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Getting Your Social Venture Started

Launching your own social venture can be one of the most exciting and meaningful endeavors you can pursue in your life. The following guide is meant to give you an overview of how to start this process, as well as the stages you will need to go through to get from an idea to a sustainable enterprise. Your journey will be full of high points and low points, missteps and seized opportunities. Most importantly, you will always be refining your original vision.

First, we need to take a moment to define what we mean by a “social venture” or a “social enterprise.” This is a young field and there will be competing definitions. For the sake of this guide series, we will define social ventures as for-profit and nonprofit ventures that aim to sustain themselves financially without relying on donations while still making the world a better place. While traditional nonprofits achieve their missions by relying on grants from foundations, contributions from donors, or money raised from fundraisers like bake sales or galas, for-profit and nonprofit ventures bring in enough revenue every month from their products and services to pay their bills – and maybe even grow. The toolkit you need to successfully bring in customers is quite different from the toolkit you need to successfully woo donors and foundations.

Despite what some people might think, a social venture can be a nonprofit organization. For example, Housing Works is a wonderful nonprofit based in New York City that provides healthcare and other services to people with AIDS. Less than 10% of their annual revenue comes from donations, while the largest share of their revenue comes from insurance and Medicaid payments for the services they provide. The second largest source of their funds is a chain of thrift stores they run throughout the city. They are most certainly a nonprofit, but to survive they don’t need to worry as much about their donors as they do about their customers – whether they are people seeking healthcare or people seeking a good deal on a used sofa.

This guide focuses on social entrepreneurs looking to start a venture, the ultimate goal of which is to be able to sustain itself without relying on donors. It breaks down into different phases that illuminate the process involved in launching one of these ventures. The phases of building a venture tend to blur into one another, but breaking them down will give you a framework for understanding where you are in the process and what you need to do next.

There is no bright-line rule for how long any one phase should take you; that will be determined by how much time you have to launch your venture, how complicated it is, and how close the original idea is to the final self-sustaining entity. So use what follows to guide you as you move forward, but don’t get too hung up if things aren’t going exactly as planned – they never do. Instead, keep your mind open, keep learning, and keep reaching out to others to help you along the way.

And most importantly, have fun and enjoy one of the most exciting and meaningful adventures you can have.

Are You Ready to Be a Social Entrepreneur?

Most ventures start with a great idea, but I’m going to start with you, the social entrepreneur. First, you need to ask yourself if you are really the kind of person who can launch a new venture from scratch and make it work. Starting these ventures involves taking on different kinds of risk. It will probably cost money, usually yours and that of investors or donors, and the threat of losing that money can drive some people crazy. There is also reputational risk. Once your venture is successful, your friends will think you are amazing and strangers will want to talk to you about how you did it. But until then, the threat of failure will be in the air. Some people are able to fall down, dust themselves off, and learn from experience. Others take falls hard and have trouble bouncing back. As a social entrepreneur, you need a thick skin coupled with an open mind.

It may go without saying, but I’m going to say it anyway: you also need to have passion for the work you are doing and a vision for how you’re going to get where you want to go. It also helps to have the skill set needed to run your venture. If you’re launching a retail business, it helps to have retail experience. If you’re launching a nonprofit focused on the arts, it helps to have worked in the nonprofit sector or in the arts or both. While you may be doing something original, there are probably successful ventures out there that have done things with enough similarity that you can learn from them. The old piece of advice for writers is that you should write about what you know. For social entrepreneurs, you should start ventures in fields you understand.

Do You Have the Financial Resources?

Chances are, if you are starting a new venture, you will not be able to draw a regular salary for some time. You need to have a plan for getting through this period. You may have plenty stashed away in a savings account. A select few of you may even have a trust fund you can rely on. If that is not you, you need to think about how you’re going to keep paying the rent and eating while you launch your venture. You may want to take on part-time jobs or temporary assignments. You may even want to keep that full-time job and start working on your venture on nights and weekends. But one way or another, you need to make sure you have a way to get from where you are now to having a venture that can support you with a reasonable salary.

Dreaming Up Your Idea

OK, if you bothered to even find this guide in the first place, you’ve probably already begun dreaming up your idea. You have an idea in your head about how to make the world a better place – now you need to share this idea with others so they can help you shape it and improve on it. Begin by talking with your friends, family, and any experts you can get a hold of. People love to give their opinions, be a part of something new, and help make the world a better place. So don’t be shy. Reach out to others and you will be surprised at how accommodating and generous they can be with their time and ideas. Be sure to listen to everybody, whether they are supportive or critical.

As your idea begins to take shape, take some time to write a one to two-page description. This will do a few things for you. It will force you to focus your idea into something more tangible. You will have the opportunity to see what’s missing. It will also give you something you can easily email around and share with others as a way to start a conversation. Finally, a well-conceived and well-written two-page description will make your idea seem more concrete to others. There is a big difference between, “Hey, I have this idea I’d like to discuss with you,” and “Please read the following two-page description about a business/nonprofit idea I am pursuing.”

Throughout this “dreaming up” period, be sure to keep an open mind. The odds that you can sit alone in a room and dream up the perfect social venture are slim. You probably have the kernel of something really valuable, but you will need to shape and refine it over time. Defend your ideas strongly, but hold them loosely.

During the second phase, you want to test your product or service in as real-world a setting as possible. This is true for nonprofits as well as for for-profits. It will be much easier to get donations or investments for seed capital if you can show people, through a small project, that what you want to do will, in fact, work.

You’ll want to start with minimal investment and low risk. Conduct market research with just your idea in your hand and then later you will want to actually try to get some customers. The key to this phase is to learn as much as you possibly can with as little cost and risk as possible. It is unlikely that your very first attempt will be perfect. But you can’t learn from your mistakes until you make them, so be sure to make your mistakes in a setting that allows you to move forward while refining and improving your idea.

It is important to begin thinking about the people who will be interested in purchasing your product or service. You will need to figure out who your customers are going to be. This is especially true if you’re launching a nonprofit and you expect this population to pay for your product or service. Remember, if you’re starting a traditional charity, you need to please your donors, but if you hope that your venture will sustain itself, you need to focus on your customers.

Market Research

The cheapest and easiest way to test your product or service is to do market research. To do this, you’ll need to actually speak with the people you ultimately hope will be your customers. Friends, family, and even experts will not be able to give you the kind of real-world feedback you will get when you ask a potential client, “Would you pay for this?”

During this phase you’ll want to know not only if people will pay for your product or service, but also how much. You will start to get a sense of how hard it’s going to be to sell. Entrepreneurs of all stripes often mistakenly believe that if they build it, their customers will come. That is rarely the case. Very few things sell themselves, and your market research will give you a sense of how hard it’s going to be for you to sell your idea to the people who will actually pay for it. Later, you will use what you learned to get a sense of what client acquisition will cost. A widget may cost you a dollar to make and five dollars to sell.

Later, you will be able to make prototypes, but to get started, start talking to prospective customers about your idea and see what they have to say.

Financials

After you have done your first round of market research, you are ready to run your financials for the first time. You will need to build one of those big Excel spreadsheets to take into account what all the expenses are and what all of your revenue streams could possibly be. This spreadsheet will evolve over time as you learn more and more, but you need to start somewhere.

Building the spreadsheet will highlight what assumptions you’re making and what the impact of being wrong about your assumptions could possibly be. If you’re keeping an open mind, these assumptions should jump off the page and point you in the direction of what further research you need to do.

The financials might also hint at solutions for cutting costs. For example, do you really need to build a complicated program from scratch or are there products you can license and reuse for your purposes at a much lower cost? Perhaps you’ll find ways to phase in your service so that the most expensive components come last after the revenue is flowing.

You may also find ways to partner with other people or organizations so that they share your risk today in exchange for reaping some of the rewards tomorrow. Running your financials will show you where some of those high-cost risk areas are, which may encourage you to seek out help to mitigate them.

Prototyping and Beta Testing

OK, it is time to see if your idea can actually work. You need to build models of your product or small-scale versions of your service, get them out there, and try to sell them. Nothing will teach you more than actually getting customers’ reactions to real versions of your product or service. Pay particular attention to how hard it is to close deals. This will give you a better idea of the cost of client acquisition and the speed at which you can scale.

Go back to your financials and see if the assumptions you made make sense. For example, if you thought you would get ten new customers a day, but it is taking you eight hours to close one customer, you know you need to revise these numbers. On the other hand, if your first customer told ten of her friends and they all want to purchase your product or service, you may also need to revise your numbers.

Make sure to ask your early customers many questions. Do they like your product or service? Do they have any suggestions on how you can improve it? Can they suggest other people who might be interested in buying it?

During this period, it is important to understand that your prototype is probably not exactly what your final product will be, so try to spend as little money as possible ramping up to this stage. It would be a mistake to prepare for full production only to learn you need to make some crucial changes. If you’re launching a for-profit business, you’ll also want to raise as little outside funding as possible, especially this early in your company’s life. The longer you can hold out before bringing in outside funding, the less of your company you’ll need to sell when you’re ready to move on.

If you’re launching a nonprofit and plan to get through the early days with a grant from a foundation, it is safer to accept donations from individuals since you won’t be giving up any control in your nonprofit venture. Just make sure the money does what you need it to do to move toward sustainability.

The process of prototyping and beta-testing your product may take several months and several iterations. At some point you will want to move into full production and sales. The line between prototyping and full production can be a blurry one, but somewhere along the line you will need to handle a bunch of different things.

Incorporating

At some point down the road, you will need to turn your venture into a for-profit or nonprofit entity (unless your venture becomes a project of an already existing nonprofit or for-profit). Choosing your legal entity involves understanding where your capital will come from and what you expect to do with your revenue streams. You should consult a lawyer to help you figure this out. There are many things you’ll be able to do on your own, but there are other things for which you’ll need to hire professionals. Building the legal structure of your venture is one of the most important tasks you’ll undertake, so it will need to be done professionally.

You also need to make sure your company’s name isn’t trademarked by another company or individual. Trademark the name of your venture before someone else does. Your lawyer will help you with this, too. You don’t want to spend a lot of time and money building a brand, only to find out someone else already owns the trademark. You’ll also need to register your domain name, Twitter handle, etc., before your public launch. If your name and other branding attributes are crucial to your project, you will want to do this in Phase 1 to make sure there are no problems.

Look Real

At this point, you may need to stop working at your kitchen table with just your cell phone and laptop. You may need to rent some office space, get a real phone number, and design a logo and letterhead so that your venture starts looking like a real enterprise and not just a hobby. All of this can cost a lot of money, so you might try to find inexpensive ways to look more real than you are. You can share office space, get a phone number that will forward calls, and design a letterhead electronically rather than by using a printer. All of this will help you save money at a time when you may not have very much to spend, while still giving you the legitimacy you need to talk to clients, take orders, and get your work done.

Staffing

Staffing is often the most expensive part of any enterprise. Again, the advice is this: as little as you need, but no less. If you are starting a for-profit and you don’t have the money to hire staff, you may be able to offer employees a share of the venture in exchange for their labor. If you are starting a nonprofit, you may be able to attract volunteers who share your passion for the cause. You also may be able to outsource much of your work so that you won’t have to take on any full-time employees at a time when you cannot afford them.

If you are hiring employees, be sure to pay attention to tax issues, unemployment insurance, and workers compensation insurance. Failure to appropriately deal with any one of these things can lead to an expensive fine down the road. Payroll companies can help you with much of this for a fairly small monthly fee.

Marketing

Now is the time to get your marketing into full gear. Whole books have been written about the best way to market your new venture. I will not attempt to summarize them here. One of the most common mistakes entrepreneurs make is spending too much time perfecting their product or service and not enough time marketing it. The perfect product will not be purchased if nobody knows about it. Make sure you put in the time, money, and energy needed to market your product or service.

Fundraising

Everything I’ve discussed so far in this phase will start to cost you real money. My advice for for-profits still stands – you should try to put off fundraising as long as you can. In fact, look for creative ways to avoid it altogether. For example, can you pre-sell your product or service using a crowdfunding platform or simply contract your clients ahead of time? Even with your best efforts, you’ll probably need to raise outside capital unless you start this process with a lot of your own money.

Rerun Your Financials

At this point, I suspect you’ll have rerun your financials a number of times. If you haven’t, you should! You have learned a lot about the cost of production, the cost of acquiring customers, and at what price-point you can sell your product or service. Go back to your financials and see how accurate you were with your assumptions. Make appropriate changes and see what modifications to your business model you need to make.

Don’t be discouraged if your initial financials were off base – that is rather common. In fact, one of my mottos is that a successful entrepreneur is not someone who can successfully implement their original business plan, but is someone who can quickly see how they have to change their business plan along the way to correct for faulty assumptions. I have read scores of business plans and have never seen one turn into a sustainable nonprofit or for-profit venture without the entrepreneur learning valuable lessons and making appropriate changes along the way.

How Are You Doing?

OK, things are getting serious. You’re spending real money on marketing, production, staffing, and other overhead. Now is the time when a lot of entrepreneurs start to really feel the stress. Before you get to this stage, you need to make sure you have set yourself up to ride through the tough times. If you saved enough money earlier, got a part-time job, or brought in an investor or donor, you will appreciate the financial cushion during these tough times. Almost every venture loses money when it first starts. The successful ones are the ones that plan for the hard times and survive them.

Sustainability is the holy grail of social ventures. Once you have created an enterprise that makes the world a better place while paying for itself, you have created a good-doing perpetual motion machine. Congratulations!

Remember, the road to sustainability has two sides: revenue and expenses. If your venture has a burn rate of $10,000 per month, it will be much easier to reach sustainability than if your burn rate is $30,000 per month. Be careful when taking on new expenses, particularly recurring big-ticket items like rent and staff. As your revenues increase, you can add them later.

Once your revenues are covering all of your expenses – don’t forget to pay yourself a living wage! – you can begin to think about improving your product or service. Reach out to new markets or even offer complementary products and services. Now is the time you can really start to think about scaling.

Ironically, now that you finally don’t need anybody’s financial assistance, it is the easiest time to do fundraising. Most of the risk is over and people want to get in on something that is succeeding. You may want to bring in some outside capital to help you grow more quickly.

Launching a social venture is one of the most exciting and rewarding things you can do in your life. Sure, it will be hard, but anything worth doing usually is. However, with passion, vision, and smart planning, you can take your idea and turn it into a reality.

The guides in this series have been designed to help you figure out the best way to manage each part of your journey. Please take the time to read each of them, but remember, you’ll learn more by doing than by reading. So get started, have fun, and change the world.

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The guides are primarily intended for social entrepreneurs based on the United States, though some of the resources may be generally of interest to an international audience. Please remember that many of the topics covered by the guides, such as corporate structures, laws and legal customs, accounting, business planning, funding and fundraising, etc., vary widely from country to country, and that the information presented here may not be correct, applicable, or relevant to any other country or jurisdiction.

We strongly advise those of you building social impact ventures outside the United States to seek advice and support from reputable professionals who are licensed in your jurisdiction, and/or have area expertise in the country where you plan to build your businesses. For more information, please see our Terms of Use.

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ANDREW GREENBLATT: GUIDE AUTHOR

Co-Founder and Senior Vice President for Strategy at BeneStream

BeneStream

Andrew Greenblatt is a Co-Founder and Senior Vice President for Strategy at BeneStream, a social venture looking to get millions of Americans access to Medicaid, Food Stamps and other government benefits.

Prior to that he was the Founder and CEO of Vendorboon, a company that offers discounts to trade and professional associations and their members for a variety of vendors with a special emphasis on socially responsible vendors. Until January of 2010, Andrew Greenblatt was the Director of Products and Innovation at Criterion Ventures where he worked with philanthropists, foundations, non-profit organizations, and entrepreneurs to plan and execute social ventures. Andrew joined Criterion in 2007 after selling Pride Diamonds, LLC, a socially responsible diamond mining company operating in Sierra Leone that he co-founded. He currently sits on the Board of Directors of the acquiring company, Target Resources Plc.

Before Pride Diamonds, Andrew helped launch and then directed TrueMajority.org, an online activist group. Prior to that he worked as the Director of Business Strategy for Oven Digital, a web design company and as Media Director for Business Leaders for Sensible Priorities. In the mid-90’s Andrew launched a human rights project called Focus on Justice using the internet. A little ahead of its time, Focus On Justice posted on the internet video that was shot in Kenya at the sites of recent human rights abuses.

Andrew was the Executive Director of Common Cause/NY from 1993-1997.

Andrew is a cum laude graduate of Harvard Law School and graduated summa cum laude from SUNY Albany with a B.A in Political Science. He moved to New York City “for a couple of years” in 1993 and still lives there with his wife and two children.


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RUSTY C. COOK: COVER DESIGNER

Rusty Design Co.

Website | Dribbble | | Twitter

Rusty C. Cook is a Chicago-based designer, illustrator, and brand builder, committed to harnessing the power of design to empower socially-conscious businesses and mission-driven organizations to communicate effectively and build meaningful relationships with their communities.


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MARC O’BRIEN

Consultant and Strategist, Social Good Guides

Website | LinkedIn | @think5577

As a Design Strategist and Creative Facilitator, Marc focuses on human-centered design and social innovation. Marc organizes, plans, and leads creative workshops to create positive change and tackle some of today’s gnarly social challenges.

Through playful exercises, he helps people come up with fun, usable, and innovative solutions to challenges. With a graphic and web design background, Marc is able to put ideas generated from these workshops into action, which continues conversations and encourages further collaborations across multiple industries. He loves finding ways for organizations to make huge changes and impacts in unexpected places.

Since 2009, Marc been actively involved, as both an advisor and facilitator, in Project M, an immersive program designed to inspire and educate young creative individuals by proving that their work can have a tangible impact on the world.

A multitude of his collaborative workshops and projects have been featured in the New York Times, Fast Co, AIGA, GOOD, Print, ID, PSFK, and various other design and culture outlets. Marc has lectured and facilitated numerous workshops at a number of distinguished universities and conferences throughout the country. Among other things, Marc is building out Secret Project @ CCA along with teaching in the graphic design department, and leading GOOD SF. He also rides a bamboo bike, makes homemade hot sauce, and unplugs in the outdoors. You can follow him on Twitter, @think557


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SHANA DRESSLER

Founder, Social Innovators Collective
Series Producer, Art Director and Editor, Social Good Guides

Website | Email | LinkedIn | @shanadressler | @sic_org

In 2011, Shana Dressler founded the Social Innovators Collective with the mission to train and nurture the next wave of social change leaders to help them achieve measurable impact and financial sustainability. Since then she has been creating and leading workshops on business development for social enterprises and nonprofits at General Assembly, New York’s premiere center for entrepreneurship, the Social Good Summit, and social enterprise conferences at Harvard, Columbia, New York University, Brown, the School of Visual Arts, Rhode Island School of Design, and others. In 2014, she designed the curriculum for a startup business school designed to support 21st century entrepreneurial problem-solvers and creatives tackling the most pressing social and environmental challenges of our time.

A deeply committed social entrepreneur, Shana is widely recognized as the first person in New York to organize rigorous educational programming for social entrepreneurs in startup mode. To fill a notable gap in the lack of resources available, Shana co-created the Social Good Guides, a series of 20 guides focused on the essential small-business skills that would-be changemakers need to know and an 8-week workshop called Social Good Startup: Idea To Launch.

Shana is an Aspen Institute Scholar, a member of the International Academy of Digital Arts and Sciences, and a judge for The Webby Awards. In 2014 she became a Delegate to the United Nations Foundation Global Accelerator which brought together a “100 of the world’s top entrepreneurs to work together with policy leaders on global issues.” Shana was recently honored by the World CSR Congress as one of the 50 Most Talented Social Innovators. In addition to frequent travel to far-flung places, Shana loves all things chocolate, and makes her way around New York on a midnight blue Vespa. You can follow her @shanadressler and @sic_org.

THE SOCIAL GOOD GUIDES PRODUCTION TEAM

Project Manager: Shana Dressler
Copy Editors: Kelly Cooper + Jessica Winney
Web Developer: Keyue Bao
Consultant + Strategist: Marc O’Brien
Series Producer, Art Director + Editor: Shana Dressler

whydonate_green_fullbanner_whitetext_110614Three years in the making, the Social Good Guides are the result of the generous contributions of a team of esteemed authors, designers, copywriters, proofreaders, project managers, marketing consultants, researchers and interns. Initially conceived as a “nights-and-weekends” labor of love, the project quickly expanded beyond its original scope once we realized that accessible information about the essential small-business skills needed to build sustainable social impact organizations was missing in the social impact space.

If you would like to make a general donation so we can finish the last four guides, click here. If you received value from reading this guide, and you would like to make a donation click here.

Please donate. Your support is needed and appreciated!

 

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TERMS OF USE

Text © 2015 Andrew Greenblatt
Cover © 2015 Liz Cook
All other graphic design and elements © 2015 Social Innovators Collective.

All rights reserved. All guides have been created for private use. No part of this publication may be reproduced, distributed, published, transmitted, photocopied or stored by third parties for download or for sale in any form or by any means, including electronic or mechanical methods, except with the written permission of the publisher, the Social Innovators Collective. Please see our full Terms of Use for more information.

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