Social Entrepreneurs Need Good Business Plans

Written by Luis Fernando Sanabria, COO of Fundación Paraguaya.

Over the last 30 years, we have seen many bright and promising ideas. There have been all kinds of initiatives aimed at improving the quality of life for people. Some ideas have managed to develop, grow, replicate and reach their goals. Many others have not succeeded. This begs the question, what causes some ideas to thrive and others to wither?

There is no direct relationship between the brilliance of an innovation and whether it will succeed or not. One thing has nothing to do with the other. What makes the difference is the way in which social entrepreneurs and organizations think about implementation and how they execute their ideas.

Having a good business plan has always been crucial for Fundación Paraguaya’s programs. From our first program, when we brought the concept of “Support to Microenterprises” to Paraguay, to our latest effort, when we finished scaling up the Poverty Stoplight worldwide, we have aimed to accelerate our programs with the sound organizational principles of the Global Social Benefit Incubator at the Miller Center of the University of Santa Clara, California.

A business plan might sound like a commercial concept reserved solely for revenue-seeking companies; however, it is perfectly applicable to social enterprises where establishing a “business” is the achievement of the mission.

A business plan starts with the Impact Model, or how the social objective of the organization is going to be achieved. This establishes the mission of the organization, the problem to be solved and the solution, as well as the Theory of Change. In addition, the plan must contain a clear and concise description of the impact mechanisms and the metrics that will be used to measure results.

In order to move forward with a social venture, a business model must be defined. This model needs to describe the product or service being provided, the market it intends to serve, and provide an analysis of the competition. This part of the process also outlines the mechanics of implementation: how beneficiaries / clients will be acquired, how the goods or services will be distributed, the minimum viable product, the value chain, the price, the equilibrium point, who will pay and an outline of the marketing and promotional strategies.

It is essential to establish the value proposal very clearly. It serves to identify the target audience of the product, what people want from it, what is being offered, and an analysis of what competitors offer and how the product is different. In the case of the Poverty Stoplight program, the value proposition is: “For organizations that want to improve the quality of life of the populations they work with, the Poverty Stoplight is a program that provides an innovative way to work with their beneficiaries. Unlike traditional poverty programs that only measure poverty and do not consider poor families as part of the solution, our tool helps organizations to clearly identify and eliminate multidimensional poverty, achieving better and more sustainable outcomes with less resources by activating the potential of the families with whom they work.”

The next step is to work on financial projections. An achieved and future results table must be included, as well as a balance and cash flow. These will show how much money is needed and how it is possible to secure funds to do so. Then, a growth plan must be developed, which should detail the strategic initiatives that will be essential to carry out the selection of KPIs (key performance indicators). This part of the plan also contains the operations strategy for expansion and the different channels or modalities that will be considered for this purpose.

The entire process might sound difficult for social entrepreneurs and those who work in the field of development. It will be important at times to seek assistance, but even though it is necessary to get support from experienced business plan developers, the experts at the heart of the issue are social entrepreneurs and members of partner organizations. They are the ones who should lead the development of the business plan.

Complicated? Maybe.

Long? For sure.

Essential? Without a single doubt.

Remember: if we do not decide on the destination, all roads will take us nowhere.