to be like steering – a matter of constant small corrections within a broad navigational plan. The details change, but all within the context of the long-term direction. You’re always reviewing and revising.

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For more resources, see our Library topic Business Planning.

[Note: Tim Berry is the president and founder of Palo Alto Software, which produces Business Plan Pro software, and is the author of The Plan-as-You-Go Business Plan. You can also read his blogs.]

October 12, 2010March 28, 2023

Ten Common Startup Mistakes

To err is human. To do the same thing repeatedly and expect different results is insanity. And to learn from the mistakes of others is a good way to improve your odds.

Here are ten major mistakes, inspired by a recent Wall Street Journal article (link below):

1. Going it Alone. Forget the solo entrepreneur fantasy. Successful businesses are built on partnerships. No one person is smart enough, or self-aware enough, to know it all. Leave room in your business plan for other people.

2. Asking too Many People for Advice. Seek out advice, but don’t go overboard asking everyone. Create a small advisory group. Then keep them in the loop, so they’ll be there when you really need them.

3. Spending Too Much Time on Product Development, Not Enough on Sales. While every business needs a good product, eventually you have to sell what you’ve got, and make improvements later. Don’t let the “perfect become the enemy of the good.”

4. Targeting Too Small a Market. A clear focus with a well-defined market niche is a hallmark of many solid business plans. That said, keep your options (and your eyes) open to a larger market to expand into as circumstances allow.

5. Entering a Market With No Distribution Partner. Finding customers is not easy for a startup, so do your homework to identify and test your ability to tap into existing networks and referral markets.

6. Overpaying for Customers. Don’t spend more money acquiring customers than you will profit from your relationship with them. How do you know? Do market research, then do your own testing.

7. Raising Too Little Capital. Undercapitalization is a big problem. Sometimes it comes from believing that starving your business early will lead to greater future success. Frugality is one thing; not being able to meet payroll is another.

8. Raising Too Much Capital. Can be just as destructive as not enough money. Remember the dot com boom-bust era?

9. Not Having A Business Plan. Can’t say that enough times.

10. Over-thinking Your Business Plan. No business plan can eliminate risk. Starting a business requires a leap of faith.

Mistakes happen. Success comes to those who learn quickly from their mistakes, and from the mistakes of others.

Here’s the WSJ article: http://online.wsj.com/article/SB10001424052748703467004575463460389523660.html

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For more resources, see our Library topic Business Planning.

Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010. Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own. Read our weekly blogs on Social Enterprise and Business Planning. Subscribe to our free social enterprise listserv.

October 2, 2010March 27, 2023

Social Capital Markets

Different dollar bills on marble surface

If there’s one challenge many social enterprises have in common, it’s finding capital. Insufficient capitalization is a primary reason that small businesses fail or fail to grow, and that’s also the case for social enterprises.

The good news: that seems to be changing. A new field is emerging, so young that it still goes by many names (social capital markets, social stock market, impact investing), but the overall goal is the same: create structures to connect socially focused investors with socially focused ventures.

We’re not talking small potatoes here. According to some sources, there is a $120 billion untapped market of individual investors who are willing to invest resources into social enterprises that produce positive social and environmental impacts. But as yet we do not have the structures (such as social stock markets) to attract those investments.

So the race is on. Next week, the third annual Social Capital Markets Conference (SOCAP10) will convene in San Francisco on just this topic. The conference web site notes “a proliferation of (social) investment funds of $100 million each, and a new index to help investors better target their financing.” Social capital is already flowing.

Since capital flows with little regard to national boundaries, so does the work in this field. The notion of a social stock market seems to have sparked (or had its latest spark) abroad, in the United Kingdom. A recent article about that effort (and connections with the US as well) can be found in a recent article published by Foundation Center, Bring on the Social Stock Exchange.

You can keep in touch with this emerging field by keeping your browser pointed at Social Edge, where this has been a lively discussion topic lately.

Finally, a major challenge for the emergence of this field is figuring out how to measure social performance in a manner that will be meaningful and transparent to social investors. This is often called social return on investment (SROI). Check out the Performance Review discussion on Social Edge about this topic.

We’ll come back to SROI in a future blog. In the meantime, do some thinking about what it would take to make your social enterprise venture (or idea) attractive to that $120 billion opportunity.

Will your venture be ready?

September 28, 2010March 28, 2023

Incentive-based Compensation

Many startup businesses set up incentive or commission-based compensation systems for their initial employees. This is often done because they can’t afford to pay staff what they’re worth. As an enticement they offer the opportunity to earn much more than a smallish base salary if these early staff achieve great success. This is common in the for-profit world, for business managers and sales staff; and today many nonprofits or hybrid organizations are exploring this kind of compensation also, mostly for the same reasons.

We tend to get two questions about incentives: Do they work? What percentage?

First, yes, financial incentives work. Offer to pay someone extra if certain results are achieved, and they will go the extra mile to accomplish those results. But only if those results are achievable and clearly, verifiably and consistently measured, if the people offered the incentives have the right skills, and if the rewards are commensurate with the level of effort required. Otherwise – and this happens many times — people get motivated to do the wrong things (sales staff argue about accounting issues and who gets credit for the sale), or they get set up for failure (it’s too difficult to hit targets so they become resentful). So if you use incentives, define your targets carefully and use them with people and situations where there is a reasonable opportunity to succeed. Otherwise you’ll waste money and poison the well, both problems startup business cannot afford.

Secondly, it can be equally challenging to figure out what percentage to pay. Many questions need to be addressed first. What’s your profit margin? How hard is to get a sale? Does the product mostly sell itself or is the sales person the key to success? What do other companies selling similar products pay their sales staff? In most cases, sales commissions are based on sales rather than profits, in part because sales are easier to measure and verify than profits. You don’t want your sales person fighting with your numbers person on how net profit was calculated.

Finally, to throw out some numbers, we’ve seen sales commissions ranging from 5% to 20% of sales. And for venture or business managers, where the commission is typically based on profit rather than sales (and base salaries are larger), we’ve seen figures in the 5-10% range. But mileage may vary, so do your homework before committing to one figure or another.

What do you think?

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For more resources, see our Library topic Business Planning.

September 20, 2010March 28, 2023

7 Sins of Social Enterprise

As the term social enterprise gains traction in the marketplace, more and more organizations are using that term. There is a real risk that this expansion will dilute the meaning of social enterprise to the point that it means any organization that can claim social as well as financial goals, no matter how vague or meaningless. This has already happened in the environmental realm, where trash haulers call themselves recyclers and oil companies outdo each other claiming to be “greener” than the next.

On that point is a recent blog written by Dionne Chingkoe, where she lists the following “Six Sins of Social Enterprise.”

The Sin of the Hidden Tradeoff – Much like a glittering generality, this sin involves presenting a person, product, firm, or service as social by highlighting a single social attribute. For example, an investment that touts a single social factor such as job creation cannot be classified in the same range as a deal with a wholly integrated social mission.
The Sin of No Proof – As the name suggests, this sin refers to making claims that have no evidence to back them up. Over time, standardized metrics and a common language will be created, making it more evident when social enterprises are not making a measurable impact.
The Sin of Vagueness – This sin involves feel-good language that’s so vague as to be meaningless. For instance, there is a growing trend in the private sector to publish CSR reports that do not contain specified goals or practices.
The Sin of Irrelevance – Making a claim that’s truthful but unimportant or unhelpful.
The Sin of Lesser of Two Evils – In the social enterprise context, this relates to a greater yet relevant debate on who can list on a social investment exchange. Can tobacco companies that train and employ marginalized people be considered social enterprises?
The Sin of Fibbing – This really doesn’t require much of an explanation.

A comment from Jed Emerson mentions a 7th sin, hubris, which involves not only the hype sometimes heard around social enterprise — that it will solve the world’s problems and enable nonprofits/NGOs to stop chasing grant dollars — but also believing that hype. A certain amount of humility is a good thing, that we can actually create all the change we want to see in the world.

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September 1, 2010March 28, 2023

5 Page Business Plan: Wave of the Future?

Three businesspeople standing in front of a building

Lately I’ve been rethinking business plans. On the one hand, in the consulting and academic world, what is meant by a business plan is a fairly comprehensive research project with thorough analysis of issues including customers, markets, competitors, pricing, marketing strategies, risks – always followed with detailed multi-paged financial projections looking three to five years into the future. To create this kind of a plan, management works on it for months, or hires a consultant to do it for them. Either way, it’s not unusual to invest a hundred hours or more into creating it.

On the other hand, in most of the business world, what is generally meant by a business plan is a brief written statement indicating goals and overall steps for achieving those goals. The goals might relate to customers, sales, units sold, profits, facilities. It looks out a year, maybe two. This is something the owner or management puts together in a few meetings, when then gets updated every year or two.

These are two very different meanings of the term business plan, and I’m beginning to wonder if both are missing the mark. The comprehensive plan isn’t all that practical for small businesses or nonprofits that lack the time or dollars to do all that work, however valuable it might be to do so. And the brief plan can be very superficial to the point that it does little more than set ambitious goals with minimal guidance on what to do when the business encounters those pesky potholes in the road.

So here’s my idea for a third kind of plan, taking the best of both worlds. For now I’m calling it the Five Page Business Plan. Keep it short and simple, but still useful. It involves doing “just enough” research and analysis into “just the right areas” that will matter for achieving success with this business. Summarize all that in three pages of text, then a page of financial projections and a page about the expertise of the management team and the facilities and key equipment that will be utilized.

Can this offer the best of both worlds? It just might. Will it attract investors? I don’t know, but I do know they’re more likely to read it than the 38 page variety. When I get the chance, I’m going to convert some of the comprehensive plans I’ve written over the years into that format. The idea is to see if it’s possible to get into five pages all that is really important in a business plan. I think it can be done.

What do you think?

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For more resources, see our Library topic Business Planning.