I take particular pleasure in this because I don't remember quite how many years ago, but we've had a business plan contest here for some time, and about 12 years ago, I guess it was, we started a social enterprise track. and you know over the years we've really been able to launch some social enterprises that have made a huge difference in the world they continue to operate they've made a difference so when I look out at all that you I wonder which one of you will be doing the same thing if I come back here in 10 or 15 years, if I'm still doing the same presentation. So let me jump off in terms of writing a business plan and what it really is about.
You know, entrepreneurship, which we teach here at the business school in a for-profit sense, it was very important to us that it not be considered a trait or a characteristic. In other words, sometimes you hear people say I'm a born- entrepreneur but if you're a born entrepreneur no one would pay us tuition to come to the business school right so we had to develop a process for learning about entrepreneurship and a definition so our definition is the pursuit of opportunity regardless of the resources you currently control when you think of a social enterprise it's a similar kind of situation you don't have resources under your control you want to start something but More akin to the social enterprise is it has to be pattern breaking. So to be an entrepreneur in the field of social entrepreneurship, you don't want to be just thinking about incremental, how do I make this process a little better? But it's what do I think about to actually create a new pattern in the area that I'm addressing.
Here are the elements of the business plan. Now, they didn't just come out of the. the air.
This is a product of many years of observing what makes for strong plans, what judges are going to be looking for. Now, judges in a business plan contest are often people who are funding social enterprise, whether they're for-profit or non-profit or a government function, it doesn't matter. The composition of the plans are the same. same.
And you may weight each of these elements differently as you develop your own plan, but you've got to make a pretty good case to eliminate any of these components because we are pretty committed to thinking that they are important. The first and most important is the definition of your problem. I can't tell you how many times we've seen plans where the presenter will assume that the problem is not the problem Assume that the people listening to the plan understand the problem in the same way as the person who's actually the social entrepreneur.
Spend enough time being clear about what is the problem. What's the scale? What causes it? Why is it there?
Often people want to jump right to the solution and give a very, very fast description. of what the problem is. Spend enough time and be specific.
Be specific about what the problem is and why it exists. Once you've described the problem, and test this by the way, when you do your business plan, test it not among people who already understand what the problem is, but you know, you all show up maybe for the content but I understand that students always show up when there's a free meal so buy your friends pizza invite them in and run by the presentation test it and see did you really understand problem I'm trying to solve? Do you understand why it exists?
And then you move to the opportunity because the flip side of every problem, as you well know, for every entrepreneur is the opportunity and that's what you're going to be focusing on. How do I really create an opportunity here to create value? First place to start in any... Social enterprise, whether you're a for-profit or a non-profit, is what's the mission?
Social enterprises are about creating social value. It may be that you want to create economic value. But the way we describe a social enterprise, even if it's a for-profit, is that its core function is to create value. is to create social value. So it's not ancillary, you know, because you could make a case that everything you do, I create a job, that's a social value.
But the core function there is not social. social value creation. So if you're in the social value track, in the social enterprise track, you want to make sure that is the key reason your enterprise exists. So start off with your mission statement. Many of them are impossibly boring and long.
Good mission statements, you know, this is what we call the four Ms. Memorable, manageable, measurable. and motivational. Just a couple of examples of a good, what we think are powerful mission statements.
I'm going to focus just on the last one, which is to educate leaders who make a difference in the world. Anyone know whose mission statement that is? Sorry?
Harvard Business School. Our dean starts every one of our meetings, or somewhere in the meeting, we say it. Most people know the the mission in this school.
And most people know it because it is, it's hard to measure, but it's certainly, we do try and measure it, but it is motivational and it's quite memorable. So I urge you to think about a mission statement that people can get their hands around rather rapidly. Once you have your mission statement, you articulated your problem, you've articulated an opportunity, you really want to discuss what is my theory of change.
How many people know what a theory of change is? Not too many. So in a social enterprise, your theory of change is, if we do this, then the result will be that. Now why do we care about that? Because it's easy to do almost anything addressing a social problem based on the mission.
So one of our missions here... One day all children in this country will have the opportunity to achieve an excellent education. How does that define my activities? The answer is it doesn't.
It allows me to do anything. Maybe a fine mission statement. The purpose of a theory of change is to force you to focus in on how we are going to achieve that mission in very specific terms.
One of the ways to think about that is looking at what we call the logic model, which is how do the inputs, what kind of inputs do I need? What kind of activities will we be doing? What kind of actions will we be taking? outputs, meaning how many people will we be affecting, how many books will we be publishing, how many people will visit our site.
That's the outputs. But the really important component are outcomes. What difference are we going to make with the people who engage with our activities? And then the impact.
And we'll talk about that in a bit of time. When you develop a theory of change, You really want to have it based on research, if at all possible. So it's very easy for you to come up with a theory of how you're going to solve homelessness, or how you're going to educate kids in India.
or whatever the social problem you're addressing is. But what's the validity behind it? Why should I invest in what you want to do because you believe?
this is a good solution to the problem. There's plenty of research out there. I cannot tell you how many business plans are presented without valid, in-depth research as to why our theory of change will actually work.
An example of a theory of change everyone's heard just about, I'm sure, in this room of Teach for America. Here's basically a form of their... mission statement but I want I wanted to just show you what their theory of change is, and I am going to read this.
Based on these beliefs, so they gave the beliefs as to why they think this theory of change would work. Our theory of change is that if the brightest college graduates agree to teach in high poverty schools for two years then, the students they teach will receive a high quality education now. And those who teach will become lifelong learners committed to social change. Notice how specific their theory of change is. They didn't say we're going to provide universal education, we're going to reduce the cost of education, we're going to create a pedagogy that will be effective.
They have a very specific approach. to what they're going to be doing. And that will help them focus. And focus is as critical in the nonprofit or social enterprise sector as it is in a for-profit. business.
So once you've done that, you really want to develop what's my business model? How am I going to go about, you know, actually doing what I say I want to do? And strategy is your set of activities that you're actually going to put together in order to implement your theory of change. If you look at this list, probably the first three should be out.
weighed over the next three. So who are your beneficiaries or your customers? Do you really know who they are? Do you really understand them? Why do you think they actually need your service and why do you think they'll actually pay for your service?
And go to the third one, what specifically does your program look like? Again, by the time you present this... And by the time you do your business plan, this is going to be really familiar.
You will have spent untold hours developing it. And you will be convinced that it's very obvious as to what your business model is, what your program looks like. But I've seen presentations. One springs to mind about a teacher development project where they were actually going to develop elements of good teaching. And.
And the presenters said to the judges, we're going to create an institute to train and develop teachers. The follow-up questions were all about what is an institute? What do you mean? How often is it going to meet?
Where is it going to be? Is it place-based? Is it virtual?
And if so, what is it going to look like? So you really want to make sure that it stands the test of people understanding. And again, you can easily test this with your peers, with your friends, with those who don't know your project. People are key.
Most venture capitalists They've heard all the ideas you can imagine. Same with donors. It's not that they're skeptical. It's that good ideas aren't worth that much. What is worth something?
What's worth something is your ability to deliver. Now, many of you, because you haven't been out, you know, starting companies or starting nonprofits, don't have a track record. So that means...
the hurdle for you is actually even higher. You have to be convincing that you are the right person to invest in. Most people who invest, even in a social enterprise, would rather invest in the top quality person and a mediocre idea than a really superb idea with mediocre people. So you've got to convince, you've got to be very convincing that you have what it takes to deliver on the promises that you're making. By the way, you don't have to know, in all of these elements, you don't have to be exhaustive, otherwise this would be a hundred page business plan.
We're not looking for that. So when we say, how might the team composition change over time? It's just as important to acknowledge that it might have to change over time as opposed to saying, we're going to replace Susan, who's the CFO, and Bob, who's the marketing director, as we get to X.
You don't need that level of specificity. What you do need is to... Recognize and acknowledge that things have to change as the organization grows and gets sophisticated. What's the mechanism for evaluating the team?
What are you going to do if team members don't live up? to your expectations. How are you going to deal with that? That conversation shows awareness to people that are judging you without your having to provide impossible and unknowable answers.
Context is critical. So What has been tried before? You know, people have come to my office time and again with the greatest idea, and they tell me why it's the greatest idea, except it's been tried before.
They didn't do the research. Do the research. What's worked?
Why is yours different? Why, if it's not so different, have others failed? What's going to make your idea successful, even though it's been tried before? My sense is that most great ideas have been around. Not necessarily with technology, but certainly in many of the social services.
So, you know, the fact that you may have the greatest job development program, you want to be able to... convince people why. Why is this different?
Why is it better? What is unique about my approach? And if it's tried before, why did others fail? That kind of knowledge is really an important component in building the kind of confidence that judges or whomever you are going to invest want to have.
You know, scaling, particularly if you're a non-profit. Scaling in the social sector doesn't necessarily mean growing your organization. In fact, the definition that we use for scaling is the measurable increase in impact based on the... of a practice, program, or process. The measurable increase in impact.
That doesn't mean that I'm going to build a large organization. Has anyone ever heard of Alcoholics Anonymous? I hope you haven't, but if you have... Anyone have any idea how large Alcoholics Anonymous is? You don't.
But if you would cite its impact, or Mothers Against Drunk Driving, a relatively small organization, but they act... other mechanisms for scaling impact, whether it's public policy or whether it's partnerships or whether it's actually embedding their programs in other organizations. So when you think of scaling impact, Scale, what people are interested in in social solutions, is the size of the problem and the size of the impact.
So if you can't make a measurable difference in the impact, people are probably going to be less interested in what you're offering. And when you think about scale, you really want to embed it in your plan. You may not have the answer as to what scale... will look like, but you want to have some ideas.
So we may be testing these two or three ways of increasing our impact, and we'll modify them as we go along, but you want to have some idea so that people know they want boldness. Everyone wants boldness. We want to solve social problems. We don't want to just have the same social problem around 20 years from today. And when you think about it, how...
How many social problems have we really been able to scale and really made a difference in? Not that many. People are thinking differently now. They want bold ideas against significant problems where you can make a significant difference.
You can measure at every stage of a social enterprise. You have to adjust your measurement for where you are. So no one expects that a startup is going to have a randomized, controlled test.
But they do expect you to have some ideas, or what are the key metrics I have to think about? And it's easy to talk about inputs and activities. and outputs, but remember what we said? What matters is impact. And impact, if you want to think about it as a definition, is what difference does it make in terms of the social problem with the existence of my enterprise?
Not today. but 10 years down the line, 15, 20 years down the line. So you don't want to come forth with a whole slew of indicators, particularly when you're a young organization, but you want to have a few. Because without them, without them, you don't have a real mechanism for learning. And people want you to have adaptability based on your learning.
And the way you learn is by having hard metrics that you can measure yourself against and improve based on the results. You know, every entrepreneur is a starry-eyed optimist. I've never met an entrepreneur who's pessimistic.
Everyone investing in entrepreneurs knows that. Having said that, you've got to be aware of the risks. There's nothing wrong with saying, here's what we see are the risks.
Here's the way we're thinking of addressing them. I wouldn't spend too much time on this, because you don't want people to be frightened away from your idea. But I'd spend enough time so that people really are aware, that you are aware, that you're not naive, that you know you're going to be meeting significant problems. barriers and that you have a sense as to how you're going to overcome these barriers. You know, at the business school you wouldn't expect that we would have to spend time talking about the financial plan.
But in reality, I've seen more plans than I can tell you with really scant financial information. Now, no one is going to believe your financial plan. I'll tell you that right now. No venture capitalist has ever seen a plan that actually is implemented one year later the way it's presented, or two, or three. And the further out you go, the less credible you are.
So why do it? It's the quality of your thinking. It's the awareness. It's the capability that you demonstrate in terms of the logic of how this financial plan is going to unfold. Make sure you put in what is the cash flow going to look like.
People talk about financial plans and try to get some specificity around it. We're going to go out and we're going to pitch some venture capitalists, or if we're a non-profit, we're going to go to foundations. That's powerful, right?
You could make it more powerful. How do you do that? Well, use a contact.
Go visit with a couple of venture capitalists. Say look, I'm not asking you for money, but what do you think of this idea? Or go visit some philanthropist and say look, I need your help. You could, as younger people who have ideas, who want to make a a difference, you can open doors. Take advantage of it.
What is the power of my saying I visited two foundations? They're very interested in this. They don't see the same kind of solution as opposed to we are going to visit foundations and raise money. So get your argument in your financial plan as powerful as you can make it. And if you've actually raised money, I guess that's even better.
People are interested not just in the front end. Is this a sustainable enterprise? Do you want to invest your money in an organization that you don't think is going to be around? Clearly no.
Think about yourself. One of the great ways for you to think about your financial plan is imagine, not that you're the seller, but you're the buyer. You're the investor.
And say to yourself, in good faith, would I put my $100,000 into this enterprise? And if so, what kind of guarantees do I need? And one of the key guarantees that you want, to the degree that it can be guaranteed, is that this is sustainable. And you better have a plan, even if it's only a rough plan, as to what's going to make it sustainable. And it better go way beyond what we know it will, or we hope it will, but have some data points.
And by the way, One of the things that you might want to embed in your plan, which we didn't say here, is you want to start, particularly in that scaling idea, with developing proof points. So you're not going from 0 to 100 miles an hour. You're going from 0 to 20 miles an hour, and stay there for a little bit of time. and then 40, and then 60, and then 80. So you want to learn along the way.
You want to prove along the way. You want to adapt along the way. We used to say I taught entrepreneurial management here at the business.
business school and the line that we still use, we started the course about 14 years ago, cash is king. And I don't care if you're running a non-profit or a for-profit and I don't care if you're selling automobiles or you're working on education. You don't have cash, you don't function.
It's as simple as that. So when you're thinking about your cash projections, you're thinking about your cash. sure you're including them in there. And again, express awareness. This is what a colleague of mine says, that the end objective for a social enterprise is best, best economical solidarity today.
I don't know if you like it, but I left it there. Here's some upcoming events that we're going to have that will hopefully help you move along this journey. And by the way, it is a fun journey. Writing a business plan is a lot of fun. You'll learn more than you can imagine about yourself and about the enterprise that you're trying to establish.
It gets a little less fun when you're trying to implement, but that's okay too. You have to have the right disposition. You have to know, believe in your plan, but don't believe so much that you don't think it's going to have to be material.
changed as you move to implementation. Regrettably, I have to run, but I have enough time if there's one key question. Does anyone have a key question? Your hand is up in the air, but you're on the line. I have a question.
I know, but it has to be key. It's a key question. Okay, go ahead. So that's all really great stuff to have in your business plan. Yeah.
And if you're making one and you want to do it more in depth on the... Yeah, you know, it's not the same for everyone. And the reason is, this is, you know, a lot.
So you can't get around the financials. You really want to know that. You don't need, you know, depending on your own project.
honest with yourself. So you know I wouldn't spend four pages on the risks you know but I would I would acknowledge them. I wouldn't necessarily spend ten pages on scalability but I'd spend a little bit more than I would on the risk. I'd really spend time on the social problem, why it's there, what makes you different, why you think your theory of change is going to be powerful, and the impact that you're going to have and the vision that you're articulating.
You know, investors, whether they're, even the ones who are just in it for the money, and that's not a social enterprise, they want a dream. They want to buy a dream. That's what they're buying.
They want the next Google if it's for profit, or they want the next Teach for America if it's a non-profit. So dream big and make sure you convey that dream with the kind of passion. And that's where I would spend a lot of my time, making sure that they understand why this dream has the potential to change the world.
What is the impact if things go wrong? the way we believe they will go 5, 10, 15 years out isn't that why you give away your money again put yourself in the shoes and look at all those elements and as I said at the very beginning they're not going to have equal weight and part of the challenge for you depending on your problem and depending on where you're addressing it is going to be how do you weight these in an impressive way and again test it you can ask people and say what are the big holes here after you get it it done? What should I include that I haven't?
So my parting words are good luck. Thank you for doing this because this is the way to change the world, you know, and you're all capable of doing it. And I look forward to hearing and reading about your great successes.
So thank you very much.