Social startupper: key questions to address

Getting them right before starting

As social entrepreneurship continues to gain popularity, more and more startups are emerging with the goal of making a positive impact on society. Having a strong desire to create change is surely remarkable, but starting an impact startup is no easy task. Social entrepreneurial journeys can indeed have several downsides including, at times, accidentally generating new social problems. Because of that, any social startupper needs to ensure he/she is constantly on the right track.

In this post, we’ll take a closer look at key questions that social startuppers should address before starting.

Social startupper: key questions to ask

As said, more and more people today seek to run successful businesses while changing the world for the better. In order to do that, we identified five key questions a social startupper should bear in mind when launching his/her business.

#1: What is the social problem that your startup aims to address?

To begin with, you need to have a clear understanding of the social issue that you aim to solve. Societal issues could range from lacking education to poverty, from unemployment to social isolation. If interested, we further discussed what complex social problems are in this article.

At this stage, it’s important not only to carefully focus a given social problem and research related outcomes, but especially to understand its root causes. By doing so, a social startupper is more likely to develop solutions able to drive real, positive impact. For instance, if your impact startup addresses homelessness, what you need to do is understanding why people become homeless in the first place. Is it because of a lack of affordable housing? Or is it due to mental health issues? Also, what are the most commonly diffused consequences? By understanding fundamental causes as well as main negative effects, a social entrepreneur may be better equipped to successfully tackle a multi-faceted societal problem right at its core.

Once the problem has been studied and comprehended, identify specific goals to achieve naturally follows. This includes defining long-term impacts and develop both the vision and the mission of a social startup. As impact-makers don’t aim for temporary fixes, it’s important to aspire to create long-term, lasting effects.

#2: Who are the beneficiaries of your startup?

Apart from the core problem, the decision-making process will driven by beneficiaries too. These are indeed the people or communities that your impact startup will be helping and that will be mostly affected by your interventions.

Identifying the beneficiaries is crucial for three reasons. First, it allows you to tailor your products or services to meet their specific needs. Second, it helps you identify touchpoints, channels and stakeholders that may drive them closer to your proposed solutions. Finally, it will serve you as an anchor for measuring the impact of your interventions.

Again, if your social startup aims to tackle homelessness, you’ll need to understand the specific challenges that homeless people face in their daily lives. How they live, what they do, where they stay, who they interact with. Through this discovery phase, you’ll be able to develop solutions that are tailored to the needs of those you target.

#3: What is your unique selling proposition (USP)?

Impact startups must have unique selling propositions (namely “USP”) setting them apart from other enterprises in the market. In other words, their products or services must be unique in a certain way. It could be because of the way they approach the social problem, or the technology they use, just to name few examples. Still, without a strong USP, no startup can differentiate itself from the competition, potentially leading to a lack of investors, customers and thus impact.

In our fictional case study, a USP could be itinerant mental health counseling or innovative products such as Sheltersuits. But also, it may relate to partnerships with local authorities and charities providing a network of shelters and food distribution channels for those in need.

By thinking and designing beforehand a strong USP, social startuppers can make their interventions stand out in a crowded market and drive real, positive change.

#4: What is your revenue model?

Sure, social startups are impact-driven first, but they still need to find a way to be financially sustainable to continue operating. That’s why it’s important to develop a revenue model that can systematically generate income and allow to meet business goals.

Business and revenues modeling are at the very core of what Social Business Design does. In this page, you can find many examples of how social enterprises and startups mix grants, donations and commercial sales to remain viable in the long term while driving impact. If you have more case studies to suggest, we’d be happy to get in touch with you

#5: How will you measure your impact?

Last but not least: impact startuppers must not forget that measuring impact is crucial for their enterprises’ success and survival. Impact assessment helps indeed practitioners to evaluate the effectiveness of their interventions and determine whether they making progress towards achieving their missions and solving targeted societal problems.

Defining your impact metrics early on will help you track progresses, achievements and make data-driven decisions. For instance, social startups addressing homelessness may choose to keep track of indicators focusing on short-term outputs (i.e. # of homeless/day who receive food or medical assistance) as well as medium to long-term outcomes (i.e. # of homeless who found permanent shelter or employment). It all depends on the interventions you offer and the ultimate impact you aim to achieve.

Theory of Change is probably the most known and diffused framework to design and visualize a pathway of change and choose impact metrics accordingly. If interested to learn more, check our article covering this topic.

Conclusion

Starting a social startup is an exciting and rewarding journey, yet it requires a lot of analysis, planning, and strategic thinking.

By addressing upfront the five key questions outlined in this article, we believe social startuppers can be more likely to develop a clear social mission and identify ways to effectively serve their beneficiaries while running financially viable businesses.

Remember: the road to social entrepreneurship is filled with challenges. However, dedication, perseverance and analytical planning can all make a difference towards creating lasting positive change in society.

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Calculating Pre-money and Post-money valuations for impact startups

Valuation methods and tools

Startup valuation is a fundamental step one should consider before carrying on any fundraising. Whether you’re a profit-oriented startupper, or an impact-driven one, startup valuation is key for approaching potential investors the right way.

As a matter of fact, startup valuation is the process of quantifying the value of your startup (“how much it’s worth“) and, from there, being able to determine the equity shares you have to – or want to – give to investors in exchange for their money.

But how to evaluate your startup? In this article, we’ll see the hows of calculating pre-money and post-money valuations for impact startups, as well as couple valuation methods used by many. So, without further ado, let’s begin!

First, what do we mean by “startup valuation”?

At the early stages of your impact startup, the company is likely to have little value. However, the more milestones it accomplishes (in terms of traction, product development, etc.) the higher its value will be.

To expand even further your business and scale your impact, it’s likely you’ll need to raise extra funds at some point. And that is the time people will ask for your “startup valuation”. While dealing and negotiating with investors, you may often hear two different versions of this concept: “pre-money valuation” and “post-money valuation“.

On one hand, pre-money valuation is the value of a startup before a new equity investment. On the other one, post-money valuation is the value of the company after having considered new funds coming from investors. If we want to put it into a concise, easy-to-remember equation:

Post-money valuation = Pre-money valuation + investment

As you may guess, post-money valuation is higher than pre-money, since it adds new investments flowing into the startup. Furthermore, remember that neither valuations can present a negative value, as it’s impossible for a startup to be worth less than zero.

Most common startup valuation methods

There’s no fixed formula for estimating startup valuations, but rather plenty of methods to choose among. Yet, regardless of the valuation method you use – we’ll cover couple of the most common ones shortly – there is one golden rule for you to always keep in mind: your impact startup is worth whatever you and investors agree it’s worth.

In fact, investors usually aim for lower valuations, which result in higher shares in exchange for the funds they may be willing to invest. Conversely you, as founder, will seek higher valuations to avoid diluting and giving up too much equity. As a consequence, negotiating (sometimes even forcefully) a reasonable halfway point will be needed.

Although no valuation method will spare you from spending time negotiating with investors, we’ll now introduce two of the most well-known frameworks used by startuppers, business angels as well as VCs. The Berkus Method and the VC Valuation Method. Let’s briefly check them out in the next section!

Method #1: Berkus Method

Developed by Dave Berkus in the early 90s, the Berkus Method is typically used to define the valuation of early-stage startups, including pre-revenue ones. It’s comprised of 5 different value drivers, which represents core areas for startup survival and growth: 

• Management team (quality and composition)

• Soundness of value proposition and business model

• Prototype or MVP already on the market

• Partnerships and strategic relationships

• Business traction and existing sales

Each area usually gets assigned a value up to $500K, for a maximum pre-money valuation of $2.5M. However, depending on the industry or geographical region, the theoretical maximum may be changed.

Overall, Berkus Method is a quick, straightforward, easily-adjustable model, that considers qualitative aspects of your (even early-stage) impact startup. Still, the flip side is that it provides rough valuation estimates and doesn’t take into account growth nor financial projections.

[ If you want to understand more about this valuation method, check this video by Dave Berkus himself! ]

Method #2: VC Valuation Method

The second framework we present is the VC Valuation Method. Here, the core idea is to derive the post-money valuation of an impact startup (and, from there, its pre-money) based on the expected ROI sought by those angel investors or venture capitalists you are in negotiation with. Unlike Berkus, calculations are based on long-term assumptions and projections, rather than past accomplishments or ongoing ones.

According to this method:

Post-Money Valuation (Pre-Money Valuation + Investment) =

Exit Value (in 5 to 7 years) / Investor Expected ROI Multiple

with:

Exit Value = Exit Multiple (based on industry trends) * Exit Year Revenue

As you see, this method combines together several financial assumptions, ignoring factors such as traction or founder experience. Also, it strongly relies on highly uncertain hypothesis, such as the exit year revenue or the exit multiple (which is often replaced by Price / Earnings multiples .. but we won’t go through that now!). Because of that, the VC Valuation Method can be a delicate framework to use for some, but definitely one to experiment with in order to better understand the VC mindset.

[ If you are interested in learning more about this valuation method, we suggest checking out this article by SharpSheets. ]

Truth to be told, there are plenty more methods startup founders can get acquainted with. Discounted Cash Flow, Risk Mitigation, Scorecard, Cost-to-Duplicate.. and the list goes on and on! Some focus on current results and milestones, some on future ones to achieve. Again, as said before, we recommend experimenting and combining several ones in order to find solid valuation ranges that may satisfy both you and the investors.

Calculating pre-money and post-money for impact startups: a tool for you!

In order to help you more easily negotiate with potential investors, we developed a friendly calculator to determine pre-money and post-money valuations for your impact startup.

Please be aware that the tool doesn’t focus on the reasons behind a given valuation, but rather it does simple, multi-directional math, based on different inputs.

Interested in adding our calculator to your toolbox? If so, fill in the form below

PRE-MONEY & POST-MONEY VALUATION FREE CALCULATOR!

As you’ll see, the tool contains five different tabs.

The first one is a template containing standard formulas to get your numbers right. By providing two inputs only (investment and desired equity), the tool will automatically calculate your pre-money and post-money valuation, allowing you to run this process easily and smoothly.

The second tab shows you couple of examples to better understand how the math actually works. For instance, let’s imagine a startup accelerator decides to invest $100.000 for a 6% stake in your company. What would your valuation be? The calculator will tell you that, according to the potential investor, your startup before the investment is roughly worth $1.5M (“pre-money valuation”) and will be worth $1.6M afterwards (“post-money valuation”). Do you think it’s a fair valuation? Or you think it’s wrong? Well’, up to you to negotiate that, but at least you now have a quick tool for doing your math!

In the third tab, you’ll then find a comparison checker that will help you determine which out of multiple investment scenarios provides your startup with the higher valuations. As founder, you probably seek higher valuations for your impact startup. This tab will tell you which scenario is more convenient for you.

And finally, the last two tabs include templates to estimate pre-money and post-money valuations using the two methods discussed before, Berkus and VC.

Conclusion

In this article, we began exploring the notion of “startup valuation“.

As seen, the process of calculating pre-money and post-money valuation for impact startups is key for any social entrepreneur eager to raise funds for its socially-oriented projects. Startuppers can use several methods for this purpose, including the Berkus Method and VC Method, briefly discussed above.

Whichever method or tool (including ours, hopefully ) you’ll choose to use for startup valuation, keep in mind that the true value of a company lies at the intersections of potential investors’ and founders’ believes. Because of that, we suggest to avoid head-on collisions and crashes with investors, but rather negotiate reasonable, fair startup valuation ranges that can represent a win-win deal for you both!

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RecyclePoints Business Model

Waste recycling meets social impact

Social Impact Mission

Truth to be told, RecyclePoints impact mission relates to both “environmental” and “social” dimensions. On one hand, the firm aims to reduce incorrect waste disposal and give new life to recyclables, at least on a nation-wide scale. On the other hand, it promotes financial inclusion, particularly for unbanked demography (i.e. waste pickers). So far, RecyclePoints managed to recover roughly 2000+ tonnes/year of waste and supported over 200 waste-pickers.

Core Interventions, Beneficiaries, Clients

We can split RecyclePoints into different categories of interventions: (I) incentive-based recycling programs, (II) recycled raw materials and (III) additional waste-related services.

Within the first category (I), the firm offers diverse solutions, including:

1. iRecycle Network, targeted at households;
2. WastePicker Initiative, targeted at individuals;
3. Schools Recycling, targeted at schools and academic institutions;
4. Corporate Recycling, targeted at companies.

As seen, the enterprise engages with a variety of very diverse targets. Here, households, individuals and schools surely are its core beneficiaries. Conversely, large companies (joining the Corporate Recycling programs) and manufacturing/recycling plants (purchasing waste-related services and/or recycled raw materials) are RecyclePoints’ main clients.

Value For Beneficiaries

As you may guess, value creation radically changes depending on the target addressed. For instance, in exchange for the recyclables they collect, individuals and waste-pickers receive cash rewards. Not just economic gain, but also empowerment to later become micro-entrepreneurs. For low-income households and small-shop owners, iRecycle Network offers support in waste disposal and accessibility to (otherwise too expensive) household items. Finally, for school students RecyclePoints provides teaching and training needed to become environmentally responsible citizens.

Value For Clients

We previously mentioned the programs and services targeted at companies. But what’s in it for them? As most CSR-related initiatives, this program provides indeed organizations with a chance to fulfill their philanthropic missions, to reduce their environmental footprint and to showcase themselves as environmentally responsible entities. And the same principle goes for manufacturing plants purchasing reliable, secondary raw materials for production.

Key Activities + Key Resources

Given the complexity of RecyclePoints model, there is a wide range of activities and resources involved.

To begin with, waste collection allows RecyclePoints to haul materials to their Hubs. Initially it was conducted as door-to-door, but then the firm reduced the pick-up distances and introduced more drop-off points to reduce the economics of logistics. Beside that, sorting and shredding/baling recyclables are other crucial steps to sell the materials to manufacturing companies and recycling plants. Lastly, we could also add community engagement as critical to ensure comprehension and participation to the different recycling programs.

Let’s now look at strategic resources. As first, we cannot forget to mention the kiosks (local recyclable waste drop-off points) and CoSoHubs (community-based collection and sorting hubs). Also, database, IOT systems and phone app help the company coordinate pick-ups from different points around the city and staying in touch with the community. Finally, direct/indirect staff (including the so-called “waste-busters“) make all the magic work.

Key Partners

In order to effectively build a sector for waste recycling in Nigeria, building the right partnerships immediately became crucial. Thus, among RecyclePoints’ key partners we cannot forget to mention Recyclers Association of Nigeria, through which the company was able to drive the conversation amongst the various (public and private) stakeholders. Also, the firm developed its WastePickers program – including its cash rewards – thanks to world bank DFID joint venture GEMS4 project. Finally, other key partners include local authorities, Tony Elumelu Foundation and Mastercard Foundation.

Cost Structure + Revenue Engines

Given all the details discussed above, it gets easier to break down RecyclePoints’ cost structure, mostly comprised of personnel, logistics, IT development and operations. In terms of revenue model, the company has three main revenue engines. The first one is represented by direct sales of processed, recycled raw materials. The second one includes fees/sponsorships paid by those companies interested in joining the Corporate Recycling program for CSR. Finally, RecyclePoints sells extra waste-related services (i.e. consultations, training, waste audit) to organizations and public institutions.

Conclusion

As discussed, RecyclePoints is a Nigerian circular economy development social enterprise. The company leverages recyclable waste as a social currency to promote financial inclusion, foster social welfare and facilitate environmental sustainability.

Through its circular, multisided business model, RecyclePoints is changing indeed the way communities in Nigeria dispose their waste, leading to increased awareness, reduced environmental footprint and improved access to financial inclusion for low-income individuals.

Thanks to a combination of different incentive-based recycling programs, the company collects, stores and processes recyclables, selling them to large companies as input materials for production. This revenue stream, together with corporate sponsorships and additional waste-related services provide RecyclePoints with a robust revenue structure.

So, next time someone tells you that circular economy is not viable nor actionable, tell him/her to give RecyclePoints’ founder Chioma Ukonu a call!

About the Author

Marco Cornetto

Hi, there!

I’m Marco, an Italian business practitioner with previous study and work experiences across Australia, Netherlands, Spain and Vietnam. Having a background in economics and business management, since 2018 I’m happy to support social entrepreneurs and impact startuppers refine their businesses and scale social impact.

At Social Business Design, I mostly write about business design, financial modeling and growth hacking, sharing useful tools and insights gathered during 5+ years of on-field experiences.

Apart from talking about social business, I love hiking, reading, eating Asian food and taking pictures while I’m traveling. If interested, feel free to get in touch with me through my channels!

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• WordPress

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Proximity Designs business model

Helping rural families in Myanmar

Social Impact Mission

To begin with, what is the social change that Proximity Designs aims to foster and magnify? Just like we previously discussed, the firm aims to increase incomes of Burmese smallholders and supports them moving out of poverty. According to its research, thanks to its products/services Proximity manages indeed to provide farmers with an average annual income increase of 30%. Astonishing percentage, right?

Beneficiaries/Customers

As said before, Proximity sells directly to its beneficiaries. Therefore, low-income, farmers, smallholders and rural families are also Proximity main customers. In particular, the company has customers living in regions such as Lowe Myanmas, Ayeyarwady Delta, Lower Myanmar and the Shan hills.

Core Interventions + Value for Beneficiaries/Customers

Products and services sold by Proximity Designs can follow in 3 main categories: farm technologies, agronomy services and finance solutions. Obviously, each has its own value proposition.

Let’s start with farm technologies. Proximity developed a wide array of agricultural products and solutions. Water sprays, pumps, automated watering-can-style irrigation systems – just to name a few. If considered as a whole, this product line creates value to its target in several ways. For instance, it reduces labor time (and costs) required to haul water from the well to the fields. Also, it increases yields, boosting productivity and sustainability of farmlands. Ultimately, products are practical and affordable, unlike expensive, inaccessible alternatives.

When it comes to agronomy services, the ultimate intention is to provide vital agronomy knowledge to farmers. In order to do that, Proximity runs different programs to share best practices and new farming techniques. Agronomy services may thus include rice seed selection, fertilizer management, as well as soil health diagnostic service. Once again, all these services contribute expanding smallholders’ agronomy knowledge, improving yields and reducing risks of losing crops.

Finally, finance solutions are meant to help rural families get access to the capital. As a matter of fact, these part of the population is usually unable to access financing options through traditional channels. Eventually, these people end up taking out loans from informal moneylenders. In light of that, Proximity Designs decided to “bring finance to the farms“, creating accessible, low-interest loan products that can adjust to each farmer’s necessities. In 2021, the loan portfolio is estimated for approximately $77 million.

Key Activities + Key Resources

To successfully deliver products and services, Proximity handles at least 3 main activities. First is product and service design. As a matter of fact, the firm strongly believes in the importance of co-designing with farmers and building/testing prototypes with them. Along time, this approach lead to setting up “Proximity Labs“, a multidisciplinary team specifically dedicated to product/service design.

Secondly, there’s manufacturing. In fact, Proximity produces and manufactures all its products locally, employing Burmese people. Last but not least, distribution. When the company first started, it sold its water pumps through agro-dealers working in small towns near active-trade spots. Eventually, Proximity created its own sales force to directly and more easily reach out to rural people.

All things considered, team/personnel (made of engineers, designers, ethnographers and agronomists), core competence and methodologies (user research, product/service design, rapid prototyping), as well as the local network and philanthropic capital should be considered as Proximity’s most strategic resources.

Key Partners + Channels

Truth to be told, financial sustainability wouldn’t be possible without key partners providing donations and grants. Because of that, mission-aligned, impact investors are not the only key partners for Proximity. Among such entities, we cannot forget to mention development banks (i.e. FMO), corporations (i.e. Autodesk), philanthropic foundations (i.e. Skoll) and, finally, local authorities/governments.

Now it’s time to look at the main channels used to reach out to the public. Apart from publications and minor events organized alongside some of the key partners we just quoted, the company uses four channels to distribute and sell its products and services. 1) Mobile/online (i.e. chatbot for agronomy services delivery), 2) Agro-dealers, 3) Network of village agents and 4) Direct field staff.

Cost Structure + Revenue Engines

When it comes to the revenue model, Proximity has three main revenue engines. The first one is direct sales of products and services (including rent-to-own programs). The second one includes principal fees and interest incomes paid by farmers in exchange for loan solutions. Third and last engine, the aforementioned grants and donations, counting for roughly 40% of the firm’s overall revenues as of December 2020. Thanks to all these income streams, the company is able to cover maintain its cost structure, mostly consisting in costs of goods sold, personnel (salaries and wages), contract service expenses and allocated shared service centre expenses. As of today, it seems that the firm will use its surplus in training and upskilling the staff through a project called “Proximity School”. 

Conclusion

Since 2004, Proximity Designs is tackling rural poverty and helping Burmese increasing their incomes.

As a matter of fact, thanks to a combination of philanthropic capital and earned revenues, the firm manufactures, distributes and sells low-cost, affordable agricultural products and solutions to local smallholders. Thanks to its propositions, the company manages to create solid value for its target in different ways. Improved agronomy knowledge, affordability, reduced labor time and costs, enhanced yields are only few aspects of what’s in it for farmers using Proximity products and services.

For years, the firm has been featured in the news for its praiseworthy results (over 900,000 farm families reached from more than 10,000 villages). Yet, we believe what makes Proximity truly unique is the human-centered approach its team constantly adopts. Going to the field and designing effective solutions for and with beneficiaries in order to maximize social benefit…That is the true power of proximity!

About the Author

Marco Cornetto

Hi, there!

I’m Marco, an Italian business practitioner with previous study and work experiences across Australia, Netherlands, Spain and Vietnam. Having a background in economics and business management, since 2018 I’m happy to support social entrepreneurs and impact startuppers refine their businesses and scale social impact.

At Social Business Design, I mostly write about business design, financial modeling and growth hacking, sharing useful tools and insights gathered during 5+ years of on-field experiences.

Apart from talking about social business, I love hiking, reading, eating Asian food and taking pictures while I’m traveling. If interested, feel free to get in touch with me through my channels!

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• WordPress

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Sanergy Business Model

Sustainable sanitation in Kenya

Social Impact Mission

As discussed in a previous article, a social enterprise’s goal is to solve a certain social issue. In this specific case, Sanergy primary mission is to make hygienic sanitation accessible and affordable in urban slums and impoverished areas in Kenya. But the firm also has a second higher goal: fostering sustainable agricultural production in the country.

Core interventions

How does Sanergy turn its higher causes into practical, tangible interventions? First, the company created a sustainable sanitation cycle, built through a franchise network of “Fresh Life Toilets” as well as a set of support services (provided to each franchisee). Thanks to this cycle, the company addresses the sanitation matter. Conversely, byproducts allow the company to meet the demand for farm inputs and to support agricultural production.

Beneficiaries + Value for beneficiaries

As a rule of thumb, “beneficiaries” are those people who are mostly affected and harmed by a certain social problem. Here, the same logic applies. As a matter of fact, Sanergy’s main beneficiaries are the urban poor: marginalized families and individuals, often living in informal settlements across Kenyan cities. For them, FLTs are tremendous sources of value, as these toilets ensure improved and more affordable (sometimes even free) access to clean sanitation facilities, as well as reduced chances of contracting diseases.

Customers + Value for customers

Encrypting Sanergy business model wasn’t an easy task. Yet, we dag into it for a while and came to a conclusion. We believe the firm has (at least) 2 customer segments.

On one side you have franchisees, usually micro-entrepreneurs or business partners installing FLTs in public spaces/areas, schools or residential compounds. What’s in it for them is a better alternative to existing sanitation solutions, as well as a potential additional source of income (when FLTs are turned into pay-per-use toilets).

On the other side you have farmers and horticultural companies. Byproducts produced by Sanergy are indeed meant for them. Such products provide this target with “reliable, affordable, high quality farm inputs” able to increase animal weight and crop yields.

Key Activities + Key Resources

When it comes to Sanergy’s key activities, we can take a closer look directly at the company website. Here, the firm describes its approach as consisting in four main activities: building toilets, supporting (and expanding) the franchise network, collecting waste and treating/converting it into agricultural end-products. All this is made possible thanks to key resources such as staff, facilities and machines, (access to) capital and brand reputation.

Key Partners

Now, what about partners? Among the extensive network that supports Sanergy, we narrowed it down and identified few fundamental partners. To begin with, foundations and organizations like Acumen invested patient capital in the firm and keep providing strategic counseling and support. Furthermore, local authorities and governments work together with Sanergy and secures land access for FLTs, supportive policies, and pretty much everything that is needed to scale the impact. Finally, the firm also partners with Kiva to ensure micro-entrepreneurs interested in joining the franchise network with accessible credit.

Cost Structure + Revenue Engines

Last but not least: viability. In order to assess Sanergy under a financial perspective, we have to understand its costs as well as its sources of revenue. Labor costs is surely the main cost driver for the company, as Sanergy strongly relies on personnel to rollout its different services (i.e. waste collection, transportation, etc.). Moreover, we can include facilities and business development (growing the franchise network + promoting/selling byproducts) as additional major costs.

In terms of income, we identified three main revenue engines used by Sanergy. These are: 1) franchising fees; 2) sales of animal feed/fertilizers; 3) external funding (subsidies and private donations). Surplus could not be considered and discussed at the time we are writing the article.

Conclusion

Sanergy is comprised of a suite of nonprofit and for-profit branches, working as one in Kenyan poorest areas to ensure accessible, affordable hygienic sanitation to all. In this article, we considered this suite as a unique entity and analyzed what kind of value is provided the different parties involved.

In fact, thanks to its “franchise model“, Sanergy first distributes and services its low-cost, high-quality sanitation units in different locations. After that, the company empties and collects once/twice a day excreta. From there, the waste is then transported to a specific facilities, where finally it gets turned into organic fertilizer and animal feed. Although Sanergy is on its way to become fully financially sustainable, its sanitation service chain can already build upon franchise fees, sales and external funding/donations.

In conclusion, we believe Sanergy is a great example of how multisided business models might help companies create and deliver diverse value propositions to different segments. As co-founder David Auerbach once said, “we believe it’s possible turning sh*t into gold while fostering positive change“. We agree with this fascinating idea.. what about you?

About the Author

Marco Cornetto

Hi, there!

I’m Marco, an Italian business practitioner with previous study and work experiences across Australia, Netherlands, Spain and Vietnam. Having a background in economics and business management, since 2018 I’m happy to support social entrepreneurs and impact startuppers refine their businesses and scale social impact.

At Social Business Design, I mostly write about business design, financial modeling and growth hacking, sharing useful tools and insights gathered during 5+ years of on-field experiences.

Apart from talking about social business, I love hiking, reading, eating Asian food and taking pictures while I’m traveling. If interested, feel free to get in touch with me through my channels!

• LinkedIn
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• WordPress

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Specialisterne Business Model

A new wave of IT specialists

Social Impact Mission

As seen at the beginning of the article, Specialisterne first started to promote its vision of diversity inclusion. Torkhil wanted to create a world with autistic people having equal opportunities in the labor market. So that’s exactly the impact mission he had in mind since the beginning: integrating people with ASD in the workforce.

Beneficiaries + Value for Beneficiaries

On Specialisterne website, the company states that they “(..) see past the diagnosis and focus instead of the special skill-set that often comes hand-in-hand with such ASD diagnosis: attention to detail, strong logical and analytical skills, an above-average ability to concentrate for long periods of time, diligence and zero-fault tolerance“. So, it’s clear who the beneficiaries are and what kind of value they bring to Specialisterne. But what’s in it for them?

After the training with Specialisterne, autistic people encounter life-changing opportunities. As a matter of fact, they further develop their latent talents, then having the chance to get employed in professional working environments. This leads to economic stability as well as social inclusion. Moreover, such virtuous initiative contributes to reducing stigma and discrimination experienced by autistic people.

Customers + Value for Customers

What about customers? Specialisterne serves international clients like Microsoft, Oracle, TDC A/S, Grundfos and KMD. So, pretty much all tech-oriented companies can, to some extent, find Specialisterne offering right on spot. In return, they don’t only get premium IT consulting and support services, but also the awareness of taking part to a higher cause. Let’s not call it with the cold name of Corporate Social Responsibility this time

Core Interventions

We still have to reveal details about Specialisterne core interventions. The company decided to group the IT services offered into three main categories: 1) Software Management; 2) Testing and Registration; 3) Data Logistic. All these services actually leverage the so-called “Autism Advantage” as unique selling point. In fact, such services consist in high-focus-high-repetition tasks, in whom autistic people usually outperform other kinds of employees.

Key Activities + Channels

No matter where Specialisterne operates, the core structure of its activities remains pretty much always the same. First, candidates (people with ASD diagnoses) undergo a five-months training program sponsored by Specialisterne Foundation. By dealing with different exercises and work tasks, candidates bring to light their skillset and talents. At the same time, they acquire new technical competences and refine social and work skills. To some extent, such programs (together with publications on international journals), also represent Specialisterne main channels.

Once successfully trained and employed, autistic people are assigned to mentors who continue supporting them all along the journey. Because of that, we believe that also tutoring and mentorship are key activities at Specialisterne. And finally, delivering business services to the clients is the moment when employees with ASD meet the market and unleash their abilities.

Key Resources + Key Partners & Stakeholders

In terms of resources, Specialisterne’s success is mostly defined by human capital (autistic people’s skills), brand reputation and international network. Such network also includes Specialisterne most strategic partners, such as LEGO Foundation and the Danish Ministry of Children and Education. These two institutions are indeed some of the main sponsors for Specialisterne’ training programs. Apart from them, Ashoka, UN, Brunel Foundation are other fundamental collaborations for the organization.

Cost Structure + Revenues + Surplus

When it comes to the economic structure, let’s just remember that Specialisterne branches are owned by Specialisterne Foundation. Each branch is self-sustainable, with revenues mostly coming from direct sales of consultancy services and, at times, from small grants. Such revenues cover staff costs (both autistic people and tutors) and consultancy fees to the Foundation.

As a matter of fact, Specialisterne Foundation surely receives consistent donations and takes part to projects funded by EU. Nonetheless, it also sells consulting services to newly established Specialisterne branches to replicate its model. Such multiple business structure helps clearly distinguishing between for-profit social business activities and non-profit advocacy initiatives.

Conclusion

Since 2004, Specialisterne works to ensure inclusion of ASD people in the labor market. Along time, its reach and depth of impact helped breaking barriers and reduced stigmas around people with autism.

Thanks to its unique proposition, Specialisterne trains autistic people and leverages their skills to sell IT consulting services to international clients. While maintaining core operations financially sustainable, this conglomerate has been able to replicate its model in more than 13 countries. So, to conclude, it’s really no coincidence that Specialisterne is considered one of the most successful cases of social innovation around the globe.

As Thorkil once told during our first interview, it’s all about “bringing humanity back to management and managerial practices”. Well.. they surely did it!

About the Author

Marco Cornetto

Hi, there!

I’m Marco, an Italian business practitioner with previous study and work experiences across Australia, Netherlands, Spain and Vietnam. Having a background in economics and business management, since 2018 I’m happy to support social entrepreneurs and impact startuppers refine their businesses and scale social impact.

At Social Business Design, I mostly write about business design, financial modeling and growth hacking, sharing useful tools and insights gathered during 5+ years of on-field experiences.

Apart from talking about social business, I love hiking, reading, eating Asian food and taking pictures while I’m traveling. If interested, feel free to get in touch with me through my channels!

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• WordPress

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StartSomeGood Business Model

Crowdfunding for a cause

Social Impact Mission

StartSomeGood is all about empowering social entrepreneurs and supporting them to raise funds. As we said at the beginning of this article, the platform was launched at a time during which crowdfunding was mainly conceived for profit-oriented initiatives and philanthropists were barely giving money to radically new social projects. Given that, StartSomeGood’s goal was (and still is) to allow changemakers to raise funds, while building and growing communities able to support them along their journeys.

Beneficiaries

StartSomeGood business model is basically a multi-party arrangement. So, there are at least three main parties here involved: StartSomeGood, donors and social entrepreneurs. Since the platform was created to support the latter ones raising funds, we could say that social entrepreneurs were at the core of the whole initiative.

Nevertheless, we actually believe that StartSomeGood’s reach of impact doesn’t really stop there. In fact, every social project funded through the platform has its own beneficiaries. Kids, migrants, unprivileged communities.. just to name a few. Due to that, those targets should be considered as StartSomeGood’s beneficiaries too. They are the ones ultimately benefiting from every social project that gets funded, aren’t they?

Core interventions + Channels

StartSomeGood’s core intervention is, obviously, the crowdfunding platform itself. The way a crowdfunding platform usually works is actually quite easy to explain.

First, the entrepreneur submits an application about a project or idea that he/she wants to raise funds for. Secondly, the platform processes the proposal, in order to understand if it fits certain requirements or not. In this specific case, StartSomeGood’s criteria strictly relate to social impact and social change. Finally, if the project gets approved, then it’s time to set up a crowdfunding campaign and post it on the platform, in order to attract backers and donors. StartSomeGood does exactly the same.

Other nice interventions promoted by the company certainly are educational contents and services. As a matter of fact, StartSomeGood launched several online courses (i.e. Crowdfunding Academy) and coaching programs (i.e. Good Hustle) to support changemakers in their entrepreneurial journeys. Some of these contents are provided for free, some don’t, but they all contribute to fulfill the company’s overall mission.

Finally, the platform, together with social media and offline events represent StartSomeGood’s main channels.

Customers

StartSomeGood charges a 5% service fee each time a social entrepreneur achieves his fundraising goals through the platform. So, at a first glance, one might consider entrepreneurs as the customer segment. Nevertheless, money initially “flows” from donors and supporters. Without them, no initiative gets funded. Because of that, donors are the ones that should be considered as SSG’s real customers.

Value for Beneficiaries + Value for Customers

On one hand, social entrepreneurs mainly receive two types of benefits: financial benefits (namely, receiving funds) and social benefits (such as connecting with supportive communities). Besides, visibility and technical support are secondary key components of StartSomeGood’s offer, since they allow entrepreneurs to reach out to potential supporters and partners quickly and effectively.

On the other hand, donors connect with changemakers in order to contribute to the greater good. In fact, whether they have a direct relationship with the entrepreneur’s cause or not, donating makes them feel good. That’s why they give money in the first place: to feel empowered and help achieve positive social impact.

Key Activities + Key Resources

In order to run a successful online business as such, StartSomeGood clearly has to constantly focus on maintaining and optimizing its platform. Additionally, other key activities to take into account are: coaching and supporting entrepreneurs, as well as business development tasks (i.e. marketing, corporate partnership management, etc.).

And what about the company’s key resources? Well, once again, platform and website surely come first, since StartSomeGood business model revolves just around them. Secondly, team skills and expertise are fundamental components contributing to the company’s overall success. CEO and founder Tom Dawkins is in fact one of the leading experts on the topic of social entrepreneurship, whereas its team strongly posses crowdfunding, business development and IT skills to keep the project up and (smoothly) running. Lastly, StartSomeGood brand is an extremely valuable resource in itself. With over $12ML dollars raised, 1000+ projects funded and an astonishing 96% satisfaction rate, this enterprise offers one of the best performing crowdfunding platforms around the world.

Key Partners & Stakeholders

StartSomeGood’s list of partners could get quite long, especially because of its widely-extended network. Yet, some of them are more relevant than others. For instance, Stripe is definitely one of them. Stripe is indeed the main technical partner that makes every pledge and economic transaction possible, in exchange for a 2.9% charge (applied only on successful campaigns). Also, foundations and corporate partners such as ING, The Ian Potter Foundation and English Family Foundation often match the funds raised through the platform and support grassroots innovation by doing so.

Cost Structure + Revenue Engines + Surplus

In the previous paragraphs we already mentioned how StartSomeGood captures value from its interventions. The company uses a crowdfunding model called “all-or-nothing“, which consists in processing pledges only if and once the campaign hits its fundraising targets. Campaigns that manage to successfully achieve their funding goals get then charged 5% service fees by StartSomeGood: these fees represent the company’s primary revenue engine. At the same time, the company leverages its expertise in crowdfunding to craft and sell online courses and coaching programs that ensure additional revenues.

All these income streams help StartSomeGood cover its costs, mainly consisting in staff and technology, as well as Stripe’s payment processing fees.

Conclusion

Over the course of its first decade, StartSomeGood successfully raised more than $12ML and got 1095 projects funded. With offices based in Australia and USA, the company had a tremendous reach of impact, as its beneficiaries come from both developed and developing countries.

With the highest success rate (53%) in the crowdfunding industry, StartSomeGood provides not just funding opportunities to changemakers of all kinds, but also counseling, capacity-building and coaching services. In conclusion, after having turned into a landmark for the fundraising/crowdfunding sector, now this company is on its way to foster worldwide positive change, doing this while remaining bold and financially sustainable.

About the Author

Marco Cornetto

Hi, there!

I’m Marco, an Italian business practitioner with previous study and work experiences across Australia, Netherlands, Spain and Vietnam. Having a background in economics and business management, since 2018 I’m happy to support social entrepreneurs and impact startuppers refine their businesses and scale social impact.

At Social Business Design, I mostly write about business design, financial modeling and growth hacking, sharing useful tools and insights gathered during 5+ years of on-field experiences.

Apart from talking about social business, I love hiking, reading, eating Asian food and taking pictures while I’m traveling. If interested, feel free to get in touch with me through my channels!

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BioLite Business Model

Clean energy for off-grid households

Social Impact Mission

We said it first, we will say it again: BioLite didn’t start as a socially-oriented project. In fact, the shift kind of happened casually along the way. Nevertheless, the company is widely known today for its main social mission: bringing safe and affordable energy solutions (i.e. HomeStove), as opposite to dangerous alternatives like smoky indoor fires.

At the same time, since open fires are responsible for 25% of global black carbon emissions, BioLite rightfully claims to also fulfill an environmental mission: reducing greenhouse gas emissions.

Beneficiaries + Customers

When it comes to BioLite, we must admit that the line between the so-called “beneficiaries” and “customers” gets quite thin. In a way, BioLite’s customers truly are both eco-conscious, outdoor enthusiasts (in developed markets) and off-grid communities (in developing regions such as India and sub-Saharan Africa). Regardless of markets and geographic locations, both segments actually pay to use BioLite’s products.

However, since HomeStove target markets are still on their way to become fully economically self-sufficient, we can state that off-grid communities are also BioLite’s main beneficiaries.

Core Interventions

“Both segments are customers, but some customers are customers more than others”. It makes some sort of sense, doesn’t it? Now, jumping into BioLite’s core interventions, the company offers a wide array of products. Ranging from solar panels to batteries, from lamps to campfire accessories, BioLite has it all. Most products, however, are targeting developed countries. For the sake of our case study, we chose to focus on the two flagship items: CampStove (portable stove for camping and backpacking) and HomeStove (low-cost, biomass cooking stove).

Value for Beneficiaries

After months spent on figuring out how to get off-grid communities discovering and embracing HomeStove, BioLite successfully managed to deliver concrete value to its beneficiaries. To begin with, HomeStove technology provides clean and safe energy to families and individuals, the majority of whom live outside city centers. Apart from reducing toxic emissions and improving users’ overall health conditions, the product is in line with cultural practices. Finally, HomeStove ensures a good return on investment, as it pays for itself within six to seven months.

Value for Customers

What about the other target, the so-called “recreation market” customers (or just outdoor enthusiasts)? Well, BioLite provides them with the similar benefits: affordable prices, portability, full integration with other tools and gears, in order to benefit from smokeless fires and additional electricity to charge devices. In a nutshell: convenience, efficiency and eco-friendliness.

Channels

BioLite uses a wide range of channels to get customers discovering, evaluating and purchasing their products? In developed markets, BioLite sells both online and offline, partnering with well-known retails stores dedicated to outdoor activities. In developing markets, online channels are set aside, with local distributors that act as both intermediaries and “feedback collectors” for further improvements of the products.

Key Activities

As you imagine, building an international business that serves two very different markets requires sharp skills and tons of action. When it comes to describing BioLite’s most strategic activities, we like to share the same ones listed on the company website: developing the technology (R&D), manufacturing products, building markets (including after-sales services) and measuring impact. Yes, you’ve read it right: measuring impact. We love the fact that, unlike others, BioLite considers it as a fundamental activity for its operations!

Key Resources + Key Partners & Stakeholders

“Technology, technology, technology”! In terms of most important resources, BioLite’s innovative thermo-electric technologies surely come first. Nevertheless, we would suggest other resources to be key factors behind BioLite’s success: design & product portfolio, international distribution network, organizational culture and, finally, the business model itself.

BioLite wouldn’t be able to generate meaningful impact by working on its own. In this sense, in developing markets key partners surely are local distributors and the so-called “Burners“. Burners are locals who first receive training form BioLite, then travel from village to village to give HomeStove demonstrations and sell the product. Moreover, since 2018 BioLite acquired EcoZoom East Africa to expand its reach of impact and address the environmental problems caused by burning charcoal. And finally, BioLite can count on Acumen to provide both financial resources, management assistance and consulting services.

Cost Structure

BioLite’s cost structure can get quite articulated due to its international reach. Nevertheless, we decided to narrow down its main cost items into three, obvious pillars: R&D activities (pretty much everything that deals with developing new products and technologies), manufacturing and distribution.

Revenue Engines + Surplus

As we said earlier, both customers and so-called “beneficiaries” directly purchase BioLite products. Because of that, BioLite revenue model is a traditional direct sales model, even though local intermediaries and retail stores are often the middle men making all this possible. By selling CampStove and other outdoor gears in western markets, BioLite generates and reinvest its profits to fuel its R&D activities, in order to come up with new solutions for developing countries.

Conclusion

From its humble beginning as a camping stove project, BioLite quickly evolved into something much bigger than that. As a matter of fact, this social enterprise doesn’t just create affordable and durable portable stoves: BioLite leverages its technology to improve millions of lives around the world.

To summarize, thanks to a business model called “Parallel Innovation“, the company designs and manufactures a wide array of products meant for two very different targets: outdoor recreation users and off-grid communities in developing countries. “Recreation and need”, served at the same time.

Sure, BioLite is still at a transitional stage, but it is definitely on the way to bring safe energy and light to off-grid households while protecting the environment and tackling global climate threats.

About the Author

Marco Cornetto

Hi, there!

I’m Marco, an Italian business practitioner with previous study and work experiences across Australia, Netherlands, Spain and Vietnam. Having a background in economics and business management, since 2018 I’m happy to support social entrepreneurs and impact startuppers refine their businesses and scale social impact.

At Social Business Design, I mostly write about business design, financial modeling and growth hacking, sharing useful tools and insights gathered during 5+ years of on-field experiences.

Apart from talking about social business, I love hiking, reading, eating Asian food and taking pictures while I’m traveling. If interested, feel free to get in touch with me through my channels!

• LinkedIn
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• WordPress

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Aravind Business Model

Eradicating needless blindness in India

Social Impact Mission

As discussed in the introduction, since its early days Aravind’s impact goal has been to eradicate needless, avoidable blindness. To quote their vision statement, Aravind “provide compassionate and quality eye care affordable to all“. This is indeed the firm’s ultimate mission.

Beneficiaries

We might say that Aravind supports visually impaired people of all kinds. However, true primary beneficiaries are underprivileged Indians who cannot afford to pay for treatments. In fact, Aravind seeks to make sure every visually impaired person can get access to proper care, regardless of their ability to pay for it. So, this is their actual beneficiary target.

Core Interventions + Channels

Aravind’s core interventions can be divided into two main categories. On one hand, Eye Camps and Vision Centres help reach out to people in cities, suburbs and rural areas, and then diagnose eye diseases. On the other one, Hospitals and Clinics are the places where surgeries and treatments are performed. All these physical locations can be also considered as primary touchpoints and channels used by Aravind.

Value for Beneficiaries

As repeatedly mentioned, Aravind makes eye care completely accessible for its beneficiaries. Besides eye surgeries performed free of charge, people coming from rural areas also receive free transportations as well as accommodation. Furthermore, experts agree that restored sight can lead to increased social inclusion and participation in work activities.

Customers + Value for Customers

As said, Aravind supports visually impaired people of all kinds, including those who are able to pay for the surgeries. As a consequence, such patients have to be considered Aravind’s true customers. Similarly to beneficiaries, the value proposition provided consists in high quality treatments and health assistance, with personalized solutions for those who decide to pay premium prices.

Key Activities

When it comes to Aravind’s strategic activities, surgeries, diagnosis and rehabilitation procedures surely come first. Moreover, Aravind runs research activities (to improve its treatments) and runs manufacturing facilities (to produce intra-ocular lenses). Last but not least, through its training programs, Aravind manages educational activities for national and international health care operators.

Key Resources + Key Partners & Stakeholders

Given the nature of its interventions, Aravind most important internal resources are personnel (surgeons, nurses, etc.), infrastructures (i.e. clinics, hospitals, etc.) and facilities (machines, technologies, etc.). Because of its worldwide reputation, Aravind brand might be considered a key asset too. Lastly, many partner organizations, both from profit and non-profit sector, support Aravind providing additional external resources, such as IT expertise, scientific knowledge and financial support.

Cost Structure

We could spend hours discussing about Aravind cost structure. Yet, in order to quickly highlight Aravind’s major costs, we cannot forget to mention staff costs, infrastructure and equipment maintenance, as well as supplies and medicines. If interested, you can find further details inside Aravind annual report.

Revenue Engines + Surplus

As we have seen before, Aravind revenue model is based on a customer segment cross-subsidization. Moreover, sponsors and private donors contribute to generate additional income streams, which are then re-invested in free surgeries for underprivileged patients and in R&D activities.

Conclusion

Ever since its inception, Aravind has worked with more than 300 hospitals worldwide (from Latin America, Africa and Asia) and helped them replicate its model. According to Community Eye Health (2014), a successful replication mostly depends on: 1) reaching out people in need, both in urban and rural areas, regardless of their ability to pay; 2) using efficiently scarce resources and optimizing tasks and processes; 3) ensuring great user journeys and offering premium quality services and treatments; 4) creating hybrid revenue models without forgetting to fuel in donations.

In conclusion, we can say that quality eye care services, efficient workflows, hybrid revenue model and most importantly constant innovation are the key factors that made Aravind what it is today.

About the Author

Marco Cornetto

Hi, there!

I’m Marco, an Italian business practitioner with previous study and work experiences across Australia, Netherlands, Spain and Vietnam. Having a background in economics and business management, since 2018 I’m happy to support social entrepreneurs and impact startuppers refine their businesses and scale social impact.

At Social Business Design, I mostly write about business design, financial modeling and growth hacking, sharing useful tools and insights gathered during 5+ years of on-field experiences.

Apart from talking about social business, I love hiking, reading, eating Asian food and taking pictures while I’m traveling. If interested, feel free to get in touch with me through my channels!

• LinkedIn
• Instagram
• WordPress

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Impact Assessment for Social Enterprises

Whys and hows of measuring impact

You probably have already heard policy-makers, academics and practitioners in the field of social innovation mentioning the importance of “assessing” impact. As a matter of fact, in a world where accountability is becoming key, it is critical for both public and private organizations to evaluate the social and environmental impact of their interventions. Same goes for impact companies too. So, in this article, we are going to discuss the whys and hows of impact assessment for social enterprises.

Defining “impact”

First things first. Let’s begin by defining “impact“.

As we discussed in other articles, “impact” can be summarized as “a significant or lasting change in people’s lives, brought about by a given action or series of actions“. Whether it’s about creating positive social or environmental impact (or a mix of both), the notion of impact relates to radical, long-term improvements in the lives of individuals or wider communities.

Today, public authorities, entrepreneurs and citizens are all increasingly being asked to think about sustainability and impact, taking actions accordingly. Unfortunately, many of them are provided with no actionable means to understand if the decisions they make truly contribute hitting the goal. Something that paves the way to worrisome phenomenon such as “impact washing“.

So how to avoid that? That’s where “impact assessment” kicks in.

What is “Impact Assessment”?

Broadly speaking, “impact assessment” is the systematic process used by public and private entities to evaluate the social effects of their interventions.

Impact assessment is becoming a priority for stakeholders of all kinds: policy-makers, foundations, investors, social entrepreneurs. Many frameworks are being undertaken today to assess the impact generated on local communities and society as a whole. As a matter of fact, we could count dozens of different methods and models to use. It is possible to classify most of them in two main categories:

• Quantitative approaches, focusing on non-numerical information and using social sciences disciplinary frameworks
• Qualitative approaches, mostly driven by numerical data.

This said, none of those can be enough by itself, with some claiming that frameworks only focused on economic return may be a dangerous way to measure impact. Because of that, practitioners agree that qualitative and quantitative methods are more powerful when combined together.

Pillars of impact assessment for social enterprises

If you want to dig into each one of the numerous attempts to establish common guidelines and metrics for impact assessment, well.. best of luck with that! But if you’re an aspiring change-maker who only wants to understand the basics first, then stick with us for a bit longer

As said, impact assessment is the process of understanding whether or not a project achieved its desired outcomes and impacts. And for social enterprises, impact creation is at the heart of what they do. It’s indeed at the very core of their mission. Thus, it’s important to grasp the basics of analyzing and measuring it. Here are some of the main principles for you to keep in mind.

Logic models

To begin with, impact assessment builds on logic models. A logic model is a set of hypotheses and assumptions linking expected causes and effects, eventually leading up towards desired long-term outcomes to achieve.

Logic frameworks such as Theory of Change can enable social enterprises clearly define beforehand (“ex-ante“) the roadmap towards impact. Without that, organizations are unlikely to chose the right inputs, activities and business models to successfully achieve their ultimate goals. So, make sure you build your own one before even starting.

Impact dimensions

While creating the logic model, it’s important to define the so-called “impact dimensions“. Here, the Impact Management Project’s “Five Dimensions of Impact Framework” suggests using five different lenses:

• What – namely, the outcomes sought and/or achieved
• Who – namely, the targets who experience such outcomes
• How Much – depth, duration and scale of impact
• Contribution – to assess whether the changes occurred (or will occur) because of the project or due to external, independent factors
• Risk – in terms of negative consequences associated to all the above

We believe this framework is great as it provides a concise – yet effective – way to help social firms begin understanding to which degree they may impact people and the planet.

Setting up the stage for measuring

Then, social enterprises should carefully design metrics, tools and procedures to collect data and analyze their interventions. If you don’t know where to start, free databases such as IRIS+ will provide you with catalogs of potential indicators to choose from, sorted out by industry and category.

Remember: impact assessment is a way to understand the true performance of a social enterprise. Because of that, collect data periodically (it’s not a “once in a while” sort-of-thing!) and be honest and transparent about it.

Measuring vs Evaluating

Practitioners already know that: there’s a time for measuring and a time for evaluating.

Impact measurement happens indeed during the intervention, as a way to monitor the project while is going on. Conversely, impact evaluation is an “ex-post” overall analysis, run after the intervention is completed. As you may guess, one without the other would do little to no benefits in truly understanding outcomes and impacts actually generated. However, organizations often fail in taking care of the latter.

Thus, involving third parties or external experts to validate and assess findings, even long after the project or program is over, may be crucial to evaluate long-term, lasting effects.

Dissemination

Bridging the gap with communities and target audiences is a priority for social enterprises. Because of that, impact assessment cannot be considered completed until the company disseminates and shares project results outside its boundaries. A clear, detailed dissemination plan can help firms reach the right people, at the right time, using appropriate formats. Only when local communities and the public are informed, true understanding and opportunities for replication can take place.

Why impact assessment is so important?

Based on the above, you probably already know the answer to this question. Still, let’s see why social entrepreneurs should care about impact assessment.

There are at least three main reasons for that.

1. First, without impact assessment, it is impossible for entrepreneurs to know whether they are truly fulfilling their impact mission or not. Simply put, it’s the only way they have to assess the true effectiveness of their projects and activities.
2. Secondly, social enterprises operate in ecosystems. As such, they must be accountable for their actions both to internal teams and external stakeholders, including the ultimate beneficiaries of their interventions. In this regard, some acted proactively, whereas others will eventually adjust to new, emerging regulations, asking companies to disclose detailed information on the way they operate and manage social and environmental risks.
3. Lastly (but strictly connected to the above), public as well as private investors are increasingly shifting their funding schemes, providing economic resources only to those organizations able to provide validated data about the outcomes achieved. Without frameworks and tools for assessing impact, social enterprises could potentially fail in accessing such funds.

Conclusion

In this article, we discussed the importance and some of the main principles of impact assessment for social enterprises.

When it comes to impact assessment, we know indeed that it’s not always clear for social entrepreneurs where to start, what to prioritize or what data to collect. Moreover, we know that in most cases it can become a long, complex and costly activity. Nevertheless, as some would say, “it is better to be roughly right than precisely wrong“. Therefore we hope both aspiring and current social entrepreneurs will choose to embrace the challenge and learn their craft along the way, by spending time and effort to truly assess the impact achieved by their organizations.

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