Nvn Toolkit

A Toolkit for Developing a Social Purpose Business Plan Funding provided by Mizuho USA Foundation

Seedco

Innovations in Community Development

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Copyright © 2004 Structured Employment Economic Development Corporation (Seedco) All rights reserved.

CONTENTS

Introduction
Acknowledgements
How to Use this Toolkit
Seedco and the Nonprofit Venture Network Part I: Getting Started
Key Elements of a Social Purpose Business
Testing for Mission-fit
Taking Inventory of the Organization
External Context
Tying it all Together
Building a Business: Recycle-A-Bicycle
A Framework for Planning: Introduction to PM&MSM
Addressing Organizational Change

Seedco

Innovations in Community Development

Part II: The Business Plan
The Executive Summary
Market Opportunity
Business Model
Operations
Management and Stakeholders
Social Outcomes
Financials Part III: Resource Guide
Pitching Your Business
Working with Consultants
Understanding Financial Statements
Glossary Part IV: Worksheets, Templates and Examples Part V: Sample Business Plan

introduction

Foreword and Acknowledgements A Toolkit for Developing a Social Purpose Business Plan grows out of Seedco's recognition that many nonprofits are eager to launch business ventures but lack targeted resources to help them through the planning process. Over the past three years, the Nonprofit Venture Network (NVN) has provided intensive technical assistance to 21 nonprofit organizations in New York City and Tampa Bay and has conducted introductory workshops with more than 250 nonprofits interested in developing social purpose businesses. Based on our experience and expertise, we designed this step-by-step business planning guide especially for nonprofit organizations. It is our hope that it becomes a valuable resource to organizations exploring the possibility of social enterprise and to more seasoned entrepreneurs. The Toolkit was created under the supervision of Jaycee Pribulsky, Senior Program Manager. Content was developed by a Seedco team including Sarah Eisinger and Rosanna Perry-Stephens, and led by Dawn Techow. A team of Seedco staff including Tracey Allard, Khary Cuffe, Rachel Bluestein and Nikhil Gadkari reviewed the document and provided insightful feedback. Asif Karmally, an intern from the New York University, Stern School of Management also assisted in writing and editing this document. Mimi Grinker and Betty Rauch kindly edited and produced the document. Giona Maiarelli of Maiarelli Rathkopf Design designed the Toolkit with assistance from Josh Reisner at Seedco. Special thanks to Karen Overton, Executive Director of Recycle-ABicycle, for graciously allowing us to pick apart her business plan and use it as an example. She has been a strong supporter of the Nonprofit Venture Network and we value her enthusiasm and dedication to social enterprise. The development of the Toolkit would not have been possible without support from the Mizuho USA Foundation. We are especially thankful to the foundation's Executive Director, Lesley Harris Palmer, for her support of the Nonprofit Venture Network since its inception. NVN has also been supported by the MetLife Foundation, the United Way of New York City, the Eckerd Family Foundation and the World Trade Center Small Business Fund. DIANE BAILLARGEON President Seedco and the Non-Profit Assistance Corporation January 2004

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introduction

Social Purpose Business Development: How to Use this Toolkit Why a Social Purpose Business Planning Toolkit? A social purpose business is a business activity started by a nonprofit organization that applies market-based solutions for the purposes of furthering the mission of the organization, generating income, and addressing social needs. Over the past five years, the social enterprise field has grown significantly. Nonprofits are seeking innovative methods of diversifying their revenues and building more sustainable organizations. As a result, nonprofits are seeking assistance in developing and launching these ventures. While starting a social purpose business shares many characteristics with developing a traditional small business venture, there are marked differences. Most importantly, you are not an individual entrepreneur. You have stakeholders and clients, funders and staff who follow a mission to provide a needed service to the community. All of these constituents have opinions and ideas about how the organization should best use its resources. In addition, decision-making may happen at multiple levels, the organizational culture may be resistant to becoming more businesslike and staff may fear mission creep. On the flip side, as an organization rather than an individual, you may have access to more resources, be able to build a planning team consisting of diverse backgrounds and expertise, and have a proven reputation in the community. This Social Purpose Business Planning Toolkit takes the organization into consideration throughout the planning process. In addition, the Business Plan you develop with this toolkit will highlight the social components and social outcomes of the business. As a communications tool, these sections are important to your staff, Board and clients as they show the way that the organization and clients will benefit. In addition, these sections are important to socially conscious funders who are seeking a social return on their investments. Who Should Use this Toolkit? The Social Purpose Business Planning Toolkit is designed for nonprofit organizations that are considering starting a revenue-generating activity or a business venture. The toolkit begins with the assessment of an idea in the context of your organization, so to begin, you will need to have a few ideas percolating. In addition, organizations that are currently operating a business might use the Toolkit as a guide for developing a plan for expansion or for revising their business model.

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introduction

Developing a Business Plan Developing a business plan is an exciting, but challenging process. Developing your business and then writing the business plan can take anywhere from several months to over a year. Staff time, organizational resources, outside consultants or experts in the field are required for the process. In the end, the business plan serves as both a communications tool and a management tool to evaluate your performance and revise your assumptions. It will justify the risks and explain the rewards associated with the business. A good business plan will: • • • • • •

Illustrate demand for your product Demonstrate stakeholders' interests and needs Confirm that the business concept is viable Post healthy and realistic financial projections Demonstrate staff and management expertise Explain your ability to meet the proposed social outcomes

The Case Study Throughout the Toolkit, we use an organization that Seedco has worked closely with for the past four years. This organization, Recycle-A-Bicycle, is an established social enterprise that has completed a business plan for expansion of the business and programmatic activities. We will refer to the Recycle-A-Bicycle business plan and pull examples to illustrate key points. The full text of the plan is available in Section V. Using the Toolkit Throughout the Toolkit, you will find a number of icons, illustrated on the following page, indicating special sections. In addition, a disk is provided that contains the Financial Projections Workbook. This is an excel file that is meant to help you build your financial projections. If you have difficulty using the disk (PC-format), please go to www.seedco.org/nvn to download the files. You will need the user id and password below. User id: Password:

toolkit business

If you have comments, would like to purchase additional copies of the Toolkit or are interested in learning more about Seedco or the Nonprofit Venture Network, please email us at [email protected].

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introduction

Helpful hints are provided to give you specific information on a topic.

Actions refer to templates, worksheets and examples which offer hands-on opportunities to put the concepts into practice. We encourage you to stop each time you see the Action symbol and pull out the corresponding worksheet from Part IV.

These are actual or “modified” examples of social purpose business.

These are questions to help you develop the Market Opportunity and Business Model Sections of your plan.

This section will assist you in developing your Logic Model or Action Plan with regard to different sections of the business plan.

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introduction

About Seedco Founded in 1986, Seedco provides financial and technical assistance, and management support, for the community-building efforts of nonprofit organizations and small businesses in targeted disadvantaged communities throughout the United States. Working in partnership with local community organizations, universities, and other local and national groups, Seedco develops wide-ranging initiatives that support working families, promote community economic development, and strengthen community-based nonprofits. Seedco's approach focuses on increasing its community partners' capacity to implement high-impact projects that build community and individual assets. Seedco's programs focus on workforce development, affordable homeownership, and entrepreneurship to achieve our community revitalization goals, including: • Supporting working families; • Promoting economic development; • Strengthening community organizations; and • Providing creative financing to support program activities. HOW WE WORK Seedco is committed to innovative, high-impact program development and delivery. We provide intensive financial and technical assistance to our networks of neighborhood-based partners, enabling them to launch model projects and realize their community-building goals. We Build Community Networks Central to Seedco's work is the belief that neighborhood organizations are invaluable partners in planning and implementing community and economic development projects. Community-based organizations have the cultural competency and understanding of local needs that are essential in creating meaningful community-building initiatives. As part of our programs, Seedco brings our network of partner organizations together to foster peer learning and collaboration. We Create, Develop, and Implement Model Projects Seedco develops model projects designed to enable community partners to devote their critical resources to program implementation. Model projects may include fully developed business plans and financing strategies, program protocols, and web-based information systems that can be adapted to local needs.

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introduction

We Provide Technical Assistance and Capacity Building To help our community partners achieve their goals, Seedco provides intensive technical assistance and capacity-building services, focusing on program implementation that leads to measurable outcomes. One tool that Seedco uses to assist organizations is its Performance Measurement & ManagementSM (PM&MSM) process, a technical assistance process that helps organizations plan, measure, improve, and be accountable for programs. PM&M helps managers articulate outcomes, collect data about these outcomes, and use that data to make and implement informed decisions. We Offer Financial Assistance Seedco's Community Development Loan Fund provides low-cost financing for community-based organizations undertaking development activities. We also help community groups gain access to pre-operational and recoverable grants to enable them to absorb some of the early costs associated with developing business plans and other activities that build their organizations' assets. Seedco creates targeted loan products around three program areas: Affordable Homeownership, Workforce Development and Community Economic Development. In response to changing needs in the market, Seedco has launched our WTC Small Business Fund, which includes loan funding for small businesses affected by the September 11th attacks.

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introduction

About Seedco’s Nonprofit Venture Network The Nonprofit Venture Network (NVN) was established in 2001 with support from the MetLife Foundation, United Way of New York and Mizuho USA Foundation. NVN offers community-based nonprofit organizations a comprehensive package of technical assistance and financing designed to enhance their capacity to launch social purpose businesses. While there are several definitions of a social purpose business, we define it as a business activity started by a nonprofit organization that applies market-based solutions for the purposes of furthering the mission of the organization, generating income, and addressing social needs. In this context, social purpose businesses serve to: • Promote innovative programs; • Create job and training opportunities; • Encourage entrepreneurial endeavors; and, • Contribute to the financial viability of the parent nonprofit organization. The Challenge In a demanding operating and funding environment, nonprofit organizations must look to new models of generating revenue streams while also fulfilling their expanding missions. Launching a social purpose business is an innovative economic development strategy that has emerged in recent years as a way for community-based nonprofits to do both. Through these ventures, nonprofits can increase their ability to fulfill the organization's mission while serving their constituents in new ways and diversify revenue sources. Starting a social purpose business venture can pose risks for the sponsoring nonprofit. When a nonprofit launches a new business venture, it strives to earn income and achieve tangible social outcomes. This undertaking can quickly test an organization's culture and management practices. The organization must constantly strive to balance its internal goals of supporting a social mission and generating revenue. NVN helps organizations find that balance through a comprehensive package of technical assistance services and low-cost financing.

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introduction

The NVN Model NVN technical assistance and services are delivered in three phases.

Phase I: Learning. This phase provides organizations with assessment and capacity building tools through the MetLife Introductory Workshop Series on Social Purpose Businesses. Phase II: Planning. Organizations that have completed the introductory workshop series are eligible to apply for pre-development grants generally in the range of $5,000 to $10,000 through Seedco's Entrepreneurial Assistance Fund, which begins Phase II of the program. Over the course of the year-long grant period, Seedco will work with organizations in group settings and one-on-one to develop a business plan. Phase III: Implementation. Phase III offers grantees access to several forms of financial assistance to support their efforts in pursuing a social purpose business, ranging from grants to below-market loans and nearequity instruments. In order for organizations to move from Phase II to Phase III, eligible organizations must have a business plan and meet Seedco's due diligence requirements. NVN held its Introductory Workshops Series in New York City and Tampa Bay in Fall 2003 and will bring on new cohorts in 2004. In addition, NVN plans to expand nationally and is exploring opportunities in several new cities. NVN Grantees To date, Seedco has provided funding through the Entrepreneurial Assistance Fund and technical assistance to the following organizations: NVN: New York City

Bedford Stuyvesant Restoration Corporation (BSRC) is developing a multi-purpose technology store, an outgrowth of BSRC's computer access and training program, to offer employment and training opportunities for local youth. Brooklyn Children's Museum is creating a museum store to provide employment and training opportunities for local youth. Brooklyn Woods, Inc. is creating a woodworking business to provide employment and training to low-income and unemployed individuals. Center for Alternative Sentencing and Employment (C.A.S.E.S) explored the creation of a greeting card business targeting the youth market that would develop the artistic and business skills of youth offenders participating in its community alternative sentencing program.

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The Children's Village is developing an automotive repair and gasoline business to provide employment and training to youth in its residential treatment center. The CityKids Foundation will launch MUSE Productions (Making Urban Solutions for Education), a youth development and educational product company specializing in issue-based video curricula and music, as well as youth outcome-measurement solutions. The Fifth Avenue Committee is creating Brooklyn Moves, a transportation and trucking business to provide employment to participants with multiple barriers to employment, including a history of incarceration. Gay Men's Health Crisis is developing a food service business that will serve staff, offer catering to groups using GMHC's office for events and meetings, and provide training and employment to clients who have experienced unemployment due to HIV/AIDS. Groundwork, Inc., a new Brooklyn-based youth leadership development program, is developing youth-run ventures that will provide community services to youth and families in East New York. Harlem Textile Works, a design and printing business that provides employment training to youth in the textile and fashion field, is planning to expand its operations through new urban designs and additional product lines. Managed Work Services of New York, a joint venture between VIP Community Services and the National Association on Drug Abuse Problems, Inc., provides employment to individuals with histories of alcohol/substance abuse through a temporary employment agency. Neighborhood Coalition for Shelter (NCS), a Manhattan-based housing provider, is developing an online business to sell donated new and used goods including CDs, DVDs, video games and books. NCS will employ and train homeless and formerly homeless individuals to operate the business. New Horizon Courier Service, an outgrowth of Lenox Hill Neighborhood House's vocational training program, recently closed its courier business that provided employment for formerly homeless individuals. Pratt Area Community Council is developing a property management business to provide employment and training to residents of low- and moderate-income neighborhoods in Brooklyn. Project Reach Youth in Brooklyn is creating a catering business to provide training in the culinary arts and employment to local youth.

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Recycle-A-Bicycle is expanding its business which teaches low-income youth affiliated with the Henry Street Settlement House to refurbish used bicycles, which are then sold at two retail outlets in Manhattan and Brooklyn. TADA!, a youth theater company in Manhattan, is developing a business to market and provide short-term theater opportunities for New York City youth during holidays and other school breaks. NVN: Tampa Bay

The Corporation to Develop Communities of Tampa will develop a plan and marketing strategy to increase traffic to an existing cluster of social purpose businesses on 29th Street: a coin laundry, an ice cream shop and an open air market. Eckerd Youth Alternatives (EYA) plans to develop a copy and computer services shop to provide training and job opportunities for rural youth in the Tampa Bay area. Tampa Bay Academy of Hope publishes the African American Listing, an annual reference manual with information on local minority-owned businesses and services that generates revenue to off-set the Academy's youth programs. The Academy plans to publish the listing on-line and employ and train youth in aspects of creating and publishing the Listing. The YWCA of Tampa Bay runs a successful youth development program for low-income girls, ages 10-16, which it plans to adapt into a for-profit venture called Y Girls, targeted to more affluent communities in Pinellas County with an aim to subsidize the Y's other programs.

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part i: getting started

Part I of the Toolkit will provide you with frameworks to think about business planning in general and your idea and organization in particular.

Part I Getting Started

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I.1

part i: getting started

I Have an Idea!! Pa r t I Getting Started




OV E RV I E W

You probably come to the business planning process with an idea born out of your organization’s need to generate new sources of revenue or address a new need among the population that it serves. But how do you know if the idea is sound? This section helps you evaluate the idea and poses questions to answer as you look at the organization’s capacity to take on a major new endeavor. It will cover the following topics: • Five Key Elements of a Social Purpose Business • Testing for Mission-fit • Taking Inventory of the Organization • Looking at the External Context • Tying it all Together • Building a Business: The Example of Recycle-A-Bicycle • A Framework for Planning: Introduction to Performance Measurement and ManagementSM • Special Section: Addressing Organizational Change

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p a r t i : Five Key Elements of a Social Purpose Business

Five Key Elements of Your Social Purpose Business Starting a social purpose business is challenging and will require a project champion, staff resources, a significant amount of time and financing. As you create your business, you will take into account five key elements: mission, the business idea, your organization, relationships and the environment. 1.

Mission. Your mission is central to all the activities that you will pursue in forming the business. Seedco defines a social purpose business as a venture that applies market-based solutions for the purposes of furthering the mission of the organization, generating income and addressing social needs.

2.

Business Idea. Your idea will evolve into a full-fledged business that includes what you are selling, the customers to whom you are selling and your “market advantage” (i.e. why customers will buy your product/service).

3.

The Organization. Your organization consists of an overlying culture and the individuals and groups that have a direct stake in the success of the business. These stakeholders include the management, staff, volunteers, target population or clients, board members and funders.

4.

Relationships. Relationships describe the way your business interacts with people or other businesses who are not direct stakeholders, but who have an influence on the success of the business. Relationships may include vendors, suppliers and strategic partners.

5.

Environment. The environment consists of the external forces that affect the business. These are circumstances outside of your control that will influence the planning or operations of the business. A successful business builds strength in all five areas but also understands the relationship between these areas. For example, you need the right people to run your business, negotiate effective relationships and maintain focus on the mission and social outcomes. In addition, your business idea must provide an opportunity to further the mission of the organization and also must make sense within the environmental context. Though this seems very straightforward, continually assessing your business around these five areas will help during both planning and operating stages. The inter-relationship of the elements is illustrated on the next page.

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Mission

As you plan, launch and operate your business, revisit these five elements and evaluate each one in relation to the others. The elements are dynamic and may change over time. These changes may be deliberate or may happen outside your control. When one element changes, you may have to adjust other elements to compensate.

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p a r t i : Testing for Mission-fit

Is there a Fit Between Your Business Idea and Your Organization’s Mission? A key step in the development of a social purpose business is determining how it aligns with your organization’s mission and program activities. It is also important to think about the needs and interests of the clients you expect to serve through your social purpose business.1 The mission of your organization and your clients are key factors in developing and assessing your business idea. One way to ensure that your business idea makes sense to your stakeholders and clients is to include them in the development process. Ask them for input before starting the social purpose business. The following Strategic Questions provide a way for you to articulate your initial social and financial goals. 1.

What is the mission of your organization?

2.

What is your social purpose business idea? What product or service do you plan to offer and who are your target customers?

3.

What are the demographics and the needs of the clients that you expect to benefit from this idea?

4.

How will the venture benefit your clients? What needs, interests and skills sets do they bring to the venture? - What programs do you have that currently serve the needs of your clients? - Have your clients expressed a special interest for new services? What kinds of new services/programs are they interested in? - What are your client's key skill sets in terms of what is needed for the business venture? How would you rate their skill level (low, medium, or high)?

5.

What assets will you use to create the business venture, e.g. building, property, equipment, intellectual property, proprietary processes?

6.

What other ways might you use these assets, e.g. sell the building or equipment, use the equipment for a new program?

7.

What are the anticipated benefits or outcomes for your clients and the organization that will result from starting a social purpose business?

8.

What are the financial goals of the business (break-even, generate profits to be used for additional training or spin off revenues for other programs)? 1 “Organization” refers to the nonprofit that is developing the business and “client” refers to the target population that is served by the nonprofit. developing a social purpose business plan

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Distribute the Strategic Questions Worksheet, located in Part IV of the Toolkit, to a group of staff, managers and Board members in order to evaluate the idea from multiple perspectives within the organization.

Action

After completing the Strategic Questions and reviewing the responses received from other stakeholders, you, your staff and Board members should be better able to assess whether the business idea truly does "extend" the mission of the organization.

Lessons from the Field

I.6




Is the business venture consistent with the overall mission of the organization or is it a major shift from the work you do?




Are the goals and outcomes of the business venture in line with the organization's mission? Do they make sense?




Does the business serve the needs, interests and abilities of your clients?




Will the business meet the needs of other stakeholders in meaningful ways?

An organization working with ex-offenders opened a thrift store to provide job training and employment to its clients. Despite writing a business plan and successfully capitalizing the store, the business manager found that the shop had a very low job retention rate. After talking with several employees, the manager learned that most employees were not interested in selling clothing at a thrift shop. For an adult population, and particularly a male population, the work opportunity did not fit their interests and long term goals. The organization did not close the thrift shop, but it has modified the training program to meet the needs of this population: now, the men work in the thrift shop for 4-5 months. At that time, if they meet performance targets that focus on attendance, punctuality and customer service, the men are eligible to move to other job opportunities including a new landscaping service and a print shop.

developing a social purpose business plan

p a r t i : Taking Inventory of the Organization

Taking Inventory of Your Organization Now that you have examined the relationship between your business idea and mission, you are ready to assess the business idea in the context of your organization. Social purpose businesses succeed when there is a sound opportunity (the right "Business Idea") and an entrepreneurial management team (the right "People") to carry out the task of launching a business. Using the Organizational Assessment Survey, you will evaluate what your organization already possesses to help you develop the "Business Idea", and what "People" are in place to lead the effort. By examining your organization's core competencies and the expertise you bring to the process you will be able to better determine if this business makes sense for your organization. The Organizational Assessment includes:

Action

1.

Articulation of the organization's values and strengths.

2.

Assessment of the financial, staff, and physical (equipment, property, etc.) resources that are needed and available for the business planning process and launch.

3.

Identification of advocates, stakeholders and partners that will provide assistance for the planning and launch of the business.

4.

Recognition of the potential challenges and difficulties with planning and launching the business.

5.

Definition of roles and responsibilities among current and potential staff for the business.

Use the Organizational Assessment Survey, located in Part IV of the Toolkit, to take stock of the organization, map your resources, and evaluate the missing pieces.

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Organizational Commitment Checklist Review your Organizational Assessment Survey to evaluate whether your organization is able and willing to make a commitment to developing a business. It is okay if there are missing pieces and unanswered questions during the initial planning phase. However, the organization should recognize that the following are needed:


Dedicated resources to support the business planning process.




A strategic plan that includes the development of a social purpose business as a near-term strategy and/or a board resolution that supports the development of a social purpose business.




A clear vision of the goals of the business.




A set of core values that can drive the development of the social purpose business.




A general understanding of the risk factors involved in starting a social purpose business.




Mitigation strategies to address resistance to change among staff, clients and stakeholders.

Entrepreneurship Team ("People") Checklist Review your Organizational Assessment Survey to evaluate whether your organization has the people in place to support the business planning process:


Project champion to lead the business planning process.




Management team that understands the risks and is realistic about possible results of the social purpose business.




Board of Directors that supports the development of the social purpose business.




Board of Directors and staff who understand that the desired outcome for a social purpose business is a mix of social and financial returns.

The Organizational Assessment Survey is meant to help you understand what you have and what you might need. Making the decision to launch a social purpose business is a significant one and requires a sound business idea and organizational readiness. Based on what you've learned thus far, are you ready to begin the business planning process?

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p a r t i : Looking at the External Context

Beginning the Business Planning Process: An Initial Look at the External Context Now that you have evaluated your business idea in the context of your organization, it is time to take a look at the market opportunity (i.e. the potential to sell your product or service) and the external environment. When you write your business plan, you will conduct the research into your potential market. However, at this time, it is important to take a preliminary look at what's happening outside of your organization that can potentially affect business development. The External Environment Assessment will ask you to look at the following:

Action

1.

Who are your potential customers? Describe them demographically.

2.

What similar products do these customers currently buy? What do they look for when buying similar products/services?

3.

Do you know who else is operating in the same market and targeting the same customers? Who are your competitors?

4.

How will you compete? How will your business be different?

5.

What is happening with the economy and your industry in particular?

6.

Are there major changes in what customers need and want, how they access the product or the price? How might this affect your business?

Complete the External Environment Assessment located in Part IV of the Toolkit. You may not be able to answer all of the questions at length, but you should have a general sense of what kind of opportunity exists.

Through the External Environment Assessment you should have considered your potential to sell your product or service in the context of your prospective customers and existing competition. Overall, how will the external environment affect the development of your business? How can you mitigate the associated challenges? One solution may be to revise your business idea. Perhaps you need to scale back the idea or even change it if these conditions prove to be too much of a challenge. You can go back to the Strategic Questions Worksheet to think through a new idea. Keep in mind that sharpening your business idea can be, and oftentimes is, an iterative process.

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p a r t i : Tying it all Together

Conclusion: Tying It all Together Understanding where your strengths lie and where you need assistance will enable you to make smart decisions about the business planning process. In the next section you will begin to develop your social purpose business plan and learn techniques to communicate your ideas to others. The worksheets and questions in this section will allow you to examine your idea and organization. After doing this work, you should be able to answer the following questions: • Does the business venture further the mission of your organization? • Is the business venture an undertaking your organization wants to pursue? • Does your organization have the capacity to develop a social purpose business? • Do the organization and Board of Directors understand the risks involved and are they willing to take such risks? • Is the organization being realistic about possible results? • Is the timing right to develop a social purpose business? • Does the organization have the right people with the right skills and is it willing to give them the freedom, responsibility and authority necessary for entrepreneurial success? • Does the organization have enough staying power in terms of time, energy and money? • Is the organization willing to make mistakes?

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part i: getting started

Lessons from the Field

Seedco’s Nonprofit Venture Network (NVN) social entrepreneurs offer this advice on the planning process:

• Business planning takes a lot of TIME. • A business "champion" or point person is vital to • • • • • • • •

maintain focus and motivation during the planning process. Define the decision-making process early on to avoid getting mired in the details. If your nonprofit clients are going to become employees, start the transition early through training and communications. Acknowledge and manage organizational culture changes as they occur. Secure executive staff and board buy-in during the pre-development phase. A business advisory board may increase the time required for the planning process, but can provide invaluable thoughts and perspective. Acknowledge the risks and determine realistic mitigation strategies. Make sure you understand the numbers. Don't be afraid to sell your products and services!

NVN social entrepreneurs identified the following common stumbling blocks:

• Failure to recognize that the business needs a manager with the experience and skills to operate a business. • Resistance to change within the organization and to new staff roles and responsibilities. • Securing the financial resources to move from planning to launch. • Understanding the targeted business customers and market opportunity.

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p a r t i : Building a Business: The Example of Recycle-A-Bicycle

Building a Business: The Example of Recycle-A-Bicycle

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Recycle-A-Bicycle (RAB) is a successful social enterprise in New York City that demonstrates strength in the five key elements and has recognized the importance of how the elements fit together.

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Mission

• Mission: Recycle-A-Bicycle provides youth development to at-risk populations through the operation of two successful full-service used bicycle shops that employ youth trained in bike repair and mechanics. Through these shops, RAB also furthers its second mission to promote environmental stewardship by offering affordable and sustainable transportation options. • Organization: Recycle-A-Bicycle is led by an energetic Executive Director (ED) who is skilled in bicycle repair and maintenance and who is an avid cyclist. Through her networks within the cycling and community development arenas, she has maintained a strong supply of donated bikes and has built a solid customer base at the retail stores. The ED has learned business management skills on the job. In addition, to further strengthen Recycle-A-Bicycle, she actively recruits volunteers, Board members and others to fill additional developing a social purpose business plan

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part i: getting started

needs. Shop managers oversee the youth interns and ensure high quality repair services for customers. Finally, the youth involved with the program are vital to the success of Recycle-A-Bicycle as they bring both enthusiasm for the program and a source of labor. • Business idea: Recycle-A-Bicycle's founder responded to a proposal to create an employment and training program for youth. The program provided valuable hard and soft skills for the youth. At the same time, Recycle-A-Bicycle began to think about its customer base. Residents of New York’s East Village neighborhood, where the program was located, were either young, low- to moderate-income individuals or residents of low-income housing. Most customers could not afford a new bicycle or did not want to pay a high price given the high rate of theft in New York City. Recycle-A-Bicycle established its competitive advantage through its location, pricing and the quality of the refurbished bikes and repair services. • Environment: Recycle-A-Bicycle makes sense in New York City. The terrain is relatively flat and the city is extremely dense. In general, it is faster to bike to a destination that is within 5 miles than to walk, drive or take public transportation. Recently, the New York City Council began talking about finding better options for those who bike to work to store their bikes during the work day. In addition, subway fare hikes in spring 2003 and the relatively mild New York City weather makes biking an attractive option. Despite the economic downturn that has plagued other small businesses during the past three years, Recycle-A-Bicycle has thrived because it (1) serves a niche market of delivery and messenger personnel, who rely on bicycles to perform their jobs and (2) provides an inexpensive alternative to a new bike for cashstrapped young New York City cyclists. • Relationships: Recycle-A-Bicycle partners with the Henry Street Settlement House and Children's Aid Society. These partnerships allow Recycle-A-Bicycle to focus on job training, knowing that its partners will provide other youth development activities such as academic tutoring or personal counseling. Recycle-A-Bicycle also has relationships with building superintendents and community leaders who donate abandoned bikes. Funders and technical assistance providers offer needed services and support. Recycle-A-Bicycle also has relationships with several cycling organizations including the Montauk Century and Bike New York who provide opportunities to market the business as well as offer youth additional part-time work.

I.14

developing a social purpose business plan

p a r t i : Building a Business: The Example of Recycle-A-Bicycle

Recycle-A-Bicycle Success Recycle-A-Bicycle did not start out with all of these elements in place, but they have built strength in each area of the business. The key to RecycleA-Bicycle's success has been the way that the elements fit together. Several examples of this include: • Recycle-A-Bicycle's relationships with youth service providers helps them focus on their employment and training mission and their environmental stewardship mission because they do not offer other youth development services. In addition, these service providers are successful in obtaining youth summer employment stipends from the city government, allowing Recycle-A-Bicycle to maintain low labor costs. • By collecting abandoned and discarded bikes, Recycle-A-Bicycle provides a valuable service for superintendents and others who would have to pay to dispose of these items. • The business idea of refurbishing and selling used bikes promotes sustainable transportation alternatives for New York City residents. • The environmental factors such as the subway and bus fare hike in spring 2003 and the economic downturn actually create new opportunities for business with Recycle-A-Bicycle. • The founder and shop managers are dedicated to the mission and also have the skills to provide quality products and services.

developing a social purpose business plan

I.15

p a r t i : A Framework for Planning: Introduction to PM&MSM

A Framework for Planning: Introduction to Performance Measurement & Management

SM

Now that you are ready to begin business plan development, it is essential that you begin to think about what needs to take place during the planning process, how these activities will be accomplished, who will be responsible for completing the work, how results will be measured and the timeline for completion. In this section, we introduce Performance Measurement & ManagementSM (PM&MSM), a process to help you plan, measure, improve and be accountable for your organization's activities. PM&M is a process that identifies how your organization's activities lead to desired outcomes. In this Toolkit, you will learn how PM&M can help you to articulate social outcomes, collect and measure data about these outcomes, and use the data to make and implement informed decisions. Social purpose businesses focus on the double bottom line - the social and financial outcomes that are expected from the venture. PM&M is a tool that will help you to define each of these outcomes and develop mechanisms for tracking your results. There are four elements in the PM&M process: 1.

The Logic Model. The Logic Model is a graphic representation of how the various resources and activities will lead to the benefits created for the organization, its clients and stakeholders. It can be used to communicate how the business will work and what outcomes will be achieved to people within the organization, potential investors and other stakeholders. Examples are provided in Part IV.

2.

The Action Plan. Action Plans guide the business planning process by clarifying and coordinating tasks, assigning responsibilities and specifying timeframes and due dates. Action plans are management tools used to help in project management, and are most useful during the business planning process. Action Plans stem from the Logic Model and the two elements are used together.

3.

Gathering Evidence and Data Collection. This is the "measurement" component of PM&M. This process involves setting targets and developing indicators that measure your performance, and then establishing systems for gathering evidence to track the indicators and determine if you met your targets.

4.

Management. PM&M provides techniques and tools that can be used for day-to-day and long-term assessment and management of the organization's activities.

developing a social purpose business plan

I.17

part i: getting started

Elements One and Two will be explained in the following pages. Elements Three and Four will be discussed in Part II of the Toolkit as they relate to tracking and measuring the social outcomes of the business and writing this into your plan. Laying the Groundwork: Developing the Logic Model A Logic Model is a way to articulate the theory of change behind your social purpose business. This theory of change is based on the notion that an activity creates an output that generates an outcome or change. Here is a simple example:

Activity: Youth clients work at a copy shop filling customer orders and performing customer service.

Output: Youth gain tangible work experience and knowledge of customer relations.

Short-term Outcome: Youth gain selfesteem and soft skills.

Long-term Outcome: Youth complete high school and continue to higher education.

Had the work opportunity not been available, these youth might not have developed the self-esteem and soft skills necessary to go on to higher education. The graphic representation of this theory of change is the PM&M Logic Model. The Logic Model demonstrates links between the resources, activities and benefits of the social purpose business, both in terms of changes or benefits to your clients and for the organization. The Logic Model consists of five elements described below. Two examples and a template for building your own Logic Model are included in Part IV of the Toolkit. • Inputs. What are the assets that the business possesses today? These are the resources dedicated or consumed by the business. For example: funding, staff, facilities, partners, franchise, consultants, participants/clients, knowledge/expertise. • Activities. What are the tangible actions that need to take place using the inputs to fulfill business objectives? Think of the activities related to both the business and program side of the venture. Some business activities could include: develop/finalize business plan, pilot the business, make sales calls or conduct advertising. Program activities may include develop/modify the training curriculum, and screen and recruit the participants. The best way to express the activities is as action verbs. I.18

developing a social purpose business plan

p a r t i : A Framework for Planning: Introduction to PM&MSM

• Outputs. What is produced as a direct result of business activities? Outputs generally depict the completion of an activity or are quantified as the number or percent of units produced as a result of the activity. For example: business plan developed, customer survey completed or 15 participants complete job training program. • Outcomes. What are the benefits or changes for your clients or participants and for the parent organization as a result of the social purpose business? Think of outcomes as the goals that your business seeks to achieve. Outcomes are expressed as initial (within 0-2 years), intermediate (within 2-3 years) and long-term (within 3-5 years). Examples include: business generates net operating income, participants obtain work experience and organization becomes more entrepreneurial. The Logic Model should capture financial, programmatic and organizational outcomes. • Arrows. The arrows on the Logic Model are used to show the cause and effect relationships between each of the elements. For example, because you have a set of assets, you can operate an activity. In general, arrows move linearly from input to activity to output to outcomes. However, other cause and effect relationships are possible. For example, an output may become an input such as when the activity involves creating a training curriculum or marketing plan. Arrows which represent causal relationships are the key to showing how your social purpose business will work. If you refer back to the Strategic Questions, you will notice that you have already thought through many of these Logic Model elements particularly the assets, activities and outcomes.

Action

Use the Logic Model Template and examples located in Part IV of the Toolkit to craft a Logic Model for your social purpose business.

developing a social purpose business plan

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part i: getting started

Action Helpful Hints

Helpful Hints on Building your Logic Model

• Add arrows to show the causal linkages between inputs, activities, outputs and outcomes. Generally, inputs will lead to activities, activities to outputs, and outputs to outcomes.

• Some inputs may lead to more than one activity, some activities may lead to more than one output, and some outputs may have more than one outcome.

• Are the inputs sufficient to support all listed activities? Are outcomes plausibly related to the business and programmatic activities? Do the outcomes genuinely represent a change or benefit for the clients/participants/customers?

• Use if/then statements to check if the Logic Model is "logical". Example: If we have dedicated staff, then we can pilot the business plan. Or, if participants attend training, then they will be placed in a job.

• Add or eliminate boxes on the template - you do not need to fill in every single box!

• In filling in the boxes, if it is easier, you may want to start with the outcomes and work backwards.

• The Logic Model can be used as a planning device, to manage the development of your business and later when your business is up and running.

Putting it Together: Building the Logic Model Developing your Logic Model often takes one of two directions. Your thought process might be direct - you know what activities you will undertake and these will lead to certain outcomes. On the other hand, you might know what outcomes you want and work backwards to determine the activities that will lead to such outcomes. Uses of the Logic Model There are many uses of the Logic Model. Most commonly, it is used as a planning, communications and operations tool. For the purposes of the social purpose business, the Logic Model is best used to convey the entire scope of the business and its outcomes to staff, prospective funders and clients/participants.

I.20

developing a social purpose business plan

p a r t i : A Framework for Planning: Introduction to PM&MSM

The Logic Model can be used in communications to staff, potential funders and clients/participants to: • Reach a shared understanding of the business within the organization • Help staff understand how their work fits into the business and organization • Explain the business to new staff and the Board of Directors • Clearly describe the business to funders, potential funders and other stakeholders The Logic Model can also be used in business planning to: • Structure the business planning process • Guide business implementation • Identify gaps in service production • Show the relationship between social, financial and organizational outcomes Finally, the Logic Model helps with operations management to: • Guide measurement efforts and provide a framework for data analysis • Understand how activities are linked to business and programmatic outcomes related to clients • Identify hiring and staff training needs • Encourage staff collaboration by illustrating shared purposes and common outcomes

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part i: getting started

Making Things Happen: Action Plans An Action Plan is a planning tool that can organize the key activities for the business planning process. Overall, the Action Plan delineates: • What activities/tasks will be done • Who is responsible for doing these activities and tasks • When each activity/task will be completed The action plan can be used to communicate expectations and accountability. To create your Action Plan, refer to your Logic Model which should organize the tasks of the business. Also, review your Organizational Assessment Survey and identify the tasks that need to be completed as part of the business planning process. Next, examine the resources and expertise you have in place to outline how the work will be accomplished. In the Action Plan, you need to include the activities, the deadlines and the responsible individuals. You will want to return to your Action Plan on a regular basis to assess whether tasks have been completed.

Task

Due Date

Person Responsible

Status/Notes

Conduct Market Research

July 2004

Marketing Assistant

Research in progress

Develop financial plan

September 2004

Business Manager

Financial statements developed

Identify staffing needs

December 2004

Business Manager

Organizational chart developed

Recruit participants for training program

December 2004

Program Manager

Questionnaire sent out to current trainees

Adapt current training and curriculum

October 2003

Program Manager

Training curriculum developed

Business-related Activities

Program-related Activities

I.22

developing a social purpose business plan

p a r t i : A Framework for Planning: Introduction to PM&MSM

Action

Use the Action Planning Template located in Part IV of the Toolkit to plan the primary activities associated with developing a business plan for your idea.

Reviewing the Action Plan To complete the action planning process, answer the following questions: • Are any key activities (or staff) missing from the plan? • Are there potential bottlenecks or delays in any part of the plan that might cause problems moving forward during implementation? • Which activities have flexible deadlines? Which do not? Conclusion Developing a social purpose business is intensive and requires a sound business idea, organizational readiness and a strategy that guides business development. The work you have completed in this section has provided you with an important opportunity to think strategically about your organization and the way in which a business venture can strengthen its work and further its mission. In developing the specific components of the business plan, revisit this section and use it as a guide for shaping the story you want to tell about your social purpose business. In this section, you have assessed your business idea and how it relates to your organizational mission. You have also explored the ways in which the external environment can impact your business idea. As a result, you should be able to: • Articulate the outcomes for your social purpose business • Describe your business idea and its relationship to your mission and programmatic activities • Describe the potential impact of the external environment on your business idea • Lay out the business on a Logic Model • Establish an Action Plan for moving forward on the business planning process Now it is time to get to the real meat of the business planning processdrafting your business plan. The second part of this Toolkit details the components of the Business Plan and provides a how-to manual to formulate a strong and compelling document.

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I.23

p a r t i : Special Section: Addressing Organizational Change

Special Section - Addressing Organizational Change Whether this is your first or fifth social purpose business, planning and launching a new venture will cause organizational changes. These changes may lead to tensions and uncertainty among staff, clients and other stakeholders. The cultural change that accompanies the opening of the new business can be one of the major challenges you will face. The best way to address organizational change is through transparency and communication. People often resist change when they are unsure how it will affect them. Your staff and stakeholders may resist change because they do not understand the goals of the new business venture or because they do not feel that their ideas or concerns are being heard. To help staff and stakeholders understand the changes that occur when developing a social purpose business, it is important to clearly communicate what is happening through formal mechanisms such as meetings, reports and memos.

Action Helpful Hints

Communicating Organizational Change Address strategic questions: • Why are we doing this? • Why a business venture? • What does this mean for staff and clients? • What does this mean for the organization? • What are we trying to accomplish? Address practical questions: • Explain what will happen and when. Show where change will occur and provide structure with an anticipated timeframe for roll-out. • Outline the differences between how the program functions now and how the business will operate in the future. • Explain how staff roles will change and how the role of clients will change. • Establish who the staff/stakeholders should talk to with questions or concerns.

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I.25

part ii: The Business Plan

Part II of the Toolkit will provide you with step-by-step instructions for developing your business and creating a written plan.

Part ii The Business Plan

developing a social purpose business plan

ii.1

part ii:The Business Plan

Ready, Set, Go. Pa r t I I The Business Plan

The first Part of the Toolkit walked through the process of assessing an idea in the context of the parent organization and introduced Performance Measurement and ManagementSM (PM&M) a method of systematic thinking that will be helpful throughout the planning process. Part II: The Business Plan introduces the seven sections of a social purpose business plan and provides tools and techniques for planning and writing each section. Portions of the Recycle-A-Bicycle business plan are included as an example throughout this section. The full text of the business plan is available in Part V of the Toolkit. Each section also includes information on integrating the tools of PM&M. The sections of the plan are laid out in the order in which they should appear in the final business plan. However, the Executive Summary will be written last, incorporating language from other parts of the business plan. In addition, during the planning and writing process, it may be necessary to jump around between the sections as business development is not a linear process. The Social Purpose Business Plan includes the following sections: • The Executive Summary • Market Opportunity • Business Model • Operations • Management and Stakeholders • Social Outcomes • Financials • Exhibits

developing a social purpose business plan

ii.1

p a r t i i : The Executive Summary

The Executive Summary You never get a second chance to make a first impression. The Executive Summary of the business plan is often the first and sometimes the only part of the plan that an investor or potential partner will read. You have only a few pages to make a compelling and concise case for your idea, the funding needs, time frame and your ability to execute the plan.
OV E RV I E W The Executive Summary is usually the last section to be written. Return to the Executive Summary once the other sections of your plan are near completion. After reading the Executive Summary, the reader should have an understanding of the core business and be interested in learning more. The Executive Summary

Helpful Hints

Because it is written last, the Executive Summary can sometimes get short changed in terms of refinement and revision. However, this section should receive significant attention. •

Try to convey your passion for starting this venture.

•

Have someone who knows nothing about your business read it to be sure that you are clearly explaining the idea and to give you fresh perspective.

•

Use formatting such as bullets, charts and numbered lists to reinforce key points.

The Executive Summary should be 3-5 pages in length and will summarize key parts of the business plan. 1.

Overview: The business idea. Explain what are you selling and to whom and include a brief description of the mission and objectives of both the nonprofit and the business. (Business Model Section)

2. Relationship of the business to the sponsoring nonprofit organization. Describe how the business venture is supported by the parent organization and the legal structure under which the business will operate. (Operations Section) 3. Opportunity: Market summary. Convince the reader that you understand the marketplace for your product or service by providing highlights of the size of the market, your target customer base and the competition. (Market Opportunity Section)

developing a social purpose business plan

ii.3

part ii: The Business Plan

4.

Competitive advantages and key partnerships. Explain why your venture will succeed. What do you bring to this market that others do not? What strategic relationships are already in place to help your business succeed? (Business Model and Operations Sections)

5.

Management team highlights. Who will operate this business and why are they qualified to do this? (Management and Stakeholders Section)

6.

Expected social impact. Outline your social outcomes and the indicators and targets for these outcomes. (Social Outcomes Section)

7.

Goals, timeline and benchmarks. Explain how the business will proceed and the key milestones for success. (Operations Section)

8.

Financial overview. Describe the financial outlook of the business including expected year of break-even, upfront costs and the financial strengths. How much do you need and when do you need it? What will these funds support? (Financials Section)

9.

Contact information. Who should the reader contact if they want to know more about the business? Provide the name, title, address, phone, fax and email information for the key contact at the organization. Including this information is extremely important because the Executive Summary might be separated from the body of the business plan and circulated. The following example from the Recycle-A-Bicycle business plan provides a comprehensive view of the business. Projections of social outcomes and financial performance are clearly delineated in charts. Every business opportunity is unique, therefore sections of the Recycle-ABicycle Business Plan may not be relevant to your business. For example, because Recycle-A-Bicycle is a social enterprise that is not a subsidiary of a larger, parent organization, the legal structure and information about the parent organization are not included. Instead, Recycle-A-Bicycle focuses on its partnerships with other organizations. If your business is a subsidiary of another nonprofit, a brief description of the parent nonprofit should be included.

ii.4

developing a social purpose business plan

p a r t i i : The Executive Summary

Recycle-A-Bicycle EXECUTIVE SUMMARY

Overview Recycle-A-Bicycle, a thriving 501(c)3 nonprofit, has a dual mission: to provide youth development opportunities to at-risk populations in New York City and to promote environmental stewardship. The nonprofit operates two successful full-service used bicycle shops that employ young people trained in bike repair and mechanics. Through these bicycle shops, Recycle-A-Bicycle offers affordable and environmentally sustainable transportation options for commuters, recreational bikers and messenger/delivery persons. As a social enterprise, Recycle-A-Bicycle has a triple bottom line in which the social and environmental missions are balanced with financial returns. Since 1997, Recycle-A-Bicycle has salvaged bikes from the waste stream and refurbished them to sell to the public. Recycle-A-Bicycle also trains young people to fix bikes and assists them in acquiring the soft skills required in today’s competitive job market. Working closely with the Henry Street Settlement and Children’s Aid Society, Recycle-A-Bicycle integrates financial, social and environmental concerns into a successful business model. Recycle-A-Bicycle currently operates two retail stores, one in the East Village of Manhattan, the other in DUMBO, Brooklyn, New York.

developing a social purpose business plan

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part ii: The Business Plan

Toward these goals, Recycle-A-Bicycle: 1 2

3 4 5 6 7

Collects donated bicycles destined for dumping. Trains at-risk youth for positions as bike mechanics and sales people, builds skills in basic business concepts and computer training, and provides a safe alternative that is a positive influence on their development. Refurbishes used bicycles through a training program. Sells the bicycles to the community as an affordable, quality transportation option. Employs graduates of the training program. Operates retail stores that also sell accessories and repair services that diversify the revenue stream and create additional profit. Offers classes to adults on bicycle repair.

Recycle-a-Bicycle is at a critical juncture in its growth. While the business is currently profitable, the potential for further growth is significant. To better serve its mission and to address the demand for used bikes, Recycle-A-Bicycle plans to create a new production facility, fill key staff positions and enhance its infrastructure. By pursuing these strategies, Recycle-A-Bicycle can increase its youth outreach by more than 100%1 in the next two years as well as create an organization that is sustained on its operating cash flow, thus reducing dependency on corporate grant funds. MARKET OPPORTUNITY The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the United States. Recent studies show that in the Northeast, 28% of adults participated in biking activities during a oneyear period. New York City boasts a healthy cycling community consisting of commuters (over 100,000 people commute by bike each day), bike messengers/delivery persons and professional and recreational riders. Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in many cyclists wanting to purchase an affordable bike as well as one that is less likely to be stolen. The prohibitive cost of a new bike also generates business at used bike stores. Demand has outpaced Recycle-A-Bicycle’s capacity to deliver for the past three years. Despite the demand, used bike stores are not prevalent in New York City. Within Recycle-A-Bicycle’s trade areas, there are few other used bike sellers due to the high costs associated with used bikes including labor to repair, inventory system requirements and insurance.

Year

Bicycles consumed (Millions)

U.S. ridership (Millions)

Bicycles consumed per rider

1995

16.2

56.3

0.28

1998

15.8

43.5

0.36

2001

16.7

39.0

0.42

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001 Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.

1 Outreach refers to the number of youth involved in any RAB activity, including both youth training and organized youth bike rides.

ii.6

developing a social purpose business plan

p a r t i i : The Executive Summary

The supply of used bikes is also strong. National trends in cycling report that the number of bicycles purchased each year remains relatively constant while the number of people riding is declining. This indicates that more bicycles are being consumed per rider. COMPETITIVE ADVANTAGE OF RECYCLE-A-BICYCLE Recycle-A-Bicycle offers a unique product and service. Its social and environmental missions make it the only socially responsible bicycle retailer in New York City. Recycle-A-Bicycle has built a trusted brand name and its products are well known as quality alternatives to traditional new bicycles. Customers often say these bicycles are better than new, referring to both the quality and the social mission. Many customers are attracted by the low prices but feel even more compelled to purchase when they learn of the social and environmental stewardship that the organization embodies. Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City. Because of low labor and materials costs, Recycle-A-Bicycle is able to offer bicycles at very affordable prices, most at 50% less than a comparable new bicycle. The youth programs inspire young people to make better life decisions and touch many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-being, provides a goaloriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An “I can do it” attitude pervades Recycle-A-Bicycle. MANAGEMENT TEAM The management team consists of three highly skilled and dedicated staff with over 10 years of experience in bicycling retailing, 13 years in transportation advocacy, and over 7 years experience in youth education. The team has proven its ability over the years and is continuing to develop new strengths. The three key staff members are: •

Karen Overton - Executive Director Ms. Overton is the founder and leader of Recycle-A-Bicycle. Ms. Overton worked as the Bikes for Africa Project Director at the Institute for Transportation and Development Policy; a consultant for the World Bank, in the International Development Bank, African American Institute; and Pedals for Progress.

•

Jared Bunde - Manager, DUMBO Shop Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as a messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as a bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. He has also excelled in his racing career, winning a silver medal for the NY State Track Cycling Championship in 2000 and 2002.

•

Yoandy Ramirez - Manager, East Village Store Mr. Ramirez started his career with Recycle-A-Bicycle as a Summer Youth Employment student in 1999. Based on his hard work, Mr. Ramirez was promoted to Assistant Manager in June 2002 and most recently became the East Village Store Manager. He will graduate from high school this summer and aspires to pursue a degree in computer science.

developing a social purpose business plan

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part ii: The Business Plan

Members of the Board of Directors complement the skills presented by the management team. The Board consists of dedicated individuals from the following professions: education, finance, social work and transportation advocacy. Each Board member brings enthusiasm, a unique skill perspective and a broad network of contacts to the organization. SOCIAL AND ENVIRONMENTAL IMPACT To date, Recycle-A-Bicycle has worked with over 4,500 youth and staffed an average of 15 positions per year. Recycle-A-Bicycle improves the lives of at-risk youth in the New York City metro area through a hands-on, formal training program in bike repair, small business and environmental education. After completing the training program, many youth fill the part- and full-time positions available at the Recycle-A-Bicycle retail stores. In addition, some secure positions in other bike shops across New York City. The organization’s strategic partners provide qualified youth counselors that recruit and work with young people who need assistance with basic job readiness skills and who can intervene in the case of serious issues regarding the social or mental well-being of participants. In 2002, Recycle-A-Bicycle worked with 772 youth through its training program. Over the next five years, the organization will increase its youth impact by 54%. In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New York City. In 2002, Recycle-A-Bicycle recycled over 14 tons of material destined for New York City’s landfills. Recycle-ABicycle expects to increase the amount of materials recycled to over 27 tons in 2007.

ii.8

2003

2004

2005

2006

2007

Youth participants to be trained

780

850

950

1050

1200

Number of positions to be filled

22

28

31

34

37

Tonnage of material to be removed from the waste stream

17

22

24

26

27

developing a social purpose business plan

p a r t i i : The Executive Summary

FINANCIAL OVERVIEW Recycle-A-Bicycle plans to make three key investments over the next three to five years to expand its programs and create opportunity for revenue growth: •

Acquire a production and training facility that will provide an expanded and dedicated space for training youth as well as refurbishing bikes, therefore meeting more of the demand for used bikes in New York City;

•

Acquire a van and hire transportation staff to allow for more strategic and coordinated pick-up of donated bikes as well as transfer of inventory between production facility and retail stores; and

•

Hire additional staff to enable the organization to raise capital from institutional grantors for business expansion as well as for increased training and youth program services.

Recycle-A-Bicycle projects net operating losses in 2003 while development and fundraising efforts are invigorated, and the marketing, internet sales capacity, retail signage/merchandising, and other critical corporate infrastructure projects are further developed. The results of this investment will be greater sales revenue and significant improvement in net margin.

SUMMARY OF REVENUE PROJECTIONS AND NET INCOME 2003

2004

2005

2006

2007

Sales Revenues

$167,657

$232,932

$290,281

$318,775

$334,446

Grant Revenues

$ 71,091

$176,396

$172,049

$188,875

$198,129

Net Income

$ (11,472) 2 n/a

$ 47,868

$ 80,105 2006 28%

$111,275 2007 35%

$126,475

Net Retail Margin

21%

38%

Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year Strategic Plan. These grants will be pursued through institutional funders with an interest in environmental stewardship and/or youth development. 2003 Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000 in grant funding will serve as working capital to support current operations as well as implement new marketing efforts. The additional $100,000 will support hiring a Development Officer, support costs associated with sourcing and obtaining the new production and training center and provide for other infrastructure improvements. 2004 Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds will be used in part for working capital and in part to support more of the Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the production and training center, hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will be used for a down payment on the production and training center.

developing a social purpose business plan

ii.9

part ii: The Business Plan

Recycle-A-Bicycle will raise the additional $106,000 through fundraising efforts spearheaded by the new Development Officer. 2005 Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional costs related to expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours by Teens program. Recycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track record of growth and is now looking for capital in order to expand the social and environmental outcomes and develop more sustainable systems within the business. Recycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer and small business in New York City. The organization serves a triple bottom line, benefiting the at-risk youth and the New York City environment through a business model that is moving toward sustainability. Recycle-A-Bicycle is seeking to increase its effectiveness in all three areas – social, environmental and financial. As one of the leading organizations combining youth education, recycling and bicycling, Recycle-A-Bicycle has the capability to expand locally as well as develop a national reach. For more information on Recycle-A-Bicycle, please contact Karen Overton, Executive Director, at [email protected].

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The Market Opportunity So you think you have a great idea… The Market Opportunity Section is intended to convince your reader that there is both a need and demand for your product or service. The Market Opportunity Section should demonstrate an understanding of your customers in terms of demographics and the factors that will influence their decision to purchase your product or service.
OV E RV I E W The viability of your business is based on a variety of factors - the market opportunity, the business model, the social and financial outcomes and the management team. In this Section, you will explain in detail the rationale for the business venture by describing the opportunity that exists for your product or service. Why is the business needed and by whom? The key items that you want to convey are demand for your product or service and the overall characteristics of the market itself. It includes: 1.

External and Industry Context of the business.

2.

Market Description, including size, growth rate and level of demand for your product offering.

3.

Customers, including target segments, demographics, purchasing power and decision factors.

4.

Competition at the local, regional and national levels.

5.

Summary of the market opportunity. This part of the business plan presents an overall picture of where your business will fit within its industry and market. You should begin with a macro-level look and then narrow the focus down all the way to your target customer. Finally, you will show where your competitors fit within both the market and your target customer base. Market research will provide you with the information needed to craft your story. At the end of this chapter you will find sources of information and guidance on how to conduct your research as well as helpful hints for creating your story. In Part I: Getting Started, you began to think broadly about your market opportunity. You may want to review your answers to the External Environment questions before you begin.

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part ii: The Business Plan


I N D U S T RY A N D E X T E R NA L C O N T E X T Begin the Market Opportunity Section by discussing the industry in general and analyzing changes or events that are taking place at international, national, regional and local levels. You should also describe the technological, economic, regulatory, labor market, political and environmental occurrences that could impact your selected industry. An analysis of the external environment provides an overview of the arena in which your social purpose business will operate. The size and scope of your proposed business will dictate the importance of these factors on your sales and operations. Industry: Your industry refers to the type of business you are operating. The Department of Labor has created industry divisions from the North American Industry Classification System (www.census.gov/epcd/www/naics.html): • • • • • • • • • • •

Agriculture, Forestry, Fishing and Hunting Mining Utilities Construction Manufacturing Transportation and Warehousing Information Finance and Insurance Real Estate and Rental and Leasing Professional, Scientific and Technical Services Management of Companies and Enterprises

• • • • • • • • •

Administrative and Support and Waste Management and Remediation Services Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Other Services (except Public Administration) Wholesale Trade Retail Trade Public Administration

Examples of relevant industry information include: • A silk screening business discusses that the industry has been shifting from manual screen printing to digital printing, which results in lower quality, but faster production time for printing T-shirts and other items. If the business focuses on manual production, it will need to show that there are customers who are looking for the higher quality printing services. • A new hardware store examines the trend in retail sales moving from small neighborhood stores to large chain stores such as Wal-Mart, Lowe's or Home Depot. If the business were also a large chain store, this information would be helpful in making the case for the new store. However, as a small community-based store, the business needs to prove that customers will shop there.

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• A copy shop outlines how the industry has been affected by new recycling laws or describes the way that technological changes such as the trend to provide Print on Demand services (a new printing technology that allows printers to efficiently produce small quantities of printed material at a time) are requiring businesses to make new capital investments. If the business wants to offer the most up-to-date services, the industry data will support the need for investment in technology. The following excerpt from Recycle-A-Bicycle begins with statistics about the bicycling industry in the United States. This information leads the reader through an explanation of the trend in the industry toward greater consumption of bikes per rider. It becomes clear that bicycles are viewed as a disposable commodity.  R E C YC L E - A - B I C YC L E I N D U S T RY A N D E X T E R N A L C O N T E X T DEMAND FOR BICYCLES CONTINUES TO GROW NATIONALLY Bicycling has long been a pastime of children and adults alike and are used most often for social and recreational purposes. In fact, bicycle riding is now the seventh most popular sport in the country (out of 62). In July 2001, the Bureau of Transportation Statistics estimated that approximately one in four adults (25%) in the United States had used a bicycle in the last 30 days. An Outdoor Industry Association Report found that within the Northeast, over 28% of adults participated in biking activities during 1994-1995. However, cycling is highly seasonal and usage declines to as low as one in ten in the winter months. Statistics show that the number of bicycles purchased each year remains relatively consistent while the number of people riding is declining. This indicates that more bicycles are being consumed per rider.

Year

Bicycles consumed (Millions)

U.S. ridership (Millions)

Bicycles consumed per rider

1992

15.4

54.6

0.28

1995

16.2

56.3

0.28

1998

15.8

43.5

0.36

2001

16.7

39.0

0.42

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001 Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.

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part ii: The Business Plan

With fewer people cycling and a constant number of bicycles being consumed, either consumers are accumulating more bicycles or disposing of more bicycles. RAB's experience points to the latter. Further evidence of this "disposable" bike culture was indicated in the keynote presentation at the 2002 Taipei International Cycle Show, when Yoshizo Shimano, Chairman of Shimano Inc. said: "American consumers buying mass-merchant bikes ride them fewer than 60 miles before hanging them up in their garages. In Japan the bicycle is so devalued that consumers dumped them in the streets creating a public nuisance. They [bicycles] have become a throw-away commodity." Source: Bicycle Retailer and Industry News, May 1, 2002 Recycle-A-Bicycle provides a unique solution to the commodification of bicycles while offering affordable, environmentally sound transportation and recreation options to residents of New York City.

Developing your Story

Developing Your Story is meant to guide both the research and writing of the Market Opportunity Section. These questions are included after the explanation of each major part of the Market Opportunity section. As you are writing your business plan, only include information that is relevant in the context of your business. Ask yourself: Why is this important and what does it mean for the potential of my business? Then ask yourself how the information fits into your story.

Macro Context: Taking a Look at the Operating Environment •

What is the economic outlook for your industry? How might this affect your proposed business?

•

Are there other current or potential events that might affect the industry? What effects do you anticipate?

Industry Context: Exploring Your Industry

ii.14

•

Define the industry that you will operate within.

•

Describe what is currently happening within your industry (e.g. trends in employment, consolidation of companies, labor issues, new legal or regulatory issues, etc.) and compare this to past trends. How will these changes affect the industry?

•

How is new technology affecting the industry?

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p a r t i i : The Market Opportunity


MARKET DESCRIPTION AND CUSTOMERS Once you have provided a snapshot of the external environment and industry, you will need to describe the market in which you will operate your business. The market is defined by the universe of potential customers for your product or service. In this section of the business plan, include the following: • Description of your market including size and geography of your target customer base. • Market trends. • A discussion of your customer segmentation strategy. • Your expected share of market or the level of demand anticipated. Some questions to consider as you conduct research are: How large is the market and how much of the market do you expect to capture? Is the market growing? Are you entering an emerging market or one that is relatively well-established? What does this mean for your business? Customer segmentation is a critical component in demonstrating your understanding of the market. When describing your customers, it is essential that you include data that proves that there is a strong demand for your product or service. In particular, you want to focus on the following: • Demographic information: age, gender, ethnicity, socio-economic background, educational attainment, employment status and population size. • Psychographic information: motivation, buying trends, interests, social concerns, political views and values. Both demographic and psychographic information will allow you to create a detailed profile of your customer base. In gathering this data, you will also be able to break your target market in various subsets, or segments, of the general market. Segmenting the market into specific, smaller groups allows you to hone in and describe your special niche and the particular needs and/or wants that the social purpose business will address. It's important to be realistic about your target market. As you describe the market and the expected market share (i.e. the number of customers that will buy your product/service), keep in mind the capacity of your social purpose business. Can the social purpose business effectively support the number of customers you expect to serve? Careful consideration of all of these questions will allow you to describe the opportunity that exists for your business in quantifiable terms.

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part ii: The Business Plan

Helpful Hints

Thinking about Customers Do not assume that customers will buy your product just because you are selling it. People are creatures of habit and they tend to purchase what they know. Think about your own purchasing behaviors: •

Do you always purchase the same brand of toothpaste? Why or why not?

•

What factors might cause you to start shopping at a different grocery store?

•

How do you decide whether or not to try a new product?

Chances are that your social purpose business will offer a product or service that is already sold by someone else. In that case, you will have to convince a customer to stop buying their regular product and switch to something new.

 R E C YC L E - A - B I C YC L E M A R K E T D E S C R I P T I O N CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG New York City boasts a healthy cycling community consisting of commuters, bike messengers/delivery persons, and professional and recreational cyclists. The New York City Department of Transportation estimates that 100,000 people commute by bike daily. In addition, there are several active bike-oriented organizations and clubs with memberships totaling over 10,000. The Five Borough Bike Tour, the largest cycling event in the U.S., takes place in New York City with a ridership of 30,000. Cyclists flock to New York City parks on the weekends during good weather. There are also New York City industries dependent on cyclists: messenger services, food delivery and pedicabs. New York City has over 100 miles of bike lanes and an additional 75 miles of Greenways for use by cyclists. For the most part, New York City's terrain is flat, and the high density and mix of land use lend themselves to cycling. Traffic and parking are constant problems facing drivers and cycling is generally a faster mode of transport for trips within a five-mile range. According to one bike shop manager, cyclists will be active in temperatures of 50 degrees Fahrenheit and above, leaving only the winter season unpopular for biking. The events of September 11th converted some commuters into cyclists. At this time, many people's access to public transportation was disrupted or they became anxious about the possibility of biological warfare in the subways. The East Village shop did a record volume of sales and repairs from September to December. With a bus and subway fare hike scheduled for May 2003, the number of commuters cycling to work is expected to increase as commuters will choose to cycle rather than pay $4 daily for a round trip.

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On a more positive note, the government's recent investment in New York City's bicycle infrastructure, perceived to make conditions safer, helps to encourage cycling. These investments include $1.5 million, received in 1994, to plan and implement a comprehensive bicycle network for New York City. Through this effort, 500 miles of bicycle routes have been identified and New York City has produced the New York City Bicycle Master Plan as well as the first-ever New York Cycling Map. In 1996, an additional $2.4 million was invested in the implementation of the Master Plan. Both of Recycle-A-Bicycle's shops directly benefit from these improvements. A new bike lane is being painted along Avenue C in the East Village, directing cyclists from the Williamsburg Bridge to pass by the shop. More impressively, a dedicated bike/pedestrian path is under construction that will run along the East River on the Brooklyn side. One of the main entrances is located at Washington Street just one block from one of RAB's shops.

After describing the cycling industry in the U.S., Recycle-A-Bicycle narrowed its story down to the local level. Recycle-A-Bicycle included data on bicycle consumption in New York City and Brooklyn as they relate to its retail locations. This data demonstrates the size of the target market. In addition, RAB included specific data on New York City's cycling community as well as information on bike lanes and other roadways used by cyclists. By including this data, RAB demonstrated that a healthy market exists for its product. In the next excerpt, Recycle-A-Bicycle effectively uses demographic and pyschographic data to segment its market and illustrate demand for its product. While the overall target market is the New York City cycling community, the market has been segmented into specific targets: socially/environmentally conscious cyclists, students, individuals that have experienced bike theft and commuters.  R E C YC L E - A - B I C YC L E TA R G E T C U S T O M E R S CUSTOMERS SEEK VALUE IN THEIR BICYCLES A strong market exists for used bikes because many consumers are unwilling or unable to purchase new bikes that typically start at $200 - 250. A typical RAB customer is 20 - 45 years old, will use a bicycle as a primary means of transportation, and has a median income of at least $20,000. Secondary customers are in a similar age range, but will use the bicycle primarily for recreational purposes. Repair services and parts are sold to a wider variety of cyclists, and Recycle-A-Bicycle is a strong supplier to the messenger and delivery bicycling communities. One in three customers shop at Recycle-A-Bicycle because they recently had a bicycle stolen. This was determined during a survey of shoppers conducted over a month in summer 2002. These customers reported that they were interested in purchasing a cheap, beat-up looking bicycle to reduce the likelihood of theft. Customers in this situation are also happy to learn that Recycle-A-Bicycle tracks every bike - from its source of donation to its final destination. Business is built on its reputation to avoid dealing in stolen bikes. The majority of customers purchase a bicycle to meet their primary transportation needs. Parts and repair sales tend to sell to the messenger and commuter communities. The fix-a-flat stations are busy in the summer serving these two communities and the enhanced accessory lines also appeal to these groups.

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part ii: The Business Plan

RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE EAST VILLAGE

ALL OF MANHATTAN

DUMBO

ALL OF BROOKLYN

Resident Population

58,595

1,459,596

47,746

2,465,326

Over Age 18

46,290

1,213,652

40,687

1,802,827

Ages 20-45

35,687

709,052

23,692

941,531

92.6%

80%

64.8%

72.9%

$43,767

$48,281

$56,293

$31,896

2.9%

0.9%

0.7%

0.5%

ATTRIBUTE

% Renters Median Earnings % Bike to Work

Source: 2000 Census, Census 2000 Summary Files (SF-1, SF-3) by Zip code; Manhattan = 100 3-Digit ZCTA; Brooklyn = 112 3-Digit ZCTA

As evidenced from the above chart, Recycle-A-Bicycle is located in prime home markets for bicycle commuters. East Village residents ride their bike to work nearly three times that of other Manhattan residents. The DUMBO trade area rate of cycling is also higher than the Brooklyn average, and should continue to grow.

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Developing your Story

Micro Context: Describing the Market and your Customers •

What is your market? Describe the demand, geography or other criteria used to define your marketplace.

•

Identify trends taking place in the market. For example, are sales growing, declining or stagnant, and at what rate? Are sales growing because new customers have entered the market (e.g. the cell phone market in the early 2000s) or have existing customers started to purchase more frequently (e.g. home computer market in the 1990s)? Have prices been changing? Have products or services changed?

•

Who are the customers for your product or service? How many potential customers are there? Describe them in terms of demographics, segmentation and trends, including future projections regarding size, demographics and decision-making to purchase goods/services.

•

How does the customer make decisions about what product or service to purchase? What factors are most important in these decisions?

•

What price are customers willing to pay? Will customers switch to your product? How much will it cost them to change to your product/service?

•

How do customers typically hear about products and services similar to your offering? How will this affect your ability to attract customers?

•

How much will it cost to acquire and support a customer?

•

How easy is it to retain your customers? Relate your customer retention information to the costs to acquire a new customer as well as the cost to the customer to switch to a new product or service.

•

Are there secondary customer segments that you will target? If so, describe them.

21

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part ii: The Business Plan


COMPETITION There is always competition for your product or service. The competition section of the business plan is meant to demonstrate how the needs of your potential customers are currently being met. With this information, you can show how your product or service is differentiated. The section will tell the reader where your potential customers currently shop and describe the product or service offerings that are currently available. Competition can exist at multiple levels - local, state and national and can be either direct or indirect. Direct competitors offer similar products or services. Indirect competitors offer a related product or service that fulfills the same need. For example, direct competition for Recycle-A-Bicycle includes mass merchants and department stores that sell bicycles at affordable prices. Local bike merchants in New York City represent indirect competition because they cater to the high end market that is willing to buy expensive and/or specialized bicycles. As part of your research, you should conduct a detailed assessment of your direct competitors, including strengths, weaknesses and business performance. The overall goal in discussing the competition is to differentiate your business, discuss how it meets gaps in service and justify why it can compete effectively against other businesses. Recycle-A-Bicycle explains how, as a used bike dealer offering quality refurbished bikes, the business is highly differentiated from other bike shops in New York City.  R E C YC L E - A - B I C YC L E C O M P E T I T I O N RECYCLE-A-BICYCLE COMPETES WELL AGAINST OTHER BICYCLE STORES

Overview The retail bike industry in New York, like most cities in the country is comprised mainly of small, independent bicycle retailers that primarily serve neighborhood clientele. Mass merchants like KMart and Toys-R-Us and sporting goods stores like Sports Authority also sell bicycles. Among sellers of new bikes, mass merchants and department stores are the greatest competition for Recycle-A-Bicycle because they offer products at affordable prices. However, these competitors are not equipped to handle adjustments or repairs and do not employ professional bike mechanics trained to offer appropriate customer service. In addition, the selection is often limited and the bikes may not be assembled properly. Recycle-A-Bicycle is not in direct competition with most independent bicycle shops in New York City because the majority of these shops cater to the high-end market. The price of a new bicycle in these shops typically begins at $200. Recycle-A-Bicycle maintains favorable relationships with many of these stores and often will receive donations of materials from them. However, bike shops make their highest profit margin from the sale of parts and accessories and Recycle-A-Bicycle competes with these stores for accessory sales. ii.20

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Few barriers exist to opening a bicycle retail store, though a capital outlay of approximately to $100,000 is required ($80,000 investment in inventory, $10,000 in tools, and $10,000 in other various costs, plus a good credit history). In general, dealer margins have been declining on bicycles and accessories, and more retailers are closing. Recycle-A-Bicycle does not anticipate any new retailers opening in the East Village or DUMBO trade areas in the immediate future. New York City Market for the Sale of Refurbished/Used Bikes Most bike shops do not offer used bikes because the cost of labor to repair them is high, and because selling used bikes requires an additional inventory system and liability policy (new bikes are insured by the manufacturer). Furthermore, due to the high rate of theft in New York City, many consumers want assurance that the bikes are sourced from legitimate places, requiring bike shops to develop additional inventory and sourcing systems. Used bicycle dealers are the primary competition for RAB and will be discussed in detail with regard to the trade area of each of the retail stores. Thrift stores are another source for used bicycles. These stores offer inexpensive bicycles. However, the supply is not steady and a bike is sold "as is", meaning that it has not been repaired and may not be safe to ride. RAB has identified a market niche, used bicycles. Given the additional requirements such as a liability policy and inventory system, the majority of bike shops only sell new bicycles. While RAB directly competes with these shops for the sale of accessories, its core product of affordable, refurbished bicycles distinguishes it from other bike retailers.

23

Developing your Story

Competition •

Who else offers your product/service? Where are they located? What are their strengths?

•

Who are the target customers for your competitors? Do your competitors plan to expand?

•

How important are your target customers to the competition? What share of your target customer market does each competitor have?

•

What are the competitive advantages of your competition (e.g. high quality product/service, customer satisfaction, strong management, brand awareness)?

•

What are the barriers to entry for new competitors? How will the barriers to entry change over time?

•

Who has the potential to enter this market? When?

•

What are the weaknesses of your competitors?

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part ii: The Business Plan


M A R K E T O P P O RT UN I T Y S U M M A RY The Market Opportunity Section can be lengthy and rather detailed. Therefore, it helps to conclude with a short summary that highlights the points about the demand for your product or service. Recycle-A-Bicycle provided a summary of the market opportunity at the end of the section. The following excerpt encapsulates the key pieces of information conveyed.  R E C YC L E - A - B I C YC L E M A R K E T O P P O RT U N I T Y S U M M A RY Recycle-A-Bicycle faces a welcome challenge: to recycle the supply and meet the demand for used bicycles in New York City. The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the United States and studies show that adults frequently participate in biking activities. New York City boasts a healthy cycling community consisting of commuters (over 100,000 people commute by bike each day), bike messengers/delivery persons, and professional and recreational riders. Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in many cyclists wanting to purchase both an affordable bike as well as one that will be less likely to be stolen in the future. The prohibitive cost of a new bike also generates business at used bike stores. Demand has outpaced Recycle-A-Bicycle's capacity for the past three years. Despite this demand, used bike stores are not prevalent in New York City. Within Recycle-ABicycle's trade areas, there are few other used bike dealers. In addition, most retail bike shops do not carry used bikes due to the high cost of labor that is required to refurbish the bikes. The supply of used bikes is also strong. National trends in cycling indicate that bicycle consumers are purchasing more bikes, though ridership remains constant. This creates a situation in which there are many bikes either sitting idly in storage or being thrown out or abandoned. In New York City, because space is at a premium, the latter situation is more likely. Recycle-A-Bicycle estimates that the supply of used bicycles is ten times greater than what the business can currently collect; these unused bicycles currently end up in landfills.

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MARKET RESEARCH The information captured in the Developing Your Story questions will shape your Market Section and add depth to your business plan. By conducting an extensive analysis of the market, you will strengthen the story you have to tell about your business and fully demonstrate that there is demand for the product or service that you are offering. As you delve into the research, you may discover that the market is in decline or that the economy will adversely affect your business. Uncovering this information doesn't mean that you should cancel your business plans. However, it does mean that you need to be flexible, responsive and thoughtful about your business idea. Identifying the market conditions, revising your idea and finding a viable opportunity are the purposes of this section. The Market Opportunity Section calls for extensive research on the external environment, industry, market size, customers and competition. Your story will be more believable if you can prove it with numbers. You can use a variety of sources to gather data: • U.S. Census Bureau www.census.gov At this site, you can access free demographic information about potential customers living in particular areas. In addition, you can access the Economic Census, an area of the website that contains industry level information that can be sorted to a local level. • Trade Associations Trade Associations are a good source of market research as they are the experts in their field. Trade Associations also have information on industry trends. Some members of the trade association are likely to be your competitors. • EASI Demographics www.easidemographics.com Easy Analytic Software, Inc. (EASI) is a New York-based independent developer and marketer of CD ROM and Internet demographic data and software solutions that provide demographic reports with unique search and analysis tools. EASI provides targeted site analysis software and updated demographics and related data for standard and customized geographies (block groups, ZIP codes, cities, counties, etc.). • Local and State Agencies Government agencies may have information on competitive companies, local demographics and data that is specific to your region or locale.

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part ii: The Business Plan

• Public Libraries Libraries provide access to news services and other databases that can provide market information at all levels - from industry-wide to local news. • Securities Firms Securities and/or investment news firms such as Reuters may have reports on your industry that indicate the size of the overall market or information on competitors. In addition, these reports can help you understand how your business should perform relative to similar companies. • Gallup Polls www.gallup.com This site offers timely industry level news and information. • Colleges and Universities Area colleges and universities may have small business development or entrepreneurship departments that can assist with research. In addition, a college library may have databases and research tools to supplement what you find at the public library. • Direct Industry Contacts Talking with experts in your field is a strong way to verify or learn the story behind the market trends and statistics that you have found in your market research. Market research is a business unto itself. There are firms that specialize in different markets and are able to conduct in-depth research and analysis into your market. However, you can do much of this research yourself, especially if your market is easily accessible. You can collect data by holding focus groups, administering surveys, distributing questionnaires and by conducting "grandma research." Examples of "grandma research" include "person on the street" interviews, observing the number of people that frequent the competition's locations and picking up price sheets for the competition. These are low-cost alternatives that can be accomplished by your team. Telling your Story Once you have completed the research and answered the Developing Your Story questions, you have to put it all together into a compelling case. This is a very individualized process, but the Recycle-A-Bicycle example lends a few lessons that might get you started. Recycle-A-Bicycle included headlines to help guide the reader through the Market Section. Each subsection begins with a headline that is proven through data and conclusions. These headlines set the stage for the section and also allow a reader to skim and still get a sense of the story.

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The headlines for RAB’s market opportunity story are: • Demand for bicycles continues to grow nationally. • Consumption of bicycles in New York City is strong. • Recycle-A-Bicycle competes well against other bicycle stores. • Recycle-A-Bicycle has a strong presence in its retail trade areas. • Customers seek value in their bicycles. • Residents in our trade areas are more inclined to commute by bicycle. The other key to writing your story is to use the market trends to prove your case. Recycle-A-Bicycle describes the New York City cycling environment in a positive light, describing the flat terrain, short distances and miles of bike lanes as reasons that cycling is popular in the city. However, RAB could also find evidence that many commuters who want to bike to work cannot due to a lack of safe space to park bikes during the day, or they could highlight the dangers of cycling in the city as cars and cabs drive in designated bike lanes. Instead, Recycle-A-Bicycle uses data such as the high level of theft as a way to discuss why the refurbished bikes are in demand because they are less expensive and look a bit less shiny and new, thus they are less attractive to thieves. Recycle-A-Bicycle has been in operation for six years and therefore has a strong sense of its market. Finding the right statistics and data to tell the story is more difficult when a business is in the start-up stage. Talking to potential customers and developing an idea of what you think the story will be are good ways to get started.

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p a r t i i : The Business Model

The Business Model What's for Sale?? The Business Model Section tells the reader what you are selling and why it will be successful in the context of the market opportunity that you described earlier. The Section describes the social component of the business, provides a pricing analysis and demonstrates how you will generate income. After reading the Market Opportunity and Business Model Sections, the reader should feel confident that you have a viable business idea.
OV E RV I E W The Business Model Section tells the reader what you are selling and why it will be successful in the context of that market opportunity. The Business Model Section should include the following: 1.

Description of the Product or Service - what you are offering and to whom.

2.

Social Component of the business - the social mission/goals that you are trying to achieve.

3.

Competitive Advantages of both the firm and the product/service, including strategic partnerships and relationships.

4.

Pricing Analysis - what you expect to charge for your product/service, how much it costs to produce it and what your competitors charge.

5.

Revenue Model - the way in which you expect to make money from the product/service. Take a moment to review the Organizational Assessment Survey that you completed in Part I: Getting Started. There, you began to describe your business model and the way it will benefit a targeted group of people. As you continue, you will build on this work and more clearly articulate your product or service offering.

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part ii: The Business Plan


D E S C R I P T I O N O F P R O D UC T O R S E RV I C E The Business Model Section begins with a straightforward description of your product or service and who benefits from it. If you have more than one line of products or a package of services, you should describe each one starting with the most important in terms of the amount of sales revenues you expect to generate. Describe the attributes and benefits that your product will provide to customers. Attributes: The features of your product or service. Attributes are often tangible aspects of your product or service. For example, the attributes of a copier might be that it copies twenty-five pages per minute and creates double sided copies. Benefits: What the customer "gets" from using your product or service. Continuing the copier example, the benefits to the customer are that they receive fast, reliable copies.

Business Planning With PM&MSM 30

Performance Measurement & Management (PM&M) is a tool that can help you in planning and communicating your business. PM&M utilizes a Logic Model to illustrate your business concept and desired outcomes. As you work through Part II: The Business Plan, we will provide suggestions on how to integrate your planning into your Logic Model. Inputs

The staff and resources that are required for your business activities (e.g. employees, donated items, the building where the business will be operated).

Activities

You should include the main activities associated with your business idea (e.g. operate ice cream shop, refurbish bikes, print t-shirts).

Outputs

What will happen as a result of the activities mentioned above (e.g. revenues generated, products sold)?

Outcomes

What are the changes or benefits associated with conducting your business activities (e.g. financial outcomes might include breaking even or generating profits while social outcomes might include clients build soft skills by working at the business)?

The Recycle-A-Bicycle Business Model Section opens with a synopsis of their business model, including strategic highlights about their recent accomplishments. It then moves into a description of product lines. Because RAB has been in business for several years, these product lines are well established. If you are a start-up business, you might not have as much information. However, try to be as specific as possible when describing your product or service. ii.28

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 R E C YC L E - A - B I C YC L E D E S C R I P T I O N O F P R O D UC T O R S E RV I C E Recycle-A-Bicycle's growing success can be attributed to the fact that it has moved to more accessible locations and has built a solid reputation in the community. Repeat customers are common, as well as visitors who were referred by word of mouth. A majority of customers choose to patronize the Recycle-A-Bicycle shops because of the social and environmental missions. Product Line -- Bicycles Recycle-A-Bicycle offers a wide variety of refurbished bicycles. Over 50% of sales are in the road bike category. This is due to the fact that it is the most common type of donation, and therefore most available in stock. The shops experience high demand for mountain bikes, hybrids, three speeds, and cruisers. These types of bikes offer the cyclist an upright position that is considered more comfortable for commuting. Recycle-A-Bicycle also sells children's bikes, but has found that few parents want to purchase second hand items for their children. Children's bike sales account for less than 5% of the bikes sold. All bicycle sales come with a 30-day warrantee. Product Line -- Repairs Recycle-A-Bicycle offers full bicycle repair services for all models of bicycle. Customers come to Recycle-A-Bicycle because many bicycle shops will not repair older bicycles. The percentage of repairs to total income has ranged from 5% to 15%, gradually increasing over the years as staff with professional experience have been added. Offering repairs helps to further Recycle-A-Bicycle's environmental impact by reducing the number of bicycles that become unusable. Furthermore, parts recycled from demanufactured bicycles are not entering the waste stream and are put to productive use again. The shops are well positioned to specialize in the repair of bicycles manufactured during the 1970's and 1980's. Repair pricing is competitive with other bicycle retailers. Product Line -- Parts and Accessories Both stores sell new and used accessories that make cycling safe and comfortable. The number and variety of accessories are currently being expanded, but the merchandise mix will remain focused on the safety, commuting and security categories. The most popular safety and security items that are sold include locks, helmets, lights, and bells. Commuting items include pumps, patch kits, racks, baskets, and fenders. The mark up on new items ranges from 50-150%, averaging 100%. Recycle-A-Bicycle offers discounted prices on used accessories acquired from donated bicycles. These are priced at wholesale rates because they require no capital outlay. The ability to stock and sell new accessories currently accounts for a little over 17% of total income and growth is expected as product offerings increase. Retail revenues have grown steadily throughout the past five years of operation. The trend in revenues has been towards increased sales of parts and accessories, driven primarily by customer awareness and loyalty. Recycle-A-Bicycle is also able to more efficiently special order items that will further increase sales in this category. Recycle-A-Bicycle's ability to quickly remanufacture bicycles, therefore meeting more of the demand for used bicycles, has been impaired by the lack of a focused production facility. Recycle-A-Bicycle expects the proportion of bicycle sales to increase once new inventory is created, as selling bicycles is the most effective way to serve both the social and environmental missions.

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32

Developing your Story

Product or Service •

Describe your products and services. What are you selling? What are the attributes and benefits of each?

•

What market needs do your products/services fill?

•

How does your product/service fill that need?


THE SOCIAL COMPONENT As a social purpose business, you are balancing the "double bottom line," or both financial and social goals. This Section shows the connection between your business and the social goals you expect to achieve. A description of the social component should include an explanation of how the business furthers your mission and assists your clients. Describe the number of clients you expect to serve through the business and the types of training or skills the clients will gain. Because the social component needs to make sense in the context of the financial goals of the business, it is important to justify the costs that would not otherwise be incurred in a traditional business. For example, if your business offers supportive "first-work" positions, it may incur more expenses than a traditional business because it must provide training and support to its staff. The increased costs may mean that you will have a difficult time competing on price or you may be quite susceptible to fluctuations in sales volume. Alternately, if your plan is to cycle employees into your business for training and then transition those employees into external permanent jobs, you might incur additional human resources costs associated with multiple hiring cycles. On the other hand, your social component may provide an economic benefit to your business model. For example, if your plan is to cycle employees into and out of the business each year, your labor costs may be lower because you will not need to offer wage increases each year. Or if employing youth, you may save on the cost of fringe benefits that are usually offered to adult employees.

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Business Planning With PM&MSM This chart is meant to provide suggestions to create or revise your Logic Model. Inputs

Activities

Outputs

Outcomes

The population you serve or the resources/assets you have developed through the organization may serve as inputs to the business and program activities. The social component of your business often represents the second major activity in which you will be engaged (e.g. culinary training program, firstwork experience including resume and soft skill development). If you are operating an employment/training business, your programmatic activities might lead to an output of trained clients. If you are utilizing intellectual property, your programmatic activities might lead to the production of a training manual or other product. What changes or benefits do you expect from the outputs (e.g. clients who are able to obtain permanent employment or move into supervisory positions, more nonprofits are able to implement a program using your training manual)?

 R E C YC L E - A - B I C YC L E S O C I A L C O M P O N E N T Youth Job Training The youth involved with Recycle-A-Bicycle are recruited through the organization's strategic partnerships with Henry Street Settlement and Children's Aid Society. These youth come from lowincome families and receive a wealth of services through the partner organizations. Recycle-ABicycle provides meaningful training and employment opportunities for these young people who in turn provide a low cost labor input for the business. Recycle-A-Bicycle works with over 750 students annually through a classroom training program focused on the following areas: • • • •

Bike repair / mechanical overview; Small business / setting goals; Environmental education / recycling / stewardship; and Safe cycling / road awareness.

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part ii: The Business Plan

Recycle-A-Bicycle also delivers innovative on-the job training programs in the following areas: • • • • • •

Basic mechanics training / advanced mechanics training; Customer service and communications; Introduction to business management /entrepreneurship; Accounting, marketing and business operations; How cycling can create a healthy lifestyle and a social structure; and Recycling and environmental stewardship.

Developing your Story

The Social Component •

Briefly discuss the mission of your organization and how the business will further this mission.

•

Describe the social goals for the business (e.g. clients trained and employed, intellectual property distributed and utilized by others).

•

What positions will your clients fill in the business, what skills do they have and what will they need to succeed in the business?


C O M P E T I T I V E A D VA N TA G E S Your competitive advantages are the reasons that your business will succeed within the marketplace. Generally, your competitive advantages are a set of characteristics unique to your business and its product or service. In addition, these characteristics should be meaningful to your customers. The most common examples of competitive advantage include: • Highest quality provider (e.g. Sony, Mercedes, Ritz Carlton) • Low-cost leader (e.g. Southwest Airlines) • First mover advantage - being the first and most established player in your market (e.g. Microsoft, Starbucks) • Strategic relationships - the way your business is able to leverage other parts of the supply chain to your advantage (e.g. distribution of Coca-Cola products or Wal-Mart's just-in-time inventory system) • Patented technology (e.g. pharmaceutical products, biomedical products) Competitive advantages also include more subtle differences and can be based on the perceptions of your target customers. Examples of such advantages include location, customer service and management. Though

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less obvious, these advantages can differentiate your business from the competition. For example, a neighborhood small business may have a prime location on a busy corner. If the business owns or holds a long term lease on the space, this may be a competitive advantage. The other competitive advantage to consider is your social mission. This may or may not be a strong advantage for your business. For Recycle-ABicycle, the social mission is a vital part of the competitive advantage. The youth and environmental components attract customers, the youth provide a low-cost supply of labor and the donated bicycles provide a lowcost supply of bikes and parts. The economic advantages are a result of the social mission. A traditional used bicycle business would not be able to produce the refurbished bicycles at such a low cost. Many social purpose businesses assume that their competitive advantage will be as the "low cost leader." They believe that they can undercut the competition and therefore generate sales. Before you decide that this will be your competitive advantage, it is important to consider how you will price your product and also to consider what price says about the product. Generally, people perceive higher priced products as higher quality while lower priced items are considered lower quality. In addition, competing on price can be a dangerous business. It is much easier to lower prices than to raise them. Finally, review your Organizational Assessment Survey results from Part I: Getting Started. Here, you described your core competencies and the relationships that your organization has in place. Are there other relationships with partner agencies, suppliers or distributors that could enhance your ability to sell your product or service? These relationships are also a competitive advantage.

An ice cream shop opened in a low-income community. They priced the ice cream at a low cost believing that the low income market would not support a high-end ice cream store. However, the product was actually premium ice cream. The result was that customers did not patronize the store because they thought the ice cream was an inferior product. In addition, the ice cream store was not making a high enough margin on its sales to support the business. After re-evaluating the business model, the ice cream store increased its prices and ended up attracting more customers.

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 R E C YC L E - A - B I C YC L E C O M PE T I T I V E A D VA N TAG E COMPETITIVE ADVANTAGES Recycle-A-Bicycle offers a unique product and service. Our social and environmental missions differentiate us from other bicycle retailers in New York City. On a product basis, Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City. Because of low labor and materials costs, a Recycle-A-Bicycle bike is priced at least 50% lower than a comparable new bicycle from an independent bicycle retailer. Recycle-A-Bicycle prices are also competitive against other used bicycle dealers. Additionally, the 30-day guarantee is unique in the used bicycle marketplace and because Recycle-A-Bicycle tracks all inventory from its source, consumers are assured that they are not buying a product that was stolen or illegally obtained. The youth programs inspire young people to make better life decisions. Recycle-A-Bicycle touches many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-being, provides a goal-oriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An "I can do it" attitude pervades Recycle-A-Bicycle. Consumers feel good about making their purchases with Recycle-A-Bicycle. Many customers report that they are drawn to Recycle-A-Bicycle because of the low prices, but feel much more compelled to purchase when they learn of the social and environmental stewardship. Recycle-A-Bicycle enjoys the following advantages in relationship to second hand dealers, chain stores, and bike stores: • • • • • • • •

ii.34

A legal operation that does not deal in stolen bikes; An indoor, year round, predictable space; Competitive prices; Higher quality bikes than the competition; A 30-day warranty; A selection of accessories and the ability to custom order special accessories and parts; A full line repair services; and A social mission in which all proceeds are applied to the social and environmental programs.

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Competitive Advantage

Developing your Story

•

What distinguishes your product or service? Do you have: - Superior product/service - Production/service delivery efficiencies - Experienced personnel - Strategic location - Brand awareness - Knowledge/ intellectual property

•

Is your social mission a competitive advantage for your business? If so, how will you use this advantage?

•

If your venture is successful, what will it look like? Is there an analogy with a commonly known business?


P R I C I N G A N A LY S I S This component explains your pricing strategy. Pricing is one of the facets of marketing and represents the value of your product or service. The price you set is driven by your customer's perception of the value of your goods or services and their willingness to purchase your product. This information will form the basis for analyzing the price people are willing to pay, and ultimately, the price that you will charge. Determining the optimal price for your product entails three steps. Analyze your pricing opportunity using each method and then use the results from all three to determine your final pricing structure. Step 1: How much does it cost you to produce the product or service? Step 2: What do your competitors charge? Step 3: How much are customers willing to spend?

Step 1. How much does it cost you to produce the product or service? At this point in the planning process you can no longer avoid the numbers. In order to determine how much to charge, you have to know how much it costs to produce and sell your product or services. Think through all of the costs involved even if you do not think that you are able to quantify them at this time. Later you may be able to estimate these costs or determine that they are negligible. The charts on the next pages illustrate examples of two businesses costing out the main product that they sell.1

1

These are examples and the costs listed were created solely for the purpose of illustration.

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Used bike shop (like Recycle-A-Bicycle): Costs to produce and sell one bike Cost to pick up donated bike frame

Cost to store donated bike for 2 weeks (average time before bikes are refurbished) Labor time to refurbish the bike (youth employees) Cost of parts used in refurbishing bike (including units of grease, new handlebars) Marketing costs (determined per bike based on total marketing cost for generating both supply of used bikes and demand for refurbished ones) Labor time to sell the bike to customer including adjustments Space and utilities used in 6-hours of refurbishing plus one week on display in retail store Total:

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developing a social purpose business plan

$2 for van rental

$4 (0.1% of storage space used for 2 weeks) 6 hours @ $6 per hour

Average cost of $20 per bike

Average cost of $5 per bike based on prior year marketing/sales analysis

1 hour @ $6 per hour

$1.50

$74.50

p a r t i i : The Business Model

Social purpose bakery: Costs to produce and sell one cake $3

Cost of ingredients including staples already on hand such as butter, oil, vanilla, baking powder, etc. Cost of utilities used in refrigeration, mixing and baking

$0.25

Labor cost for professional pastry chef

0.5 hours @$30/hour

Labor cost for assistant chefs (clients from nonprofit who have attended training program)

2 hours @ $8/hour

Cost of storing the cake in refrigerated case (portion of cost of case, electricity used)

$3 (estimated)

Portion of cost of delivery van plus fuel and maintenance

$2

0.25 hours @ $8/hour

Delivery van driver Marketing costs determined on a revenue basis (i.e. $2000 in marketing is expected to result in $6000 of new sales) Total:

$3

$44.75

After calculating the cost of the product, you may use cost-plus pricing to effectively increase the price by a certain percentage. This percentage may be based on industry standards or may be determined after assessing competitive prices (see Step 2, below). A second method of pricing based on cost is to use a standard mark-up rate. Mark-ups are common in retail businesses that purchase inventory at wholesale rates. Cost-plus and markups allow you to set a base price that you can assess after completing Steps 2 and 3.

Step 2. What do your competitors charge? Assessing what competitors charge allows you to benchmark your price and gives you a sense of the "market price." This analysis will show the general consumer's willingness to pay. Start by determining the prices of similar products. Then place the products along a range based on your perception of the quality of the product. For example, a range of toothbrush prices would include the 99 cent version at the low end of the quality scale and a sonic toothbrush at the high end of the quality scale with a number of

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part ii: The Business Plan

other toothbrushes in the middle. Place your own product along the range given your perception of its quality and other attributes to get a sense of how you fit into the pricing landscape. This process should give you an idea of the price range for your product. (You might end your pricing analysis after completing Steps 1 and 2. After you decide where your product fits in its landscape, make sure that the price covers your costs and then price accordingly. In some cases, this is adequate. However, a more sophisticated analysis will provide a greater understanding of how your customers perceive the value of your product. For this reason, you should work through Step 3.)

Step 3. How much are customers willing to spend? Determining the price that customers are willing to pay requires testing the different customer decision factors. For some products or some people, the decision may be based solely on price. However, most people weigh a number of factors to determine what to buy. Conjoint Analysis is a process that helps you predict the price customers might be willing to pay, based on the weight that customers place on different decision factors associated with the product. To use this method, follow these steps: 1. Choose 6 - 8 competitive products that you think are most like your product. 2. List attributes that you think are important to the customer when purchasing or using this type of product. 3. Ask some potential customers to rate the products on these attributes and to rank the attributes in terms of importance in the decision to purchase. 4. Use a weighted average calculation to determine the price customers are willing to pay.

Review the example of Conjoint Analysis in Part IV of the Toolkit.

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So what price should you charge? If you have worked through all three steps, you should have a good sense of the price that you should charge based on your costs, the competition and what customers are willing to pay. If you tested one specific product, you can use the customer knowledge to extrapolate pricing for other products. Ideally, your customers will be willing to pay more than the cost of your product. If they are not willing to pay more than your cost, then you need to rethink your product. • Is there a way to produce the product more efficiently? • Is there a way to increase the value of the product in a customer's mind through marketing efforts?
THE REVENUE MODEL The market opportunity and the pricing analysis provide the background and basis for the assumptions you make about the financial performance of the business. The revenue model shows what you expect to make through the sales of your product or service. It is hard to predict the future. As your business builds historical data and a deeper understanding of customer behavior, sales projections should become more accurate. It will always be difficult to estimate your sales volume for years into the future. The point of projecting your sales is to show how you intend to grow the business - at what rate and through what means (increasing prices, increasing volume, increasing your margins, etc.). The reader will judge whether your projections are reasonable and realistic for your particular business based on information provided throughout the business plan. The reader will expect your estimates to be optimistic rather than pessimistic. To construct the revenue model, you will look at each product/service line on a per unit basis. The three assumptions that you will begin with are: 1.

Price - What will you charge for the product or service? What are the "units" associated with this price (e.g. single product, package of services or average product sales)?

2.

Sales Volume - How many will you sell at that price?

3.

Cost of Goods Sold - What is the unit cost for the business to provide this product/service? With these assumptions, you will calculate your revenues (price times sales volume), gross profit (revenue minus cost of goods sold) and gross margin (gross profit divided by revenue).

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Price The rationale for the price you plan to charge should be developed in the pricing analysis section. This section explains why you will charge below, on par or above the prevailing market rates. This section should also outline what the prevailing market rates are and the trends/changes in rates over time (including forecast of prices if available). In developing the pricing assumptions, you will determine what you will charge for each product line both in the present and over the next five years. You will need to estimate the price increases that will be implemented over time. Information to assist you with estimating price increases might come from talking to your suppliers and vendors about their own estimates and assessing how prices have changed over the past few years.  UN D E R S TA N D I NG R E C YC L E - A - B I C YC L E P R I C I NG Refurbished bikes are sold at approximately 50% of the market value of a similar, new bike. Because this is an on-going concern, they know that the average revenue from a bike sale is $125. In addition, Recycle-A-Bicycle assumes the same average price per bike over the next five years. The rationale for the constant price comes from both the market and the cost of goods. First, the market for new bikes has generally flat pricing, therefore if Recycle-A-Bicycle maintains its pricing strategy of charging approximately 50% of the market value of a new, comparable bike, it will not be able to raise prices significantly. More important is that the cost of goods will not increase significantly and therefore Recycle-A-Bicycle does not need to raise prices to maintain its current gross margins. The cost of goods will not rise because most of the parts used to refurbish the bikes are sourced from donated bikes, and labor to repair the bikes is generated through youth employment, which tends to remain a steady wage over time.

Sales Volume Your market analysis will be the main guide as you estimate the volume of sales. It is best to break down sales volume to the smallest time unit that is feasible to estimate. Very few businesses experience the same level of sales volume from day to day or month to month. For example, many retail businesses experience most of their weekly sales on the weekends. Sales volume is also often seasonal. For example, many retail stores experience the majority of their sales during the months leading up to Christmas. On the other hand, ice cream shop sales bottom out during the cold winter months. The more detailed you are at tracking your sales, the better your projections will be in the future. Some retail operations will track sales volume and projection by the hour. As a start-up, with no historical data on which to base your projections, you might want to start at a more macro level with monthly projections that estimate volume over the first 12 months. Think about all of the factors that are likely to affect sales volume each month and estimate your volume with those factors in mind. For Years 2 - 5, it is acceptable to determine a growth factor to apply to each product line. You can base this factor on the level of marketing and brand awareness that you will generate, predicted increases in market ii.40

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demand, your competitive advantage and general industry growth trends. You may also calculate growth in reverse by determining the level of sales needed to meet your financial goals and then determining if this is reasonable given your market opportunity.

 UN D E R S TA N D I NG R E C YC L E - A - B I C YC L E S A L E S VO L U M E Recycle-A-Bicycle projects its sales volume by the day of the week and the month of the year. On a weekly basis, bike sales tend to take place on the weekends. On a yearly basis, Recycle-A-Bicycle does most of its business in the spring and summer. To account for the monthly seasonality, Recycle-A-Bicycle estimated the number of bikes sold each day in the highest volume months and then applied a "seasonality factor" to other months of the year based on historical data. For example, Recycle-A-Bicycle estimates that in January, it will sell half as many (Seasonality factor of 0.5) bikes as during a prime month such as April (Seasonality factor of 1.0).

WEEKLY BIKE SALES

M

T

W

Th

F

Sa

Su

Total

Bike Sales - East Village

1

1

1

2

2

3

-

10

Bike Sales - DUMBO

1

1

1

1

2

2

-

8

Bike Sales - Total

2

2

2

3

4

5

-

18

$250

$250

$250

$375

$500

$625

-

$2,250

Daily Bike Sales Revenue

ANNUAL BIKE SALES

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Total

Seasonality Factor

0.5

0.4

0.5

1.0

0.8

0.8

1.0

1.0

0.8

0.7

0.7

0.5

0.7

Expected Sales - EV

20

16

20

40

32

32

40

40

32

28

28

20

348

Expected Sales - DUMBO

16

13

16

32

26

26

32

32

26

22

22

16

278

Expected Sales - Total

36

29

36

72

58

58

72

72

58

50

50

36

626

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part ii: The Business Plan

Recycle-A-Bicycle has three other product lines: Parts, Service and Accessories. For projections of Accessories, Recycle-A-Bicycle did not create a formal estimate for the volume of sales of each unit stocked, but rather assumes that accessories are generally sold at the time a bike is purchased and therefore revenues from accessories are estimated as a percent (30%) of the total revenues of bike sales. Parts are pegged to Accessories, based on historical evidence of a correlation between sales of the two product lines. Finally, Service is pegged to Parts based on the idea that most customers looking for parts will also purchase Repair Services to have the parts installed on the bikes. OTHER PRODUCTS

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Total

Accessories ‘02 Sales

$ 1,350

1,080

1,350

2,700

2,160

2,160

2,700

2,700

2,160

1,890

1,890

1,350

23,490

Parts ‘02 Sales

$ 2,363

1,890

2,363

4,725

3,780

3,780

4,725

4,725

3,780

3,308

3,308

2,363

41,108

Service ‘02 Sales

$ 1,231

985

1,231

2,462

1,970

1,970

2,462

2,462

1,970

1,724

1,724

1,231

21,421

Cost of Goods Sold The Cost of Goods Sold (COGS) also known as the Cost of Goods, reflects the direct costs to the business to produce the amount of product/service that you are selling. COGS is a specific accounting convention that should reflect the costs that are directly associated with the items that are projected to be sold. Other costs associated with the business will be included in Fixed Costs. These include Selling, General and Administrative (SG&A) expenses. These Fixed Costs will include items such as salaried staff that work on the business, rent, utilities and marketing activities. The Cost of Goods Sold is an expense related directly to the revenues that you have earned during a particular time period. There are two components to Cost of Goods: Direct Materials cost and Direct Labor cost. Direct Materials: For retail businesses, direct materials cost is the cost of purchasing the inventory. For example, a museum store will source its products from a number of vendors in order to fill the store with merchandise that is relevant to the museum experience. The cost of purchasing each product from the vendor is the cost of the good. For manufacturing businesses, direct materials refers to all materials that can be traced directly to a unit of output. For example, the direct materials for a catering business include the cost of the food used to fulfill an order. The units of spices and other staple goods like butter, oil, etc. are also included in the cost.

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Direct Labor: Direct labor is the time spent working specifically on the production of the product or service. For a retail business, labor costs are usually included as a fixed cost (unless the employee works on commission). For a manufacturing business, direct labor refers to the wages paid to line workers who are involved in the production. For a service business, direct labor usually refers to the wages paid to staff providing the service. To estimate changes in the cost of goods sold over time, think about factors affecting the cost of purchasing inventory and raw materials as well as increases in wages that you will pay to direct laborers. Discussions with your vendors and suppliers are a good way to get a sense of potential increases in direct materials.  UN D E R S TA N D I NG R E C YC L E - A - B I C YC L E C O S T O F G O O D S The Recycle-A-Bicycle business model is set up to minimize the cost of goods sold. For bike sales, the direct materials cost is estimated to be 14% of the average price. This represents $15 - 20 for supplies needed to refurbish the bikes (or $17.50 for an average bike price of $125). All accessories are sold at a 100% mark-up on the direct materials cost except locks, which have a 50% mark-up. Based on the historical ratio of sales of locks and other accessories, the average mark-up for accessories is 60%. Parts are gleaned from donated bikes and are removed by youth during the training program and therefore do not have any direct materials costs associated with them. Direct labor consists of the youth, mechanics and retail managers associated with the two shops. A portion of the direct labor is subsidized through summer youth employment contracts with the city and through free labor generated by the youth training program. One way that Recycle-A-Bicycle entices youth to volunteer their time is through the Earn-A-Bike program in which labor hours translate into credits toward a bicycle.

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COST OF SALES 2003

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Repair Supplies

$

648

518

648

1,296

1,037

1,037

1,296

1,296

1,037

907

907

648

Accessories

$

540

432

540

1,080

864

864

1,080

1,080

864

756

756

540

PT Retail Mechanics

$

870

870

1,088

1,088

1,088

1,088

1,088

1,088

1,088

1,088

870

FT Storage Facility Mechanic$

-

-

-

-

-

-

-

-

-

-

-

870 T -

432

432

432

432

432

432

432

432

432

432

432

432

Retail Mgr/Asst Mgr Labor $ 6,240

6,240

7,800

7,800

7,800

7,800

7,800

7,800

7,800

7,800

6,240

6,240

-

-

-

-

-

-

-

-

-

-

-

8,493 10,508 11,696 11,221 11,221 11,696 11,696 11,221 10,983

9,206

8,730

PS 218 Mechanic

$

PT Van Driver

$

-

TOTAL

$ 8,730

Use the Revenue Assumptions Template in the Financial Projections Workbook to determine the revenue potential of your business based on your projections of price, sales volume and cost of goods sold. Instructions for using the Template are provided in Part IV of the Toolkit.

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Operations How does this thing work?? The Operations Section explains how you will make the business idea a reality and proves that you understand how the business will work from the inside (as compared to the market section which shows how the business will work from the outside).
OV E RV I E W For a start-up business, this Section will demonstrate what you have in place and how you will continue to build up the operations. For an expanding business, this Section will show a plan for growth and stability. The Recycle-A-Bicycle example is a business in a growth and expansion mode. The following subsections should be included: 1.

Legal structure/relationship of parent to business This can be brief or extensive depending on the complexity of the relationship and legal structure.

2.

Description of operations and/or production process This subsection shows what actually happens internally in order for the business to operate. It also details the fixed costs associated with your business.

3.

Staffing The staffing subsection lays out your staffing plan and gives a rationale for how these staff will be used. To make your staffing plan, you will need to assess the capacity of your operations and determine the number of staff needed to meet your revenue projections. A staffing plan template is provided to help you determine your staffing costs.

4.

Marketing plan The Marketing plan describes the promotional strategies to be used to launch or grow the business. This is a particularly important section of your business plan.

5.

Implementation plan and timeline This subsection shows the reality of putting your plan in motion and includes a budget for start-up costs.

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part ii: The Business Plan


R E L AT I O N S H I P T O PA R E N T O R G A N I Z AT I O N Here, you need to explain the legal structure of the business and why this structure is appropriate for your business. Please consult a legal advisor to determine the best legal structure for your particular business. In New York City, the Lawyer's Alliance for New York offers a workshop entitled "Business Ventures for Nonprofits" that provides introductory information on the ways to structure your business. Other nonprofit lawyer groups in other cities may offer similar services. There are three basic structures for your business: 1. Operate as a program of the parent nonprofit 2. Establish a subsidiary nonprofit entity 3. Establish a separate for-profit entity (LLC or corporation) Additional structures that you might consider are joint ventures and or a combination of nonprofit and for-profit entities. There are advantages and disadvantages to each structure and your legal advisor will guide you. Think through the following issues as a starting point in determining what is best for your business: • Control: Who will have day-to-day control of the business? • Is the parent organization comfortable with establishing a separate entity, especially a for-profit entity? • Liability: Does the parent nonprofit need to be shielded from potential debt or lawsuits that may result from the business activities? • Will the business generate substantial income and potentially jeopardize the parent's nonprofit status? • How will the legal structure affect your brand image? • What is your timeline for establishing the business? • Where do you plan to look for start-up and on-going capital?

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 R E C YC L E - A - B I C YC L E R E L AT I O N S H I P TO PA R E N T Recycle-A-Bicycle is an example of an organization in which the business operations are seamlessly integrated into the parent nonprofit. Recycle-A-Bicycle began in 1994 as a project of Transportation Alternatives and grew through partnerships with the Children's Aid Society and the Henry Street Settlement. Through support from Henry Street, Recycle-A-Bicycle created a retail business that soon became an integral part of the program. In 2002, Recycle-A-Bicycle received its own nonprofit status. Recycle-A-Bicycle continues to thrive due to its strong partnerships. Because there is not a formal parent-business relationship, Recycle-A-Bicycle included the details of its organizational history in an appendix, under the title: History and Milestones.


O P E R AT I O N S A N D / O R P R O D U C T I O N P R O C E S S This subsection outlines the key factors involved in creating your product or service. It should include an overview showing how the business works and the key success factors. In addition, this subsection should introduce the Fixed Costs associated with the business. Operations Processes You will describe how your business works from an internal perspective. In planning your operations, you need to determine your capacity -- the maximum amount of product or service that can be created, produced and sold in a given period of time. After you know your capacity, you can conduct a reality check on your sales forecasts to be sure that you are able to make, produce or service the sales volume predicted. If you do not have the capacity, you will need to determine how to meet your demand. One common technique is outsourcing.

Manufacturing/Production Companies If you are producing or manufacturing a product, describe the process that turns raw materials into the final products including the equipment and labor that are needed. Discuss the challenges you face and the capacity of your production facility. For manufacturing and production businesses, capacity is the number of widgets that can be produced each day (or week). For example, Recycle-A-Bicycle refurbishes 15 - 20 bikes per week. Their capacity is set by the number of work stations in the two stores, the number of youth involved in the program, the hours that the stores are open, availability of used parts, the storage space for bikes before being refurbished and the retail sales space. You may also want to include a description of a system for quality control. Consider this Lesson from the Field.

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part ii: The Business Plan

The Food Project, a youth-serving organization that grows its own organic vegetables and then sells them at a farmer's market decided to expand its business by offering a line of “Fresh Salsa.” The youth are involved in every aspect of this business venture - they developed the recipe for the salsa and did initial market research. The salsa is a seasonal product and is marketed toward higher end grocery stores and gourmet shops. While marketing and distribution seem to be a major component of their success, business operations have actually proven to be the critical success factor for the venture. The salsa operations begin with the production of the organic tomatoes. As the product became popular, the organization could not grow enough tomatoes to meet the demand and had to purchase from tomato suppliers to supplement their own crops. This meant that the cost to make the salsa was higher than projected. In terms of labor, the youth worked in a small kitchen and originally followed a recipe that was time and labor intensive. Again, as the salsa became popular, the youth had a difficult time meeting the demand due to the time required for each batch. By analyzing their process, they developed a streamlined production schedule where they could make 18 units per hour. The “Fresh Salsa” venture is at a crossroads: the organization may consider outsourcing production to a nearby plant to have the salsa bottled. Quality of product and involvement of the youth may be compromised, however. Through these experiences, the organization now plans to have a more thoughtful Operations Plan in place to meet demand in the second season.

Retail Businesses If you are opening a retail outlet, you should outline the hours of operation, the inventory system and merchandising plan as well as the layout of the store. Detail the furniture and fixtures that you have in place and explain what you still need. Describe your retail strategy with regard to inventory rotation and markdowns, if this was not included in the business model/pricing sections. A critical factor in effectively managing a retail business is supply chain management. A company's supply chain is the process by which it acquires the goods that it resells to customers; it starts from the basic raw materials, covers the manufacturing, warehousing and transportation stages, and ends inside the retail store where the product is ultimately sold to the ii.48

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consumer. Supply chain management refers to the process of limiting the costs associated with each step in the chain. These costs can be controlled by strategies such as bulk purchasing, developing strong supplier relationships, as well as minimizing the time that inventory sits on the shelves (or maximizing inventory turn). These initiatives help lower both your costs and your funding needs, and therefore increase profitability and financial independence.

Service Businesses If you are operating a service business, describe the people, materials and processes involved in delivering the service. Outline the steps involved in the service process and your systems for customer service, management and quality control. These should include specific measurable targets so that management can track them. An example would be: 98% of all customers should be served within 10 minutes of calling us and with no errors in processing their requests. A key factor to control in a service business is capacity. If you have excess capacity (too many people providing services), you will erode your profit margins because your employees are not generating adequate revenue. If you have too little capacity, you risk losing customers due to long waiting times or a decline in the quality of services provided. Therefore, capacity planning involves a delicate balance between having too many or not enough employees. One way to approach this problem would be to build capacity slightly higher than a conservative sales estimate, thereby leaving some cushion for excess demand during peak periods.

Supplier and Vendor Relationships In addition to explaining the processes involved in your business, you also should describe your relationships with suppliers and vendors. Having strong relationships with suppliers or vendors can mitigate some of the business risks and create economic benefits to your business. In addition, your ability to operate the business is dependent on your ability to source materials you need, when you need them and at affordable prices. For example, a strong supplier relationship will allow you to negotiate the payment terms that work with your cash flow needs. Other benefits might include guaranteed delivery or the ability to return damaged merchandise or materials that you do not need. Fixed Cost Assumptions Thinking through the operations of your business will lead you to examine the Fixed Costs. In the upcoming subsection of your Operations Plan, you will develop projections for staffing expenses and marketing costs. At this time, you should begin to think about all other costs such as facilities expenses (rent, utilities, equipment), administrative expenses (insurance, payroll, office supplies), travel/conference expenses, training or other program-related expenses.

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part ii: The Business Plan

Examples of Fixed Costs include: Facilities

Administrative

Program-Related

Rent/Mortgage

Personnel

Program-Related Training curriculum

Utilities

Insurance

Furniture/Fixtures

Overhead charge from parent

Equipment repair

Job development or coaching Training stipends

Office supplies Legal fees

Complete the Fixed Costs Template in the Financial Projections Workbook. A list of possible expenses is included in the template, but this list should be modified to fit your business.

Business Planning With PM&MSM 52

This chart is meant to provide suggestions to create or revise your Logic Model and Action Plan. Inputs

Suppliers and vendors might be key inputs for your social purpose business.

Activities

The processes that your business goes through to create or add value to merchandise might be important activities to include. This might lead to another activity such as sales.

As a start-up or growth business, you may find it useful to use an Action Plan to lay out the activities of the day-today operations.

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The Recycle-A-Bicycle Operation Section describes the process of "remanufacturing" a bike. This explains the current operation and describes the way that the business sources the used bicycles. The remaining part of the production section describes the process for expanding and improving production in order to meet greater supply and demand. An excerpt from the re-manufacturing explanation follows:  R E C YC L E - A - B I C YC L E O PE R AT I O N S A N D P R O D UC T I O N "RE-MANUFACTURING" THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE Materials Donation RAB promotes reuse and recycling of bicycles. Over 1,000 used bicycles are collected annually. Eighty percent (80%) of donations come from bike shops and apartment building superintendents, with the remainder collected from individuals and corporate donors. Bike shops and apartment buildings are the most prevalent source because bikes are often abandoned at these locations. Donation saves the cost of disposal and provides a tax deduction. Additionally, individuals who want to support Recycle-A-Bicycle's mission bring in bikes, parts and accessories. There are also several reputable volunteers who collect bikes in their neighborhood on garbage night and deliver them to RAB's facilities. Finally, corporations organize employee collections and one bike manufacturer, Fuji, donates surplus inventory to the project. The organization will collect twice the number of bicycles when greater storage, production and transportation capacities are available. De-manufacturing process/re-manufacturing process The Youth Classroom Training Program curriculum was developed to teach bicycle mechanics skills through the disassembly and reassembly of key mechanical components. The first stage of the youth training program involves de-manufacturing damaged bicycles. Upon arrival, bicycles are assigned a number in chronological order of receipt and then logged into the inventory. All frame damaged bikes and very rusty bikes are slated for immediate de-manufacturing. The component parts are cleaned and inventoried for use in repairing other bicycles or for sale to consumers. Approximately 20% of the bicycles are de-manufactured. The remaining bikes are assessed for type, quality and amount of repair time necessary to refurbish. Bikes that have the highest market value, that are in high demand (3 speeds and mountain bikes), and that are quickest to repair are worked on first. In addition, some customers put a down payment on a recent arrival and return to buy it fully repaired. These "pre-ordered" bikes also receive priority in terms of the order in which bikes are refurbished. On average, a refurbished bike requires six hours of labor.

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part ii: The Business Plan


S TA F F I NG This is a critical element of a successful business and should demonstrate the "people power" required for your venture. The staffing template provided will assist you in determining the staffing costs associated with the business. Staffing Plan When planning your business, remember that you cannot do everything yourself. You will need staff to operate, serve, produce or sell products and services. Staffing costs are one of the largest expenses for businesses. Developing a staffing plan requires an honest and thorough appraisal of what skills and experience are needed, when they are needed, and how much you are willing or required to pay to acquire staff with the right skills and experience. In addition, you need to assess how you will use your clients, the skills that they bring and any additional staffing needed for training and supervision. Your staffing plan should outline the various job positions and include a description of the roles and responsibilities for each position. It should also explain what staff are currently employed and what positions will be added in the future. In addition, the staffing plan should show how you plan to increase staff as your business grows over the next five years. Include an organizational chart to show the relationships between all the staff members. When developing your staffing plan, consider the following: • Do you have a balance of skills to complement both the financial and social goals of the business? • Do you have enough staff to meet the revenue projections that you have developed (e.g. are there enough staff to keep your retail store open 60 - 70 hours each week)? • Does the staffing plan match your operational needs? • What skills are needed for each position? • Can your client population fill these staffing needs? • Are some positions meant to provide transitional employment to your client population? If so, what level of turnover do you anticipate and how will this affect your staffing, management and training expenses? • How flexible is your staffing plan if the business takes off either more quickly or more slowly than projected?

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Complete the Staffing Plan Template in the Financial Projection Workbook. Instructions for completing the Template can be found in Part IV of the Toolkit.

Business Planning With PM&MSM This chart is meant to provide suggestions to create or revise your Logic Model. Inputs

Your staff are valuable inputs for the business.

Activities

Similar to the Social Component part of the Business Model Section, your activities might include training or providing supportive services to staff. Or, if you need to hire a significant number of workers, then recruiting and hiring staff may even be an activity.

 R E C YC L E - A - B I C YC L E H U M A N R E S OU R C E S P L A N Human Resources Recycle-A-Bicycle currently supports eight staff positions. Five positions are filled by bicycle mechanics who hold positions of store managers and head mechanics at its two retail stores. The business manager is the executive director, Karen Overton, who manages the triple bottom line. Adding staff to the team to diversify the skill sets and reduce the burden on the business manager is a strategic goal for the organization. The store managers understand and are able to deliver on the retail aspects of Recycle-A-Bicycle operations. Though the managers have been working as a team for only a short time, they have demonstrated strong potential. Because of their trade and industry expertise, the team understands the social mission and how to integrate youth and learning into their operations. Retail and program management are adequately served by the team. Recycle-A-Bicycle relies heavily on volunteer labor to achieve several aspects of its corporate activities such as tutoring youth, website development and maintenance, and fundraising. Though there are a handful of motivated, talented individuals who donate their time, this labor pool is unpredictable and does not provide a stable source of labor.

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part ii: The Business Plan


MARKETING PLAN Creating your product and identifying that a market exists are only half the battle. Now you must convince customers to purchase your product. To do this, you will need a marketing plan. What is Marketing? "Marketing means solving customers' problems profitably." Marketing is a process of determining what those problems (needs) are and then designing your product, price, distribution and promotions to solve those problems. What Does Effective Marketing Accomplish? It is important to begin thinking about marketing at an early stage in the business planning process. Effective marketing will help your business achieve its objectives because it: • Generates sales, utilization and public support for an organization. • Represents the organization to its various publics - consumers, government agencies and the press. Formulating Your Marketing Plan You will need to consider the following elements in developing your marketing plan. They will also enable you to estimate marketing costs for your start-up budget. Much of the information needed to develop this plan is contained in other parts of the business plan. 1.

Situation Analysis This will include a summary of the internal strengths and weaknesses of your social purpose business and the external factors that may affect it. Also include the results of any research you have done.

2.

The Marketing Mix These are commonly referred to as the "Four P's": Product, Price, Promotion and Place. The Four P's are dynamic and interconnected and will change throughout the life of your business to meet the changing needs of your customers. Product: This is the product or service that you are selling. You have already described the characteristics in the Business Model Section. Now, you need to think about what is unique or different about the benefits that your product or service provides. This niche or uniqueness will distinguish you from your competitors and will help sell your product/service. Over the life of your business, you may need to rethink your product or service so that it better fulfills the specific needs of target customers.

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Price: Price is based on your costs, the demand for your product or service and what the competition charges for similar products or services. Again, refer back to the Business Model Section for an in-depth description of how to price your product. It is important to remember that price is adjustable. Place (of distribution): Place refers to where you are going to sell or provide your product or service, how you are going to get it there and how much it will cost for this distribution. Place can also refer to where and how your product or service is accessed by your target customers. Is your location convenient, safe and easy to reach? Do your hours of operation fit the times that your target customers are available? Place may have been included in your Business Model and Operations Sections. Promotion: Promotion involves developing communications to convince potential customers to buy the product or use the service. Use the P-Flow Worksheet in Part IV of the Toolkit to think through and refine your "Four P's." As you fill in the chart, consider the extent to which one element makes sense in terms of the others.

3.

Targeting In order to make decisions about what combination of product, price, place and promotion to employ, you will need to have a thorough understanding of: • The characteristics of your potential customers • The specific needs the potential user of your product or service • The ways they access information • How they decide which product or service to use

4.

Positioning Positioning begins with determining what you want your target customers to think about you. (A positioning statement is not a mission or vision statement - which is what you want your business to achieve or become.)

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part ii: The Business Plan

A Positioning Statement has a formal structure: [Product] is the brand of [Category] which to [Target] delivers [Unique Product Benefit] Product = what you are selling Category = the business you are in Target = your target customer Unique Product Benefit = why your target market will want your product

Helpful Hints

Positioning Statements To determine your category, think about what business you are in. You may need to "unpack" your business model and consider the purpose of your business and the type of product or service that you offer. Determining your unique benefit comes from understanding your customers and what they are looking for in your product/service. For social purpose businesses, this may or may not involve including the emotional value of your social mission.

Positioning Statement Examples: Recycle-A-Bicycle is the brand of Used Bicycle Retail Stores, which to New York City cyclists delivers bikes that help create a better world. Victim Service Hotline is the brand of telephone consultation, which to victims of violent crime provides immediate, concrete, confidential support from professional counselors.

Complete the Positioning Statement Worksheet in Part IV of the Toolkit. Play around with the target customer, category and unique product benefit to find the statement that truly captures what you want your customers to think about you.

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5.

Setting your Marketing Goals You are now in a position to set your marketing goals/objectives. These will be the highest-level statement of your goals. Be sure to consider the sales and revenue targets you projected. Marketing goals should have quantifiable results that can be used to determine the success of the marketing campaign.

6.

Determining your Marketing Strategy Once your marketing goals are set, you will need to determine your marketing strategies - or the broad logic of actions you will take to achieve your goals. Basically, there are four kinds of strategies you will want to consider. Do you want to: • Create Awareness - or educate your customers about the attributes and benefits of your product or service? Think about how you might use Promotion and Place to create awareness. • Generate Trial - or convince new customers to try your product or service? Think about how Promotion, Place and Price all have a role in generating trial. • Build Preference - or convince customers that your product or service is better than the competition? Think about how you might need to utilize all 4 Ps - Product, Promotion, Place and Price - to build preference. • Generate Repeat - or retain existing customers? Think about why Promotion and Price might be the best tactics to use for generating repeat sales or usage.

7.

Deciding on the Tactics You Will Use Tactics are the specific activities that you will use to achieve your marketing strategy/ies. Although you may decide to manipulate any one of the four "P’s" in a tactical way, generally most of your activities will be focused on Promotion. In selecting promotional tactics, think about the following: Advertising: Specific tactics include newspapers, magazines, TV, radio and outdoor signage. • Benefits: Reaches large groups. • Drawbacks: Expensive. You may reach a far broader audience than your specific target. Personal selling: Specific tactics include face-to-face meetings with individual customers in a personalized setting. • Benefits: Most powerful promotion technique --it is much harder to dismiss a sales rep than it is to ignore a newspaper ad. • Drawbacks: Expensive and time consuming.

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part ii: The Business Plan

Publicity: Specific tactics include news releases and feature stories. • Benefits: Credible and free. • Drawbacks: You can lose control of the message and it is very labor intensive. Public Relations: Specific tactics include lobbying, parades, press conferences. • Benefits: Reaches large groups of people. • Drawbacks: Does not usually generate sales. Sales Promotions: Specific tactics include trial packages and premiums. • Benefits: It is non-recurring. Supplements both advertising and personal selling. • Drawbacks: Ineffective on its own. The Marketing Plan Now that you have formulated the elements, you are ready to write your Marketing Plan. The Marketing Plan lays out your marketing goals and explains how you will meet these goals. The sections of a Marketing Plan are: 1. Situation Analysis - Brief analysis of the External Environment and your internal strengths and weaknesses. 2. Description of the Target Market. 3. Positioning Statement. 4. Marketing Goals/Objectives - should be consistent with your business goals. 5. The Strategies you will use to achieve those goals. 6. Implementation. • Tactics • Action Plan • Budget

Marketing Plan Outline for Recycle-A-Bicycle Objectives: Highest-level statement of company goals. • Example: Sell 50 bikes per week from April to September out of two retail stores. Strategies: Broad logic of actions taken to achieve objectives. • Example 1: Increase awareness of RAB among college students by 50%. • Example 2: Increase flow of used bikes for repair by 4 units per week.

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Tactics: How will the strategies be executed? (Related to example 1) • Example: Set up tables to distribute literature on-campus (6 tables). • Example: Place advertisements in student publications (10 ads). • Example: Create links to RAB website (100 new links). • Example: Utilize current volunteers to increase word-ofmouth. Budget: How much will it cost to implement these strategies? • Example: On-campus tables: $200 per table • Example: Advertisements: $50 per ad • Example: Links to website: $1000 to hire sales intern

Business Planning With PM&MSM This chart is meant to provide suggestions to create or revise your Logic Model and Action Plan. Inputs

If your business is armed with a Marketing Plan, this might be included as an input.

Activities

If you are in the process of developing that plan, then the development is an activity that will lead to the output of a Marketing Plan that will later become an input for the business. Implementation of the Marketing Plan is another activity that might be significant to include.

Outputs

If the activity is developing a plan, then you will have a plan as an output. However, if your plan is to implement, you will have ads placed or presentations made or other outputs related to your tactics.

Outcomes

The marketing outcomes are the goals you have outlined in your plan (e.g. raise brand awareness or increase sales)

Implementation of a Marketing Plan requires coordination of both time and resources for creating materials and making sales calls. Action Planning can help you organize who is responsible for each item on the plan and allow you to track the success of your efforts.

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part ii: The Business Plan

 R E C YC L E - A - B I C YC L E M A R K E T I NG P L A N When the production and training facility is in operation, additional marketing will be needed to increase the supply of donated bikes and create demand among customers. New staff and volunteers will be recruited with this task in mind, so that a concerted effort can be placed in marketing the organization and merchandising and sales within the stores. While the production center is in development, a formal sales and marketing plan will also be developed. Within this plan, new product offerings will be considered that will increase the stores' revenues and profitability. Recycle-A-Bicycle can market its social and environmental missions much more aggressively within the stores and their trade areas. A campaign will be developed that highlights these two areas. This will include print media, an enhanced website, and a video that can be played in each store to assist consumers in immediately understanding why Recycle-A-Bicycle is the best place to purchase a used bicycle. In addition, Recycle-A-Bicycle will create and install much needed signage at the DUMBO store. Recycle-A-Bicycle will also investigate selling used parts on the internet. Two strategies will be explored: using E-Bay as a mechanism for sales or tapping into the Bicycle Trader website that specializes in the sale of second-hand bicycles, parts and accessories. Strategy: Recycle-A-Bicycle will create an aggressive marketing campaign, make improvements to point-of-sale merchandising in the stores, develop and implement a customer service training program, add new accessory lines to both operations and improve the website to better facilitate e-business.

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Management and Stakeholders The Buck Stops Here. The Management and Stakeholders Section should explain who will lead the business venture and ensure its success. The Section highlights the management strengths and shows that you recognize where gaps exist and how to fill them. As you are writing this section, ask yourself "If I was an investor, would I trust this team with my money?"
OV E RV I E W Your management team is one of the most important elements of your business. Your team will be the force behind both selling the business idea to other stakeholders and executing the plan. For-profit and nonprofit investors will look at this team for proof of experience, leadership and vision. If the business idea needs to be revised or even completely changed, investors and stakeholders want to know that there is a team that is experienced and capable of "making things happen." The Management Section should include: 1.

Introduction to the team including description of relevant experiences and explanation of team's experience working together

2.

Explanation of key management team positions and bios for positions that are filled

3.

Description of positions to be filled and skill sets sought for each position
INTRODUCTION TO THE TEAM In constructing this section of the plan, it is useful to describe the years of relevant experience across management team members. For example, Recycle-A-Bicycle opens this section with:

Recycle-A-Bicycle's management has over 10 years of experience in bicycling retailing, 13 years in transportation advocacy, and over 7 years experience in youth education. The team has proven its ability over the years and is continuing to develop new strengths.

In addition, include brief information about your Board of Directors, Advisory Board or others who will have a direct influence on the success of the business. These groups often provide significant business experience that may be lacking in your management team. Recycle-A-Bicycle relies on their Board of Directors for assistance in business development activities. Recycle-A-Bicycle writes:

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Board of Directors membership complements the skills presented by the management team. Nearly all Directors volunteer in capacities beyond their Board role. The Board consists of dedicated individuals with experience in: education, financial management and analysis, social work and transportation advocacy. Each Member brings enthusiasm, their unique skill perspectives, as well as a broad network of contacts to the Board and the entire organization.


MANAGEMENT TEAM BIOS The social purpose business will need a manager who has the skills to pursue both the social and financial goals. To do this, your business manager will need to have a unique set of skills, including: • Industry expertise • Entrepreneurial experience • Enthusiasm and understanding of the social component • Financial management capabilities • Understanding of or interest in the nonprofit sector • Knowledge of or familiarity with managing the double bottom line • Sales and marketing background • Operational experience An optional way to structure the business management is to have two managers with different responsibilities. One business manager could be responsible for meeting the financial goals of the business and handling the day-to-day operations. The other could be a social manager who ensures that the business maintains its focus on mission. The heart of the Management Section includes brief bios on the key team members. These bios highlight the work experience that is most relevant to the business activities. Taken together, the team should show competence in the skills required to operate your particular business. In addition, as a social purpose business, it is important to highlight experience working with the target population and in the nonprofit services field. Finally, this section should prove the commitment of team members to this enterprise. Recycle-A-Bicycle has a somewhat flat organizational structure and therefore included a large number of staff members who may not be typical "management team" level. However, by including these staff members, Recycle-A-Bicycle was able to tell the story of how many program participants have become full-time employees while also pursuing other interests or additional education. ii.62

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 R E C YC L E - A - B I C YC L E M A NAG E M E N T B I O S Karen Overton Executive Director, Recycle-A-Bicycle, Inc. Ms. Overton was the founder of Recycle-A-Bicycle when it began as the environmental education initiative for Transportation Alternatives in 1994. Prior to that, Ms. Overton worked as Bikes for Africa Director for the Institute for Transportation and Development Policy and as a consultant for the World Bank, in the International Development Bank, African American Institute, and Pedals for Progress. In 1998, Ms. Overton incorporated Recycle-A-Bicycle. Through her various positions, Ms. Overton has developed skills in the areas of project management (design, implementation and evaluation); research (data collection, analysis and publication); writing (Ms. Overton has authored several cycling manuals, magazine articles, and publicity pieces); training (design and implementation of training programs for youth and transport planners/economists); and public speaking at several alternative transportation symposia. Ms. Overton cycles year round. Ms. Overton has a Masters Degree in Urban and Regional Planning from the State University of New York-Albany, and is recognized as an expert in the field of alternative transportation planning. Jared Bunde Manager, DUMBO Shop Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as a messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as a bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. His racing career has excelled, winning silver medals for the NY State Track Cycling Championship in 2000 and 2002. Mr. Bunde brings with him an interest in the arts and the environment. He has taken photography courses, permaculture and ecological design courses, and completed the Foundation Program at the Parsons School of Design. During his tenure with Recycle-A-Bicycle, Mr. Bunde has increased the shop's productivity and profitability. Through his efforts, the shop experienced an overall increase of $20,000 in revenue in 2002.

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part ii: The Business Plan


M A NA G E M E N T T E A M P O S I T I O N S T O B E F I L L E D As the management team is assembled, you should note areas where skills are still lacking. For example, your business manager may possess a wealth of industry knowledge and operational capacity but be lacking in financial management skills. In this case, you will want to be sure to hire a strong, experienced financial officer or to identify a Board Member or volunteer who has the time and dedication to fill this need. As a start-up or growing business, you may not have all of your key management positions filled. It is important to show what types of individuals you are looking for and how those people will be integrated into the organization. This is not a flaw in your business planning, but rather demonstrates that you have planned for the appropriate management. Business Planning With PM&MSM 66

This chart is meant to provide suggestions to create or revise your Logic Model and Action Plan. Inputs

Management and stakeholders are a critical input for your business and programmatic activities.

Activities

Recruiting Board or key team management members may be an activity.

If skills or training is needed for managers, you should include these activities in your Action Plan to show the importance of professional development for your managers.

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p a r t i i : Social Outcomes

Social Outcomes The Business of Achieving Your Mission. The Social Outcomes Section details how the business will help the organization meet its mission and projects the extent of that impact. The Section will describe what you want to achieve and why you believe these outcomes will be achieved. The Social Outcomes Section complements the Financial Section, where you will project the financial outlook. At this point, you should pull out your Logic Model and Action Plan to use as you think through your social outcomes.
OV E RV I E W Social outcomes are the change or benefit to society achieved from the social purpose business. Generally in the outcomes-measurement field, outcomes are client focused. However, in the context of a social purpose business, the concept of outcomes measurement has been expanded to include programmatic or organizational outcomes. Social outcomes should be quantifiable, and are measured against a target, and then evaluated over time to determine if the goal was met. Nonprofit organizations are often asked by funders, boards and other stakeholders to quantify their achievements. The same holds true for social purpose businesses. Investors are interested in the double bottom line. Thus, performance is not solely evaluated on financial performance but also on the social outcomes that have been achieved. The Social Outcomes Section describes your social outcomes goals and your system to evaluate performance. Outcomes Measurement and the Social Purpose Business Plan Nonprofits are generally skilled in setting goals, usually articulated in a mission statement. Think of your own organization's mission - it is likely to be representative of the philosophy that guides your organization's work. Your organization may be skilled in measuring staff performance; for instance, your fundraising department is likely evaluated on number of dollars raised. However, assessing the performance of your programs usually proves to be more vexing. Does your organization currently track and measure the outcomes of its programs? Do these outcomes inform management decisions in terms of evaluation of staff and program performance? Even if you have systems in place, as many nonprofits do, translating them to the social purpose business arena is an added challenge. This is where Seedco's Performance Measurement & ManagementSM (PM&MSM) comes in. The Social Outcomes Section of the business plan uses PM&M to explain the outcomes of the business and then helps business managers achieve

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those outcomes by developing measurements and indicators to assess progress. This methodical approach to management can have a profound impact not only on achieving the goals of the social purpose business, but also throughout the parent nonprofit organization. The social outcomes section should include: 1.

Background Information • Origin of the social purpose business project and organizational information. • Description of relevant programs and services such as training programs and job coaching that will be will utilized by or provide support for the business. • Explanation of how the business furthers the mission of the organization.

2.

Implementation and Evaluation Strategy • PM&M Logic Model (introduced in Part I: Getting Started). • Narrative description of outcomes. • 5-year projection of targets for achieving outcomes. • Management reports/charts. • Mitigation strategies if targets are not met.
I M P L E M E N TAT I O N A N D EVA L UAT I O N S T R AT E G Y The implementation and evaluation strategy is the more difficult piece of the Social Outcomes Section. We suggest utilizing PM&M as a framework for this part of the section. The remainder of this chapter of the Toolkit will walk you through this framework. As described in Part 1: Getting Started, PM&M is designed to help organizations plan, measure, improve, and be accountable for the operational activities of the business and particularly for the social outcomes that the business seeks to achieve. For a social purpose business, PM&M helps managers articulate outcomes, collect data about these outcomes, and then use the data to make and implement informed decisions.

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PM&M can help you create management reports that can be used for a variety of purposes: • Monitor progress toward achieving desired social outcomes. • Guide planning for new or expanded programs or ventures. • Improve performance by identifying challenges. • Create and implement incentive systems based on performance indicators. • Evaluate "return on investment" in terms of social goals. In Part 1: Getting Started, you were introduced to two essential components of PM&M - the Logic Model and the Action Plan. Using the Logic Model as a starting point, this Section will assist users in articulating social outcomes in the context of the social purpose business plan. It will provide examples of how to quantify social outcomes and will include worksheets on developing indicators and creating a data collection system for measuring the achievement of those outcomes. Specifically, this section will delve more deeply into PM&M to focus on the following: • Gathering Evidence and Data Collection. This is the "measurement" piece of PM&M and involves developing indicators, setting targets and then gathering evidence to track the indicators. • Outcome-Driven Management. Using PM&M to manage the business is the most complex aspect of the process. Here, several techniques and tools are presented to ensure that outcomes tracking is an integral part of the day-to-day operations of the social purpose business. Gathering Evidence and Data Collection: Measurement While many organizations already conduct outcomes measurement, PM&M's 5-step approach is a proven roadmap for how to incorporate measurement into the management of the business. It is one approach, and should be viewed in light of what is already taking place at your organization. Steps for Measuring Social Outcomes: 1. 2. 3. 4. 5.

Review Outcomes to be Measured Describe the Outcomes Develop Indicators to Measure Outcomes Set Targets and Establish Assumptions to Quantify Outcomes Collect Data

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Step One: Review Outcomes to Be Measured On your Logic Model, you identified the initial, intermediate and longterm outcomes that you hoped to achieve. Review your Logic Model and determine if there are any outcomes that have not been captured. Add or remove outcomes to create an accurate representation of the scope of the business. Once all of your outcomes are captured, you will work through the next four steps to create a plan for collecting data and track your progress on these outcomes. Theoretically, you should track all of your outcomes initial, interim and long term. However, it is sometimes not possible to collect data on certain outcomes because the process of collection becomes too costly. For example, data collection may require surveying large populations or an investment in infrastructure. At this point, plan to track all of your outcomes. In Step Three, you will develop and test "indicators" to determine if data collection is feasible.

Step Two: Describe the Outcomes In this step, you will describe the outcomes that you seek to achieve. This forces you to think how you would observe the achievement of each outcome. In other words, what happens if the outcome is achieved? An outcome such as "youth possess soft skills" may mean to one organization that youth show up for work on time and are able to interact with supervisors and co-workers. However, to another organization, "youth possess soft skills" may mean that the youth have developed an appreciation for customer service. In fact, describing the outcome can also help to clarify its meaning among your own staff. Example Outcome Description Outcome:

Students gain skills in bicycle repair and customer service

Descriptions:

For Recycle-a-Bicycle, this may mean the following: • Youth know how to assess and execute basic bike repair. • Youth have increased comfort level with customer interaction related to bike repair.

Step Three: Develop Indicators Developing indicators, or measures, is key to the entire process of outcomes measurement. Indicators are how you will determine whether the outcomes have been achieved. Use the descriptions of your outcomes from Step Two, to help develop your indicators. Start by brainstorming all possible indicators for an outcome. You will then assess the indicators using the "quick test" to see if they are both useful and practical.

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Assessing Indicators: Quick Test Some of the indicators that you develop may ultimately prove to be too difficult to measure or not particularly relevant to the outcome you want to measure. You may need to be creative to come up with ways to measure your outcomes. It is up to you and your organization to determine if the cost of collecting the data is worth the benefit of being able to track that particular outcome. To help determine if the indicator is feasible, ask yourself the following: • Is it useful? Does it act as a marker for progress? Does it contribute information for decision-making? Does it truly measure the outcome you want to achieve? • Is it practical? Is the cost of collecting data for this indicator justified by the benefit of having and using the data?

OUTCOME

DESCRIPTION IN WORDS

INDICATOR

USEFUL?

PRACTICAL?

Youth gain skills in bicycle repair and customer service.

Youth are able to make basic bike repairs and youth are comfortable with sales and other interactions with customers.

Number/percent of students leaving the Recycle-ABicycle training program for fulltime employment.

Yes. This indicator shows the success of the training program in helping youth develop soft skills and gain valuable work experience toward long-term success.

Yes. This indicator builds credibility for the program.

Youth transition successfully to permanent employment.

Youth stay in a new job for a given period of time and earn a living wage.

Retention rate after one year of employment in a new job.

Yes. This indicator builds credibility for the program.

Maybe. Depending on the number of youth transitioning out of the training program, it may be difficult to track what happens to each one of the students.

OUTCOME

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Helpful Hints

Developing Indicators •

Some indicators may be qualitative. You need to make these observations and judgments credible by providing a description of how you arrived at that judgment. For example, if RAB was going to determine the improvement in customer service, it might develop a survey or interview customers whose answers can then be quantified through a rating system.

•

Create multiple measures. For outcomes that are more difficult to measure, such as developing interpersonal skills, you may need to identify several different measures to cover each element of the outcome.

•

Measurements need to be adaptable. Don't get stuck measuring the same things - be open to new, more important concepts that may emerge and need to be measured instead of, or in addition to, what you are already measuring.

Complete the Developing Indicators and Quick Test worksheet in Part IV of the Toolkit. Indicators should be created before moving to Step Four.

Step Four: Develop Performance Based Targets Once you have the indicators developed, the next step in the process is to set targets. Begin by establishing a baseline performance for each indicator. The baseline may be based on past experience, the success of a similar program or simply your best guess. Then project targets for the indicators over the next five years. Make assumptions on how outcomes will grow based on a combination of what you want to achieve and what you believe is realistic. For example, will you be satisfied if 50% of the client population served in your business move on to college or additional training? Would you be more satisfied with 75%? Is 75% realistic? Could you reach 90% by year five? You will have to establish these targets before developing the collection strategy.

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Helpful Hints

Setting Targets •

Base social purpose business targets on current program and evaluation strategies.

•

If there is no current program that matches the work and mission of the social purpose business, look to other programs within the parent organization or to similar social purpose businesses.

•

Remember to be realistic and ambitious. It is better to risk not reaching your targets than to leave clients or your mission underserved.

Mitigating Risks The social purpose business may not be able to meet the targets you have set. As we have discussed, you will need to be realistic in establishing targets, but also embrace risk taking. But what if you can't meet the targets? What if the population does not succeed in the first employment experience, or they cannot find jobs? Much like you develop mitigation strategies in case the business is not able to meet its financial projections, you will need to establish mitigation strategies for the social purpose business. This may include adapting the training program, cutting back on the number of employees or phasing in social purpose goals over time.

Step Five: Collect Data In this step, you will develop a data collection strategy. This strategy will become part of your on-going outcomes assessment. In addition, data collection sets the stage for developing management reports that can be used to demonstrate your progress to Board Members, supervisors, employees and other stakeholders. Data Collection Strategy • Where will the data come from and what methods will you use to collect this data? What are the sources? Sources include: libraries, internet, government, census information and customer feedback. And what are the methods? Methods include surveys, interviews, focus groups and performance evaluations. • Who will collect the data? Who will be responsible? Will it be the business manager or someone from the parent organization? It is important to clearly establish the party responsible for the collection. • When will the data be collected? How frequently will you collect data? Will it be monthly, quarterly or twice a year? The frequency depends on the program element that is attached to the business.

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•

How will the data be stored? Will you use spreadsheets or software to track outcomes? If you come from a larger parent organization, it is likely that you already have evaluation strategies in place. Is it possible to adopt those systems for use in tracking the social outcomes of the business? Create a Data Collection Strategy for your social purpose business using the Data Collection Worksheet in Part IV of the Toolkit.

Outcome-Driven Management So now what? You have concluded the steps for Gathering Evidence and Data Collection. Developing the system of tracking indicators is only half the battle. Using the information to inform the operations of the social purpose business is the real challenge. Like many other management strategies, assigning responsibility and communicating the process and rationale will help speed the adoption of the data collection and management system. The data on indicators helps managers to: • Assess performance targets • Make informed decisions • Track and review progress for performance improvement • Accelerate the learning process, promote accountability, and identify and solve problems A key part of integrating data collection into the social purpose business is to develop a reporting mechanism that allows you to document and highlight progress. As part of this process, you will need to determine how often to report on your outcomes, what information to provide and who will receive these reports. Management reports can be used for several purposes: • Monitor Progress • Guide Planning • Improve Performance • Manage Programs • Evaluate Investment (funders/investors) ii.72

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p a r t i i : Social Outcomes

Review the PM&M Management Worksheets in Part IV of the Toolkit. These worksheets are tools to help you and your organization remain committed to tracking outcomes. A sample management reporting document is included as an example of a tracking form that you can incorporate into the ongoing management of the social purpose business and the parent organization to inform management decisions going forward.

Helpful Hints

Outcome-Driven Management •

Hold annual staff retreats and regular staff meetings devoted to the Social Purpose Business - devote as much time to thinking through the social outcomes as you do in thinking through the financial goals.

•

Set targets. Institutionalize an annual memo requiring staff to look back and look forward - this requires staff to plan for outcomes and review outcomes achieved.

•

Evaluate performance reviews based on outcomes achieved.

•

Determine the frequency of distributing management reports-monthly, quarterly, semi-annually.

Technology PM&M is based on systematic thinking and is built around basic concepts that express complex ideas. The worksheets will assist you to create your action plans, logic models, indicators and tracking tools. While you will want to fill out the worksheets to master the concepts, you will eventually want to manage the system in a more sophisticated manner. Using spreadsheet software is a good place to start. Or you may choose to adapt current outcomes measurement tools, such as a databases, to the new needs of the social purpose business. PM&M does not require fancy technology in order to make the process work, but investing in technology will help facilitate the use and adoption of PM&M.

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p a r t i i : Financials

Financials Show Me the Money! The Financial Section tells the story of the sustainability and viability of the business based on all of the revenues and expenses that you will incur to accomplish the goals of your plan. It also demonstrates that you have thought through the major risk factors and that you understand how they will affect the bottom line. As you prepare this Section, ask yourself: "Would I invest my own money in this venture? Why or why not? What do I need to know to make an informed decision?"
OV E RV I E W In developing your financials and implementing your plan, you will analyze the financial potential of the business. Evaluation tools, which form the basis of this Section, include pro-formas or projections, breakeven analysis and sources and uses statements. These tools use assumptions to forecast the financial outlook of the business. When you are actually running your business, you will also utilize a number of management tools to help you understand what is happening with the business and compare your success to previous years, competitors and your projections. Management tools include the balance sheet, income statement and cash flow statement. A description of these statements and information on using them is included in Part III: Resource Guide. The Financial Section of your plan should include the following information: 1.

Introduction

2.

Cost and revenue assumptions

3.

Financial projections (3 to 5 years) and sensibility analysis

4.

Sources and uses statement (current funding sources and commitments)

5.

Capital needs by stage of development

6.

Risks and strategies for mitigation

7.

Summary/conclusion If this is your first time working with or creating financial statements, it would be wise to seek assistance from a business consultant with skills in both modeling and analyzing projections. You may be able to access these resources inexpensively through a local business school or through business counselors.

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part ii: The Business Plan


INTRODUCTION Begin the Financial Section by providing context and highlighting the major points of this section. Recap the major factors affecting your financial situation from the market opportunity, business model, management or operations section of the plan. State your financial goals for the business in the short and long term including when you expect to break even and the projected net income over the next 3 to 5 years. Your financial goals might also address your plans for reinvesting profits in the business or passing them to the nonprofit parent organization. In the example below, Recycle-A-Bicycle provided background on two major events that affected their financial performance in the recent past.

 R E C YC L E - A - B I C YC L E F I NA NC I A L S E C T I O N I N T R O D UC T I O N Recycle-A-Bicycle has successfully grown and expanded through a self-financing approach. This approach was required due to the fact that Recycle-A-Bicycle did not obtain 501©3 status until July 2002. Without formal nonprofit credentials, the organization had limited access to grants or donations that would have provided the capital needed to grow more rapidly. Therefore, Recycle-ABicycle functioned much like a start-up small business, utilizing dedicated staff and growing only when net profits or donated funds were available to reinvest in the business. After five years of operations in the East Village, Recycle-A-Bicycle recognized the strong opportunity to grow its operations and training program through the creation of the DUMBO store. The diversification, additional space, and new market opportunity will assist in the growth of Recycle-A-Bicycle. But the addition of the new DUMBO store has put demands on Recycle-ABicycle's cash flow, as the store has not yet built up a sustainable level of sales. This has created a need for additional financing for working capital. As consumers become more aware of the store, the sales volume from retailing is expected to sustain operations. Recycle-A-Bicycle has reached a critical juncture in its lifecycle in which further expansion is required in order to meet demand and scale its youth development efforts. Affordable financing is required to support the Five-Year Strategic Plan. Financing will be pursued through philanthropic grants, debt financing and other socially supportive funders. This section reviews the near-term capital needs of the organization. Recycle-A-Bicycle has developed a five-year financial outlook to accompany this business plan. Please refer to Appendix E and Appendix F for details. Projections are based on historical performance and are realistic but conservative estimates. Recycle-A-Bicycle believes it has the capacity to outperform the projections, given stability in staffing and few negative external factors. Significant assumptions to the plan are in shown in Appendix G.

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COST AND REVENUE ASSUMPTIONS AND FINANCIAL PROJECTIONS All of the projections that you create for the business require that you begin with assumptions about the revenues you will generate and the costs you will incur in operating the business. These assumptions are your best guess on what will happen in your business. You have detailed these assumptions in two earlier sections of the plan: • Business Model: Sales revenues and cost of goods (based on market opportunity section). These are reflected on the Sales Assumptions Worksheet within the Financial Projections Workbook. • Operations: Staffing costs, fixed costs, marketing plan and start-up budget. The Financial Projections Workbook includes worksheets for staffing, fixed costs (including marketing) and your start-up budget. Revenue assumptions will be based on two main factors: Price and Sales Volume. In addition, you will make assumptions on the Cost of Goods Sold for the product or service that you hope to sell. You must also make assumptions about the rates of growth in each of these factors. Expense assumptions are based on your best guess as to the cost of running the business. These costs will include staffing, utilities, insurance, marketing, etc. Growth in expenses should be projected using information on historical growth rates, discussions and contracts with vendors and suppliers as well as the current rate of inflation. If you have been using the Financial Projections Workbook provided in the Toolkit, your five-year projections should now be complete.

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SAMPLE 5 YEAR PROJECTION CREATED FROM FINANCIAL TEMPLATE WORKBOOK 5 YEAR PLAN

START UP

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Product A

$60,795

$75,994

$88,267

$99,035

$106,067

Product B

$177,870

$204,551

$227,256

$250,345

$256,566

Product C

$3,080

$3,422

$3,733

$3,996

$4,138

$241,745

$283,966

$319,255

$353,376

$375,830

Product A

$34,740

$48,859

$51,447

$57,158

$61,216

Product B

$29,400

$34,486

$38,694

$42,645

$45,216

Product C

$1,540

$1,711

$3,733

$1,998

$2,099

$176,065

$203,910

$227,248

$251,596

$267,299

73%

72%

71%

71%

71%

$158,663

$184,188

$194,361

$207,624

$221,275

$58,200

$28,700

$28,700

$30,448

$31,361

$32,302

Profit from Business Operations $(58,200)

$(11,298)

$(9,840)

$2,440

$12,610

$13,722

no

no

no

yes

yes

yes

$50,000

0

0

0

0

0

Net Profit (not including taxes, $(8,200) depreciation)

$(11,298)

$(9,840)

$2,440

$12,610

$13,722

$(8,200)

$(19,498)

$(29,338)

$(26,898)

$(14,288)

$(566)

no

no

no

no

no

no

Annual Revenues

Total Revenues

Cost of Goods

Gross Profit Gross Margin

Staffing Costs

Fixed Costs

Breakeven?

Grant Subsidies

Cumulative Cast Flow

Cash Flow Positive?

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In the write-up for the plan, outline your assumptions. The rationale behind these assumptions should have been given in other places in the plan, so this section will just provide highlights and then detail the numbers. Use graphs and charts to visually represent your analysis where possible and use volume-adjusted measurements such as income as a percent of sales or inventory days on hand to add perspective. In your analysis of the projections, you may want to discuss the following: • Break-even: The break-even point shows the level of sales needed to cover all of your expenses, and in how much time you think this level will be achieved. When you determine the break-even point, ask yourself if this is reasonable given your market opportunity, staff, marketing plan and operational capacity. (A break-even calculation is provided in the Financial Projections Workbook.) • Seasonality: Is your business seasonal? How does this affect your projections? • Economies of scale: In what areas are you able to take advantage of economies of scale as you grow the business? In the following example, Recycle-A-Bicycle is able to make assumptions based on past performance because it is an established business. The business plan explains the projected sales volume increases over the next five years. The average price is assumed to remain constant.  R E C YC L E - A - B I C YC L E A S S U M P T I O N S REVENUE ASSUMPTIONS The bicycle industry is seasonal in nature. The most lucrative season runs from April through August. The less lucrative season runs from December through March due to cold weather. Unlike other retailers, Recycle-A-Bicycle does not benefit from holiday consumption patterns as most customers prefer to give new rather than used items as gifts. The East Village store will outperform the newer DUMBO shop over the next few years because it has enjoyed a six-year presence in the neighborhood. Over the next five years as Brooklynites become more aware of the DUMBO shop, sales will increase to 80 - 90% of the East Village store sales. Recycle-A-Bicycle expects to grow revenue 100% in 2003 due to several factors: •

Full-year results of new DUMBO store (opened October, 2002);

•

Subway fare hike will prompt people to evaluate their commutes with some spillover effect on

•

Recycle-A-Bicycle sales; and

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•

Addition of new development officer mid-year (although greatest benefit will likely be realized in 2004).

Recycle-A-Bicycle's sales revenue increases, although large in percentage terms, represents a conservative expectation. Despite doubling the retail capacity through the DUMBO store, bike sales are expected to increase by only 84% (from 339 in 2002 to 626 in 2003). East Village shop DUMBO shop TOTAL

2002A 294 45 339

2003E 348 278 626

Beyond 2003, Recycle-A-Bicycle expects revenue growth to accrue from its investment in marketing, as well as the full impact of the development officer. Recycle-A-Bicycle expects 71% top-line growth in 2004 through 40% increase in bike sales and 148% increase in grant funding including down-payment capital grant for new facility. In 2005 - 2007, revenue growth will slow to 12%, 10% and 5% respectively. After 2007, revenue growth is expected to level out at 3 - 5% annually. EXPENSE ASSUMPTIONS The major expense for Recycle-A-Bicycle is labor. Recycle-A-Bicycle will create a succession plan that increases the professional staffing in order to strengthen the organization. Recycle-A-Bicycle will also invest in training, so that staff may be prepared to fill in any gaps that might occur. Mechanics will undergo sales and advanced mechanics training as this is a proven method for creating higher productivity. The organization will take advantage of its strategic partnership with Henry Street Settlement to secure an Administrative Assistant through Henry Street's job-training program, at no cost to Recycle-A-Bicycle. The following chart examines the effect of the new strategies on net income over the five-year projections. Though net income will be negative in 2003, the organization will return to positive net income in 2004 and beyond.

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RECYCLE-A-BICYCLE PROFIT AND LOSS STATEMENT

2003

2004

2005

2006

2007

Classes Swift Folder Grants Capital Grant Bikes Accessories Parts Service Credit Card Fees

3,900 $ 720 $ $ 71,091 $ $ 78,300 $ 23,490 $ 41,108 $ 21,421 $ (1,282)

3,900 1,080 138,396 38,000 109,620 32,886 57,551 29,989 (2,093)

3,900 1,440 172,049 137,025 41,108 71,938 37,487 (2,617)

3,900 1,440 188,875 150,728 45,218 79,132 41,235 (2,878)

3,900 1,440 198,129 158,264 47,479 83,089 43,297 (3,022)

Total Net Sales Growth

$ 238,748 51.5%

409,328 71.4%

462,329 12.9%

507,649 9.8%

532,576 4.9%

SALES

COST OF SALES Repair Supplies Accessories PT Retail Mechanics FT Storage Facility Mechanic PS 218 Mechanic Retail Mgr / Asst Mgr PT Van Driver

$ $ $ $ $ $ $

11,275 9,396 12,186 5,184 87,360 -

15,785 13,154 17,572 15,821 5,340 89,981 3,955

19,732 16,443 22,623 16,295 5,500 92,680 4,074

21,705 18,087 25,632 16,784 5,665 95,461 4,196

22,790 18,992 27,721 17,288 5,835 98,324 4,322

Total Cost of Sales Gross Profit Gross Margin

$ 125,401 $ 113,347 25.2%

161,608 247,721 40.4%

177,347 284,982 38.9%

187,530 320,119 41.2%

195,272 337,304 41.6%

TOTAL EXPENSES

$ 131,944

213,785

220,289

226,662

231,380

OPERATING INCOME Interest Expense Interest Income Other Income

$ (18,597) $ (1,691) 774 $ 493 $

33,936 (20,339) 1,311 690

64,693 (19,585) 716 863

93,457 (17,105) 968 949

105,923 (14,623) 1,555 996

NET OPERATING INCOME

$ (19,021)

15,598

46,687

78,269

93,851

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Sensitivity of Assumptions Once you are done with your projections, you should estimate the sensitivity of your results to the assumptions you have made. Ask yourself the following questions: How would my breakeven analysis be impacted if revenues are 5% lower than I though? What if I have to hire an additional worker to meet my projected demand? How would I change my plans if I was only able to get funding for half the amount that I need? No projections are ever exactly correct - they simply represent your best guess of the amounts of expenses and revenues that will be realized in the future. Therefore, it is prudent to leave yourself some flexibility when making your financial forecasts. The answers to the above questions will help you build in some margin for error in your financial projections.
S OU R C E S A N D U S E S S TAT E M E N T This section shows what the business needs in terms of capital and investments. Your capital need is the amount of cash required to meet the business expenses. The Sources and Uses statement demonstrates how much it will cost to implement your plan and where the money is going to come from. The Statement lays out the expenses and costs of operating the business ("uses") and then shows the revenues and cash investments that are expected to flow in ("sources"). The difference is your financing need.

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Recycle-A-Bicycle Sources and Uses Statement 2004 SOURCES

Cash deficit from 2003 Classes Swift Folder Sales Bike Sales Accessories Sales Parts Sales Service Revenues Credit Card Fees Capital Grant

Total Sources Excess (Deficit)

USES

$(19,021) $3,900 $1,080 $109,620 $32,886 $57,551 $29,989 $(2,093) $38,000

$251,911 $(105,143)

Repair Supplies Accessories PT Retail Mechanics FT Storage Facility Mechanic PS 218 Mechanic Retail Mgr/Asst Mgr Labor PT Van Driver Salaried Wages Payroll Taxes Workers Comp & Disability Healthcare Benefits Accounting Advertising Automobile Bad Debt Repair & Maintenance Communications Store Expenses Postage & Delivery Printing & Repro Educational Materials Travel & Entertainment Ride Leader Bank Fees Rent Storage Mortgage Insurance Utilities Expensed Investments Interest Expense Interest Income Other Income

$15,785 $13,154 $17,572 $15,821 $5,340 $89,981 $3,955 $87,550 $19,264 $3,379 $6,650 $3,090 $2,060 $5,000 $125 $515 $4,597 $206 $515 $1,751 $206 $1,030 $3,600 $206 $29,664 $39,568 $2,100 $709 $2,000 $(20,339) $1,311 $690

Total Uses

$357,055

In addition, in this section it is useful to demonstrate funding commitments to the parent or related programs to show a history of support for the work of the parent organization and to show where you might receive grants or other philanthropic investments.

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part ii: The Business Plan

 R E C YC L E - A - B I C YC L E F UN D I NG C O M M I T M E N T S SOURCE

Sales Revenue Fundraising

2002 PERCENTAGE

2003 PERCENTAGE

69% 31%

65% 35%

Recycle-A-Bicycle raised $50,000 in grant funding in 2002. Major support was provided by Bike New York. Grant funding in 2003 has been secured or is expected from Bike New York, The Citizens Committee for NYC, Travelers Foundation, Monterey Foundation and Silverman Foundation.


C A P I TA L N E E D S BY S TA G E O F D E V E L O P M E N T In this final part of the Financial Section, you will use your financial projections and Sources and Uses Statement to explain the total amount of funding needed for start-up, new investment, growth or expansion of the business. Discuss the amount of capital needed and the timing in order for the business to meet its projections.  R E C YC L E - A - B I C YC L E C A P I TA L N E E D S CAPITAL NEEDS The projections indicate that grant funding of approximately $520,000 is needed over the next 3 years to cover costs associated with expansion of the business and training program. This funding amount includes a capital grant of $38,000 that will be used as a down-payment on the production and training facility. In three years (2005), Recycle-A-Bicycle will generate approximately $60,000 in net operating profit. Capital needs are greatest in 2003 and 2004 when new staff is hired and infrastructure related to the new production facility is added since these additional expenses are not be matched immediately with increased revenues. However, these investments will quickly produce positive returns for the organization as net income grows steadily from 2004 to 2007. In 2004, financing of approximately $300,000 is needed to purchase the training and production facility. This financing has been modeled as a 10-year mortgage at 6% annual interest. In addition, the following debt service chart includes a $100,000 loan beginning in 2003 to finance the beginning of the Five-Year Strategic Plan (assuming grant funds are not available).

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R I S K S A N D M I T I G AT I NG S T R AT E G I E S In this Section, describe the major risks associated with implementing your plan and fulfilling your projections. The purpose of this section is to show that you understand the weaknesses in your assumptions and that you have thought through what you will do if your assumptions are wrong or something unpredicted happens to the business. Risks may involve factors that are outside your control. The risks that you include should be realistic. To develop your risks, ask "What if" questions about your assumptions (see the RAB example that follows for some examples). For each risk, discuss its potential affect on your business and suggest strategies to either thwart or deal with the issue should it arise. Helpful Hints

Developing Mitigation Strategies The following are mitigation strategies to consider as you develop this section of your plan. •

Have a strong management team in place, especially an industry expert who can anticipate problems before they occur and who has experience trouble shooting.

•

Establish contingency plans before problems arise so that both management and staff know what to do "in case."

•

Develop a system to monitor cash flows into and out of the business in order to assess your liquidity.

•

Diversify your business revenues by building several product or service lines that appeal to different target customer segments.

•

Use Management Reporting tools to assess what is happening in the business and compare results to projections.

•

Create an exit strategy for your nonprofit. How will the nonprofit know if the business is not successful? When will the nonprofit review the results of the operations and what are the decision factors for closing the business. On the other hand, what will the nonprofit do if the business is highly successful or begins to cause mission drift?

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part ii: The Business Plan

 RECYCLE-A-BICYCLE RISKS AND STRATEGIES FOR MITIGATION RISKS AND STRATEGIES FOR MITIGATION Recycle-A-Bicycle has identified several risks associated with implementing its strategic initiatives as well as strategies to mitigate these risks. These are briefly described below. 1. Store revenues lag behind plan: demand is low Strategy for mitigation: We would reduce operating costs by reducing labor and curtailing store hours during exceptionally slow periods (e.g. during a heavy snowstorm). We will simultaneously continue aggressive marketing efforts to pull in demand. Recycle-A-Bicycle operations are flexible and have been subject to past revenue variations, management is comfortable managing to these issues. 2. Insufficient Raw materials to meet sales demand Strategy for mitigation: Recycle-A-Bicycle seldom has to actively solicit raw materials donations, and supply does not look to be constrained in the near future. If for some reason there is a shortage of bicycles we would initiate outreach efforts to increase supply. Used bicycles could be purchased at police auctions as a reasonably inexpensive substitute to donated bicycles. Though margin would suffer, Recycle-A-Bicycle would still be able to meet demand for bicycles and offer its higher margin accessory and repair lines. 3. Insufficient labor to meet production demand Strategy for mitigation: Given current labor market conditions in New York City, we do not anticipate any issues. Our wage rate is very competitive with the market and we always have a surplus of labor. However, if a labor supply shortage exists, we would tap into our volunteer network which has worked well in the past to meet seasonal demands for production. 4. Funding is not obtained on schedule Strategy for mitigation: The Executive Director has solid fundraising experience and is confident in the goals listed. The addition of the new Development Director will enhance these strengths. Operations will be managed to the funding commitments that are available, and when possible, reserves will be created to help smooth cash availability. 5. Loss of senior management before training and succession plan is implemented Strategy for mitigation: The Board of Directors and others have committed their energy should an unplanned change in Senior Management occur. Recycle-A-Bicycle has several professional services partners such as their accountant and business management consultant who can help provide transitional support services. 6. Loss of a major partner Strategy for mitigation: The Executive Director has many relationships with potential partners and is nurturing these as prospects for when the production/training facility is operating.

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S U M M A RY / C O NC L U S I O N Conclude your business plan with information on your financing need and next steps. Convince the reader that your business is a worthwhile investment through a quick summary of your business situation.  RECYCLE-A-BICYCLE CONCLUSION Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year Strategic Plan. These grants will be pursued through institutional funders with an interest in environmental stewardship and/or youth development. 2003 Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000 in grant funding will serve as working capital to support current operations as well as implement new marketing efforts. The additional $100,000 will support hiring additional staff, support costs associated with sourcing and obtaining the new production and training center and provide for other infrastructure improvements. 2004 Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds will be used in part for working capital and in part to support more of the Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the production and training center, hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will be used for a down payment on the production and training center. Recycle-A-Bicycle will raise the additional $106,000 through fundraising efforts spearheaded by the new Development Officer. 2005 Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional costs related to expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours by Teens program. Recycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track record of growth and is now looking for capital in order to expand the social and environmental outcomes and develop more sustainable systems within the business. Recycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer and small business in New York City. The organization serves a triple bottom line, benefiting the at-risk youth and the New York City environment through a business model that is moving toward sustainability. Recycle-A-Bicycle is seeking to increase its effectiveness in all three areas - social, environmental and financial. As one of the leading organizations combining youth education, recycling and bicycling, Recycle-A-Bicycle has the capability to expand locally as well as develop a national reach.

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p a r t i i : Exhibits

Exhibits Supporting your business plan. In your business plan, exhibits are the supporting materials that back up the story you have told throughout the documents. Include relevant information that helps make your case. Examples of items that could be in the Exhibits Section include: 1.

Detailed financial projections, monthly cash flows and other supporting financial information

2.

Financial statements of the parent nonprofit

3.

Resumes and biographies of key managers, staff or Board members

4.

Descriptions of the parent nonprofit activities

5.

Press clippings or other news items about the business or relevant programs

6.

PM&M Logic Model

7.

Marketing materials for the business

8.

Letters of support

9.

Client/customer lists

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part iii: resource guide

Part III of the Toolkit will provide you with a few extra resources to assist with the planning process.

Part III Resource Guide

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part iii: resource guide

And a Couple Other Things... Pa r t I I I Resource Guide

Every person and organization comes to the planning process with different skill sets and expertise. The Resource Guide provides information on a few specific topics that may be new to you, at least in the context of business ventures. The section includes: • Pitching your Business • Working with Consultants • Understanding Financial Statements • Glossary of Business Terms

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p a r t i i i : Pitching your Business

Pitching Your Business Plan Completing your business plan is a major task. But you are not done yet. Next, you will need to condense this immense amount of information and planning into a pitch that is comprehensible and compelling. The following is a guide for developing a 10-minute presentation. You may also want to create a 3-minute "elevator pitch," a short, concise version of the 10-minute presentation. The 10-minute Presentation Welcome (30 seconds, title slide) • Introduce yourself and explain your role in the business. • Mention the purpose of the presentation and your “ask”. Overview of Parent Organization (1-2 minutes, 1 slide) • Explain the mission of the organization and how you accomplish this mission (key programs and services). • Describe the population that your business will serve and your experiences with this population. Include a brief success story or anecdote. The Social Purpose Business (3-4 minutes, 2-3 slides) • Describe the business. What is your business and what products or services do you sell? Who are your customers and what is your market opportunity? • Explain your competitive advantage. • Clarify how the social purpose business furthers the mission of the organization. Management Team (30 seconds, 1 slide) • List key team members and describe their experience. • Convince the audience that you have the right people to make this business work! Social Outcomes (1-2 minutes, 1 slide) • State the short term, interim and long-term outcomes (you might include your logic model). • Briefly describe how you will track and measure your outcomes. Financial Outcomes (2-3 minutes, 2 slides) • Summarize your assumptions and 5-year profit/loss projections. • Discuss the financial outlook for the business. • Explain your financial need and how you plan to fill this gap.

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part iii: resource guide

Conclusion: Next Steps and the “Ask” (1 minute, 1 slide) • Outline the next steps for the business? Include the timing of these steps. • Include the "ask" - what do you want from the audience in terms of financing, inkind resources, etc. • End on high note - summarize why this is a worthwhile business. Tips for Presenting a Social Purpose Business to Potential Funders Concentrate on your message and the ideas you want to convey. • Practice your introduction and your conclusion until you are entirely comfortable with the first and last few minutes of your presentation. • Focus on the "big picture" and the overall message you want to communicate to your audience. Create a PowerPoint presentation that is professional and easy-to-read. • Avoid overcrowding. - Use 3 to 5 high-level bullet points - then, expand on them when you speak. - Use short sentence fragments to "telegraph" your points. • Avoid distractions. - Use pictures and animations on your slides only when they add to your presentation. - Keep the background simple and professional. • Include a Conclusions and/or 'Any Questions?' slide. Talk confidently to individuals, not a faceless crowd. • Make eye contact. • Use the gestures, phrases and movements that come naturally to you. Let your personality come through. • Remember, you know your subject better than anyone in the room • Use your breath for control. - Before you get up to speak, take several slow, deep breaths. Inhale as you count to five, hold for 2 counts, and then slowly exhale as you count to five. Repeat several times. - Before you start speaking, pause and take a deep breath. • When you speak, look at your audience, not at your presentation. Be prepared for tough questions. • Work with your colleagues on a list of tough questions about your business and funding plans. • Practice the answers to these questions. Practice - it's the key to confidence.

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p a r t i i i : Working with Consultants

Working with Consultants Through your organizational assessment or Action Plan, you may find that you do not have the expertise or time to complete a part of the planning. Or you may believe that an outside perspective would be helpful in moving the planning forward. In these cases, a consultant is a valuable tool. When working with a consultant, it is important to think through what you need done and the amount of staff time required to manage the project. Before You Hire a Consultant 1.

Develop a Draft Scope of Work Document. This document outlines the project to be completed and the associated timeline and deliverables (or work document) required. It will be used to solicit proposals from consultants. Think about the following questions: • What is your goal for the project? Define your project outcomes. • What type of expertise does the project require? • What are the qualifications you seek in a consultant? • What is the deliverable that is needed and how will it be used? • What is the time frame in which the work should be completed? • Who at the organization will manage the consulting project? • What is the budget range for the consulting project?

2.

Identify Potential Consultants. Send your Scope of Work document to potential consultants before meeting with them. Ideas for finding potential consultants include: • Reach out to organizations that are similar to yours for ideas, contacts and references of potential consultants. • Contact professional associations such as networks of organizational development practitioners, facilitators, trainers and fundraisers. • Contact local universities for student or faculty resources.

3.

Choose a Consultant. Interview potential consultants in order to assess their skills as well as the fit with your organization. Key questions to ask during the interview: • Have you worked on similar projects or consulted with groups similar to ours? What did you learn from the experience? • What skills do you possess that will be helpful with our project? • How would you work with our staff, Board and constituents? • Will other members of the consulting team be working on the project? Who are they? How will the tasks be divided up? • What challenges do you anticipate? How will they be addressed? • What do you see as our responsibility during the consulting engagement? • Can the work be completed in the time frame and budget specified?

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part iii: resource guide

After the interview, request a short written proposal including a description of how they will complete the project, a timeline and a budget. Request that references and samples of the consultant's work be included with the proposal. The criteria you use to select a consultant will be some combination of skills, experience, budget, timeline and personality. Managing the Consulting Relationship

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1.

Write up a final Scope of Work and/or contract to formalize the relationship with the following information: • Project description • Need for services • Deliverables (interim and final) • Timeframe for completing the work • Check-in times • Evaluation process • Budget and payment process

2.

Prior to beginning the consulting arrangement, it is important to have a candid conversation about expectations and how you will handle the situation in the event that expectations are not met. • Provide a detailed briefing on your organization, what you are trying to accomplish and any research to date. • Communicate that the Scope of Work may change once the work begins. Establish how such changes will be handled.

3.

Don't become overly dependent on the consultant. The consulting relationship is collaborative and you play an important role in shaping the process so that you can achieve your goals.

4.

Establish set check-in times for the project to ensure that you have open communication. Determine when you will see drafts of the work. • Develop agendas to guide the check-in meetings. • Review interim drafts of the work to ensure that the project goals are being met.

5.

Set aside adequate time to work with the consultant.

developing a social purpose business plan

p a r t i i i : Understanding Financial Statements

Understanding Financial Statements There are three main reports that are prepared to deliver financial information about the health of businesses. These are: the Balance Sheet, the Income Statement and the Cash Flow Statement. The statements are used both internally to manage the financial performance and externally to communicate the financial position to stakeholders or funders. Each of these provide separate types of information and can provide valuable insights into the performance of the business during the previous accounting period. They can also give early warning signals of problems that may arise in the future. As you read through this section refer to the examples provided in Part IV of the Toolkit. Balance Sheet The balance sheet is a snapshot of a company's assets and liabilities on a particular day. It is divided into two columns, with all the assets listed on the left and liabilities listed on the right. The reason it is called a balance sheet is because both sides must "balance"; that is, they must have the same totals at the bottom. There is a basic accounting equation which makes the balance sheet "balance": Assets = Total Liabilities + Equity. Some of the items listed on the assets or left side of the balance sheet would be: Property, Equipment, Cash, Accounts Receivable and Inventory, etc. On the right side of the balance sheet, you would typically see the following items: Bank loans (short term and long term), Accounts Payable and Owner's Equity. This last item, Owner's Equity, is what is left over after subtracting the total liabilities from the total assets. This represents the net value of the company, which can be claimed by the owners of the company.

Analysis of Balance Sheet There are some key items on your balance sheet to analyze closely. They may be an early warning signal of impending problems with your financial standing. • Current ratio: This is mathematically calculated as the ratio of total current assets to total current liabilities. Since 'current' means items that will be received or payable within the next accounting year, it would be ideal for this ratio to be close to one. In other words, the total current assets and current liabilities would be equal. If that was the case, we could reasonably conclude that the company will be able to meet its obligations and remain solvent for the next year.

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part iii: resource guide

• Debt to Total Assets: This ratio is mathematically calculated as the ratio of total liabilities to total assets. Since the 'ideal' debt to total assets varies by industry (for example capital intensive businesses will have a higher ratio than service businesses), it is useful to compare this ratio with similar companies to see if a business may have too much debt. Income Statement The income statement summarizes the activities of a company during the previous accounting period, and answers the following question: "Did we make a profit last year?" It lists items such as revenues, cost of goods sold, salary expenses, marketing expenses, administrative expenses, and finally, net income. Remember that the net income item does not equal the amount of cash that the company generated. Due to accounting conventions and business practices (such as purchasing goods on credit), there can be significant differences in what the company declares as net income, and the amount of cash it generated over the course of the year. For this reason, we have a third report, call the Cash Flow Statement.

Analysis of Income Statement Most analysis of the income statement is done by evaluating each item on the statement as a percentage of revenues. This method allows you to compare these ratios across firms with vastly different levels of revenue. The following ratios are useful tools in assessing how much money the company earns as a percentage of total revenues: • Gross margin: This is the gross profit (revenues minus cost of goods sold) as a percentage of total revenues - it tells you on average how much a company earns on the sales of its goods. • Operating margin: This is the operating profit (before interest costs) as a percentage of total sales. The ratio tells you how much money a company spends to earn one dollar of revenues. The interest expense is left out since interest depends on the amount of debt taken on by a company, which is not strictly an 'operating' decision (rather, it is a financing decision). • Net margin: This is net income as a percentage of revenues. This tells how much of the total revenues the company's owners can keep for themselves, after paying all the expenses incurred during the year. Notice that these move down the income statement: first analyzing the gross profit, then operating and finally net profit. In this way, we can separate problems and see at what stage the highest costs are incurred.

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p a r t i i i : Understanding Financial Statements

Cash Flow Statement (CFS) The CFS details the amount of cash that came into the company, and which was paid out of the company over the course of the previous accounting period. It documents the change in cash balance during the accounting period. It has three main sections: • Cash Flow from Operating Activities (such as payments of salaries, rent on office space, purchases of goods and receipts from cash sales) • Cash Flow from Investing Activities (such as purchases of a delivery truck, machinery or office building) • Cash Flow from Financing Activities (such as loans received from a bank or investments by the owner of the company) The total of these three sections is the Net Cash Flow. It can be a positive or negative number, and, when added to the beginning balance in your bank account, should give you the balance in the bank account at the end of the year.

Analysis of Cash Flow Statement While it is helpful to know whether the Net Cash Flow is positive or negative, a negative net cash flow may not necessarily be a bad thing. For example, a company may have a positive cash flow from operating activities, but due to high investments in the business or repayments of debt the net cash could be negative. A high level of investment back into the business (and resulting negative net cash flow) may actually be good news! The key to analyzing the CFS is to identify where cash is being spent; arguably the most troublesome discovery would be a negative cash flow from operating activities. This would mean that you are spending more than you earn in revenues - certainly not a sustainable position. Summary This section has briefly introduced the main accounting documents used to report the activities of a business. When doing analysis across all the statements, it is worthwhile not just to look at ratios for a single year, but compare the trend of each ratio for several years. Although we have highlighted a few of the key items to look at in each accounting statement, it must be noted that this is not meant to be a comprehensive discussion of financial analysis. Each industry has its own unique accounting conventions, and any analysis must take into account the nuances of the specific company and the industry's accounting standards and practices. If you are evaluating the performance of a company, it is best to consult a professional accountant or experienced financial consultant who would be able to help in this task.

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p a r t i i i : Glossary of Business Terms

Glossary of Business Terms Accounts Payable Payments owed to suppliers for goods and services. Accounts Receivable Payments owed by customers for delivered goods and services. Amortization The process of liquidating (paying off) a debt through installment payments; amortization also refers to the process of prorating expenditures over time in order to write them off. Assets The resources that the company possesses for the future benefit of the business (includes cash, inventory, accounts receivable, equipment buildings). Balance Sheet Snapshot of a company's holdings at a given point in time. Shows the assets owned by a company, the liabilities owed to others and the accumulated investment of its owners. Balloon Payment Principal is paid back in a lump sum at the end of the loan term. This keeps payments lower during the life of loan as the company pays only accrued interest. Benchmarking Comparing your business with other similar businesses or competitors. Brand Equity The good will, positive associations and recognition earned by a brand. Break Even Point The amount of sales (in dollars or units) that will cover all the costs of running the business. Call Option The company's ability to pay back the debt before maturity. Calls are usually applied to bonds. Often a call option will require that the company pay more than the face value of the debt. Calls are also attached to preferred equity. Cash Flow The money coming in to the business and the money going out is the flow of cash that determines whether a business will survive.

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part iii: resource guide

Cash Flow Statement (CFS) Document summarizing the business's cash flow position for a given period. Often shows the sources and uses of cash. Competitive Analysis Examination of your company's position in the marketplace relative to the competition. Core Competencies Advantages and strengths your company has relative to the competition. Cost of Goods Sold (COGS) The cost to your company of acquiring or producing the goods and services sold in a given period of time. Coupon Rate Interest rate on a bond (sometimes used to refer to the interest rate on any debt instrument). Covenants A way for the debt holder to ensure some control over the company. Covenants include limits on different financial ratios (like assets to liabilities or debt to equity) and may bar the company from selling any major assets without approval from the debt holder. Debt Service The regular debt payment that a company makes (monthly or annually), which includes interest accrued and a portion of the principal. Dequity Hybrid financing instruments that combine certain characteristics of both debt and equity. Preferred stock is the most common example. Differentiation Any way a company markets its products and services to distinguish them from the others in the market. Ways of differentiating include features, fit, styling, reliability, packaging, sizes, service and brand names. Fixed Costs Costs that do not vary with volume of goods or services produced or sold. Often includes rent and insurance. Fixed Income A security in which the holder receives a specific annual interest income and a specific amount at maturity. Gross Margin Revenue from sales to customers, minus the cost of goods sold (COGS). Tells you whether the business is making a profit, before considering corporate expenses.

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p a r t i i i : Glossary of Business Terms

Interest-Only Payments Debt service in which company pays only the interest that accrues. Principal is usually paid back in a lump sum (balloon payment). Income Statement (Profit and Loss Statement) Shows the flow of activity and transactions over a specific period of time. In general, revenue minus expenses equals income (profit). Liabilities Obligations to repay borrowing, debts and other obligations to provide goods or services to others (includes bank debt, accounts payable, advance payments from customers to deliver goods or services, taxes owed and wages owed). Marginal Revenue and Cost The revenue and cost of producing and selling one more item. Market Segment The portion of all consumers that is the ideal buyer for a product or service. For example, a snack food manufacturer might target a young consumer who makes purchases on impulse, while a gourmet food manufacturer targets an older consumer who does research on quality. Market Share The ratio of company sales in a market to total sales in a market. Can be expressed in dollars or sales units. Maturity The length of the term of debt. Moratorium Debt service is not paid for a specific amount of time (helps start-ups by not requiring them to immediately begin debt repayment). Nonrecourse Debt Debt for which the borrower cannot be held personally liable for payment. Operating Income/Operating Profit/EBIT Earnings before interest and taxes, or the profit made from the operations of the company, usually the production and sale of goods and services. Equals gross margin minus selling, general and administrative expenses. Opportunity Cost The sacrifice made to use an asset for one purpose instead of another. For example, by deciding to produce more pizza, a café might have to produce fewer sandwiches. The opportunity cost is the revenue lost from sandwiches not sold.

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part iii: resource guide

Owners' Equity The accumulated dollar measure of the owners' investment in the company. Assets minus liabilities equals owners' equity. Positioning Projection of a product as having a certain desired image which makes it appealing to a certain segment of the market. Principal The original amount borrowed or financed; interest is paid on the principal. Return or Return on Investment (ROI) A measurement of the amount of money that has been realized as a result of a certain investment of resources; the amount earned in proportion to the capital invested, usually stated as a percentage. Secured Debt is guaranteed by an asset. If company defaults, that asset is sold and proceeds are used to pay the secured creditor. Typical assets include land/buildings and accounts receivable. Seniority The order in which debt holders are paid back. Each debt holder will have a different seniority. Senior, general and subordinate debt are the most common terms for levels of seniority. All debt is senior to equity. Variable Contribution Amount remaining from sales revenue after covering variable costs, expressed per unit of sales. This is the amount that will go toward covering fixed costs. Variable Costs Costs that vary with production or sale of goods and services. Often includes materials, sometimes labor. Working Capital The amount of funds available to pay short-term expenses. Seen as a cushion to meet unexpected or out-of-the-ordinary expenses. It is determined by subtracting current liabilities from current assets.

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part i: getting started

Part IV contains materials referenced in Parts I, II and III. Pull out these sheets as you work through the Toolkit in order to guide your planning process and better understand the concepts.

Part IV Worksheets, Templates and Examples

developing a social purpose business plan

I.1

Part IV: Strategic Questions

Social Purpose Business Planning Strategic Questions Distribute this Strategic Questions Worksheet to a group of staff, managers and board members to help you evaluate your social purpose business idea from multiple perspectives within the organization. 1. State the overall mission of the organization.

2. Describe your social purpose business idea. What product or service do you plan to offer and who are your target customers?

3. Describe the clients that you expect to benefit from this idea in terms of demographics and needs.

4. How will the venture benefit your clients? What needs, interests and skills sets do they bring to the venture? What programs do you have that Have your clients expressed a currently serve the needs of special interest for new services? your clients? What kind of new services/ programs are they interested in?

What are your client’s key skill sets in terms of what is needed for the business venture?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.1

Part IV: Strategic Questions

5. What are the anticipated benefits or outcomes for your clients and the organization that will result from starting a social purpose business? Client Outcomes

Organizational Outcomes

6. What assets will you use to create the business venture (e.g. building, property, equipment, intellectual property, proprietary processes)?

7. What other ways might you use these assets (e.g. sell the building or equipment, use the equipment for a new program)?

8. What are the financial goals of the business (break-even, generate profits to be used for additional training or spin off revenues for other programs of the organization)?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.2

Part IV: Organizational Assessment Survey

Organizational Assessment Survey This survey will help you to gauge your organization’s ability to develop a social purpose business. We suggest that you give this survey to a cross-section of your staff members to get their input into the organization’s capacity to start a new venture. Assessing the Organization 1. The core values of the organization are:

2. The strengths of our organization are:

3. The areas of the organization that need improvement are:

4a. The financial, staff, and physical (equipment, property, etc.) resources that are needed for the business planning process are:

4b. The financial, staff and physical (equipment, property, etc.) resources that are needed for the launch and operation of the business are:

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.3

Part IV: Organizational Assessment Survey 5a. The organization has the following financial, human, and physical resources available for the planning process:

5b. The organization has the following financial, human, and physical resources available for launch and operations:

6a. How might the organization acquire the missing financial, human and physical resources that are still needed for business planning?

6b. How might the organization acquire the missing financial, human and physical resources that are still needed for launch and operations?

7. The advocates for the social purpose business among the Board of Directors are:

8. What kind of assistance and/or expertise can your Board of Directors provide?

9. How would an advisory board or business development task force aid in your planning process? Who/what skills would you look for in recruiting members for this group?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.4

Part IV: Organizational Assessment Survey 10. The organization has the following strategic partnerships and relationships that will aid in developing the business:

11. What strategic partnerships or relationships are necessary in order to plan and launch the business? How can the organization develop these partners?

12. In developing the business, the organization expects to experience tension and/or resistance to change in the following areas:

13. How might a consultant help you in the planning or launch of the business? What work would they do for you?

14. The timeframe for the business planning process is:

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.5

Part IV: Organizational Assessment Survey

Assessing your “People” The entrepreneurship team, including key staff, Board members and other stakeholders will be comprised of: Name

Title/ Position

Role on Entrepreneurship Team

Skills/Expertise

Project Champion

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.6

Part IV: External Environment Assessment

External Environment Assessment This assessment is an initial “quick test” to assist you in thinking about the feasibility of your business idea in the context of your potential customers and marketplace. An in-depth market analysis will be completed later during the business planning process. Questions to Consider

Associated Challenges

1. Who are your potential customers? Describe them demographically. What similar products do these customers currently buy? What do they look for when buying similar products/services?

2. Who are your competitors? What are their strengths and weaknesses??

3. How will you compete? How will your business be different?

4. What is happening with the economy, your industry and your market? Are there major changes in what customers need and want, how they access the product or the price? How might this affect your business?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.7

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.8

Part IV: Logic Model Template

Performance Measurement and ManagementSM Logic Model Template The following is a basic template for a Logic Model. In addition, two examples are provided to help you think through your own business idea: The Recycle-A-Bicycle Logic Model, demonstrating a business that is currently in operation; and the City Café, a business that is operating a pilot and is in development. Note that the template provides space for business, program and organizational outcomes. INPUTS

ACTIVITIES

OUTPUTS

Business Activities

Business Outputs

INITIAL OUTCOMES Business Outcomes

Organizational Outcomes

Program Activities

Program Outputs

Program Outcomes

INTERIM OUTCOMES Business Outcomes

LONG TERM OUTCOMES Business Outcomes

Organizational Outcomes

Organizational Outcomes

Program Outcomes

Program Outcomes

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.9

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.10

Part IV: Logic Model Examples

Recycle-A-Bicycle Logic Model Outputs Inputs Board

Staff Youth

Funding Materials Donation Facilities Consultant Inventory and bookkeeping systems

Activities Conduct youth training programs

Youth trained in bicycle repair and business concepts

Refurbish bicycles

Ongoing sales activity

Conduct business activities at retail stores Analyze operations & set production goals Create resource development strategy

Revised operating plan

Initial Outcomes Students graduate from training Youth employed at RAB or other bike shops

Facilities and staffing plan

Long-term Outcomes

Healthy lifestyle practiced by program graduates

Healthy lifestyle promoted to others by program graduates

Youth graduate high school

Youth develop strong job skills

Improved inventory & bookkeeping Strategy for resource development

Interim Outcomes

Financing for new facility and programs secured

Graduates become environmental stewards Youth enter living wage careers or obtain postsecondary education

Retail sales volume increase

Long-term staff positions supported by sales

RAB offers consistent programming Organizational Sustainability achieved

Van & Storage Facility acquired

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.11

Part IV: Logic Model Examples

City Café A Social Purpose Youth Business

INPUTS

Business Plan Ideas Staff Business Advisory Committee Funding Facilities

ACTIVITIES

OUTPUTS

INITIAL OUTCOMES

Business begins to generate income from sales

Develop/revise business plan Develop business strategy

Implement training

LONG-TERM OUTCOMES

Business breaks even

Completed business plan

Conduct market analysis Provide employment and leadership opportunities for youth Develop training curriculum

INTERIM OUTCOMES

Business

Launched Youth participate in activities Youth receive employment and training opportunities

Organization becomes more entrepreneurial

Youth develop skills and gain experience to pursue meaningful job opportunities

Parent organization explores additional revenue generating activities

Youth advance in a meaningful career

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.12

Part IV: Action Plan Template

Action Plan Template Use the activities on your Logic Model to determine what needs to be done with respect to the business. The Action Plan can be used to manage both the business planning process and the operations of your business.

Task (WHAT)

Due Date (WHEN)

Responsibility (WHO)

Status/Notes

Category:

Category:

Category:

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.13

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.14

Part IV: Conjoint Analysis

Conjoint Analysis As you learned in the Part II: Business Model Section, Conjoint Analysis is a process that helps you predict the price customers might be willing to pay, based on the weight that customers place on different decision factors associated with the product. Conjoint Analysis uses the following process: 1. Choose a range (3 – 8) of competitive products that you think are most like your product. 2. List attributes that you think are important to the customer when purchasing or using this type of product. 3. Ask a sample of potential customers to rank the attributes in terms of importance in the decision to purchase and then ask them to rank the competitors on these attributes. 4. Use a weighted average calculation to determine the price customers are willing to pay. Example of Conjoint Analysis for Social Purpose Bakery Chocolate Cake The following shows a sample pricing analysis for a Social Purpose Bakery that is testing its signature chocolate cake to determine a basis for pricing its baked goods. Step 1: Choose a range of competitive products that you think are most like your product. Our Social Purpose Bakery was able to identify three bakeries that it believed were its prime competitors: The Cake Place, a gourmet grocer and Baked for Good. Step 2: List attributes that you think are important to the customer when purchasing or using this type of product. Our Social Purpose Bakery decided on the following attributes: Taste, Presentation, Ease of ordering, Convenience, Customer service and Social mission. Step 3: Ask the sample of potential customers to rank the list of attributes using a 100 point scale based on importance of the attribute in your decision to purchase. Attributes Taste Presentation Ease of ordering Convenience Customer service Social mission Total

Ranking

100

Then ask the sample of potential customers to rate the competitive products on a scale of 1 to 10 (10 being the best) based on the attributes identified in Step 2. Also have them rate your product.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.15

Part IV: Conjoint Analysis An example of the worksheet provided to the sample of potential customers for the Social Purpose Bakery is below: Attributes

Bakery 1: The Cake Place

Bakery 2: Gourmet Grocer

Bakery 3: Baked for Good

Taste Presentation Ease of ordering Convenience Customer service Social Mission Price of the Product

Test Case: Social Purpose Bakery

TBD

Step 4: Use a weighted average calculation to determine the price customers are willing to pay. For example, the following are the rankings of one customer. Attributes Taste Presentation Ease of ordering Convenience Customer service Social mission Total Attributes

Taste Presentation Ease of ordering Convenience Customer service Social Mission Price of the Product (actual price of competitors)

Ranking 65 25 1 5 3 1 100 Bakery 1: The Cake Place 10 5 10 6 8 0 $35

Bakery 2: Gourmet Grocer 8 5 8 9 8 0 $22

Bakery 3: Baked for Good 7 9 10 6 8 6 $30

Test Case: Social Purpose Bakery 9 7 8 7 7 8 TBD

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.16

Part IV: Conjoint Analysis

Price Calculation: Attributes

Taste Presentation Ease of ordering Convenience Customer service Social Mission Total Score Actual Price

Bakery 1: The Cake Place 10*65=650 5*25=125 10*1=10 6*5=30 8*3=24 0*1=0 839 $35

Bakery 2: Gourmet Grocer

Bakery 3: Baked for Good

8*65=520 5*25=125 8*1=8 9*5=45 8*3=24 0*1=0 722 $22

7*65=455 9*25=225 10*1=10 6*5=30 8*3=24 6*1=6 750 $30

Test Case: Social Purpose Bakery 9*65=585 7*25=175 8*1=8 7*5=35 7*3=21 8*1=8 832 ?

Determining your price: The Social Purpose Bakery evaluated how it ranked compared to the other three products and with respect to the importance of the different attributes. Based on this, the bakery was able to evaluate where it fit along the price continuum of the three other products. The price that our Social Purpose Bakery should be able to charge is between $30 and $35 because its weighted ranking is between that of Baked for Good and The Cake Place.

Score Price

Gourmet Grocer

Baked for Good

722 $22

750 $30

Social Purpose Bakery 832 $30 - 35

The Cake Place 839 $35

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.17

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.18

Part IV: Using the Revenue Model Template

Revenue Model Template The disk provided in the Toolkit contains templates that are meant to assist you in developing a five year outlook for your business. You can use or modify these templates, or create your own. In the Revenue Assumptions template, you are provided with space for three basic product lines. If you have more product lines, you will need to add sections to the template. This template is extremely basic and is meant to serve as a starting point for new businesses. Yellow coded cells are where you will enter your assumptions. Enter only numerical values. Blue coded cells are for text entries. Cells without color are coded with formulas and will be calculated based on the assumptions that you enter in the Yellow-colored cells. Instructions: 1. Begin with your primary product line. Enter the name of the product line in the bluecolored cell currently labeled “Product/Service A”. Then enter the name of the first month that you will be projecting (enter the date in the format: Month Year, e.g. February 2003). 2. Enter the price you will charge for this product/service in year one. Indicate in the blue box what units this price refers to. For example, one cake, one bicycle, a package of services, an “average” customer purchase, etc. 3. Estimate the sales volume per month for year one. That is, how many units will you sell each month. The template will calculate the monthly revenue from that product/service line and will show the seasonality by showing what percent of annual sales are generated each month. 4. Estimate the cost per unit in direct materials and direct labor costs. The template will total the cost and calculate the gross margin on each unit sale. 5. Now you will estimate future revenues. You will need to estimate increases in the three major assumptions: price, sales volume and cost of goods. You will enter the percent increase (or decrease) expected. The template will fill in the new price, sales volume and costs associated with your projected increase. The template allows you to enter three product lines and at the bottom of the worksheet, calculates the total revenues, costs, gross profit and gross margins. If you have additional product lines, you will need to modify the template. A printed version of one completed Product Line and the total calculations is provided on the next pages.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.19

Part IV: Using the Revenue Model Template

Product/Service A Pricing Price per unit = what you will charge Units

$

21.00 per service

(For example: per hour, per piece, per pound) Insert date in format: March 2003

Sales Volume (Units sold)

Month 1

Month 2

Number of units to be sold each month Percent of total units sold Sales Revenues (price x volume)

Feb-03 165 6% $3,465

Mar-03 250 9% $5,250

Cost per unit Direct Material cost per unit Direct Labor cost per unit Total cost per unit Gross Margin (%) Gross Margin ($)

Increases for Years 2 - 5

$ $ $ $

12.00 12.00 43% 9.00

Apr-03 250 9% $5,250

Month 4

Month 5

May-03 250 9% $5,250

Jun-03 320 11% $6,720

Month 6

Jul-03 320 11% $6,720

Month 7

Month 8

Aug-03 320 11% $6,720

Sep-03 230 8% $4,830

Month 9

Oct-03 230 8% $4,830

Month 10

Nov-03 230 8% $4,830

Month 11

Dec-03 165 6% $3,465

Month 12

Jan-04 165 6% $3,465

Total

2895 $60,795

(Direct Labor is a tricky issue. Ask yourself if the cost truly varies with the number of units sold) (Cost per unit should be less than the price per unit or else you will lose money on every item you sell!) (Price minus cost, then divided by price) (Price minus cost)

One method of estimating increases in revenues is to think through changes in the price, sales volume and cost of goods that you will experience over the next few years. These cells allow you to look at how changes in these factors wlll affect your revenues, margin and profits.

Price growth rate Year 2 Year 3 Year 4 Year 5

Month 3

0% 1% 2% 2%

New price $ $ $ $

21.00 21.21 21.63 22.07

Unit sales growth rate New Volume 25% 15% 10% 5%

3,619 4,162 4,578 4,807

Sales Revenues $ $ $ $

75,994 88,267 99,035 106,067

Cost per unit growth rate 1% 2% 1% 2%

New cost per unit $ $ $ $

12.12 12.36 12.49 12.74

Gross Margin 42% 42% 42% 42%

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.20

Part IV: Using the Revenue Model Template

Revenue Model Summary

Year 1 Forecast (month-by-month) Revenues Product/Service A Product/Service B Product/Service C Total Revenues Cost of Goods Product/Service A Product/Service B Product/Service C Total Cost of Goods Operating/Gross Profit Gross Margin (%)

$ $ $ $

Feb-03 3,465 8,470 280 12,215

$ $ $ $

Mar-03 5,250 13,310 280 18,840

$ $ $ $

1,980 1,400 140 3,520

$ $ $ $

3,000 2,200 140 5,340

$

8,695 $ 71%

$ $ $ $

Apr-03 5,250 13,310 240 18,800

$ $ $ $

3,000 2,200 120 5,320

13,500 $ 72%

$ $ $ $

May-03 5,250 13,310 240 18,800

$ $ $ $

Jun-03 6,720 22,385 240 29,345

$ $ $ $

Jul-03 6,720 22,385 240 29,345

$ $ $ $

Aug-03 6,720 22,385 240 29,345

$ $ $ $

Sep-03 4,830 15,125 240 20,195

$ $ $ $

Oct-03 4,830 15,125 240 20,195

$ $ $ $

Nov-03 4,830 15,125 280 20,235

$ $ $ $

Dec-03 3,465 8,470 280 12,215

$ $ $ $

Jan-04 3,465 8,470 280 12,215

$ $ $ $

60,795 177,870 3,080 241,745

$ $ $ $

3,000 2,200 120 5,320

$ $ $ $

3,840 3,700 120 7,660

$ $ $ $

3,840 3,700 120 7,660

$ $ $ $

3,840 3,700 120 7,660

$ $ $ $

2,760 2,500 120 5,380

$ $ $ $

2,760 2,500 120 5,380

$ $ $ $

2,760 2,500 140 5,400

$ $ $ $

1,980 1,400 140 3,520

$ $ $ $

1,980 1,400 140 3,520

$ $ $ $

34,740 29,400 1,540 65,680

13,480 $ 72%

13,480 $ 72%

21,685 $ 74%

21,685 $ 74%

21,685 $ 74%

14,815 $ 73%

14,815 $ 73%

14,835 $ 73%

8,695 $ 71%

Total

8,695 $ 71%

176,065 73%

5-Year Projection Annual Revenues Product/Service A Product/Service B Product/Service C Total Revenues Cost of Goods Product/Service A Product/Service B Product/Service C Total Cost of Goods Operating/Gross Profit Gross Margin (%)

Projected Revenues based on changes in price, volume and cost of goods Year 1 Year 2 Year 3 Year 4 $ 60,795 $ 75,994 $ 88,267 $ 99,035 $ 177,870 $ 204,551 $ 227,256 $ 250,345 $ 3,080 $ 3,422 $ 3,733 $ 3,996 $ 241,745 $ 283,966 $ 319,255 $ 353,376

$ $ $ $ $

34,740 29,400 1,540 65,680

$ $ $ $

176,065 $ 73%

43,859 34,486 1,711 80,056

$ $ $ $

203,910 $ 72%

51,447 38,694 1,866 92,007

$ $ $ $

227,248 $ 71%

57,158 42,625 1,998 101,780

$ $ $ $

Year 5 106,067 265,566 4,198 375,830

$ $ $ $

61,216 45,216 2,099 108,531

251,596 $ 71%

267,299 71%

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.21

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.22

Part IV: Using the Fixed Cost Template

Fixed Cost Template In the Financial Projections Workbook, the Fixed Costs Template contains a list of possible expenses associated with a typical small business. Add and eliminate items from this list as needed. The Fixed Costs projections are formulated to allow a standard rate of increase over the course of the five years. However, when creating your projections, it is best to determine the rate of growth for each item separately. In some cases, you will know exactly how the expense will grow and in others, you will have to estimate. Year 1 Year 2 Year 3 Year 4 Year 5 Annual Amount Annual Amount Annual Amount Annual Amount Annual Amount Facilities Expenses Rent Mortgage Utilities Signage Office equipment (computers, copiers, fax machine) Equipment Repair and Maintenance Services Administrative Expenses Insurance Payroll fees Legal fees/retainer Accounting fees Office supplies Association Memberships Phone/Cell Phone/Pager Computer Software Parent nonprofit admin fee or overhead charge

Travel and Conference Expenses Conferences Transportation Marketing and Sales Expenses Credit Card Fees Advertising Campaign Fliers/coupons/other printing Logo design/branding Training or other Program-related Expenses Training curriculum Program supplies Program overhead

12000 0 2400 0 2400 1200

12360 0 2472 0 2472 1236

12731 0 2546 0 2546 1273

13113 0 2623 0 2623 1311

13506 0 2701 0 2701 1351

2400 300 0 0 2400 0 0 500

2472 309 0 0 2472 0 0 515 0

2546 318 0 0 2546 0 0 530 0

2623 328 0 0 2623 0 0 546 0

2701 338 0 0 2701 0 0 563 0

0 0

0 0

0 0

0 0

0 0

1200 2400

0 1236 2472 0

0 1273 2546 0

0 1311 2623 0

0 1351 2701 0

1545 0 0

1591 0 0

1639 0 0

1688 0 0

0

0

0

0

1500

Other/miscellaneous Total Fixed Expenses Fixed Expense Growth Rate

$

28,700

$

29,561

$

30,448

$

31,361

$

32,302

3%

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.23

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.24

Part IV: Using the Staffing Plan Template

Staffing Plan Template The Staffing Plan Template is a worksheet within the Financial Workbook. The template is divided into two sections: one for salaried employees and the other for those employees paid hourly. As in the Revenue Model, this is a basic template to guide your planning process and you may need to expand its scope or even redesign the model to fit your busines. In particular, you may need to develop a more detailed plan for adding part-time employees over the course of the first year as you ramp up your operations. Before you use this plan, you will need to determine the number of employees needed to fulfill the level of sales projected and provide support services as needed. To use this template, enter text in the blue colored cells and enter numerical values in the yellowcolored cells. The template will total the staffing costs in a table at the bottom of the page. A printed version of this worksheet is included here. Follow the steps below to use the staffing template. 1. Input the titles of the positions for salaried employees and the corresponding annual salary. 2. Estimate the percent of time for which each salaried employee will be paid each year. Your business may employ some staff part time and then move them to full time as you grow. These cells allow you to demonstrate that increase. 3. Estimate the cost of living increase to be paid to salaried employees from year to year. 4. Enter the titles of the positions for hourly employees, the corresponding hourly wages and cost of living increase. 5. Estimate the number of hours per week that each position will work each year for five years. 6. Determine the number of employees in each position each year. This is a place where you can increase the number of hourly employees over the years. 7. Enter the payroll tax, workers compensation rate, and fringe benefit rate for the business. The template will total the staffing costs in the table at the bottom of the page.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.25

Part IV: Using the Staffing Plan Template Staffing Assumptions Salaried Employees Salaried Staff Positions Business Manager Lead Mechanic Chief Financial Officer Assistant Manager Marketing Director Human Resources/Payroll Manager Development Officer

Year 1 Salary $ 50,000 $ 40,000 $ 50,000 $ $ 45,000 $ 40,000 $ 40,000

Annual cost of living increase for salary Salaried Staff Time (as % of FTE) Business Manager Lead Mechanic Chief Financial Officer Assistant Manager Marketing Director Human Resources/Payroll Manager Development Officer

Year 2 Salary $ 51,500 $ 41,200 $ 51,500 $ 30,000 $ 46,350 $ 41,200 $ 41,200

Year 3 Salary $ 53,045 $ 42,436 $ 53,045 $ 30,900 $ 47,741 $ 42,436 $ 42,436

Year 4 Salary $ 54,636 $ 43,709 $ 54,636 $ 31,827 $ 49,173 $ 43,709 $ 43,709

Year 5 Salary $ 56,275 $ 45,020 $ 56,275 $ 32,782 $ 50,648 $ 45,020 $ 45,020

Year 2

Year 3

Year 4

Year 5

3% Year 1 100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

5%

0%

0%

0%

0%

0%

50%

50%

50%

50%

5%

0%

0%

0%

0%

0%

0%

0%

0%

0%

5%

5%

0%

0%

0%

Hourly Employees Hourly Staff Positions and wages Youth mechanics none none none Annual cost of living wage increase for hourly

Hourly Staff Time (Hrs/week/employee) Youth mechanics none none none

Hourly Staff Time (Number of employees) Youth mechanics none none none

Year 1 Hourly Wage $ 10.00 $ $ $ -

Year 2 Hourly Wage $ 10.15 $ $ $ -

Year 3 Hourly Wage $ 10.30 $ $ $ -

Year 4 Hourly Wage $ 10.46 $ $ $ -

Year 5 Hourly Wage $ 10.61 $ $ $ -

1.50% Year 1 Hours/Week 15

Year 1

Year 2 Hours/Week 15

Year 2

Year 3 Hours/Week 15

Year 3

4

5

Year 4 Hours/Week 15

Year 4 6

Year 5 Hours/Week 15

Year 5 7

8

Staffing Expenses: Payroll taxes Workers comp - other Fringe benefits Weeks per year

9.425% 2.32% 20.00% 52.00

% of total wages % of total wages % of total wages weeks used to calculate annual wages

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.26

Part IV: Using the Staffing Plan Template

Total Staffing Costs: Business Manager Lead Mechanic Chief Financial Officer Assistant Manager Marketing Director Human Resources/Payroll Manager Development Officer Subtotal Salaried Employees

$ $ $ $ $ $ $ $

Year 1 65,873 52,698 3,294 2,964 2,635 127,463

$ $ $ $ $ $ $ $

Year 2 67,849 54,279 19,762 2,714 144,603

$ $ $ $ $ $ $ $

Year 3 69,884 55,907 20,355 146,146

$ $ $ $ $ $ $ $

Year 4 71,981 57,585 20,965 150,530

$ $ $ $ $ $ $ $

Year 5 74,140 59,312 21,594 155,046

Youth mechanics none none none Subtotal Hourly Employees

$ $ $ $ $

31,200 31,200

$ $ $ $ $

39,585 39,585

$ $ $ $ $

48,215 48,215

$ $ $ $ $

57,094 57,094

$ $ $ $ $

66,229 66,229

Total Staffing Costs

$

158,663

$

184,188

$

194,361

$

207,624

$

221,275

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.27

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.28

Part IV: P-Flow Analysis

P-Flow Worksheet Think about your 4 Ps (Product, Price, Place and Promotion). As you fill in the chart, consider the extent to which one element makes sense in terms of the others. For example, Recycle-A-Bicycle targets the messenger and student market segments because Recycle-A-Bicycle bikes are more affordable than a new bike (average price of $125). In addition, promotions are primarily generated through grassroots efforts and word of mouth, both of which are strong ways to reach the messenger and student market segments. It would not make sense for Recycle-A-Bicycle to create glossy advertisements in Bicycling Magazine because those readers are more likely looking to buy new, high-end bikes.

FOUR P’S Product

DESCRIPTION Describe the attributes of your product?

What are the benefits?

Price

Who are your competitors?

What are your costs?

What is the value perception?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.29

Part IV: P-Flow Analysis

Promotion

Segmentation (list important customer groups in your market):

Target (identify which of the segments will be your primary and secondary targets):

Tools (list the tactics, as of now, that you think you will use to promote your business):

Place

Describe your current channels of distribution:

List any other distribution opportunities:

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.30

Part IV: Positioning

Developing Your Positioning Statement Primary Positioning: [PRODUCT or SERVICE] is the brand of [CATEGORY] which to [TARGET] delivers [Unique BENEFIT]

Now, create a secondary positioning statement. Change the target, and/or the benefit. This statement should represent the business opportunity that you feel is almost as important as your primary focus. Secondary Positioning: [PRODUCT or SERVICE] is the brand of [CATEGORY] which to [TARGET] delivers [Unique BENEFIT]

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.31

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.32

Part IV: Developing Indicators

Developing Indicators and Quick Test Worksheet Instructions: 1. Identify the initial, interim, or long-term outcomes that you want to measure. Write the outcome below. 2. Describe this outcome in words. 3. Based on these descriptions, identify indicators or measures. 4. For each indicator, assess whether it is useful and practical. Outcome: _____________________________________________________________________ Outcome Description in Words

Indicator

Useful?

Practical?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.33

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.34

Part IV: Data Collection

Data Collection and Management Worksheet Instructions: 1. Identify the outcome you want to capture and write it in below. 2. From the Indicators Worksheet, select the “best” indicators for the outcome. 3. Determine the data collection strategy. Identify how the data will be collected, what data collection instrument will be used, who will be responsible, and how often the data will be collected? Outcome to Measure: ______________________________________________________ Indicator

Data Source and Methods

Data Collection Instruments

Who Will Collect the Data?

When will the Data be collected?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.35

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.36

Part IV: Outcomes Management

PM&MSM Outcomes Tracking Template

OUTCOMES

Indicators

Example: Example: Reduction in waste Tonnage of donated bikes entering NYC waste collected stream Example: Youth acquire job skills and move into better paying longterm employment

Status as of Year 1 Target Year 2 Target 3/31/03 (4/1/02 (4/1/03 3/31/03) 3/31/04) 8 tons 15 tons 25 tons

Example: Number of students leaving the Recycle-A-Bicycle training program for full-time employment

10

Example: Average wage earned by youth

Minimum wage

20

30

10% above 10% above minimum wage minimum wage

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.37

Part IV: Outcomes Management

Uses of the Management Report Who uses information? Board

What information do they need to know?

Senior Staff

Outputs & Outcomes Information All (Inputs, Activities, Outputs, & Outcomes Information)

Line Staff/ Supervisors

Inputs, Activities & Outputs Information

Funders

Inputs & Outcomes Information

Why do they need to know information? - Monitor Progress & Guide Planning - Monitor & Manage Progress - Improving Performance - Program Management - Day to Day Oversight Evaluate Investment

When do they need to know information? Quarterly Board Meeting Monthly

Weekly/Daily

Six month/Annual

Template for Management Report Who uses information?

What information do they need to know?

Why do they need to know information?

When do they need to know information?

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.38

Part IV: Sample Financial Statements

Sample Balance Sheet SAMPLE COMPANY CONSOLIDATED BALANCE SHEET Period End: June 30, 1998

June 30, 1998

June 30, 1997

Assets Current Assets: Cash and Cash Equivalents Short-Term Investments Accounts Receivable - Net Merchandise Inventory Deferred Income Taxes Other Current Assets Total Current Assets

$

Property, Less Accumulated Depreciation Long-Term Investments Other Assets Total Assets

222,709 20,343 143,928 2,104,845 56,124 37,734 2,585,683

$

3,636,917 28,716 93,335

195,146 16,155 118,408 1,714,592 34,116 31,185 2,109,602

3,005,199 35,161 69,315

$

6,344,651

$

5,219,277

$

92,475 99,019 1,133,177 80,104 112,749 247,820 1,765,344

$

98,104 12,478 969,777 64,669 83,377 220,915 1,449,320

Liabilities and Shareholders' Equity Current Liabilities Short-Term Borrowings Current Maturities of Long-Term Debt Accounts Payable Employee Retirement Plans Accrued Salaries and Wages Other Current Liabilities Total Current Liabilities Long-Term Debt, Excluding Current Maturities Deferred Income Taxes

1,283,092 160,263

1,045,570 123,778

Total Liabilities

3,208,699

2,618,668

Total Shareholders' Equity

$

3,135,952

$

2,600,609

Total Liabilities and Shareholders' Equity

$

6,344,651

$

5,219,277

See accompanying notes to consolidated financial statements.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.39

Part IV: Sample Financial Statements

Sample Income Statement SAMPLE COMPANY INCOME STATEMENT Period Ending: June 30, 1998 Years Ended on Net Sales Cost of Sales Gross Margin Expenses: Selling, General and Administrative Store Opening Costs Depreciation Interest (Note 13) Total Expenses

June 30, 1998 $

12,244,882 8,950,156 3,294,726

June 30, 1997 $

10,136,890 7,447,117 2,689,773

2,118,149 71,651 271,769 74,735 2,536,304

1,754,780 69,999 240,880 65,567 2,131,226

Pre-Tax Earnings

758,422

558,547

Income Tax Provision

276,000

201,063

Net Earnings $ 482,422 See accompanying notes to consolidated financial statements.

$

357,484

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.40

Part IV: Sample Financial Statements

Cash Flow Statement SAMPLE COMPANY CASH FLOW STATEMENT Period Ending : June 30, 1998

Years Ended on

June 30, 1998

June 30, 1997

Cash Flows From Operating Activities: Net Earnings $ 482,422 $ Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: Depreciation 271,769 Amortization of Original Issue Discount 445 Increase in Deferred Income Taxes 14,337 Loss on Disposition/Writedown of Fixed and Other Assets 23,540 Changes in Operating Assets and Liabilities: Accounts Receivable - Net (25,520) Merchandise Inventory (390,253) Other Operating Assets (6,313) Accounts Payable 163,400 Employee Retirement Plans 75,508 Other Operating Liabilities 87,513 Net Cash Provided by Operating Activities 696,848

(846) (108,712) 6,732 55,610 60,527 31,103 664,870

Cash Flows from Investing Activities: (Increase) Decrease in Investment Assets: Short-Term Investments Purchases of Long-Term Investments Proceeds from Sale/Maturity of Long-Term Investments (Increase) Decrease in Other Long-Term Assets Fixed Assets Acquired Proceeds from the Sale of Fixed/Other Long-Term Assets Net Cash Used in Investing Activities

19,848 (19,866) 2,644 (18,528) (928,040) 38,202 (905,740)

25,773 (15,384) 4,811 (5,472) (772,792) 31,183 (731,881)

Cash Flows from Financing Activities: Net Increase (Decrease) in Short-Term Borrowings Long-Term Debt Borrowings Repayment of Long-Term Debt Proceeds from Stock Options Exercised Cash Dividend Payments Net Cash Provided by Financing Activities

(5,629) 296,159 (15,458) 12,140 (50,757) 236,455

17,199 265,795 (32,781) 210 (28,653) 221,770

Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year

27,563 195,146 222,709

154,759 40,387 195,146

$

$

357,484 240,880 192 7,637 14,263

See accompanying notes to consolidated financial statements.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN IV.41

part i: getting started

Part V contains the full text of the Recycle-A-Bicycle Business Plan.

Part V Sample Business Plan

developing a social purpose business plan

I.1

Part V: Sample Business Plan

RECYCLE- A- BICYCLE, INC. NEW YORK BUSINESS PLAN

APRIL, 2003 CONFIDENTIAL FOR MORE INFORMATION, CONTACT KAREN OVERTON, EXECUTIVE DIRECTOR 55 WASHINGTON STREET, BROOKLYN, NY 11201 [email protected] © 2003 RECYCLE-A-BICYCLE NEW YORK

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.1

Part V: Sample Business Plan

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.2

Part V: Sample Business Plan

TABLE OF CONTENTS I. II.

EXECUTIVE SUMMARY

5

MARKET OPPORTUNITY

11

DEMAND FOR BICYCLES CONTINUES TO GROW NATIONALLY ERROR! BOOKMARK NOT DEFINED. 12 CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG RECYCLE-A-BICYCLE COMPETES WELL AGAINST OTHER BICYCLE STORES 13 RECYCLE-A-BICYCLE HAS A STRONG PRESENCE IN ITS RETAIL TRADE AREAS 14 CUSTOMERS SEEK VALUE IN THEIR BICYCLES 14 RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE 16 MARKET OPPORTUNITY SUMMARY 16 III.

BUSINESS MODEL

17

DESCRIPTION OF PRODUCTS AND SERVICES “RE-MANUFACTURING” THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE COMPETITIVE ADVANTAGES STRATEGIC PARTNERSHIPS AND RELATIONSHIPS REVENUE MODEL OVERVIEW

18 25 20 21 22

IV.

37

SOCIAL OUTCOMES TRACKING

SOCIAL INDICATORS OF SUCCESS ENVIRONMENTAL INDICATORS OF SUCCESS

37 38

V.

25

OPERATIONS: FIVE YEAR STRATEGIC PLAN HIGHLIGHTS

SUMMARY OF STRATEGIC INITIATIVES

30

VI.

33

MANAGEMENT TEAM

MANAGEMENT TRACK RECORD PERSONNEL NEEDS BY STAGE OF DEVELOPMENT

33 29

VII.

37

FINANCIALS

FINANCIAL ESTIMATES AND ASSUMPTIONS RISKS AND STRATEGIES FOR MITIGATION CAPITAL NEEDS, TIMELINE AND BENCHMARKS

41 45 47

APPENDICES

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.3

Part V: Sample Business Plan

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.4

Part V: Sample Business Plan I.

EXECUTIVE SUMMARY

OVERVIEW Recycle-A-Bicycle, a thriving 501©3 nonprofit, has a dual mission: to provide youth development opportunities to at-risk populations in New York City and to promote environmental stewardship. The nonprofit operates two successful full-service used bicycle shops that employ young people trained in bike repair and mechanics. Through these bicycle shops, Recycle-A-Bicycle offers affordable and environmentally sustainable transportation options for commuters, recreational bikers and messenger/delivery persons. As a social enterprise, Recycle-A-Bicycle has a triple bottom line in which the social and environmental missions are balanced with financial returns. Since 1997, Recycle-A-Bicycle has salvaged bikes from the waste stream and refurbished them to sell to the public. Recycle-A-Bicycle also trains young people to fix bikes and assists them in acquiring the soft skills required in today’s competitive job market. Working closely with the Henry Street Settlement and Children’s Aid Society, Recycle-ABicycle integrates financial, social and environmental concerns into a successful business model. Recycle-A-Bicycle currently operates two retail stores, one in the East Village of Manhattan, the other in DUMBO, Brooklyn, New York. Toward these goals, Recycle-A-Bicycle: 1. Collects donated bicycles destined for dumping. 2. Trains at-risk youth for positions as bike mechanics and sales people, builds skills in basic business concepts and computer training, and provides a safe alternative that is a positive influence on their development. 3. Refurbishes used bicycles through a training program. 4. Sells the bicycles to the community as an affordable, quality transportation option. 5. Employs graduates of the training program. 6. Operates retail stores that also sell accessories and repair services that diversify the revenue stream and create additional profit. 7. Offers classes to adults on bicycle repair. Recycle-a-Bicycle is at a critical juncture in its growth. While the business is currently profitable, the potential for further growth is significant. To better serve its mission and to address the demand for used bikes, Recycle-A-Bicycle plans to create a new production facility, fill key staff positions and enhance its infrastructure. By pursuing these strategies, Recycle-A-Bicycle can increase its youth outreach by more than 100%1 in the next two years as well as create an organization that is sustained on its operating cash flow, thus reducing dependency on corporate grant funds. MARKET OPPORTUNITY

1

Outreach refers to the number of youth involved in any RAB activity, including both youth training and organized youth bike rides. DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.5

Part V: Sample Business Plan The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the United States. Recent studies show that in the Northeast, 28% of adults participated in biking activities during a one-year period. New York City boasts a healthy cycling community consisting of commuters (over 100,000 people commute by bike each day), bike messengers/delivery persons and professional and recreational riders. Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in many cyclists wanting to purchase an affordable bike as well as one that is less likely to be stolen. The prohibitive cost of a new bike also generates business at used bike stores. Demand has outpaced Recycle-A-Bicycle’s capacity for the past three years. Despite the demand, used bike stores are not prevalent in New York City. Within Recycle-ABicycle’s trade areas, there are few other used bike sellers due to the high costs associated with used bikes including labor to repair, inventory system requirements and insurance. The supply of used bikes is also strong. National trends in cycling report that the number of bicycles purchased each year remains relatively constant while the number of people riding is declining. This indicates that more bicycles are being consumed per rider. YEAR 1995 1998 2001

BICYCLES CONSUMED (MILLIONS) 16.2 15.8 16.7

U.S. RIDERSHIP (MILLIONS) 56.3 43.5 39.0

BICYCLES CONSUMED PER RIDER 0.28 0.36 0.42

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001 Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.

COMPETITIVE ADVANTAGE OF RECYCLE-A-BICYCLE Recycle-A-Bicycle offers a unique product and service. Its social and environmental missions make it the only socially responsible bicycle retailer in New York City. Recycle-A-Bicycle has built a trusted brand name and its products are well known as quality alternatives to traditional new bicycles. Customers often say these bicycles are better than new, referring to both the quality and the social mission. Many customers are attracted by the low prices but feel much more compelled to purchase when they learn of the social and environmental stewardship that the organization embodies. Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City. Because of low labor and materials costs, Recycle-A-Bicycle is able to offer bicycles at very affordable prices, most at 50% less than a comparable new bicycle. The youth programs inspire young people to make better life decisions and touch many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.6

Part V: Sample Business Plan being, provides a goal-oriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An “I can do it” attitude pervades Recycle-A-Bicycle. MANAGEMENT TEAM The management team consists of three highly skilled and dedicated staff with over 10 years of experience in bicycling retailing, 13 years in transportation advocacy, and over 7 years experience in youth education. The team has proven its ability over the years and is continuing to develop new strengths. The three key staff members are: •

Karen Overton - Executive Director Ms. Overton is the founder and leader of Recycle-A-Bicycle. Ms. Overton worked as the Bikes for Africa Project Director at the Institute for Transportation and Development Policy; a consultant for the World Bank, in the International Development Bank, African American Institute; and Pedals for Progress.

•

Jared Bunde - Manager, DUMBO Shop Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as a messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as a bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. He has also excelled in his racing career, winning a silver medal for the NY State Track Cycling Championship in 2000 and 2002.

•

Yoandy Ramirez - Manager, East Village Store Mr. Ramirez started his career with Recycle-A-Bicycle as a Summer Youth Employment student in 1999. Based on his hard work, Mr. Ramirez was promoted to Assistant Manager in June 2002 and most recently became the East Village Store Manager. He will graduate high school this summer and aspires to pursue a degree in computer science.

Members of the Board of Directors complement the skills presented by the management team. The Board consists of dedicated individuals from the following professions: education, finance, social work and transportation advocacy. Each Board member brings enthusiasm, a unique skill perspective and a broad network of contacts to the organization. SOCIAL AND ENVIRONMENTAL IMPACT To date, Recycle-A-Bicycle has worked with over 4,500 youth and staffed an average of 15 positions per year. Recycle-A-Bicycle improves the lives of at-risk youth in the New York City metro area through a hands-on, formal training program in bike repair, small business and environmental education. After completing the training program, many youth fill the part- and full-time positions available at the Recycle-A-Bicycle retail stores. In addition, some secure positions in other bike shops

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.7

Part V: Sample Business Plan across New York City. The organization’s strategic partners provide qualified youth counselors that recruit and work with young people who need assistance with basic job readiness skills and who can intervene in the case of serious issues regarding the social or mental well-being of participants. In 2002, Recycle-A-Bicycle worked with 772 youth through its training program. Over the next five years, the organization will increase its youth impact by 54%. In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New York City. In 2002, Recycle-A-Bicycle recycled over 14 tons of material destined for New York City’s landfills. Recycle-A-Bicycle expects to increase the amount of materials recycled to over 27 tons in 2007. 5-Year Projected Outcomes Youth participants to be trained Number of positions to be filled Tonnage of material to be removed from the waste stream

2

2003

2004

2005

2006

2007

780

850

950

1050

1200

22

28

31

34

37

17

22

24

26

27

FINANCIAL OVERVIEW Recycle-A-Bicycle plans to make three key investments over the next three to five years to expand its programs and create opportunity for revenue growth: • Acquire a production and training facility that will provide an expanded and dedicated space for training youth as well as refurbishing bikes, therefore meeting more of the demand for used bikes in New York City; • Acquire a van and hire transportation staff to allow for more strategic and coordinated pick-up of donated bikes as well as transfer of inventory between production facility and retail stores; and • Hire additional staff to enable the organization to raise capital from institutional grantors for business expansion as well as for increased training and youth program services. Recycle-A-Bicycle projects net operating losses in 2003 while development and fundraising efforts are invigorated, and the marketing, internet sales capacity, retail signage/merchandising, and other critical corporate infrastructure projects are further developed. The results of this investment will be greater sales revenue and significant improvement in net margin.

2

Includes both full and part time positions DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.8

Part V: Sample Business Plan Summary of revenue projections and net income Sales Revenues Grant Revenues Net Income Net Retail Margin

$ $ $

2003 2004 167,657 $ 232,932 71,091 $ 176,396 (11,472) $ 47,868 n/a 21%

$ $ $

2005 290,281 172,049 80,105 28%

$ $ $

2006 318,775 188,875 111,275 35%

2007 $ 334,446 $ 198,129 $ 126,475 38%

Recycle-A-Bicycle -Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year Strategic Plan. These grants will be pursued through institutional funders with an interest in environmental stewardship and/or youth development. 2003

Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000 in grant funding will serve as working capital to support current operations as well as implement new marketing efforts. The additional $100,000 will support hiring new staff, support costs associated with sourcing and obtaining the new production and training center and provide for other infrastructure improvements.

2004

Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds will be used in part for working capital and in part to support more of the Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the production and training center, hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will be used for a down payment on the production and training center. Recycle-A-Bicycle will raise the additional $106,000 through fundraising efforts spearheaded by the new Development Officer.

2005

Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional costs related to expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours by Teens program.

Recycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track record of growth and is now looking for capital in order to expand the social and environmental outcomes and develop more sustainable systems within the business. Recycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer and small business in New York City. The organization serves a triple bottom line, benefiting the at-risk youth and the New York City environment through a business model that is moving toward sustainability. Recycle-A-Bicycle is seeking to increase its effectiveness in all three areas – social, environmental and financial. As one of the leading organizations combining youth education, recycling and bicycling, Recycle-A-Bicycle has the capability to expand locally as well as develop a national reach. For more information on Recycle-A-Bicycle, please contact Karen Overton, Executive Director at [email protected]. DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.9

Part V: Sample Business Plan

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.10

Part V: Sample Business Plan II.

MARKET OPPORTUNITY

DEMAND FOR BICYCLES CONTINUES TO GROW NATIONALLY Bicycling has long been a pastime of children and adults alike and are used most often for social and recreational purposes. In fact, bicycle riding is now the seventh most popular sport in the country (out of 62). In July 2001, the Bureau of Transportation Statistics estimated that approximately one in four adults (25%) in the United States had used a bicycle in the last 30 days. An Outdoor Industry Association Report found that within the Northeast, over 28% of adults participated in biking activities during 1994-1995. However, cycling is highly seasonal and usage declines to as low as one in ten in the winter months. Statistics show that the number of bicycles purchased each year remains relatively consistent while the number of people riding is declining. This indicates that more bicycles are being consumed per rider. YEAR 1992 1995 1998 2001

BICYCLES CONSUMED (MILLIONS) 15.4 16.2 15.8 16.7

US RIDERSHIP (MILLIONS) 54.6 56.3 43.5 39.0

BICYCLES CONSUMED PER RIDER 0.28 0.28 0.36 0.42

10 Yr. Avg.

16.7

48.3

0.34

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001 Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.

With fewer people cycling and a constant number of bicycles being consumed, either consumers are accumulating more bicycles or disposing of more bicycles. Recycle-A-Bicycle’s experience points to the latter. Further evidence of this “disposable” bike culture was indicated in the keynote presentation at the 2002 Taipei International Cycle Show, when Yoshizo Shimano, Chairman of Shimano Inc. said: “American consumers buying mass-merchant bikes ride them fewer than 60 miles before hanging them up in their garages. In Japan the bicycle is so devalued that consumers dumped them in the streets creating a public nuisance. They [bicycles] have become a throw-away commodity.” Source: Bicycle Retailer and Industry News, May 1, 2002

Recycle-A-Bicycle provides a unique solution to the commodification of bicycles while offering affordable, environmentally sound transportation and recreation options to residents of New York City.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.11

Part V: Sample Business Plan CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG Using a conservative average (20% less than the national standard), nearly 200,000 new bicycles are consumed annually in Brooklyn and Manhattan alone: Population Bicycle Consumption per 1000 people Annual Bicycle Consumption

UNITED STATES BROOKLYN MANHATTAN 277,800,000 2,465,326 1,459,596 60.2 50 50 16,700,000

123,266

72,979

Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001. New York Data estimated

CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG New York City boasts a healthy cycling community consisting of commuters, bike messengers/delivery persons, and professional and recreational cyclists. The New York City Department of Transportation estimates that 100,000 people commute by bike daily. In addition, there are several active bike-oriented organizations and clubs with memberships totaling over 10,000. The Five Borough Bike Tour, the largest cycling event in the U.S., takes place in New York City with a ridership of 30,000. Cyclists flock to New York City parks on the weekends during good weather. There are also New York City industries dependent on cyclists: messenger services, food delivery and pedicabs. New York City has over 100 miles of bike lanes and an additional 75 miles of Greenways for use by cyclists. For the most part, New York City's terrain is flat, and the high density and mix of land use lend themselves to cycling. Traffic and parking are constant problems facing drivers and cycling is generally a faster mode of transport for trips within a five-mile range. According to one bike shop manager, cyclists will be active in temperatures of 50 degrees Fahrenheit and above, leaving only the winter season unpopular for biking.

The events of September 11th converted some commuters into cyclists. At this time, many people’s access to public transportation was disrupted or they became anxious about the possibility of biological warfare in the subways. The East Village shop did a record volume of sales and repairs from September to December. With a bus and subway fare hike scheduled for May 2003, the number of commuters cycling to work is expected to increase as commuters will choose to cycle rather than pay $4 daily for a round trip. On a more positive note, the government’s recent investment in New York City’s bicycle infrastructure, perceived to make conditions safer, helps to encourage cycling. These investments include $1.5 million, received in 1994, to plan and implement a comprehensive bicycle network for New York City. Through this effort, 500 miles of bicycle routes have been identified and New York City has produced the New York City Bicycle Master Plan as well as the first-ever New York Cycling Map. In 1996, an additional $2.4 million was invested in the implementation of the Plan. DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.12

Part V: Sample Business Plan

Both of Recycle-A-Bicycle’s shops directly benefit from these improvements. A new bike lane is being painted along Avenue C in the East Village, directing cyclists from the Williamsburg Bridge to pass by the shop. More impressively, a dedicated bike/pedestrian path is under construction that will run along the East River on the Brooklyn side. One of the main entrances is located at Washington Street just one block from one of RAB’s shops. RECYCLE-A-BICYCLE COMPETES WELL AGAINST OTHER BICYCLE STORES Overview The retail bike industry in New York, like most cities in the country is comprised mainly of small, independent bicycle retailers that primarily serve neighborhood clientele. Mass merchants like K-Mart and Toys-R-Us and sporting goods stores like Sports Authority also sell bicycles. Among sellers of new bikes, mass merchants and department stores are the greatest competition for Recycle-A-Bicycle because they offer products at affordable prices. However, these competitors are not equipped to handle adjustments or repairs and do not employ professional bike mechanics trained to offer appropriate customer service. In addition, the selection is often limited and the bikes may not be assembled properly. Recycle-A-Bicycle is not in direct competition with most independent bicycle shops in New York City because the majority of these shops cater to the high-end market. The price of a new bicycle in these shops typically begins at $200. Recycle-A-Bicycle maintains favorable relationships with many of these stores and often will receive donations of materials from them. However, bike shops make their highest profit margin from the sale of parts and accessories and Recycle-A-Bicycle competes with these stores for accessory sales. Few barriers exist to opening a bicycle retail store, though a capital outlay of approximately to $100,000 is required ($80,000 investment in inventory, $10,000 in tools, and $10,000 in other various costs, plus a good credit history). In general, dealer margins have been declining on bicycles and accessories, and more retailers are closing. Recycle-A-Bicycle does not anticipate any new retailers opening in the East Village or DUMBO trade areas in the immediate future. New York City Market for the Sale of Refurbished/Used Bikes Most bike shops do not offer used bikes because the cost of labor to repair them is high, and because selling used bikes requires an additional inventory system and liability policy (new bikes are insured by the manufacturer). Furthermore, due to the high rate of theft in New York City, many consumers want assurance that the bikes are sourced from legitimate places, requiring bike shops to develop additional inventory and sourcing systems. Used bicycle dealers are the primary competition for RAB and will be discussed in detail with regard to the trade area of each of the retail stores. Thrift stores are another source for used bicycles. These stores offer inexpensive bicycles, however the supply is not steady and a bike is sold "as is", meaning that it has not been repaired and may not be safe to ride.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.13

Part V: Sample Business Plan RAB has identified a market niche, used bicycles. Given the additional requirements such as a liability policy and inventory system, the majority of bike shops only sell new bicycles. While RAB directly competes with these shops for the sale of accessories, its core product of affordable, refurbished bicycles distinguish it from other bike retailers. RECYCLE-A-BICYCLE HAS A STRONG PRESENCE IN ITS RETAIL TRADE AREAS Recycle-A-Bicycle offers a unique product and service bundle that experiences limited competition in its two distinct retail trade locations. East Village, Manhattan, Retail Competition Bicycle retailers in the Lower East Side include: • Frank's Bike Shop on Grand St th st • Bikes by George on 12 St/1 Ave; • Bike Works on Ridge St; th st • Two local thrift shops on Ave. B and 6 St/1 Ave; th th • Mobile bike mechanics on 7 St/Ave C and 10 St/Ave. A.; and, • Local department stores including Toys-R-Us at Union Square and K-Mart at Astor Place. A healthy underground market of stolen bicycles sold in the neighborhood (i.e. Thompkins Square Park) also exists, but for the past few years the police have been controlling these venues. The trade area of the East Village Store is shown in Appendix B. The East Village is an established retail center with many affordable varieties of retail. DUMBO,

Brooklyn, Retail Competition There are no other bike dealers in DUMBO. All are outside the radius shown on the trade area map in Appendix C. Internet Sales Competition There are no direct internet competitors for our product and service mix. Used bicycles are available on ebay, but there are few websites offering quality used bikes or parts. Recycle-ABicycle is planning to extend its internet sales capabilities to take advantage of this void as our prices are competitive even outside of New York. CUSTOMERS SEEK VALUE IN THEIR BICYCLES A strong market exists for used bikes because many consumers are unwilling or unable to purchase new bikes that typically start at $200 – 250. A typical RAB customer for a bicycle purchaser is 20 – 45 years old, will use a bicycle as a primary means of transportation, and has a median income of at least $20,000. Secondary customers are in similar age demographics, but will use the bicycle primarily for recreational purposes. Repair services and parts are sold to a wider variety of cyclists, and Recycle-A-Bicycle is a strong supplier to the messenger and delivery bicycling communities. One in three customers shop at Recycle-A-Bicycle because they recently had a bicycle stolen. This was determined during a survey of shoppers conducted over a month in summer 2002. DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.14

Part V: Sample Business Plan These customers reported that they were interested in purchasing a cheap, beat-up looking bicycle to reduce the likelihood of theft. Customers in this situation are also happy to learn that Recycle-A-Bicycle tracks every bike - from its source of donation to its final destination. Business is built on its reputation to avoid dealing in stolen bikes. The majority of customers purchase a bicycle to meet their primary transportation needs. Parts and repair sales tend to sell to the messenger and commuter communities. The fix-a-flat stations are busy in the summer serving these two communities and the enhanced accessory lines also appeal to these groups. East Village Customers Residents of the East Village are aware of Recycle-A-Bicycle as the organization has operated in the neighborhood for five years. The organization is well known and has attracted many local supporters. Key target customer groups include: • New York University and Baruch College students; • Cyclists using the Williamsburg Bridge as a throughway to Manhattan; and, • Neighborhood residents shopping at other Avenue C retail storefronts. Customers is seeing a revitalization of retail spaces attracting more residents to shop within the neighborhood. A new community bank opening directly across the street will dramatically increase foot traffic in front of the store.

DUMBO DUMBO

The new store is beginning to cultivate a repeat clientele. Marketing efforts are focused on Brooklyn, and the local artists and students have been the biggest market. The neighborhood is becoming more ‘upscale’ with several warehouse to condo conversions occurring. Key target customer groups include: • New York Technical College and Long Island College which are in the trade area; • Cyclists using the paths off of the Manhattan Bridge and Brooklyn Bridge; and, • Cyclists using the East River Greenway. ATTRIBUTE Resident Population Over age 18 Ages 20 – 45 % Renters Median Earnings % bike to work

EAST VILLAGE 10009 ZIP CODE

ALL OF MANHATTAN

DUMBO 11201 ZIP CODE

ALL OF BROOKLYN

58,595

1,459,596

47,746

2,465,326

46,290 35,687 92.6% $43,767

1,213,652 709,052 80% $48,281

40,687 23,692 64.8% $56,293

1,802,827 941,531 72.9% $31,896

2.9%

0.9%

0.7%

0.5%

Source: 2000 Census, Census 2000 Summary Files (SF-1, SF-3) by Zip code; Manhattan = 100 3-Digit ZCTA; Brooklyn = 112 3-Digit ZCTA

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.15

Part V: Sample Business Plan RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE As evidenced from the above chart, Recycle-A-Bicycle is located in prime home markets for bicycle commuters. East Village residents ride their bike to work nearly three times that of other Manhattan residents. The DUMBO trade area rate of cycling is also higher than the Brooklyn average, and should continue to grow. MARKET OPPORTUNITY SUMMARY Recycle-A-Bicycle faces a welcome challenge: to recycle the supply and meet the demand for used bicycles in New York City. The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the United States and studies show that adults frequently participate in biking activities. New York City boasts a healthy cycling community consisting of commuters (over 100,000 people commute by bike each day), bike messengers/delivery persons, and professional and recreational riders. Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in many cyclists wanting to purchase both an affordable bike as well as one that will be less likely to be stolen in the future. The prohibitive cost of a new bike also generates business at used bike stores. Demand has outpaced Recycle-A-Bicycle’s capacity for the past three years. Despite this demand, used bike stores are not prevalent in New York City. Within Recycle-ABicycle’s trade areas, there are few other used bike dealers. In addition, most retail bike shops do not carry used bikes due to the high cost of labor that is required to refurbish the bikes. The supply of used bikes is also strong. National trends in cycling indicate that bicycle consumers are purchasing more bikes, though ridership remains constant. This creates a situation in which there are many bikes either sitting idly in storage or being thrown out or abandoned. In New York City, as space is at a premium, the latter situation is more likely. Recycle-A-Bicycle estimates that the supply of used bicycles is ten times greater than what the business can currently collect; these unused bicycles currently end up in landfills.

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Part V: Sample Business Plan III. BUSINESS MODEL Recycle-A-Bicycle provides environmental education and job training for New York City youth. Source: Recycle-A-Bicycle Mission Statement

Recycle-A-Bicycle, a growing social purpose business, is a manufacturing and retail venture that provides youth with training and employment opportunities by refurbishing and selling used bicycles as well as offering accessories and parts and repair services. Recycle-A-Bicycle is built around the concepts of youth development and environmental stewardship. First, Recycle-A-Bicycle collects bicycles destined for the dump. These bikes are then processed by young people involved in the youth training program and sold to the community as an affordable alternative transportation option. Retail activities follow the principals of reuse, reduction and recycling. The two elements go hand in hand to create a viable business. Recycle-A-Bicycle’s operations generate considerable community benefits: waste reduction, an affordable source of non-polluting transportation, youth education, work force preparation, job creation and constructive social programming for youth. • •

Recycle-A-Bicycle provides affordable and environmentally sustainable transport. Recycle-A-Bicycle trains youth for positions as bike mechanics and sales people, build skills in basic business concepts and computer training, and provide a safe alternative that is a positive influence on their development.

The youth training program provides Recycle-A-Bicycle with a relatively low cost labor input for the remanufacturing process. Youth are trained in the basic mechanics of bicycles and further benefit by developing job skills and understanding basic business concepts. In addition, they earn a stipend or school credits for their participation and they have the opportunity to earn their own bicycle as an incentive, which they are encouraged to use as their mode of transport to and from work or school. Students are trained at our DUMBO, Brooklyn facility or Children’s Aid Society partner site, and then have the opportunity to work in one of two retail shops, once they have demonstrated a certain level of competence. In 2002, Recycle-A-Bicycle worked with over 770 youth. Recycle-A-Bicycle takes advantage of very low cost raw materials supply. With a fairly limited amount of outreach, Recycle-A-Bicycle is able to capture over 1,000 bicycles per year from the waste stream. In accordance with the environmental mission, Recycle-A-Bicycle accepts bikes in any condition. This provides a critical advantage in parts sourcing and materials reuse. On average, the business has removed 13 tons of waste per year from the waste stream, for the past 7 years. Recycle-A-Bicycle is facing growing supply and demand for our product. Recycle-A-Bicycle has a proven track record and is now seeking capital to expand the social and environmental reach and develop more sustainable systems within the business.

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Part V: Sample Business Plan

DESCRIPTION OF PRODUCTS AND SERVICES Recycle-A-Bicycle operates two stores offering used bicycles, full repair services, and parts and accessories for bicyclists. East Village, Manhattan Store 75 Avenue C, New York, NY 10009

• Located in the East Village of Manhattan. • RAB has operated in this neighborhood since 1997. • The current location on Avenue C opened in October 2000. • Sales have consistently grown. • Open Monday to Friday from 1 to 7pm and Saturday from 10am to 4pm. • There are two work stands for repairs and on average three employees. • Average sales are $234 per day.

The East Village store at its opening.

DUMBO,

Brooklyn Store 55 Washington Street, Brooklyn, NY 11201

• Located in newly revitalized Brooklyn neighborhood, DUMBO (“Down Under the Manhattan Bridge Overpass”). • The store opened in October 2002. • Open Monday to Saturday from 12 to 7pm. • Training classes are held in the evenings and weekend morning hours. • The store has four workstations for repairs and training and on average 2 employees. • Recycle-A-Bicycle administrative offices are located here. • Average sales are $123 per day.

DUMBO

Store during a local artists exhibition co-promotion

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Part V: Sample Business Plan Recycle-A-Bicycle’s growing success can be attributed to the fact that it has moved to more accessible locations and has built a solid reputation in the community. Repeat customers are common, as well as visitors who were referred by word of mouth. A majority of customers choose to patronize the Recycle-A-Bicycle shops because of the social and environmental missions. A narrative of our history and major milestones is available in Appendix A. Product Line --Bicycles: Recycle-A-Bicycle offers a wide variety of refurbished bicycles. Over 50% of sales are in the road bike category. This is due to the fact that it is the most common type of donation, and therefore most available in stock. Recycle-A-Bicycle experiences high demand for mountain bikes, hybrids, three speeds, and cruisers. These types of bikes offer the cyclist an upright position that is considered more comfortable for commuting. Recycle-A-Bicycle also sells children's bikes, but has found that few parents want to purchase second hand items for their children. Children’s bike sales account for less than 5% of the bikes sold. All bicycle sales come with a 30-day warrantee. Product Line -- Repairs: Recycle-A-Bicycle offers full bicycle repair services for all models of bicycle. Customers come to Recycle-A-Bicycle because many bicycle shops will not repair older bicycles. The percentage of repairs to total income has ranged from 5% to 15%, gradually increasing over the years as staff with professional experience have been added. . Offering repairs helps to further Recycle-A-Bicycle’s environmental impact by reducing the number of bicycles that become unusable. Furthermore, parts recycled from demanufactured bicycles are not entering the waste stream and are put to productive use again. The shops are well positioned to specialize in the repair of bicycles manufactured during the 1970’s and 1980’s. Repair pricing is competitive with other bicycle retailers. Product Line – Parts and Accessories: Both stores sell new and used accessories that make cycling safe and comfortable. The number and variety of accessories are currently being expanded, but the merchandise mix will remain focused on the safety, commuting and security categories. The most popular safety and security items that are sold include locks, helmets, lights, and bells. Commuting items include pumps, patch kits, racks, baskets, and fenders. The mark up on new items ranges from 50-150%, averaging 100%. Recycle-A-Bicycle offers discounted prices on used accessories acquired from donated bicycles. These are priced at wholesale rates because they require no capital outlay. The ability to stock and sell new accessories currently accounts for a little over 17% of total income and growth is expected as product offerings increase. Retail revenues have grown steadily throughout the past five years of operation. The trend in revenues has been towards increased sales of parts and accessories, driven primarily by customer awareness and loyalty. Recycle-A-Bicycle is also able to more efficiently special order items that will further increase sales in this category.

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Part V: Sample Business Plan Recycle-A-Bicycle’s ability to quickly remanufacture bicycles, therefore meeting more of the demand for used bicycles, has been impaired by the lack of a focused production facility. Recycle-A-Bicycle expects the proportion of bicycle sales to increase once new inventory is created, as selling bicycles is the most effective way to serve both the social and environmental missions. Youth Job Training The youth involved with Recycle-A-Bicycle are recruited through the organization’s strategic partnerships with Henry Street Settlement and Children’s Aid Society. These youth come from low-income families and receive a wealth of services through the partner organizations. Recycle-A-Bicycle provides meaningful training and employment opportunities for these young people who in turn provide a low cost labor input for the business. Recycle-A-Bicycle works with over 750 students annually through a classroom training program focused on the following areas: • Bike repair / mechanical overview; • Small business / setting goals; • Environmental education / recycling / stewardship; and • Safe cycling / road awareness. Recycle-A-Bicycle also delivers innovative on-the job training programs in the following areas: • Basic mechanics training / advanced mechanics training; • Customer service and communications; • Introduction to business management /entrepreneurship; • Accounting, marketing and business operations; • How cycling can create a healthy lifestyle and a social structure; and, • Recycling and environmental stewardship. COMPETITIVE ADVANTAGES Recycle-A-Bicycle offers a unique product and service. Our social and environmental missions differentiate us from any other bicycle retailer in New York City. On a product basis, Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City. Because of low labor and materials costs, a Recycle-A-Bicycle bike is priced at least 50% lower than a comparable new bicycle from an independent bicycle retailer. Recycle-A-Bicycle prices are also competitive against other used bicycle dealers. Additionally, the 30-day guarantee is unique in the used bicycle marketplace and because Recycle-A-Bicycle tracks all inventory from its source, consumers are assured that they are not buying a product that was stolen or illegally obtained. The youth programs inspire young people to make better life decisions. Recycle-A-Bicycle touches many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-being, provides a goal-oriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An “I can do it” attitude pervades Recycle-A-Bicycle.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.20

Part V: Sample Business Plan

Consumers feel good about making their purchases with Recycle-A-Bicycle. Many customers report that they are drawn to Recycle-A-Bicycle because of the low prices, but feel much more compelled to purchase when they learn of the social and environmental stewardship. Recycle-A-Bicycle enjoys the following advantages in relationship to second hand dealers, chain stores, and bike stores: • A legal operation that does not deal in stolen bikes; • An indoor, year round, predictable space; • Competitive prices; • Higher quality bikes than the competition; • A 30-day warranty; • A selection of accessories and the ability to custom order special accessories and parts • A full line repair services; and, • A social mission in which all proceeds are applied to the social and environmental programs. STRATEGIC PARTNERSHIPS AND RELATIONSHIPS The key to Recycle-A-Bicycle’s success has been its ability to develop strong partnerships. This strategy encourages resource sharing and allows each organization to specialize in what it does best. Recycle-A-Bicycle contributes its curriculum, mobilization of donated materials, technical expertise, retail capabilities, and networks in the environmental and cycling circles. Partner organizations contribute space, cost of instruction, transportation for bike collections, youth recruitment, support services, and neighborhood connections. Recycle-A-Bicycle’s two strongest partners are described below. Henry Street Settlement, founded in 1893 by social worker/nurse Lillian D. Wald, is a not-forprofit arts and social service institution serving the people of New York City, especially Manhattan’s Lower East Side. Its innovative programs have been models for similar efforts in countless municipalities across the nation. Many Henry Street Settlement initiatives have led to major state and federal legislative changes. Recycle-A-Bicycle works in partnership with Henry Street Settlement to offer a job training program that puts youth to work. We collaborate with the Youth Employment and Counseling Services as well as the Workforce Development Center. Henry Street Settlement has qualified counselors to recruit and work with young people who need assistance with basic job readiness skills. These counselors are also available to intervene in the case of serious issues regarding the social or mental well being of our participants. Henry Street Settlement also offers youth leadership development opportunities, tutoring, SAT preparatory courses, and career counseling services to our young people. These services are funded primarily by contracts with the New York City Department of Labor and some foundation grants. Recycle-A-Bicycle offers environmental education, bike repair, earn-a-bike, basic business instruction, and cycling trips to an average of 60 students each year.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.21

Part V: Sample Business Plan Children’s Aid Society, founded in 1853 by Charles Loring Brace, is dedicated to promoting the welfare of children in New York City. It was one of the first agencies of its kind in the US and became well known for opening youth lodging houses in the poorest and most populous districts of New York City. The Children’s Aid Society continues to be at the forefront of child welfare reform as well as in providing services that respond to society’s needs. Currently it maintains 22 sites that provide child care, academic assistance, counseling, after-school programming, job training and leadership development services. In 1990, the Children’s Aid Society partnered with the New York City Board of Education to open three community schools in Washington Heights, a low-income neighborhood in upper Manhattan. The unique partnership offers services to students, parents and members of the community such as health care, leadership and skills development (i.e. English as a second language and the parents’ association), and after-school and summer programming for young people. In May 1994, Recycle-A-Bicycle partnered with Children’s Aid Society and Intermediate School 218 to offer an after-school bike repair program. Based on its success, Recycle-A-Bicycle also became integrated into the summer program and then into the school day. The program offers environmental education, bike repair, earn-a-bike, and ride club activities to over 500 young people each year. Community Networks Because of the Shop’s social mission, we have developed relationships with organizations that are willing to promote the business. Examples of this include: • Transportation Alternatives features Recycle-A-Bicycle events during Bike Week; • The Five Borough Bike Club creates a fundraising opportunity by inviting Recycle-ABicycle staff to break down bikes for their Montauk Century; and • the American Gardening Association featured our shop by offering garden cycling tours on bikes rented from Recycle-A-Bicycle. Recycle-A-Bicycle also belongs to other networks relevant to its social and environmental missions: • New York City Waste Prevention Coalition; • The Youth Bicycle Education Network; and, • Seedco’s Nonprofit Venture Network. REVENUE MODEL OVERVIEW The organization has built a strong revenue base through its retail stores and also increased its ability to generate grant revenue by completing 501©3 status in July 2002. Grants will become a more important source of revenue for Recycle-A-Bicycle in the next five years as the organization seeks capital to expand its business operations and increase its youth outreach. The new DUMBO store, opened in summer 2002, will further increase Recycle-A-Bicycle’s ability to grow the bottom line.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.22

Part V: Sample Business Plan Historical Revenue By Source $180,000

$160,000

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$1998

1999

2000 Sales

Donations

2001

2002

Grants

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.23

Part V: Sample Business Plan

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.24

Part V: Sample Business Plan IV. OPERATIONS: FIVE YEAR STRATEGIC PLAN HIGHLIGHTS Recycle-A-Bicycle has a strategic plan to expand the organization in order to increase the social impact of the business. The business is focused on processing more bicycles in order to remove a greater amount of material from the waste stream as well as to better meet the demand for used bikes. As a result, the business will be able to train and hire more youth. As capacity is currently constrained, the business has hit a plateau that cannot be overcome without additional staff, space and infrastructure. As a result, a Five-Year Strategic Plan was developed in 2002 through an intensive planning process that included input from Recycle-A-Bicycle staff, management, Board of Directors, and other stakeholders and partners. The plan identifies areas that are critical to the success of Recycle-A-Bicycle and will require an organizational focus. Strategies have been created in each category to address deficiencies, bolster strengths and create changes with the goal of making Recycle-A-Bicycle a more sustainable organization. A summary version of these results is shown at the end of this section. Operations and Production “RE-MANUFACTURING” THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE Materials Donation: Recycle-A-Bicycle promotes reuse and recycling of bicycles. Over 1,000 used bicycles are collected annually. Eighty percent (80%) of donations come from bike shops and apartment building superintendents, with the remainder collected from individuals and corporate donors. Bike shops and apartment buildings are the most prevalent source because bikes are often abandoned at these locations. Donation saves the cost of disposal and provides a tax deduction. Additionally, individuals who want to support Recycle-A-Bicycle’s mission bring in bikes, parts, and accessories. There are also several reputable volunteers who collect bikes in their neighborhood on garbage night and deliver them to our facilities. Finally, corporations organize employee collections and one bike manufacturer, Fuji, donates surplus inventory to the project. The organization will collect twice the number of bicycles when greater storage, production and transportation capacities are available. De-manufacturing process / remanufacturing process: The Youth Classroom Training Program curriculum was developed to teach bicycle mechanics skills through the disassembly and reassembly of key mechanical components. The first stage of the youth training program involves de-manufacturing damaged bicycles. Upon arrival, bicycles are assigned a number in chronological order of receipt and then logged into the inventory. All frame damaged bikes and very rusty bikes are slated for immediate de-manufacturing. The component parts are cleaned and inventoried for use in repairing other bicycles or for sale to consumers. Approximately 20% of the bicycles are de-manufactured. The remaining bikes are assessed for type, quality, and amount of repair time necessary to refurbish. Bikes that have the highest market value, that are in high demand (3 speeds and mountain bikes), and that are quickest to repair are worked on first. In addition, some customers put a down payment on a recent arrival and return to buy it fully repaired. These “pre-ordered” DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.25

Part V: Sample Business Plan bikes also receive priority in terms of the order in which bikes are refurbished. On average, a refurbished bike requires six hours of labor.

Remanufacturing a bicycle In order for Recycle-A-Bicycle to expand its de-manufacturing and remanufacturing processes, it needs to have a focused production and training facility because the current manufacturing operations are fragmented. Though the educational mission is well served, there is lost opportunity as not enough bicycles are being manufactured to meet demand in the retail stores. This opportunity cost can make the difference in sustaining the organization through retail operations alone. Over 2,000 bicycles were not collected in FY2002 due to lack of resources to pick up and store these bikes. The new facility will allow Recycle-A-Bicycle to increase the amount of trash it removes from the waste stream and ensure a consistent amount of used bicycles for sale. Storage space will allow for more efficient raw materials sorting and reuse. And more space will allow Recycle-ABicycle to consider creating other product lines which support its mission, such as selling used parts on the internet. In addition, the retail stores will be able to display and sell more bikes as valuable square footage is currently being used for storage of raw materials and waste. Securing a new production facility will also enable Recycle-A-Bicycle to double the number of youth participants in the job training program. This will provide the learning environment they DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.26

Part V: Sample Business Plan need to apply their newly acquired knowledge. Young people that excel in this program will be hired by Recycle-A-Bicycle or placed in shops around New York City. With the new production center, Recycle-A-Bicycle will be operating from three locations. In order to facilitate movement of materials between the three locations, Recycle-A-Bicycle will also need to acquire a van. Recycle-A-Bicycle plans to purchase rather than rent the space for the new facility. One benefit of choosing ownership rather than rental space is the availability of capital budget grants. These grants can drive down the cost of ownership. Specifically, the Environmental Services Unit of the NYS Department of Economic Development offers matching grants for capital investments in remanufacturing businesses. In addition, there are capital grants offered by other organizations, such as the Charles Hayden Foundation, that have a particular interest in supporting youth initiatives. Strategy: Recycle-A-Bicycle will create and own a production and training facility for processing raw materials. In 2004, a facility will be identified, purchased and outfitted. Ownership of space will help mitigate risks presented by ownership changes, and also allow the organization to build equity on its balance sheet and have a more permanent outlook. The space will provide a more efficient learning environment for youth. More management attention will be placed on the process of manufacturing: from raw materials identification and sorting, to moving materials, to eliminating waste in the process quickly. This facility, acting as a central storehouse, will significantly improve the operations and profitability of the organization. Acquiring a van will also allow the group to nearly double the amount of donated bicycles that it could collect. To date, infrastructure has primarily been bootstrapped. Improved measurement systems for inventory and raw materials are necessary to ensure that increased production processes can be adequately managed. In addition, store productivity and production throughput need to be more closely tracked and analyzed to identify new areas of improvement. Strategy: Recycle-A-Bicycle will invest in new technology for its operations including a customer database and a centralized parts inventory database, continue to build its management team, and improve its communications processes. Staffing Recycle-A-Bicycle current supports eight staff positions. Five of these positions are filled by bicycle mechanics who hold positions of store managers and head mechanics at its two retail stores. The business manager is the Executive Director, Karen Overton, who manages the triple bottom line. Adding staff to the team to diversify the skill sets and reduce the burden on the business manager is a strategic goal for the organization. The store managers possess a good understanding and ability to deliver on the retail aspects of Recycle-A-Bicycle operations. Though the managers have been working as a team for only a short time, they have demonstrated strong potential. Because of their trade and industry

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.27

Part V: Sample Business Plan expertise, the team understands the social mission and how to integrate youth and learning into their operations. Retail and program management are adequately served by the team. Recycle-A-Bicycle relies heavily on volunteer labor to achieve several aspects of its corporate activities such as tutoring youth, website development and maintenance, and fundraising. Though there are a handful of motivated, talented individuals who donate their time to RecycleA-Bicycle, this labor pool is unpredictable and does not provide a stable source of labor. Several gaps exist in key areas of organizational leadership. One particular area is resource development and fundraising. The need for fundraising and development has increased over the past several years as Recycle-A-Bicycle has experienced government cut-backs that limit their ability to fulfill the youth training and employment mission. For example, the New York City summer youth employment initiative has been a source of funding for employment opportunities for youth during the summer. However, this initiative has been cut back over the past two years, resulting in less funding available for Recycle-A-Bicycle to pay summer interns. In addition, adding staff at the leadership level will increase the organization’s ability to plan and implement additional programs to promote environmental stewardship and youth development. In addition, the Executive Director is often performing tasks of a relatively low skill level instead of doing higher-level work. The retail managers do not possess the skills to fill in areas where the Executive Director is not able to deliver, though they are highly capable retail operators. Administrative assistance is needed to reduce this burden on the Executive Director. A staffing and succession plan is being developed for organizational leadership, which will mitigate these issues. Strategy: Carefully managed staff growth in several key skill areas will allow for better assignment of responsibilities, diversification of risk, for more tasks to be completed, and for better accountability and organizational performance. The Board supports hiring new staff to focus on fundraising, allowing the existing Executive Director to move back into the position of program and operations oversight Recycle-A-Bicycle will also hire an Administrative Assistant as well as a Production Assistant to oversee operations at the Production and Training Facility (see below).

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.28

Part V: Sample Business Plan PERSONNEL NEEDS BY STAGE OF DEVELOPMENT These positions are reflected in the financial model. Additional positions not listed here may be required depending on the strategies pursued. Targeted Hire Date 6/2003 9/2003 1/2004

Position Title

Responsibilities

Development Officer Administrative Assistant Production Assistant

Fundraising/Development Administration Coordinate production and raw materials collection

Sales and Marketing When the production and training facility is in operation, additional marketing will be needed to increase the supply of donated bikes and create demand among customers. New staff and volunteers will be recruited with this task in mind, so that a concerted effort can be placed in marketing the organization and merchandising and sales within the stores. While the production center is in development, a formal sales and marketing plan will also be developed. Within this plan, new product offerings will be considered that will increase the stores’ revenues and profitability. Recycle-A-Bicycle can market its social and environmental missions much more aggressively within the stores and their trade areas. A campaign will be developed that highlights these two areas. This will include print media, an enhanced website, and a video that can be played in each store to assist consumers in immediately understanding why Recycle-A-Bicycle is the best place to purchase a used bicycle. In addition, Recycle-A-Bicycle will create and install much needed signage at the DUMBO store. Recycle-A-Bicycle will also investigate selling used parts on the internet. Two strategies will be explored: using E-Bay as a mechanism for sales or tapping into the Bicycle Trader website that specializes in the sale of second-hand bicycles, parts and accessories. Strategy: Recycle-A-Bicycle will create an aggressive marketing campaign, make improvements to point-of-sale merchandising in the stores, develop and implement a customer service training program, add new accessory lines to both operations and improve the website to better facilitate e-business. Additional Strategic Opportunities Recycle-A-Bicycle will continue to expand its social mission to groups that have unmet needs and can make use of the services offered by the organization. In 2003, Recycle-A-Bicycle published and distributed 3,000 manuals that detail the process of starting ride clubs. Youthoriented organizations were invited to a workshop in April 2003 to learn how they can start these programs with the goal of starting up ten ride clubs in 2003. These organizations can invest in a ride club “fleet” by purchasing bikes from Recycle-A-Bicycle. This will allow Recycle-ADEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.29

Part V: Sample Business Plan Bicycle to further its social mission and put more kids on bicycles. Recycle-A-Bicycle will serve in a technical assistance capacity to these groups to ensure their success. As the number of graduates from the youth training program increases with the creation of the manufacturing facility, Recycle-A-Bicycle will increase its efforts to place youth in local employment. Lastly, the Tours By Teens program is an example of new programming that Recycle-A-Bicycle will be starting in 2004. This program will train teens to give tours of selected neighborhoods by bicycle. Teens will study the history of a neighborhood, research and compile a tour program. Tour leaders will be graduates of the Recycle-A-Bicycle bike repair curriculum so handling the groups’ mechanical needs will be covered. The Tours By Teens program will employ program graduates and will help Recycle-A-Bicycle improve its visibility throughout New York City. Strategy: Recycle-A-Bicycle will increase the impact of its efforts by adding several new programs to its portfolio, including enhanced ride clubs, adult education, and a tourist operation. SUMMARY OF STRATEGIC INITIATIVES Progress has already been made in several of these areas: a customer has offered to donate a vehicle to the project this spring; a New York University professor has adopted Recycle-ABicycle as a class project and will upgrade the website and develop an inventory system that facilitates e-business, and; free bicycle storage space has been identified in the East Village that will increase storage capacity by 100%. The Five-Year Strategic Plan includes the following major actions: 1. Hire for skills that are needed; Add staff to the RAB team; 2. Create a focused production and training facility and improve materials movement within the organization; 3. Own the production and training facility; Build the RAB brand and balance sheet; 4. Institute stronger marketing and sales efforts to increase retail revenues; 5. Strengthen operations; and, 6. Pursue new social mission specific strategies.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.30

Part V: Sample Business Plan 2003 OR IMMEDIATE Obtain temporary production and training facility Obtain financing for strategic objectives Hire/acquire Administrative Assistant Hire Development Officer Investigate improvements to employee benefits program Develop and implement marketing campaign including signage Purchase new computers and software to support inventory and accounting systems Set up inventory management system and review merchandising Renew East Village lease Update customer service training program

2004 2005 / LATER Purchase independent production Investigate establishing new and training facility sites for student training to reach more students Hire Production Assistant Renew DUMBO lease or consider purchasing space Acquire a van for materials Investigate starting uptown collection and distribution retail shop Revitalize volunteer Evaluate expansion into the management program Bronx Create used part / sales interface Evaluate franchising to the inventory database Recycle-A-Bicycle regionally or nationally Fundraise for Tours By Teens Implement Tours By Teens Program Program Enhance E-business capabilities for bicycles

Market used parts on the internet through separate site

Test selling used parts on the internet (through web auctions or set up independent site)

Source: Recycle-A-Bicycle 5-Year Plan

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.31

Part V: Sample Business Plan

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.32

Part V: Sample Business Plan V.

MANAGEMENT TEAM

MANAGEMENT TRACK RECORD Recycle-A-Bicycle’s management has over 10 years of experience in bicycling retailing, 13 years in transportation advocacy, and over 7 years experience in youth education. The team has proven its ability over the years and is continuing to develop new strengths. Board of Directors membership complements the skills presented by the management team. Nearly all directors volunteer in capacities beyond their Board role. The Board consists of dedicated individuals with experience in: education, financial management and analysis, social work, and transportation advocacy. Each member brings enthusiasm, their unique skill perspectives, as well as a broad network of contacts to the Board and the entire organization. Board member biographies are listed in Appendix D. Karen Overton Executive Director, Recycle-A-Bicycle, Inc. Ms. Overton was the founder of Recycle-A-Bicycle when it began as the environmental education initiative for Transportation Alternatives in 1994. Prior to that, Ms. Overton worked as Bikes for Africa Director for the Institute for Transportation and Development Policy and as a consultant for the World Bank, in the International Development Bank, African American Institute, and Pedals for Progress. In 1998, Ms. Overton incorporated Recycle-A-Bicycle. Through her various positions, Ms. Overton has developed skills in the areas of project management (design, implementation and evaluation); research (data collection, analysis and publication); writing (Ms. Overton has authored several cycling manuals, magazine articles, and publicity pieces); training (design and implement training programs for youth and transport planners/economists); and public speaking at several alternative transportation symposia. Ms. Overton cycles year round. Ms. Overton has a Masters Degree in Urban and Regional Planning from the State University of New York-Albany, and is recognized as an expert in the field of alternative transportation planning. Jared Bunde Manager, DUMBO Shop Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as a messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as a bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. His racing career has excelled, winning a silver medal for the NY State Track Cycling Championship in 2000 and 2002. Mr. Bunde brings with him an interest in the arts and the environment. He has taken photography courses, permaculture and ecological design courses, and completed the Foundation Program at the Parsons School of Design. DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.33

Part V: Sample Business Plan

During his tenure with Recycle-A-Bicycle, Mr. Bunde has increased the shop’s productivity and profitability. Through his efforts, the shop experienced an overall increase of $20,000 in revenue in 2002. Rich Conroy, Program Coordinator, Children’s Aid Society Mr. Conroy founded the Major Taylor Bike Recycling in 1998. He served as its director for a year before moving to New York City. During this time he developed the organization’s goals, raised funds and managed the budget, recruited volunteers, instructed students in bicycle maintenance and repair, and created the website. This experience makes him well qualified to coordinate the Recycle-A-Bicycle/Children’s Aid Society youth education program at Intermediate School 218. Mr. Conroy holds a PhD from Notre Dame from the Department of Government and International Studies, and taught political science classes at the college level for four years. Upon moving to New York City, he managed Metro Bicycles, a successful bicycle chain store in New York City, for three years. Mr. Conroy’s skills uniquely blend his experience in teaching and management with his love for bicycles. Rommell Bishop Head Mechanic, Children’s Aid Society Mr. Bishop enrolled in the Brooklyn Recycle-A-Bicycle training program at age 14. After two years, he volunteered to participate in the fundraising event, Bike Aid. This required that he ride his bicycle cross country for the entire summer. Upon his return, Mr. Bishop was employed as student assistant mechanic and served in this position until he graduated from high school. In 2000, he was hired as the Head Mechanic for Recycle-A-Bicycle at Children’s Aid Society. Mr. Bishop is an excellent role model for students, having come through the training program himself. Through his familiarity with the program, Mr. Bishop is able to create new opportunities for young people. In addition, he occasionally volunteers to chaperone bike trips, and spends extra time and effort on students eager to learn and build a bike. In 2002, Mr. Bishop enrolled in an airplane mechanic’s program offered at LaGuardia Community College. He currently works part-time at Children’s Aid Society and dedicates his afternoons to study. Yoandy Ramirez, Manager, East Village Store Mr. Ramirez holds the position of East Village Assistant Manager. He started as a Summer Youth Employment student in 1999 and was hired to work as a student mechanic on Saturdays. Based on his hard work, dedication and advanced mechanical skills, Mr. Ramirez was promoted to Assistant Manager in June 2002. He will graduate with a high school diploma this summer and aspires to pursue a degree in computer science.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.34

Part V: Sample Business Plan Denny de los Angeles Head Mechanic, DUMBO Mr. de los Angeles started as an on the job trainee with Recycle-A-Bicycle in the spring of 2000. After two months time, Recycle-A-Bicycle offered him a full time job as mechanic due to his aptitude. He was promoted to East Village Assistant Manager the following year. Unfortunately, Mr. de los Angeles suffered from a broken leg, and when he returned to the organization in October 2002, he was given a mechanic’s job at DUMBO. Once business picks up in the spring of 2003, he will be promoted to DUMBO Assistant Manager. Mr. de los Angeles is completing his high school degree via a correspondence program. Kerri Martin Outreach Coordinator, Recycle-A-Bicycle Inc. Ms. Kerri Martin graduated from the College of New Jersey in 1994 with a B.A. in Sociology and a minor in French. She is fluent in French and German. Upon graduating, Ms. Martin was employed by Commerzbank in the Technology department where she d did database designing and data warehouse reporting. She also worked on Web Development Team. Ms. Martin joined Recycle-A-Bicycle’s volunteer Ladies’ Night in 1999 and has been actively involved with the organization until hired in 2003. She has dedicated her spare time to bicycle advocacy. She has been an active volunteer with Transportation Alternatives for several years, and served as a volunteer coordinator for one of their monthly bicycle count projects. She also produces a public access TV show called Bike TV, a weekly show on a wide range of bike related topics.

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Part V: Sample Business Plan

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.36

Part V: Sample Business Plan VI.

SOCIAL OUTCOMES TRACKING

SOCIAL INDICATORS OF SUCCESS Youth Training -- Recycle-A-Bicycle has worked with over 4,500 youth and staffed an average of 15 positions per year. Recycle-A-Bicycle improves the lives of many at-risk youth in the region by offering an effective training program in the areas of bike repair, small business, and environmental education. Strategic partners provide qualified youth counselors to recruit and work with young people who need assistance with basic job readiness skills and who can intervene in the case of serious issues regarding the social or mental well being of participants. Partner programs also offer youth leadership development opportunities, tutoring, SAT preparatory courses, and career counseling services to our young people. In addition to the skills training and self-esteem building that the youth training provides, many participants earn their own bicycles. The organization promotes bike riding as a form of recreation and transportation among the youth. The benefits of promoting an active lifestyle among youth are not calculated by the organization, but the benefits are assumed to be significant. In the future, Recycle-A-Bicycle may be able to track this increase in activity among youth participants. Youth Participants 1995 1996 1997 1998 1999 2000 2001 2002 Total 10-13 years 325 384 276 370 7003 430 609 737 3,831 14-21 years 20 88 139 169 91 94 99 35 735 Total 345 472 415 539 791 524 708 772 4,566 Recycle-A-Bicycle Jobs Filled (includes part time and full time) 1995 1996 1997 1998 1999 2000 2001 2002 Total Jr. Staff 0 0 0 0 0 14 10 8 32 Sr. Staff 6 10 10 10 13 10 12 8 79 Total 6 10 10 10 13 24 22 16 111

3

In 1999, RAB served 300 additional youth during a one-time summer mountain biking camp. DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.37

Part V: Sample Business Plan

A “fix a flat” class in action ENVIRONMENTAL INDICATORS OF SUCCESS Since its inception, Recycle-A-Bicycle has removed 109 tons of material from the waste stream and eliminated 104,244 trips by other polluting transportation sources. In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New York City. The organization removes tons of material from the waste stream each year. As the business increases its capacity to pick up, store and refurbish discarded bicycles, its positive impact on the waste stream will also increase. In 2002, Recycle-A-Bicycle recycled over 14 tons of material destined for New York City’s landfills. Over the next five years, the amount of tonnage removed will steadily increase. Additional environmental benefits are accrued as bicycles are used as alternatives to driving. To calculate these benefits, Recycle-A-Bicycle assumes that each bicycle sold replaces 28 car trips each year. Waste Prevention 1995 1996 1997 1998 1999 2000 2001 2002 Total Bicycles 556 617 787 926 1205 976 1061 953 7081 Tons of 8.56 9.49 12.10 14.25 18.54 15.02 16.32 14.66 108.93 Material Represents tonnage of material removed from waste stream, and that 65 bicycles = 1 ton of waste

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Part V: Sample Business Plan

Air Pollution Prevention 1995 1996 Bicycles 311 208 Trips 8,708 5,824

1997 435 12,180

1998 468 13,104

1999 665 18,620

2000 510 14,280

2001 2002 483 643 13,524 18,004

Total 3,723 104,244

Recycle-A-Bicycle will generate increased outcomes through its expansion and growth. The following chart outlines the expected outcomes over the next five years.

4

Outcomes Youth participants to be trained

2003 780

2004 850

2005 950

2006 1050

2007 1200

Number of positions to be filled4

22

28

31

34

37

Tonnage of material to be removed from the waste stream

17

22

24

26

27

Number of non-polluting vehicle trips generated

20,000

23,000

25,000

27,000

29,000

Includes both full and part time positions DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.39

Part V: Sample Business Plan

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.40

Part V: Sample Business Plan VII. FINANCIALS Recycle-A-Bicycle has successfully grown and expanded through a self-financing approach. This approach was required due to the fact that Recycle-A-Bicycle did not obtain 501©3 status until July 2002. Without formal nonprofit credentials, the organization had limited access to grants or donations that would have provided the capital needed to grow more rapidly. Therefore, Recycle-A-Bicycle functioned much like a start-up small business, utilizing dedicated staff and growing only when net profits or donated funds were available to reinvest in the business. After five years of operations in the East Village, Recycle-A-Bicycle recognized the strong opportunity to grow its operations and training program through the creation of the DUMBO store. The diversification, additional space, and new market opportunity it provides will assist in the growth of Recycle-A-Bicycle. But the addition of the new DUMBO store has put demands on Recycle-A-Bicycle’s cash flow, as the store has not yet built up a sustainable level of sales. This has created a need for additional financing for working capital. As consumers become more aware of the store, the sales volume from retailing is expected to sustain operations. Recycle-A-Bicycle has reached a critical juncture in its lifecycle in which further expansion is required in order to meet demand and scale its youth development efforts. Affordable financing is required to support the Five-Year Strategic Plan. Financing will be pursued through philanthropic grants, debt financing and other socially supportive funders. This section reviews the near-term capital needs of the organization. Recycle-A-Bicycle has developed a five-year financial outlook to accompany this business plan. Please refer to Appendix E and Appendix F for details. Projections are based on historical performance and are realistic, but conservative estimates. Recycle-A-Bicycle believes it has the capacity to outperform the projections, given stability in staffing and few negative external factors. Significant assumptions to the plan are in shown in Appendix G. FINANCIAL ESTIMATES AND ASSUMPTIONS Recycle-A-Bicycle is at a critical juncture in its organizational development. Investment in building the organization’s equity and developing professional staff are expected to produce positive returns within the five-year period. INVESTMENTS Recycle-A-Bicycle plans to make three key investments over the next five years to expand its programs and create the opportunity for the level of revenue growth projected in the above graphs. •

Acquire a Production and Training Facility

In January 2004, Recycle-A-Bicycle plans to acquire a production and training facility that will benefit the organization by relocating the environmental and youth training element from the retail shops to their own facility. This will enable the stores to focus on retailing through DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.41

Part V: Sample Business Plan increased space in which to showcase finished bicycles and accessories. In addition, it will free up workstations, increasing capacity for repair services. The facility will also improve the shops’ appearances as there will be less donated bicycles and “work-in-progress” creating clutter. Expected cost: Facility purchase cost of $330,000 for a 3,000 square foot facility assuming 10% down payment via a capital grant and 10-year mortgage payments of approximately $3,300 per month. In addition, $5,000 is budgeted for leasehold improvements. The addition of the facility will also require investment in a Production Assistant to staff the new facility. Expenses related to the Production Assistant include approximately $20,000 in salary and benefits. •

Acquire a van

The acquisition of a van will improve the efficiency by which materials are collected and transferred to appropriate project sites. A higher number of bicycles will be collected and consequently, productivity will increase as there will be a greater number of “easy” tune-ups and greater selection for customers. Expected cost: Annual operating expenses of $6,000. No cost for acquisition because, as noted earlier, a customer has offered to donate a van to Recycle-A-Bicycle in Spring 2003. •

Hire a development officer

Recycle-A-Bicycle will hire an individual that is networked in the youth training and social services sectors. This person will be able to contribute immediately and their efforts will cover the cost of the position within 9 months. Expected cost: $50,000 annual salary plus approximately $5,000 benefits REVENUE The bicycle industry is seasonal in nature. The most lucrative season runs from April through August. The less lucrative season runs from December through March due to cold weather. Unlike other retailers, Recycle-A-Bicycle does not benefit from holiday consumption patterns as most customers prefer to give new rather than used items as gifts. The East Village store will outperform the newer DUMBO shop over the next few years because it has enjoyed a six-year presence in the neighborhood. Over the next five years as Brooklynites become more aware of the DUMBO shop, sales will increase to 80 – 90% of the East Village store sales. Recycle-A-Bicycle expects to grow revenue 100% in 2003 due to several factors: • Full-year results of new DUMBO store (opened October, 2002); • Subway fare hike will prompt people to evaluate their commutes with some spillover effect on Recycle-A-Bicycle sales; and

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.42

Part V: Sample Business Plan •

Addition of new development officer mid-year (although greatest benefit will likely be realized in 2004).

Recycle-A-Bicycle’s sales revenue increases, although large in percentage terms, represents a conservative expectation. Despite doubling the retail capacity through the DUMBO store, bike sales are expected to increase by only 84% (from 339 in 2002 to 626 in 2003). East Village shop DUMBO shop

2002A 294 45 339

2003E 348 278 626

Beyond 2003, Recycle-A-Bicycle expects revenue growth to accrue from its investment in marketing, as well as the full impact of the development officer. Recycle-A-Bicycle expects 71% top-line growth in 2004 through 40% increase in bike sales and 148% increase in grant funding including down-payment capital grant for new facility. In 2005 – 2007, revenue growth will slow to 12%, 10% and 5% respectively. After 2007, revenue growth is expected to level out at 3 – 5% annually. CURRENT FUNDING SOURCES AND COMMITMENTS SOURCE Sales Revenue Fundraising

2002 Percentage 69% 31%

2003 Percentage 65% 35%

Recycle-A-Bicycle raised $50,000 in grant funding in 2002. Major support was provided by Bike New York. Grant funding in 2003 has been secured or is expected from Bike New York, The Citizens Committee for NYC, Travelers Foundation, Monterey Foundation and Silverman Foundation.

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Part V: Sample Business Plan

Revenue by category $600,000

1,206 $500,000

1,266

1,096

$400,000 877

$300,000 626

$200,000 339 $100,000

$2002

2003 Grants

Bikes

2004 Accessories

2005 Parts

2006 Service

2007 No. of bikes sold

EXPENSES The major expense for Recycle-A-Bicycle is labor. Recycle-A-Bicycle will create a succession plan that increases the professional staffing in order to strengthen the organization. Recycle-ABicycle will also invest in training, so that staff may be prepared to fill in any gaps that might occur. Mechanics will undergo sales and advanced mechanics training as this is a proven method for creating higher productivity. The organization will take advantage of its strategic partnership with Henry Street Settlement to secure an Administrative Assistant through Henry Street’s job-training program, at no cost to Recycle-A-Bicycle. The following chart examines the effect of the new strategies on net income over the five-year projections. Though net income will be negative in 2003, the organization will return to positive net income in 2004 and beyond.

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Part V: Sample Business Plan

Revenue and Net Income 600,000 532,576 507,649 500,000

462,329 409,328

400,000

300,000 238,748 200,000

126,475

100,000

111,275 80,105

0

-11,472 2003

47,868 2004

2005

2006

2007

(100,000) Revenues

Net Income

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.45

Part V: Sample Business Plan RISKS AND STRATEGIES FOR MITIGATION Recycle-A-Bicycle has identified several risks associated with implementing its strategic initiatives as well as strategies to mitigate these risks. These are briefly described below. 1. Funding is not obtained on schedule Strategy for mitigation: The Executive Director has solid fundraising experience and is confident in the goals listed. The addition of the new Development Director will enhance these strengths. Operations will be managed to the funding commitments that are available, and when possible, reserves will be created to help smooth cash availability. 2. Store revenues lag behind plan: demand is low Strategy for mitigation: We would reduce operating costs by reducing labor by curtailing store hours during exceptionally slow periods (e.g. during a heavy snowstorm). We will simultaneously continue aggressive marketing efforts to pull in demand. Recycle-A-Bicycle operations are flexible and have been subject to past revenue variations, management is comfortable managing to these issues. 3. Insufficient Raw materials to meet sales demand Strategy for mitigation: Recycle-A-Bicycle seldom has to actively solicit raw materials donations, and supply does not look to be constrained in the near future. If for some reason there is a shortage of bicycles we would initiate outreach efforts to increase supply. Used bicycles could be purchased at police auctions as a reasonably inexpensive substitute to donated bicycles. Though margin would suffer, Recycle-A-Bicycle would still be able to meet demand for bicycles and offer its higher margin accessory and repair lines. 4. Insufficient labor to meet production demand Strategy for mitigation: Given current labor market conditions in New York City, we do not anticipate any issues. Our wage rate is very competitive with the market and we always have a surplus of labor. However, if a labor supply shortage exists, we would tap into our volunteer network which has worked well in the past to meet seasonal demands for production. 5. Loss of a major partner Strategy for mitigation: The Executive Director has many relationships with potential partners and is nurturing these as prospects for when the production/training facility is operating. 6. Loss of senior management before training and succession plan is implemented Strategy for mitigation: The Board of Directors and others have committed their energy should an unplanned change in Senior Management occur. Recycle-A-Bicycle has several professional services partners such as their accountant and business management consultant who can help provide transitional support services.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.46

Part V: Sample Business Plan CAPITAL NEEDS, TIMELINE AND BENCHMARKS The projections indicate that grant funding of approximately $520,000 is needed over the next 3 years to cover costs associated with expansion of the business and training program. This funding amount includes a capital grant of $38,000 that will be used as a down-payment on the production and training facility. In three years (2005), Recycle-A-Bicycle will generate approximately $50,000 in net operating profit. Capital needs are greatest in 2003 and 2004 when new staff is hired and infrastructure related to the new production facility is added since these additional expenses are not be matched immediately with increased revenues. However, these investments will quickly produce positive returns for the organization as net income grows steadily from 2004 to 2007. In 2004, financing of approximately $300,000 is needed to purchase the training and production facility. This financing has been modeled as a 10-year mortgage at 6% annual interest. In addition, the following debt service chart includes a $100,000 loan beginning in 2003 to finance the beginning of the Five-Year Strategic Plan (assuming grant funds are not available). Debt service $400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$2002

2003

2004

2005

2006

2007

$(50,000) Interest payment

Principal payment

Cash balance

Debt balance

Operating cash flow

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.47

Part V: Sample Business Plan Summary of Revenues, net income and net margins: Sales Revenues Grant Revenues Net Income Net Retail Margin

$ $ $

2003 2004 167,657 $ 232,932 71,091 $ 176,396 (11,472) $ 47,868 n/a 21%

$ $ $

2005 290,281 172,049 80,105 28%

$ $ $

2006 318,775 188,875 111,275 35%

2007 $ 334,446 $ 198,129 $ 126,475 38%

Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year Strategic Plan. These grants will be pursued through institutional funders with an interest in environmental stewardship and/or youth development. 2003

Recycle-A-Bicycle seeks $171,000 in funding in 2003. Thus far, the organization has raised $38,000 of this funding need. Proposals for additional funding of up to $50,000 have been submitted and other funding requests will be made during the year. Approximately $71,000 in grant funding will serve as working capital to support current operations as well as implement new marketing efforts. The additional $100,000 will support hiring the Development Officer, support costs associated with sourcing and obtaining the new production and training center and provide for other infrastructure improvements. As this funding is vital for the growth of the organization and its ability to meet the objectives of the Five-Year Strategic Plan. Recycle-A-Bicycle has projected the $100,000 as debt financing and is able to support the debt service required through its steady cash flows and strong financial management. Funding from a grant source will allow the organization to avoid over $8,500 in interest expense over the next five years.

2004

Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds will be used in part for working capital and in part to support more of the Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the production and training center, hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will be used for a down payment on the production and training center. Recycle-A-Bicycle will raise the additional $106,000 through fundraising efforts spearheaded by the new Development Officer.

2005

Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional costs related to expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours by Teens program.

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Part V: Sample Business Plan

RECYCLE- A- BICYCLE, INC. NEW YORK BUSINESS PLAN

APPENDIX

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.49

Part V: Sample Business Plan TABLE OF CONTENTS EXHIBIT

APPENDIX PAGE

A.

HISTORY AND MILESTONES

51

B.

TRADE AREA OF EAST VILLAGE STORE

53

C.

TRADE AREA OF DUMBO STORE

54

D.

BOARD MEMBER BIOGRAPHIES

55

E.

2003 MONTHLY PROFIT AND LOSS STATEMENT

57

F.

5 YEAR PROFIT AND LOSS STATEMENT

58

G.

ASSUMPTIONS TO FINANCIAL MODEL

59

H.

EXECUTIVE DIRECTOR C.V.

61

I.

COMMUNITY NETWORK REFERENCE

62

J.

MEDIA COVERAGE

63

K.

SUMMER YOUTH EMPLOYMENT CURRICULUM

64

L.

SEEDCO LOGIC MODEL

67

M.

PICTURES OF RECYCLE-A-BICYCLE

68

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.50

Part V: Sample Business Plan APPENDIX A -- History and Milestones of Recycle-A-Bicycle 1994 Transportation Alternatives receives NYC funding to initiate the Recycle-A-Bicycle project. A partnership is formed with Children’s Aid Society. The Manhattan Borough President inaugurates the project and our first class, teaching bike repair and environmental stewardship, is offered in May 1994. 1995 RAB partners with Eastern District High School. 1996 RAB publishes Tools for Life: A Start-up Guide to Youth Recycling and Bicycling Programs. Two thousand copies are printed and distributed. RAB partners with Henry Street Settlement and offers its first job training program. 1997 A dedicated work space is established in the Charas, El Bohio Community Center. A grant from the Urban Resources Project to Henry Street Settlement provided funds to create a youth job training program and to capitalize a bicycle retail business. This business model has been based on the donation of bicycles and their sale after the restoration work done by teens enrolled in the job training program. 1998 RAB becomes incorporated. A business plan is written in partnership with Henry Street Settlement. The first two RAB students travel cross-country with Bike Aid. 1999 Tours By Teens is developed by Henry Street Settlement students as part of NYC Summer Youth Employment Program. Students researched the history and culture of the East Village, mapped out a tour, designed a brochure, and led 3 pilot tours. The goal is to start-up a program that trains and employs teens as tour guides. 2000 RAB opens its first retail storefront in the East Village. 2001 A new storefront lease was negotiated on Avenue C, in the Lower East Side - an area that is still currently enjoying a great amount of investment. The relocation of retail activity from a third floor (walk-up) room based in a community center to a storefront doubled the amount of repair business, as well as facilitated bike sales and rentals. This space also provided separation of job training and retail activity, which has enhanced our ability to offer higher quality services to both customers and students.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.51

Part V: Sample Business Plan APPENDIX A -- History and Milestones of Recycle-A-Bicycle (CONTINUED) RAB produces bike safety public messages for radio and television that’s paid for by the NYS Governor’s Committee on Traffic Safety. 2002 In May, a lease was signed to create a second retail location and training center in Dumbo, Brooklyn. Extensive renovation was required and the shop opened in October. In July, RAB received its official IRS 501-c-3 status, after successfully completing a 5 year review period. This status provides greater access to funders. In July, RAB received a Seedco grant to upgrade its business plan. In November, a major strategic planning effort was undertaken by all staff, management, and the Board of Directors. Input from key partners was included and a 5-Year strategic plan was created.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.52

Part V: Sample Business Plan APPENDIX B -- East Village Trade Area Map

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.53

Part V: Sample Business Plan APPENDIX C --DUMBO Trade area map

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.54

Part V: Sample Business Plan APPENDIX D-- Board Member Biographies Jonathan Orcutt, Board President Mr. Orcutt is Associate Director, Tri-State Transportation Campaign. Since 1994, Mr. Orcutt has planned advocacy campaigns, supervised staff and raised funds for the Campaign, a highly effective mass transit and sustainable transportation advocacy organization in the New York/New Jersey/Connecticut metropolitan region. He is editor of the Campaign's awardwinning weekly bulletin, Mobilizing the Region, and develops Campaign strategies on a wide range of transportation policy issues. He sits on the executive committee of the board of the League of American Bicyclists, a national advocacy organization, and is vice-president of the Kissena Cycling Club, a NYC race- and fitness-oriented bicycle riding group. Mr. Orcutt was executive director of Transportation Alternatives between 1989 and 1994 where he developed programs to promote bicycle transportation and traffic calming policies. Mr. Orcutt holds a B.A. with honors from Colby College. Sara Elinson Ms. Elinson is a Senior Manager at Standard & Poor’s in their Corporate Value Consulting group. This group, formerly PriceWaterhouseCoopers, provides clients with Mergers & Acquisitions advisory services, as well as broader corporate finance advice. She has advised clients on, debt refinancing, debt restructuring, and finance raisings. Additionally, she has provided capital structure valuations and advice. Ms Elinson holds an MBA degree from Cornell University. Ms. Elinson also volunteers her time for RAB as the Dumbo store manager on Saturdays. Christine Koenig, Ms. Koenig is Workforce Development Center / Chief Administrator at the Henry Street Settlement. She has worked at Henry Street Settlement since 1986 in direct services and administration. Ms. Koenig is the founder of the Greening Challenge-Youth for Ecology initiative that was the foundation for environmental programming in Youth Services. She has forged many collaborations within the environmental field and local movement. She also founded Beyond City Limits in 1990, an international exchange program for urban youth. Ms. Koenig holds a MSW degree and is certified as a field administrator.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.55

Part V: Sample Business Plan APPENDIX D-- Board Member Biographies (CONTINUED) Ira Perelson Mr. Perelson has worked as a NYC high school social studies teacher (bilingual-Spanish) since 1975. His board interests center around youth development. Mr. Perelson served as the faculty advisor to the Student Unity Club at Eastern District High School for over ten years and as an Outward Bound instructor for two years. In 1995, Mr. Perelson founded the North Brooklyn Recycle-A-Bicycle project. He directed its activities for six years. During this tenure, he developed curriculum, forged a partnership with Green Maps System and created a map-making project, helped send six teens on cross-country bike trips, taught over 150 students bike repair, and managed an advisory board. Mr. Perelson continues to be an active RAB board member. He holds a B.A. degree from Brooklyn College and an M.A. in Chinese History from Columbia University. He is fluent in Chinese, Russian, and Spanish.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.56

Part V: Sample Business Plan APPENDIX E – MONTHLY P&L 2003 Monthly Profit & Loss Statement Profit & Loss April 3, 2003

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

Oct-03

Nov-03

Dec-03

Sales Classes

325

325

325

325

325

325

325

325

325

325

325

60

60

60

60

60

60

60

60

60

60

60

60

5,924

5,924

5,924

5,924

5,924

5,924

5,924

5,924

5,924

5,924

5,924

5,924

4,500 1,350 2,363 1,231 (74) 15,679

3,600 1,080 1,890 985 (59) 13,805

4,500 1,350 2,363 1,231 (74) 15,679

9,000 2,700 4,725 2,462 (147) 25,049

7,200 2,160 3,780 1,970 (118) 21,301

7,200 2,160 3,780 1,970 (118) 21,301

9,000 2,700 4,725 2,462 (147) 25,049

9,000 2,700 4,725 2,462 (147) 25,049

7,200 2,160 3,780 1,970 (118) 21,301

6,300 1,890 3,308 1,724 (103) 19,427

6,300 1,890 3,308 1,724 (103) 19,427

4,500 1,350 2,363 1,231 (74) 15,679

Cost of Sales Repair supplies Accessories PT Retail mechanics FT storage facility mechanic PS 218 mechanic Retail mgr /asst mgr labor PT van driver Total cost of sales

648 540 870 432 6,240 8,730

518 432 870 432 6,240 8,493

648 540 1,088 432 7,800 10,508

1,296 1,080 1,088 432 7,800 11,696

1,037 864 1,088 432 7,800 11,221

1,037 864 1,088 432 7,800 11,221

1,296 1,080 1,088 432 7,800 11,696

1,296 1,080 1,088 432 7,800 11,696

1,037 864 1,088 432 7,800 11,221

907 756 1,088 432 7,800 10,983

907 756 870 432 6,240 9,206

648 540 870 432 6,240 8,730

Gross profit

6,949

5,312

5,171

13,353

10,080

10,080

13,353

13,353

10,080

8,444

10,222

6,949

Swift folder Grants Capital grant Bikes Accessories Parts Service Credit card fees Total net sales

325

Growth

Gross margin

Expenses Salaried wages PT Admin wages Payroll taxes Workers comp & disability Healthcare benefits Accounting Advertising Automobile Bad debt Repair & Maintenance Communications Store expenses Postage & delivery Printing & repro Educational materials Travel & Entertainment Ride leader Bank fees Rent Storage mortgage Insurance Utilities Expensed investments Total expenses Operating income Interest expense Interest income Other income Net operating income

44.3%

2,917 986 206 277 83 167 100 10 42 372 17 42 142 17 83 17 1,600 167 46 7,289 (340) 28 (312)

38.5%

33.0%

53.3%

47.3%

47.3%

53.3%

53.3%

47.3%

43.5%

52.6%

44.3%

2,917 986 206 277 83 167 100 10 42 372 17 42 142 17 83 17 1,600 167 46 7,289

2,917 1,153 252 277 83 167 100 10 42 372 17 42 142 17 83 17 1,600 167 27 7,483

2,917 1,153 252 277 83 167 100 10 42 372 17 42 142 17 83 17 1,600 167 46 7,502

2,917 1,153 252 277 83 167 100 10 42 372 17 42 142 17 83 17 1,850 167 46 7,752

2,917 1,153 252 277 83 167 100 10 42 372 17 42 142 17 83 1,200 17 1,850 167 86 8,992

2,917 1,153 252 277 83 167 100 10 42 372 17 42 142 17 83 1,200 17 1,850 167 106 9,012

7,083 1,546 270 546 83 167 100 10 42 372 17 42 142 17 83 1,200 17 1,850 167 101 12,800 26,654

7,083 1,546 270 546 83 167 100 10 42 372 17 42 142 17 83 17 1,850 167 46 12,599

7,083 1,546 270 546 83 167 100 10 42 372 17 42 142 17 83 17 1,850 167 46 12,599

7,083 1,378 224 546 83 167 100 10 42 372 17 42 142 17 83 17 1,850 167 46 12,386

7,083 1,378 224 546 83 167 100 10 42 372 17 42 142 17 83 17 1,850 167 46 12,386

(1,977) 23 (1,954)

(2,312) (177) 28 (2,460)

5,851 57 5,907

2,328 45 2,373

1,088 (177) 45 957

4,341 57 4,397

(13,301) 46 57 (13,198)

(2,518) (177) 189 45 (2,460)

(4,155) 185 40 (3,930)

(2,164) (985) 179 40 (2,931)

(5,437) (177) 174 28 (5,411)

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.57

Part V: Sample Business Plan APPENDIX F -- 5-YEAR P&L 2003 – 2007 Annual Profit & Loss Statements Profit & Loss April 3, 2003

2003

2004

2005

2006

2007

Sales Classes Swift folder Grants Capital grant Bikes Accessories Parts Service Credit card fees Total net sales Growth

3,900

3,900

3,900

3,900

720

1,080

1,440

1,440

1,440

71,091

138,396

172,049

188,875

198,129

78,300 23,490 41,108 21,421 (1,282) 238,748

38,000 109,620 32,886 57,551 29,989 (2,093) 409,328

137,025 41,108 71,938 37,487 (2,617) 462,329

150,728 45,218 79,132 41,235 (2,878) 507,649

158,264 47,479 83,089 43,297 (3,022) 532,576

51.5% 167,657

71.4% 232,932

148%

12.9% #

9.8%

3,900

4.9%

290,281

318,775

334,446

24%

10%

5%

Cost of Sales Repair supplies Accessories PT Retail mechanics FT storage facility mechanic PS 218 mechanic Retail mgr /asst mgr labor PT van driver Total cost of sales

11,275 9,396 12,186 5,184 87,360 125,401

15,785 13,154 17,572 15,821 5,340 89,981 3,955 161,608

19,732 16,443 22,623 16,295 5,500 92,680 4,074 177,347

21,705 18,087 25,632 16,784 5,665 95,461 4,196 187,530

22,790 18,992 27,721 17,288 5,835 98,324 4,322 195,272

Gross profit

113,347

247,721

284,982

320,119

337,304

Gross margin

25.2% #

40.4%

38.9%

41.2%

41.6%

Expenses Salaried wages PT Admin wages Payroll taxes Workers comp & disability Healthcare benefits Accounting Advertising Automobile Bad debt Repair & Maintenance Communications Store expenses Postage & delivery Printing & repro Educational materials Travel & Entertainment Ride leader Bank fees Rent Storage mortgage Insurance Utilities Expensed investments Total expenses

55,833 15,133 2,932 4,670 1,000 2,000 1,200 125 500 4,463 200 500 1,700 200 1,000 3,600 200 21,200 2,000 688 12,800 131,944

87,550 19,264 3,379 6,650 3,090 2,060 5,000 125 515 4,597 206 515 1,751 206 1,030 3,600 206 29,664 39,568 2,100 709 2,000 213,785

90,177 20,269 3,597 6,749 3,183 2,122 5,000 125 530 4,735 212 530 1,804 212 1,061 3,600 212 33,668 39,568 2,205 730 220,289

92,882 21,097 3,765 6,852 3,278 2,185 5,000 125 546 4,877 219 546 1,858 219 1,093 3,600 219 35,668 39,568 2,315 752 226,662

95,668 21,854 3,912 6,958 3,377 2,251 5,000 125 563 5,023 225 563 1,913 225 1,126 3,600 225 36,000 39,568 2,431 774 231,380

Operating income Interest expense Interest income Other income Net operating income

(18,597) (1,691) 774 493 (19,021)

33,936 (20,339) 1,311 690 15,598

64,693 (19,585) 716 863 46,687

93,457 (17,105) 968 949 78,269

105,923 (14,623) 1,555 996 93,851

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.58

Part V: Sample Business Plan APPENDIX G -- ASSUMPTIONS TO FINANCIAL MODEL Assumptions – Initiatives Initiatives On-going Hire Development Officer Development Officer healthcare Hire PT van driver Hire PT administrative support (in-kind) Purchase Prod/Training Facility Purchase van (donated) Hire Production Assistant for Prod. Facility

Date Aug-03 Aug-03 Jan-04 Mar-03 Jan-04 Jan-04 Jan-04

One-time Implement inventory system Leasehold improvements at storage facility Tools and equipment at storage facility Business consultant (remaining fees) Real Estate Consultant

Aug-03 Jan-04 Jan-04 Aug-03 Aug-03

$ $ $ $ $ $ $

$ $ $ $

Cost 50,000 3,228 8.00 110.00 8.00

Quantity annual annual hour 40 hour 40 sq ft 3,000 at purchase, plus: hour 160

4,167 269 320 $3,297 417 1,280

Incr 3% 3% 3% 3%

month month month month month month month

3%

800 (2 computers) 5,000 2,000 4,500 $7,500

Assumptions – Expenses Expenses April 3, 2003

Repair supplies Bike accessories

14% of bicycle sale price 40% of accessories sale price

Payroll taxes Workers comp - exec Workers comp - other

9.425% of total wages 0.43% of total wages 2.57% of total wages Annual $ 35,000 $ 3,228 $ 1,000 $ 2,000 $ 2,000 $ 1,200 $ 125 $ 500 $ 4,463 $ 200 $ 500 $ 1,700 $ 200 $ 1,000 $ 200 $ 2,000

Salary - ED Benefits Accounting Audit Advertising Van rental Bad debt Repair & Maint Communications Expenses store Postage & Delivery Printing & repro Educational materials Travel & Ent Bank fees Insurance

Utilities Waste removal Utilities Total Ride leader DUMBO Rent - 2003 DUMBO Rent - 2004 DUMBO Rent - 2005 DUMBO Rent - 2006 DUMBO Rent - 2007

($15-$20 of supplies per bicycle sold at an average price of $125) (100% margin for all products excluding locks; locks marked up approx. 50%)

Annl incr 3%

Month $ 2,917 $ 269 $ 83 $ 167 $ 167 $ 100 $ 10 $ 42 $ 372 $ 17 $ 42 $ 142 $ 17 $ 83 $ 17 $ 167

annual annual annual annual annual annual annual annual annual annual annual annual annual annual annual

Annual incr 3% 3% 3% 3% 3% 3% 0% 3% 3% 3% 3% 3% 3% 3% 3% 5%

month month month month month month month month month month month month month month month month

Rent EV - Annual EV - Monthly

Credit card fees % of all sales transaction fee

PT Labor

2003 13,200 1,100

2004 18,000 1,500

2005 18,000 1,500

2006 18,000 1,500

2007 18,000 1,500

30% 2.6%

35% 2.6%

35% 2.6%

35% 2.6%

35% 2.6%

3% Annual increases

Manager Asst. Manager Mechanic PS 218 Mechanic

$15.00 $10.00 $8.00 $8.00

per hour per hour per hour per hour

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Total

16 30

16 30

16 11

16 30

16 30

16 70

16 90

16 85

16 30

16 30

16 30

16 30

192 496

46

46

27

46

46

86

106

101

46

46

46

46

688

-

-

-

-

-

1,200

1,200

1,200

-

-

-

-

3,600

500 750 1,083 1,417 1,500

500 750 1,083 1,417 1,500

500 750 1,083 1,417 1,500

500 750 1,083 1,417 1,500

750 1,083 1,417 1,500 1,500

750 1,083 1,417 1,500 1,500

750 1,083 1,417 1,500 1,500

750 1,083 1,417 1,500 1,500

750 1,083 1,417 1,500 1,500

750 1,083 1,417 1,500 1,500

750 1,083 1,417 1,500 1,500

750 1,083 1,417 1,500 1,500

8,000 11,664 15,668 17,668 18,000

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.59

Part V: Sample Business Plan APPENDIX G -- ASSUMPTIONS TO FINANCIAL MODEL (CONTINUED) Assumptions – Income Income April 3, 2003 Weekly bike sales Average bike price

$

125 M 1 1 2

Bike sales - EV Bike sales - DUMBO Bike sales - Total Daily bike sales revenue

$

250

T 1 1 2 $

250

W 1 1 2 $

250

R 2 1 3 $

375

F 2 2 4 $

500

Sa 3 2 5 $

625

Su $

Total 10 8 18

- $

2,250

Bike sales Seasonality factor Expected sales - EV Expected sales - DUMBO Expected sales - Total

JAN 0.5 20 16 36

FEB 0.4 16 13 29

MAR 0.5 20 16 36

APR 1.0 40 32 72

MAY 0.8 32 26 58

JUN 0.8 32 26 58

JUL 1.0 40 32 72

AUG 1.0 40 32 72

SEP 0.8 32 26 58

OCT 0.7 28 22 50

NOV 0.7 28 22 50

DEC 0.5 20 16 36

Total 0.7 348 278 626

Bike Inventory Existing Finished inventory Existing WIP inventory Restorable donations No. restored Available for sale

JAN 74 355 67 65 139

FEB 103 357 67 65 168

MAR 139 358 67 65 204

APR 168 360 67 30 198

MAY 126 397 67 45 171

JUN 114 418 67 45 159

JUL 101 440 67 30 131

AUG 59 477 67 30 89

SEP 17 513 67 45 62

OCT 4 535 67 50 54

NOV 4 552 67 50 54

DEC 4 568 67 60 64

Total 4

36

29

36

72

58

58

72

72

58

50

50

36

626

103

139

168

126

114

101

59

17

4

4

4

28

28

Total bikes sold Ending finished inventory

Monthly bike revenue

$

Lost monthly bike revenue

4,500

$

$0

$

$0

JAN Accessories Rel. to bikes 2002 sales Parts Rel. to accessories 2002 sales Service Relationship to parts 2002 sales

3,600

4,500

$

$0

FEB

9,000

$

$0

MAR

7,200

$

$0

APR

7,200

$

$0

MAY

9,000

$

$0

JUN

9,000

$

$0

JUL

7,200

$

$0

AUG

6,300

$

$0

SEP

6,300

$

$0

OCT

4,500

800 580 64

$

$0

NOV

78,300 $0

DEC

Total

0.30 $ 14,894

$

1,350

$

1,080

$

1,350

$

2,700

$

2,160

$

2,160

$

2,700

$

2,700

$

2,160

$

1,890

$

1,890

$

1,350

$

23,490

1.75 $ 28,820

$

2,363

$

1,890

$

2,363

$

4,725

$

3,780

$

3,780

$

4,725

$

4,725

$

3,780

$

3,308

$

3,308

$

2,363

$

41,108

0.52 $ 15,018

$

1,231

$

985

$

1,231

$

2,462

$

1,970

$

1,970

$

2,462

$

2,462

$

1,970

$

1,724

$

1,724

$

1,231

$

21,421

Other revenue sources 2002

2003

2004

2005

2006

2007

23,815 21,055 3,786 48,656

35,723 31,583 3,786 71,091

71,445 63,165 3,786 138,396

89,306 78,956 3,786 172,049

98,237 86,852 3,786 188,875

103,149 91,194 3,786 198,129

Total Grants per Month

4,055

5,924

11,533

14,337

15,740

16,511

Classes - Annual Classes - Monthly

3,900 325

3,900 325

3,900 325

3,900 325

3,900 325

3,900 325

Grants Donations Contributions Benefit

Swift folder Commission per bike Bikes sold Revenue - annual Revenue - monthly Other income Sales tax credit

$60 $ $

8 480 40

$ $

12 720 60

$ $

18 1,080 90

$ $

24 1,440 120

$ $

24 1,440 120

$ $

24 1,440 120

0.30% of taxable sales for prompt payment

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.60

Part V: Sample Business Plan APPENDIX H -- Executive Director C.V.

Karen Overton 55 Washington Street Brooklyn, NY 11201 [email protected]

Work Experience: Executive Director, Recycle-A-Bicycle, Inc. (1998-present) Founded innovative organization dedicated to youth environmental education and job training that has worked with over 4,500 youth and removed 109 tons of waste from the waste stream. • Established the organization’s legal and structural framework; handle all finances • Hire and train permanent staff of six and organize volunteers • Successfully increased fundraising/development 200% over the life of the organization • Oversaw creation of a second successful retail establishment, including site selection, tenant buildout, merchandising, and community development • Led 5-year strategic planning effort; writing business plan and sourcing financing to grow the business • Co-authoring training manual “One Revolution at a Time: How to Start and Run a Youth Cycle Club” and providing technical assistance to youth groups • Serve as technical consultant to other youth and transportation programs nationwide

Recycle-A-Bicycle Project Director, Transportation Alternatives (1994-1998) Founded a youth environmental education project in which duties included: • Developing partnerships with youth organizations • Fundraising & coordinating material donations • Developing curriculum & instructing • Publishing “Tools for Life: A Start-Up Guide for Youth Recycling and Bicycling Programs”

Bikes for Africa Project Director, Institute for Transportation and Development Policy (1992-1994) Established a bicycle project in Beira, Mozambique in which duties included: • Hiring and training staff • Running revolving credit fund for women peasants • Fund raising • Research and publication of project’s socio-economic impact

Education: 1993 - Masters in Urban & Regional Planning. State University of New York at Albany. 1985 - Bachelor of Arts in Latin American and Caribbean Studies. State University of New York at Albany.

Special Skills: Fluent in Portuguese, working knowledge of Spanish. Proficient in Quickbooks and other common applications

Affiliations: 1997 to present Director and Treasurer, Institute for Transportation and Development Policy, Appointed to Board of Directors of global transportation policy and program development organization. Elected Treasurer of the Board 2001 to present Advisory Board Member, Ryan-Nena Health Clinic, Appointed by clinic director to advise staff of largely government-funded institution that provides services to low income HIV-positive residents of Manhattan’s Lower East Side. DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.61

Part V: Sample Business Plan APPENDIX I -- COMMUNITY NETWORK REFERENCE MAJOR PARTNERS Henry Street Settlement Children’s Aid Society

www.henrystreet.org www.childrensaidsociety.org

AFFILIATES Transportation Alternatives Five Borough Bike Club’s Montauk Century New York City Waste Prevention Coalition Project Renewal The Youth Bicycle Education Network Nonprofit Venture Network

www.transalt.org www.5bbc.org www.nycwpc.org www.projectrenewal.org www.yben.org www.seedco.org

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.62

Part V: Sample Business Plan APPENDIX J -- MEDIA COVERAGE Copies of articles are available upon request.

Spinning on 2 Wheels of Fortune, David Gonzalez, The New York Times, Saturday, May 31, 1997, p. 21. Recycle-A-Bicycle, YES. A Journal of Positive Futures, Winter 1997/1998. Summer Fun for Recycle-A-Bicycle, Greenline: The North Brooklyn Community News, September 1999, p. 1. Honor Roll: Kristina Rodriguez, Todd Edelman, Latingirl Passages, August-September 2000. Program gets ‘em in fresh gear, Matthew Creamer, New York Daily News, Sunday, October 8, 2000. Wanna’ get inspired yourself?, College Bound Magazine, November/December 2000.. Reality Pokes Its Nose Into the Tents, Guy Trebay, The New York Times, Tuesday, February 11, 2003, p. B10. Urban Legend: Karen Overton. Tracie McMillan, CityLimits, June 2003, p. 7.

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.63

Part V: Sample Business Plan APPENDIX K -- YOUTH EMPLOYMENT CURRICULUM SAMPLES

Derallieurs and Gears Goals: To understand the function of gears and how to use them to increase distance and speed. Students will disconnect, inspect, lubricate and reinstall a gear cable. Set-up: -

5 bikes with functioning rear and/or front derailleurs 8/9/10 y-wrenches cable cutters

Discussion Questions: - What are gears? What do they do? - When would we want to make it easier to pedal the bike? When would we want to make it harder? - Who has a bike with gears? Do you use them often? - Do gears help cyclists ride farther? The Lesson: 1. Ask for two volunteers to come up to the bike. Walk them through how to shift gears (one pedals, the other shifts). Stress that one should never shift gears unless the pedals are moving (not just the wheel). Tell the students to watch how the chain moves. 2. Ask the pedaler if it is easier to pedal in the low or high gears. 3. Have the pedaler turn the pedals as fast as he/she can when the bike is in low gear. Stop the wheel and try it again in high gear. Ask the students if the wheel turned faster the second time. 4. Name the parts and explain how the cable system works. 5. Demonstrate a derailleur cable “overhaul” - Loosen the eyebolt and disconnect the cable - Take the cable out of the housing - Inspect cable for rust and damage - Replace or straighten cable if necessary - Oil cable housing - Reinstall cable - Check and adjust cable tension 6. Assign groups to bikes to perform lesson. 7. Clean up. Classroom Lesson Plan © 2003 Recycle-A-Bicycle NYC

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.64

Part V: Sample Business Plan APPENDIX K -- YOUTH EMPLOYMENT CURRICULUM SAMPLES (CONTINUED)

Environmental Education & Cannibalizing Bikes Goal: To understand the environmental impact of garbage and recycling. To understand the positive environmental contributions of RAB and its students. To recycle bicycle parts. Set-up: -

Get out bikes and bike parts to be disassembled (ex. steel drop handlebars, rusty wheels) Write the three rules of cannibalizing on the board: Keep similar pieces together!!!, finish taking off one part before moving on to the next one, put pieces away. Get one example of a complete brake and a disassembled brake

Opening discussion questions: - What happens to your garbage when you throw it away? Where does it go and how does it get there? - How much garbage do you throw away at your house per week? How many apartments are in your building? How many buildings are on your block? How many blocks are there in NYC? How much garbage do we throw out every week?! - Do garbage trucks cause air pollution? How does it effect the environment if we have to ship our garbage far away? - What can we do about the garbage problem? The Lesson 1. Have the students look around at all of the bikes and pieces in the shop. Explain that most of these pieces would be in the garbage if it weren’t for RAB. 2. Explain the three fates of a bicycle that enters the shop (earned, sold, disassembled) 3. Describe how we use the parts off of cannibalized bikes to build new ones. 4. Demonstrate how to keep like pieces together by showing an example of a complete brake (all in one piece) and a disassembled brake (in 15 pieces). Show how difficult it would be to reassemble a brake if one piece is missing. 5. Assign students to bikes or cannibalizing projects. Students can use the tools from the boards. 6. Ten minutes before class ends, students stop working on bikes. 7. Instruct students on where to put parts. Get one container for miscellaneous small parts. 8. Clean up and put away tools. Classroom Lesson Plan © 2003 Recycle-A-Bicycle NYC

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.65

Part V: Sample Business Plan APPENDIX K --YOUTH EMPLOYMENT CURRICULUM SAMPLES (CONTINUED)

Bike Safety Check-up Goals: To apply the cumulative information from the previous lessons to perform a complete bike safety check. To learn the most important things to check on a bike before every ride. Set-up: -

five booby trapped bikes with 6-10 problems each A written list describing the make, model, color, and type of each bike and a description of every problem Photocopies of a checklist of how to evaluate a bike Pencils and blank paper

Opening discussion questions: - Name all of the lessons we have had in this class. - Why should we check our bikes before we ride? - What can happen to you if the bike has problems? What can happen to the bike? The Lesson: 1. Go over the check list using student volunteers to help demonstrate each step. 2. Break students into groups and pass out a checklist and pencils to each one. 3. Have the students write the make, model, color and type of bike on the top of a blank paper. 4. Have students evaluate each bicycle. Make them take their time and go over the check list from top to bottom. They should write a complete description of every problem on their paper. 5. Once they have performed a thorough safety check, compare their answers with the prewritten list of problems. If they are missing any, ask them to go back and look for more problems. 6. Clean up. Classroom Lesson Plan © 2002 Recycle-A-Bicycle NYC

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.66

Part V: Sample Business Plan APPENDIX L --SEEDCO LOGIC MODEL‘((This Logic Mode was modified for use in this toolkit)

Inputs Board

Activities Conduct Youth Training Programs

Staff Youth Funding

Materials Donation Facilities Consultant Inventory and bookkeeping systems

Refurbish bicycles Conduct business activities at retail stores

Analyze operations & set production goals Create resource development strategy

Outputs Youth trained in bicycle repair and business concepts Ongoing sales activity

Revised operating plan

Initial Outcomes Students graduate from training Youth employed at RAB or other bike shops Youth develop strong job skills Improved inventory & bookkeeping

Strategy for Resource Development Facilities and staffing plan

Financing for new facility and programs secured

Interim Outcomes Healthy lifestyle practiced by program graduates Youth graduate high school

Long-term Outcomes Healthy lifestyle promoted to others by program graduates Graduates become environmental stewards Youth enter living wage careers or obtain postsecondary education

Retail sales volume increase

Long-term staff positions supported by sales

RAB offers consistent programming Organizational Sustainability achieved

Van & Storage Facility acquired

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.67

Part V: Sample Business Plan APPENDIX M PICTURES OF RECYCLE-A-BICYCLE

Yoandy Ramirez in the East Village Store

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.68

Part V: Sample Business Plan Working on a bicycle

Local bike tour

Youth field bike trip to Montauk beach DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.69

Part V: Sample Business Plan

Local bike tour

NYC Council Member Margarita Lopez visits Recycle-A-Bicycle

DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN V.70