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FlywheelBusinessPlanv1041111FINAL.pdf

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Business & Strategic Plan

Version 1.0 – April 11, 2011

fly^wheel (flī′hwēl′) noun

1. a heavy wheel that stores kinetic energy and smooths the operation of

a reciprocating engine by maintaining a constant speed of rotation over

the whole cycle

2. a term from the venture capital world which is used to represent the

recurrent, margin-generating heart of a business

3. a hub that provides significant momentum to assist nonprofits

generate sustained energy (e.g. learning, skills, capital) through social

enterprise

Confidential & Proprietary

Table of Contents

Introduction ........................................................................................................................ 4

1.0 Executive Summary ....................................................................................................... 8

2.0 Business Description and Goals .................................................................................. 11

2.1 State of Environment & History of Social Enterprise in Cincinnati......................... 11

2.2 Venture Description ................................................................................................. 13

2.3 Description of Product or Service ............................................................................ 14

2.4 Overview of Nonprofit Organization ....................................................................... 23

2.5 Business and Social Goals ........................................................................................ 24

2.6 Guiding Principles ................................................................................................... 25

3.0 Definition of the Market ............................................................................................. 26

3.1 Industry Overview .................................................................................................... 26

3.2 Industry Outlook ...................................................................................................... 32

3.3 Industry Best Practices ............................................................................................ 32

3.4 Description of Market Need .................................................................................... 35

3.5 Description of Customer .......................................................................................... 40

4.0 Competitive Analysis................................................................................................... 42

4.1 Competitive Environment ........................................................................................ 42

4.2 Profile and Analysis of Direct Competitors ............................................................. 43

4.3 Porter‟s Five Forces Analysis ................................................................................... 44

4.4 Competitive Advantage ............................................................................................ 44

5.0 Organization and Management .................................................................................. 46

5.1 Organization Staffing Model .................................................................................... 46

5.2 Succession Planning................................................................................................. 50

5.3 Advisory Council ...................................................................................................... 50

5.4 Performance & Knowledge Management ................................................................ 51

5.4 Legal Issues .............................................................................................................. 52

6.0 Operations ................................................................................................................... 53

6.1 Customer Experience ............................................................................................... 54

6.2 Information Technology .......................................................................................... 58

6.3 Monitoring and Evaluation ..................................................................................... 62

6.4 Description of Daily Operations .............................................................................. 65

7.0 Branding, Marketing and Sales Strategy .................................................................... 66

7.1 Branding .............................................................................................................. 66

7.2 Plan to Reach Target Market ............................................................................... 67

8.0 Financials .................................................................................................................... 72

8.1 Financial Overview ................................................................................................... 72

8.2 Earned Income Strategy .......................................................................................... 73

8.3 Corporate Development Strategy ............................................................................ 73

8.4 Fund Development Strategy .................................................................................... 74

8.5 Projected Financials ................................................................................................. 74

8.6 Financial Targets ................................................................................................. 78

8.7 Return on Investment & Community Impact ..................................................... 79

9.0 Risk and Mitigation Strategies .................................................................................... 80

9.1 SWOT Analysis .................................................................................................... 80

9.2 Risk Analysis ........................................................................................................ 80

10.0 Appendices ................................................................................................................ 89

Introduction

Since Flywheel’s selection in October 2010, the founding partners have set out on two

parallel tracks – one, to operationalize Flywheel Social Enterprise Hub (“Flywheel”)

through establishing roles and responsibilities and two, to conduct market research that

would feed into a business and strategic plan (see graphic below). Through this process,

we have interviewed and met with countless individuals and groups, carried out a survey

of over 100 nonprofit organizations with diverse needs and backgrounds, and conducted

3 focus groups (see Appendix for details).

Through the interviews and discussions with individuals who have been engaged in

numerous community-wide efforts, we have learned and applied the following operating

principles to our efforts at Flywheel, including:

 Goal-setting: o Be realistic with goals o Start small and build – establish a step-up timeline o Focus on the most important things and not everything o Set and meet expectations o Keep the end goal in mind

 Communications: o Maintain clear, consistent, and timely communications o Strive to be user-friendly o Communicate recognizable success

 Community: o Be community-driven and not ego-driven o Ensure diversity on the Advisory Council

 Quality: o Provide a high-quality experience o Limit experience to those organizations which have a high degree of

readiness

We also learned about the strengths and weaknesses of various operating structure from

interviews as well as our own market research on comparable organizations within and

outside Cincinnati. Both efforts concluded that a separate backbone organization was

the optimal structure. Our experience also suggests that for Flywheel to take on a

market leader role within the Greater Cincinnati community we need to have strong

accountability, fast decision-making, and be community-owned.

Flywheel

Courtesy of Center for Nonprofit Management

As a result, we have opted to move from our current state (alliance) to a future state

(integration) during our planning phase and plan to continue this migration over the

spring/summer timeframe. This integrated, community-owned model will be governed

by an Advisory Council. As a result, we are waiting to decide on the exact details of the

integrated type (e.g. management service organization or subsidiary) as well as the

continued role of each founding partner until the Advisory Council is formed and

functional. More details on the migration can be found in Section 6.0.

Based on the start small and build model, we are proposing the following step-up

timeline and plan, which will be referenced throughout the Flywheel Business &

Strategic Plan. This approach builds upon a research-based model1 Flywheel plans to

use for its own clients.

At each step, one or more critical areas of development will be focused on. In Step 1, we

will build our client pipeline, hire talent, and build awareness of social enterprise. In

1 Flamholtz, Eric G. & Yvonne Randle. Growing Pains: Transitioning from an Entrepreneurial to a Professionally Managed Firm. John Wiley & Sons (2007).

(Incubate under partners)

 Launch Flywheel

 Form advisory council  Raise funds for 2011-

2012  Hire talent

 Conduct workshops  Evaluate inquiries  Conduct second

feasibility pilot

(Move from alliance to

optimal integration model)

 First advisory council meeting

 Train/mentor advisors  Conduct workshops  Evaluate inquiries

 Conduct feasibility assessments

 Conduct business plan pilot

 Launch SEA chapter

(Finalize integration model)

 On-going advisory council meetings

 Advisors ready

 Conduct workshops  Evaluate inquiries  Conduct feasibility

assessments  Conduct business plans

 Apprentice Leaders Circle kick-off

 Regular SEA chapter meetings

 Create Business & Strategic Plan 2.0

STEP 1: Pilot

STEP 2: Start-up

STEP 3: Expansion

April – May 2011

Summer 2011

Fall 2011

Step 2, we will establish “proof of concept” by testing and refining our customer

research and developing and testing our products and services. In Step 3, we will start

rapid expansion of our products and services – utilizing our full portfolio of workshops,

inquiry gathering, feasibility assessments, and business planning - and begin

organizational scale-up. In this step, we will test our existing resources and develop

operational systems to ensure that we have a system that lets Flywheel operate

efficiently and effectively. Because we will be continuously learning about our customer

and organizational needs, we will update our business and strategic plan and it will

reflect this heightened degree of organizational maturity. We will also make predictions

about the timeline associated with remaining steps in Flywheel’s organizational

development – professionalization and consolidation.

1.0 Executive Summary

Many have asked the question – what is special about social enterprise? Is it a trend or a

fad? Social enterprise has been around for almost a century through the groundbreaking

work of pioneers, such as YMCA, Goodwill, and Girl Scouts. It has recently taken root in

the social nomenclature and almost 50% of all social service agencies have adopted it as

not only a principle to earn income for their organization, but as a way to advance the

social and economic goals of the community. In Cincinnati alone, based on a survey

conducted by Flywheel and Community Wealth Ventures, in Greater Cincinnati and

Northern Kentucky, we estimate that 30% of local nonprofits operate a social enterprise.

Of those operating social enterprises, 50% operate one social enterprise, 30% operate

two social enterprises, and 20% operate three or more social enterprises. 44% of these

organizations started their first social enterprise in the last decade.

Based on our survey results of 40 existing social enterprises, the average social

enterprise in Cincinnati/Northern Kentucky is a small business with 3 employees and

annual revenues of $137,000. In 1981, Economists from Control Data Corporation

estimated that a job generated through social enterprise brought a net value of $52,000

per year to the American economy. Today that same job brings brings a net value closer

to $80,000. The contribution of the average social enterprise to the

Cincinnati/Northern Kentucky economy is $240,000 in stimulus each year.

Flywheel is an outgrowth of five years of work within the social sector to help build

sustainable social enterprises and decades of work by nonprofit leaders leading social

enterprises in Greater Cincinnati. We aspire to become a multi-stakeholder and

community-driven hub focused on maximizing the experience of Cincinnati nonprofits

starting social enterprises and creating a fertile environment for start-up, launch, and

growth. We will accomplish this by building a professional services organization that

provides a high-quality, cutting-edge customer experience at a value-based price.

The concept for a hub was originated by a group of local funders, Greater Cincinnati

Foundation, Carol Ann and Ralph V. Haile Jr./US Bank Foundation, Jacob G.

Schmidlapp Trusts/Fifth Third Bank, and United Way of Greater Cincinnati. Four

organizations (Leadership Council of Human Services Executives, Executive Service

Corps of Cincinnati, Miami University‟s Center for Social Entrepreneurship and Centric

Consulting) formed an alliance to conduct market research, formulate the strategy and

kick-start the initiative. Through our planning process, we talked to nonprofit

organizations of all types and sizes – those who had never considered social enterprise

and those who were running social enterprises – to design the ideal customer strategy.

We also researched similar collaborations from across the country and within Cincinnati

to uncover best practices and embed them in our business model. We interviewed some

of the sharpest collaborators within Cincinnati to develop the best community-driven

structure. Taken together, we have built Flywheel to be an independently run

organization run by an Executive Director and governed by an Advisory Council and

influenced by numerous stakeholder groups. We also built it to be an innovative social

enterprise itself – funding the mission through combined sources of revenue, including

earned income, corporate dollars, and philanthropic support. We also have leveraged

the talent and energy around us within Cincinnati by developing a cost-efficient and

resource-rich flexible staffing model – part paid advisors and part volunteer. All of this

was created to ensure that Greater Cincinnati nonprofits can seamlessly stretch into

social entrepreneurship – whether it is through a feasibility assessment or a business

plan – to better serve their clients and become a more sustainable organization.

Beyond assisting the individual nonprofit organization, Flywheel has an ambition to

become part of a constellation of organizations achieving large-scale system change

within the Greater Cincinnati region. We wish to promote social enterprise to the larger

consumer community. We hope to help with the transformation of the philanthropic

mindset from charity-based to investment-based and create a capital market for

nonprofit organizations. We plan to infuse nonprofit organizations with translated

business concepts that will help them run better organizations. We aspire to influence

policy to improve economic incentives for social enterprises and those assisting them.

To achieve this, Flywheel has laid out a financial model that allows us to accomplish

these goals in a cost-effective method that still allows for value-based pricing for

nonprofit organizations. While some nonprofits will need support through scholarships,

we believe that this model is viable.

Based on this model, we are seeking an investment in the first year of $75,000 in start-

up capital, support of $60,000 from an Investors Circle, and assistance providing

scholarships to those nonprofits without resources to pay for Flywheel’s services.

Start-up (2010- 2011)

2011 2012 2013 2014 2015

REVENUE $116,500 $432,265 $676,190 $716,930 $792,965 $916,190

COSTS $90,500 $420,250 $662,428 $697,727 $760,392 $859,578

CUMULATIVE PROFITS $26,000 $38,015 $51,777 $70,980 $103,553 $160,165

$- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000

$1,000,000

Macro Level Flywheel Snapshot

2.0 Business Description and Goals

2.1 State of Environment & History of Social Enterprise in

Cincinnati

The social sector has evolved dramatically over the past decade as the entire landscape

has changed in the twenty-first century. Nonprofits have been faced with shifting

funding, tectonic economic upheaval, increased calls for accountability, new

technologies and modes of communication, and uncertainty about the future. In

addition, the traditional nonprofit has been overshadowed by a new generation of

organic, decentralized and flexible organizations, which embrace entrepreneurship in

order to deal with pressing social challenges. To face these changes and build and

sustain a healthy social sector, it is important for communities to invest in the capacity

of all of these organizations and ultimately the social ecosystem.

Contemporary challenges require contemporary tools and approaches. PBS (Public

Broadcasting System) has perhaps the pithiest definition of a social entrepreneur: “The

job of a social entrepreneur is to recognize when a part of society is stuck and provide

new ways to get it unstuck. He or she finds what is not working and solves the problem

by changing the system, spreading the solution, and persuading entire societies to take

new leaps.” Arguably, the nonprofit sector across the United States – including Greater

Cincinnati/Northern Kentucky – is stuck between the chasm of what worked in the 20th

century and what will work in the 21st century to solve social issues.

The idea for Flywheel came from experience and learnings from previous efforts to

support nonprofits with social enterprise by each of the founding organizations in both a

regional and national context (see Appendix on the History of Social Enterprise in

Cincinnati). Before 2007, the community had no coordinated set of services to support

Greater Cincinnati social enterprises. The introduction of the Health Foundation‟s

project with grantees in 2007 and Community Wealth Ventures, which introduced a 10-

month business planning process, in 2008 demonstrated a strong interest in the

concept of coordinated and high-quality comprehensive support for social enterprise.

However, while helpful to a few select nonprofits, the nonprofits and funders concluded

that it was important to build the bench strength locally to support social enterprise

from within the Greater Cincinnati region for all types of nonprofit organizations. In

addition, Cincinnati nonprofit organizations with social enterprises had little or no

connections with each other except through the Health Foundation‟s work with

behavioral health organizations. Through both the Community Wealth Ventures‟ and

Health Foundation‟s experience, we learned that the effective support of social

enterprise requires a broad range of functional and business skills and most

organizations do not have all the knowledge required for this work. It was essential for

the efforts to not only help the organizations select a social enterprise, but also build

their capacity as an organization to ensure its success. To this end, the Greater

Cincinnati Foundation, Carol Ann and Ralph V. Haile Jr./US Bank Foundation, Jacob

G. Schmidlapp Trusts/Fifth Third Bank, and United Way of Greater Cincinnati took the

step to create a “hub” for social enterprise in the Greater Cincinnati/Northern Kentucky

region.

It is for this reason that four organizations –

the Leadership Council of Human Services

Executives (“Leadership Council”), Executive

Service Corps of Cincinnati (“ESCC”), Miami

University‟s Center for Social Entrepreneurship

(„Miami”) and Centric Consulting (“Centric”)

joined in a strengths-based partnership (named

“Flywheel”) to build a coordinated and

flexible “hub” to introduce the concept of social

enterprise to nonprofits and launch, grow, and

help troubleshoot social enterprises. While it is inherent that social enterprise is a tool

to create unrestricted income for nonprofits and serve client populations, it is our hope

that our model will help jumpstart the process of “unsticking” past paradigms by

infusing best practices from the nonprofit sector and business sector into the cultures of

“What's "missing" is a hub for resources and connecting. While we hear of other organizations pursuing social enterprises in the local area, at this point there is nothing that connects us to share best practices, struggles, ideas, information, etc. Having a resource such as this may help move the process of launching a social enterprise along more smoothly and efficiently.” -Survey Respondent

the nonprofits involved and, as a result, seed the larger social sector ecosystem. In

addition, we intend to “practice what we preach” and have intentionally constructed

Flywheel to be decentralized, coordinated, flexible, and open to serve any nonprofit at

any phase within the social enterprise adoption curve.

2.2 Venture Description

Flywheel is a multi-stakeholder and collective impact initiative in the business of

maximizing the experience of Greater Cincinnati nonprofits engaging in social

enterprise and creating a fertile environment for start-up, launch, and growth. The long-

term strategic mission of Flywheel is to be recognized as the go-to resource for social

enterprise and entrepreneurship within the Greater Cincinnati/Northern Kentucky

region. Our core strategy is to build a hub – which connects resources needed for start-

up, launch, and growth of social enterprises – and provides these resources through a

high-quality, customer-focused, and value-priced model.

Through our research, Flywheel has found 5 unique social enterprise customer

segments with specific services and benefits that meet the client where they are and help

them progress to the next phase of social enterprise. (See 2.3 for the complete

Description of Services.) Through Flywheel’s unique value proposition, we are

enabling our customers to progress faster in their quest to start-up, launch, and grow

social enterprises. In the past, we have found that nonprofits can take years trying to

find or develop an appropriate social enterprise that triangulates the need for board

acceptance, mission fit, and financial viability. We believe – through the hub -

Flywheel can reduce this development and decision-making process from years to

months. We also believe we can leverage our social enterprise knowledge and skill-set to

more effectively launch new ventures and optimize existing social enterprises.

Our strategy is to provide the same high-quality services as national providers at a better

value through reduced overhead and travel and our combined paid-volunteer talent

strategy. Compared to local providers, we will match their consulting rates, but provide

a deeper breadth of skills and experience in the area of social enterprise. We estimate

that the customer return on investment will be three to five times the service fees. For

the customer, the return on investment would be from increased social enterprise

revenue and/or decreased management work time. Our experience with both the

feasibility pilot and through focus groups showed that each organization spent $50,000

of management time trying to decide on a venture before it is even launched. This

compared with our combined process of ideation and a feasibility assessment, which

averages only $10,000-$20,000 (dependent on complexity of idea and previous

experience), provides an excellent return-on-investment.

2.3 Description of Product or Service

Through our research, we found five unique customer segments:

 Seekers – those who are not currently considering social enterprise, but have some awareness of it through peers

 Gatherers – those considering social enterprise, but with low levels of knowledge or past experience with social enterprise

 Ideators, Testers, Planners, and Piloters – those with a higher degree of knowledge and with some degree of progression through phases

 Apprentices – those running a social enterprise and with a high degree of business expertise, but low levels of knowledge or past experience with social enterprise or the nonprofit sector

 Experts – those running a social enterprise with a high degree of knowledge

To illustrate our model, we have produced a visual that integrates all these concepts into

our Core Services. We have also provided two tracks for participating organizations –

“early-stage” for younger organizations and/or those who have not engaged in social

enterprise before and could benefit from intense support services and “mezzanine-

stage” for mature organizations and/or those who are familiar with social enterprise and

business concepts.

This summary chart shows the key services and benefits provided to each of the 5 social

enterprise segments based on the Phases described above in the model. We have

estimated their concentration based on survey results. We believe these concentrations

will shift as Flywheel enters the marketplace and begins satisfying needs.

Target Market

(% Of Nonprofits)

Flywheel Services Benefits

“Seekers”

(40%)

 Community attention and

awareness

 Assess readiness for

workshops

 Understanding of

social enterprise

benefits and effort

required

“Gatherers”

(20%)

Phase 1

 101 and 201 workshops

with self-assessment tool

 Quantification of the

potential of social

enterprise

 Follow-up clinics and

board presentations

 Ideation assistance

 Increased

knowledge and

understanding

 Energized board

“Ideators,

Testers,

Planners, &

Piloters” (10%)

Phase 2a

 Social enterprise ideation

and readiness

Phase 2b

 Dedicated feasibility

assessment assistance

 Organizational capacity-

building around decision-

making, market research,

and activity-based costing.

Phase 3

 Dedicated business

planning team

 Organizational capacity-

building around business

modeling and

development stages,

operations, and project

management

Phase 4

 Assistance with pilot

 Coaching to revise

business plan as needed

 Ensure high-impact

ideas are generated

and vetted properly

 Increased

confidence through

proven process

 Understanding of

the value of market

research

 Reduces

management time

through guided

decision-making

 Understanding of

business models and

strategic

development phases

 Appreciation for the

value of operations

and strong project

management

“Apprentices”

(10%)

 Boot camp for new social

enterprise leaders

 Ongoing coaching in new

role

 Creation of personal

development plan

 Faster growth and

personal

development

“Experts”

(20%)

 Assistance with new

ventures

 Assistance with updating

existing social enterprises

 Partnership that

allows for outside

viewpoint and

validation

2.3.1 Early Stage

2.3.1.1 Phase 1 - Gatherers

Flywheel will conduct Social Enterprise 101 and 201 workshops in various locations

across the MSA on a quarterly basis to engage nonprofits and their Boards in discussing

social enterprise and whether or not it is right for the organization. At a minimum, it

will expose them to core business concepts, including market research, effective

decision-making skills, and planning concepts. Ideally, it will start a conversation

between the nonprofit‟s leadership and Board. We will end the 101 workshop with a self-

assessment that will help them understand the essential elements of a successful social

enterprise. As a follow-up measure, Flywheel will provide “clinics” and support

services for each nonprofit attendee to track their interest and help them overcome any

barriers. Examples of these engagements include presenting to their full Board and

assisting with the ideation process. We plan to partner with the Health Foundation on

this step – they have been providing 101 and 201 workshops for over a year and plan to

continue them this fall and next spring. We are also encouraged by recent conversations

with C-Cap/Queen City Angels who are very interested in Flywheel and hope to lend

their support for education/training opportunities. We anticipate serving 75 nonprofits

in the first year in Phase 1.

2.3.1.2 Phase 2a - Ideators

Once a nonprofit decides to pursue social enterprise, they are likely to have a myriad of

ideas to pursue but a shortage of high quality ideas and an inability to move from

ideation to decision-making. The key to ultimate success is finding the idea that has a

profitable market and fits with the mission of the organization. Upon completion of a

short organizational assessment, each participating organization will be matched with

the right advisor to assist them develop and strengthen their venture ideas to improve

mission fit and financial viability. We have chosen a model where we use an “advisor”

versus a consultant to ensure that the organization is learning on their own and does not

become overly reliant on the advisor. It is also important to ensure that the knowledge is

transferred from the advisor to the organization upon completion of the engagement.

When possible, Flywheel will identify advisors who are highly skilled consultants with

a high level knowledge of the community and reflective of the organization and

community.2 We anticipate serving 15 nonprofits in the first year in Phase 2a.

2.3.1.3 Phase 2b - Testers

Once a nonprofit decides to test the feasibility of their possible social enterprise

opportunities, before we begin the formal engagement, we will test their readiness to

invest in the social enterprise process. This type of testing has been proven to be

important in not only the Rogers‟ innovation-decision model, but also in the promising

practices of capacity-building programs.3 Flywheel plans to assess each organization

through a culture assessment and a battery of interviews of both Board Members and

the senior management team. If we find that they are not ready to proceed, we will assist

them with a plan to become ready.

When they are ready to proceed, we will use the assessment information to assist us

with matching them with the right advisor to assist them with conducting a feasibility

assessment. As needed, we will also add volunteer advisors to the team to serve as

subject matter experts and assist with market research. Through this process, we will

not only conduct the assessment, but also help the organization build their capacity in

three related areas – decision-making, market research, and activity-based costing. At

the end of the process, they will decide on the opportunity that has the most promise for

2 Connolly, Paul and Peter York. Building the Capacity of Capacity Builders. The Conservation Company, 2003. 3 Ibid.

their organization based on a customized set of decision criteria. We anticipate serving 9

nonprofits in the first year in Phase 2b.

2.3.1.4 Phase 3 - Planners

In this phase, we will develop a business plan to turn the vetted opportunity into reality.

While we originally intended to implement a similar peer-learning process to the

successful Cincinnati Collaborative conducted by Community Wealth Ventures, we have

not found much interest or demand for this type of process from nonprofits in Greater

Cincinnati/Northern Kentucky at this time. Instead, in year one, we will concentrate on

building the pipeline and implement a Collaborative as warranted by demand.

Nonprofits did value peer-driven opportunities and recommended other methods,

which will be discussed below.

Flywheel instead will provide business planning assistance through an individualized

engagement process – similar to the feasibility assessment. It will be customized based

on the organizational need and the intensity of the social enterprise. If they have worked

with Flywheel on the feasibility assessment, we will take the next steps to develop a

plan. If they have not worked with Flywheel before, we will first test their readiness

before starting the engagement. Similar to the feasibility assessment, Flywheel will

serve as an advisor and work closely with a team from the organization to develop the

business plan. We plan to pilot our business planning process in summer 2011 – using a

variety of methods, including a traditional paper-based business plan and an online

version called Business Plan Pro. Either way, through this process, we will not only

develop a business plan, but also help the organization build their capacity in three

related areas – business models and development stages, operations, and project

management. We will also be working with them on the cultural shift inherent in a

nonprofit organization starting a social enterprise. We anticipate serving 2 nonprofits in

the first year in Phase 3.

2.3.1.5 Phase 4 - Piloters

Research has shown that even the best business plan cannot predict every possible

outcome when a social enterprise launches. Markets shift, staff is hard to find, and

customers are different than expected. We will mitigate some of these issues by

encouraging organizations from Phase 3 to pilot their social enterprise before fully

launching. Whatever they decide, Flywheel would like to continue our work with

organizations after the business planning phase through ad-hoc tracking, coaching, and

assistance with revising business assumptions. It is our goal to keep the advisor a

consistent force within the team, but we might also add qualified subject matter experts

as needs arise. On a case-by-case basis, we might also provide implementation

assistance through an on-site consultant. We anticipate serving 3 nonprofits in the first

year in Phase 4.

2.3.2 Mezzanine Stage

As a separate path for mature organizations or those with social enterprise experience,

we plan to provide “expedited services” either to:

 Option 1a: Grow or troubleshoot an existing social enterprise

 Option 1b: Develop new social enterprise leaders

 Option 2: Start a new social enterprise

For option 1a and 2, we will start with a comprehensive assessment process to design a

customized coaching and/or consulting plan for the organization. At the mezzanine

stage, we may move away from our preferred coaching model on an individual basis. We

anticipate serving 20 nonprofits in the first year in the Mezzanine stage - 4 nonprofits

with Option 1a with 4-month engagement and 2 nonprofits with Option 2 with 6-month

engagement.

Through our market research, we found that many operational social enterprises were

bringing in fresh talent. While this talent had many strengths, we also found that the

talent needed opportunities for increasing their knowledge on social enterprise as well

as the nonprofit sector and networking with other leaders of social enterprises. For

option 1b, we anticipate offering an “Apprentice Leaders Circle” that accelerates the

learning of nonprofit culture and expectations for those new to the nonprofit sector

along with general business concepts important to social enterprise. This concept is

built upon the highly-successful piloting of Leaders Circles done by the Leadership

Council and the Vistage groups provided in the for-profit sector. It is a peer support

group which meets regularly each month to help each individual learn and troubleshoot

their issues. It will be facilitated by an experienced advisor who will provide follow-up

coaching sessions on an individual basis. We anticipate serving 10 nonprofits with

option 1b with a Leaders Circle.

We also hope to provide mezzanine-stage organizations with the opportunity to mentor

early-stage organizations through both formal roles (as coaches and speakers) and

informal roles (through networking activities). We believe these opportunities will

benefit both organizations.

To summarize the number of nonprofit served within each offering:

Number of Nonprofits Served in

Year 1

Workshops/Trainings 75

Clinics (including Ideation) 15

Feasibility Assessments 13

Business Plans 4

Pilot Coaching 3

Apprentice Leaders Circle 10

2.3.3 Additional Services

Based on the market research and our desire to build a true “hub,” we plan to provide

additional services, including:

 Engagement

o Engage the community and our participants in the larger discussion on

social enterprise (e.g. L3Cs, legislation, certification of social enterprises)

happening at the state, national, and international level.

o Continue to educate the government and community-at-large about social

enterprise and motivate them to purchase from Greater

Cincinnati/Northern Kentucky social enterprises.

o Connect our social enterprises with the larger entrepreneurship

community (e.g. Hamilton County Business Center, Queen City Angels).

 Cooperation

o Develop a culture of cooperation and partnership through the “hub” where

mezzanine organizations share with early stage organizations,

organizations partner with each other to share resources, and

organizations use each others‟ services.

o Start a chapter of the Social Enterprise Alliance to engage both nonprofits

and the community-at-large in the advancing social entrepreneurship

within the region.

 Education

o Leverage existing trainings/boot camps provided by for-profit business

incubators.

o Leverage existing trainings in the community by providing access to

scholarships for needy organizations wishing to attend Health Foundation

or other trainings that might benefit their social enterprise (e.g. Social

Media, Board Leadership).

o Provide scholarship assistance for needy organizations to become

members of the Social Enterprise Alliance and attend the Social Enterprise

Alliance conference in Chicago in October 2011.

 Capital

o The key to any start-up is access to capital when the time is right to invest.

Flywheel hopes by successfully motivating the community around social

enterprise that a capital market will emerge. We will work tirelessly to fuel

this growth.

2.4 Overview of Nonprofit Organization

During the planning phase, the legal structure for Flywheel started as an alliance (see

figure in Introduction) between the four founding organizations through a binding

memorandum of understanding with the Leadership Council of Human Services

Executives serving as the fiscal agent. Suzanne Smith, Executive Director of the

Leadership Council provided initial leadership during the planning phase for Flywheel.

This was an intentional decision because the founding partners wanted to use the

planning process to research the best business model and structure without constraint.

Moving forward, as we researched and interviewed experts about various models both

within and outside Cincinnati, it became clear that staying an alliance is not consistent

with two important principles of Flywheel:

 Being community-driven

 Strong accountability and fast decision-making

We also found through our secondary research that the best practices suggest that in

order to have optimal collective impact, it is best for the organization to be independent

of any organization. Being independent will also allow us to have clear lines of

accountability – to the community and the Advisory Board – and allow us to make

decisions more quickly.

During the spring and summer, Flywheel plans to undertake the process of moving

toward an integration business model with Flywheel taking on its own identity with a

dedicated Executive Director, as funding allows. The exact nature of the integrated

model will be discussed and decided by the Advisory Council during the spring/summer.

Each of the founding organizations will have a representative on the Advisory Council

and provide resources to support Flywheel. There will be a memorandum of

understanding between the 4 founding partner organizations and Flywheel to outline

the exact types of clients and services that will be exclusively served/ provided by

Flywheel and the founding partner organizations. We anticipate that the Business &

Strategy Plan 2.0 will provide additional details about these arrangements and the final

business model. Because we want Flywheel to be community-owned, we are waiting to

make these final decisions until we build our Advisory Council.

2.5 Business and Social Goals

Because we are intentionally a social enterprise, our business and social goals are

interrelated. In year one, Flywheel would serve over 100 nonprofits at various service

levels depending on client need and readiness. The business goal for year one is to

achieve at least $200,000 total revenue with over one third of total revenue from earned

income. Beyond year one, we plan to increase the earned income from nonprofits and

other sources and reduce our dependence on philanthropic sources. For our social goals,

we hope to:

 Short-term –

o Increase skills and knowledge of social enterprise

o Increase awareness and adoption of best practices

o Increase positive attitude toward social enterprise

o Reduce time from ideation to launch of social enterprise

 Long-term –

o Improve application of management practices

o Increase nonprofit capacity for social enterprise

o Increase community understanding and coordination

o Increase percentage of nonprofits with earned income

o Increase capital to support nonprofits with social enterprises

2.6 Guiding Principles

Flywheel believes that our culture is an important foundation from which to build a

successful and sustainable social enterprise. We identified these principles during the

application process and they have stood the test of time with only minor modifications:

Flywheel’s Six Guiding Principles

 We want to unify, centralize, and coordinate services in order for organizations to access services when needed and reduce redundancy.

 We want to lower barriers for participation and provide various options customized to the needs of the organization.

 We want nonprofits to test feasibility before pursuit of a business idea.

 We want to be known for our master-class talent and for our superior customer service.

 We want to be focused on two types of outcomes – organizational change and system change. We not only want to help create social enterprises, but we want to create an environment where social enterprises can grow and thrive.

 We want to operate as a social enterprise and practice what we preach.

3.0 Definition of the Market

3.1 Industry Overview

To breakdown the market for Flywheel, we conducted a market sizing project and used

existing research to determine the size of the market in Greater Cincinnati/Northern

Kentucky. In 2006, Greater Cincinnati had a total of 9,674 tax-exempt organizations,

6,366 of these were 501(c)(3)s and 3,408 were public charities. First, as a conservative

measure, we only looked at public charities and excluded fraternities, churches, and

other membership-based organizations. Second, we theorized based on our market

research that we could only assist public charities with annual revenues over $25,000.4

This gave us a market of at least 1,354 target organizations within our region. Third, as

another conservative measure, we estimate that about half of the public charities (677

target organizations) with revenue over $25,000 could appropriately utilize social

enterprise to support their mission. This is consistent with research that 50% of social

service agencies have at least one social enterprise. Based on our customer segments

from our research, we believe that, currently, these 677 target organizations fall into:

Customer Segment Number of organizations within Greater

Cincinnati/Northern Kentucky

Seekers – those who are not currently

considering social enterprise, but have

some awareness of it through peers

271 organizations

Gatherers – those considering social

enterprise, but with low levels of

knowledge or past experience with social

enterprise

135 organizations

4 Ferrante, Joan and Missy Gish. State of Northern Kentucky/Greater Cincinnati Nonprofit Sector. Northern Kentucky University, 2006. Accessed March 22,2011 at http://civicengagement.nku.edu/docs/nonprofitforweb-2.pdf

Ideators, Testers, Planners, and

Piloters – those with a higher degree of

knowledge and with some degree of

progression through phases

68 organizations

Apprentices – those running a social

enterprise and with a high degree of

business expertise, but low levels of

knowledge or past experience with social

enterprise or the nonprofit sector

68 organizations

Experts – those running a social

enterprise with a high degree of knowledge

135 organizations

Not surprisingly, as the nonprofit sector has grown, so too has the number of

organizations that provide capacity-building5 assistance. The study of nonprofit

management emerged as a distinct field in the late 1960s and, until recently, it was

small and fragmented. During the past two decades, the number of academic and other

research centers focused on the nonprofit sector has grown. For example, recent studies

suggest that close to 700 nonprofit management support organizations exist.6 As Lester

Salamon notes in The State of Nonprofit America (2002), “what was once a scatteration

of largely overlooked institutions has thus become a booming cottage industry dedicated

to the proposition that nonprofit organizations are distinctive institutions with enough

commonalities, despite their many differences, to be studied, represented, networked,

serviced, and trained as a group.” In fact, the Alliance for Nonprofit Management

(formerly Support Centers of America) has emerged as the professional association of

individuals and organizations devoted to improving the management and governance

capacity of nonprofits and assisting nonprofits in fulfilling their missions. The figure

below shows the range of providers (“capacity builders”) available to nonprofits and

examples within each of these categories.

5 Capacity-building has become the commonly used term to describe “activities that strengthen nonprofits so they can better achieve their mission. Connolly, P. & York, P. (2003). Building the Capacity of Capacity Builders. The Conservation Company. 6 Salamon, Lester, ed. The State of Nonprofit America. Brookings Institution Press, Washington, D.C. 2002.

As illustrated in the figure above, the providers represent many forms and sometimes

cross-over between categories. For example, Annie E. Casey Foundation also provides

consulting services to its grantees and many consulting firms go beyond consulting to

provide community trainings and education.

In recent years, nonprofit experts have written numerous books, such as Forces for

Good7, to help nonprofits translate for-profit strategy into meaningful applications in

the social sector. For example, in High Performance Nonprofit Organizations:

Managing Upstream for Greater Impact, Letts, Ryan, and Grossman endorsed the

notion of “cultural adaptation” from the business sector, which “extract[ed] ideas and

processes from one environment for testing and application in another.8”

Flywheel is operating within this capacity-building industry as a “hub” which

intentionally provides cross-over between training, consulting, and management

7 Crutchfield, Leslie and Heather McLeod Grant. (2008) Forces for Good. New York: John Wiley & Sons. 8 Letts, C., Ryan, W. P. & Grossman, A. (1999). High Performance Nonprofit Organizations: Managing Upstream for Greater Impact. Hoboken, NJ: Wiley & Sons.

Nonprofit Capacity Building Providers

support organizations and supports the notion of business extraction into the nonprofit

sector. In addition, Flywheel has concentrated its offerings to support exclusively

organizations wishing to pursue social enterprise. Within the larger industry, this is a

further specialized class of organizations.

Since the concept of Flywheel is intentionally unlike others within Cincinnati, we

evaluated close rivals. The first segment we operate in is the organizations and

individuals that provide consulting, coaching and support for nonprofits on social

enterprises. Our survey of Greater Cincinnati nonprofits9 report working with the

following capacity builders:

Capacity builders used (%

using each type)

Operating

Social

Enterprise(s)

Considering

Social

Enterprise

Total group

(Operating +

Considering)

Community Wealth Ventures 14 6 10

Health Foundation 39 35 37

Executive Service Corps 28 15 20

Universities (e.g. Miami, UC,

Xavier, Cincinnati State)

22 10 15

Used Volunteer 31 13 20

Other 36 12 23

None of the above 11 35 25

Within the Other category, nonprofit organizations used experts at nonprofit start-ups,

Cause Impact, the Social Enterprise Alliance, the Grantsmanship Center and the Yale

School of Business/Goldman Sachs. To estimate its size, we used benchmark data from

ESCC. We estimate the current segment size of Greater Cincinnati nonprofit capacity

builders at about $1 million in annual revenues supporting about 500 nonprofits per

year. Based on data from ESCC, we are expecting that there will be minimal growth in

this segment.

9 Flywheel Social Enterprise Survey Results - February 1, 2011

The second segment we operate in is nonprofit leadership training and development.

Our rivals in this segment are similar to those above – universities, Health Foundation,

and ESCC. Talbert House also operates the EXCEL leadership program targeted to

rising stars within the sector. We estimate this industry to be about $1,300,000

annually, based on a conservative estimate of $960 per year per nonprofit leader and

about 1,354 nonprofit leaders needing training and development. This is based on the

fact that there are 1,354 public charities with revenue over $25,00010 and assumes that

only 1 leader per organization per year on average receives external leadership and

development training. Based on our primary research, the nonprofit leadership training

and development segment is growing because of the increased leadership demands of

delivering more with less resources and the upcoming succession planning challenge

caused by retiring baby boomers.

The third segment we operate in is social enterprise support organizations, which is an

issue-specific management support organization. Currently, there are not any rivals that

provide these services in Greater Cincinnati/Northern Kentucky. These organizations

provide a suite of services to support organizations moving through the social enterprise

phases. The services are intensive and provide a range of services, including mentoring,

networking, best practice dissemination, consulting and access to capital. Based on

estimates from other communities and our own market research, we estimate this

industry to be about $680,000 per year.

We are excited to note that there are several benchmark organizations operating in

other markets that we studied to estimate the potential size of our market and identify

industry best practices and trends11. In general, these benchmark organizations have

intensely supported about 3 to 14 organizations per year through the phases of ideation,

feasibility assessment, business planning and piloting over a period of 6 months to 2

10 Ferrante, Joan and Missy Gish. State of Northern Kentucky/Greater Cincinnati Nonprofit Sector. Northern Kentucky University, 2006. Accessed March 22,2011 at http://civicengagement.nku.edu/docs/nonprofitforweb-2.pdf 11 Flywheel SESO Research and Analysis - February 17,2011

years per client. They also serve about 50 to 120 clients total per year through other

services, including training, networking and other engagements.

Organization

(Location)

Total

Served

Years of

Operation

Average

Nonprofits

per Year

Community Impact

Centre for

Social

Innovation

(Toronto)

300 6 50 Members have $25 million

annual revenue. 30% of

members feel more interest

has been generated from

funders.

The Idea

Village

(New Orleans)

570 8 14 $87 million annual revenue

and over 1,000 jobs created.

Allocated $2.5 million in

capital to 157 entrepreneurs.

REDF

(San Francisco)

NA 13 10 Original portfolio has $12

million annual revenue and

over 3,700 people employed

by social enterprise.

The Mind Trust

(Indianapolis)

NA 5 6 Allocated approximately $3

million in start-up capital.

Parramatta

Social

Enterprise Hub

(Parramatta,

Australia)

150 3 50 21 employment

opportunities for the

seriously disadvantaged.

Increased the SE network

from 25 to 150

organizations.

Social

Innovation

Accelerator

(Pittsburgh)

NA 8 (2001 to

2009)

120 Clients received access to

capital, business

development support,

mentoring and networking.

Based on market research, we believe it is most important to focus on the social

enterprise support organization industry segment. While we will provide training and

consulting, we are closer in aspiration to this segment. We also believe – due to

economic and social trends – that this segment has the most potential for growth.

3.2 Industry Outlook

Our market research has shown that the overall social enterprise capacity building

industry will experience strong growth over the next decade as funders expect more

entrepreneurial activity from nonprofits and nonprofits realize the potential benefits of

social enterprise for both economic and social ends. Currently, a number of trends

support this growth, including:

 Reduced reliance on philanthropic and government grants;

 Increased support for programs to assist the hard-to-employ;

 Infusion of talent based on growth of social entrepreneurship programs and the retirement of the baby boomer generation;

 Increased support from nonprofit boards for integrated nonprofit and business leadership skills; and

 Strong purchasing trends from consumers interested in supporting causes.

While these remain positive, we will also monitor negative trends, which could impact

Flywheel, including:

 Increased mergers and closings of nonprofits – which will lead to a smaller market size;

 Reduced funds for professional development; and

 Reduced staff sizes – which could lead to less time to be focused on social enterprise.

3.3 Industry Best Practices

As we evaluated best practices and areas to explore for our business model, we looked at

four related segments – capacity builders in general, social enterprise support

organizations, business incubators in Greater Cincinnati, and nonprofit consulting

practices. Based on an environmental scan of secondary sources, the following eight

core characteristics were identified as requirements of effective capacity-building:

 Comprehensive – offers one-stop shopping with an array of content areas

 Customized – custom-tailored to type and stage of life cycle

 Competence-Based – given by highly qualified consultants

 Timely - information is relevant

 Peer-connected – allows peer networking and connections

 Assessment-based – begins with assessment of needs and assets of nonprofit and community

 Readiness-based – client is ready to receive the intervention/engagement

 Contextualized – aware of other activities happening within nonprofit that could support or detract from efforts.12

Many nonprofit leaders have stated that the system of providing capacity-building

services to the nonprofit sector is unfortunately fragmented within the Cincinnati MSA.

Trainings are often designed to meet external funding requirements or the perceived

needs of the sector. The result is canned approaches to specific problems, which often

lack the flexibility to respond to the individual needs of nonprofit organizations or

create sustainable change. Alternatively, customized solutions are available, but they are

typically short-term and often cost-prohibitive. We have built our business model

around these elements – both to attract nonprofit organizations to work with us and to

increase our social impact.

Specific to social enterprise, the best support organizations provided superior client

engagement by meeting the client exactly where they are with exactly what they need to

progress to the next phase. Engagements provided very high quality and intensive

support services, which lasted from 6 months to 2 years. Many had a rigorous intake

process to ensure the best venture ideas and organizations get the support they need.

Many also had a large connected expert network of supporters, funders and functional

expert resources, mentors and referring sources to generate additional clients. In

addition, they conducted strong advocacy for social enterprise to not only bring in

clients, but also to build broad awareness among key stakeholders and the community.

We were particularly interested that the support organizations with the highest

community impact (revenues and job growth) provided direct access to social enterprise

12 Analysis conducted by Duke University in an independent project, which will be published in 2011.

capital grants to remove the funding barrier from the best enterprises. The following is

a summary of critical success factors that will be applied to Flywheel:

 All offer comprehensive support services across all phases;

 All are flexible to offer what is needed when it is needed;

 All implement rigorous selection and extended service periods for the most intensive services and highest potential ventures and organizations;

 All provide access to their strong expert network;

 Some provided capital directly to clients;

 Some excelled at measurement and evaluation; and

 Some leveraged collaboration and partnerships and engaged the community to increase available resources.

Within Greater Cincinnati, we conducted benchmarking of business incubators to

identify potential partners and generate additional best practices and success factors.13

Business incubators provide a comprehensive suite of services for new for-profit

companies to successfully start up and grow. The services include direct financing,

access to venture capitalists, business planning, coaching, networking and mentoring

and incubation/start-up space. We identified that the 4 strongest business incubators -

Hamilton County Business Center, C-Cap, Queen City Angels and Cincy Tech.

Interestingly, the key best practices and success factors from these 4 leading business

incubators are similar to the social enterprise support organizations:

All provide comprehensive support services that cover all phases;

All utilize a rigorous selection process to focus on the most promising ventures;

All provide funding via direct financing and/or via venture capitalists;

All have a broad range of experts for networking, coaching and mentoring; and

All define a clear focus area in terms of geography and/or industry sector.

Based on unpublished research conducted by Duke University, the nonprofit consulting

sector is split between sole practitioners, boutique firms, and larger nonprofit consulting

firms. As expected, there is a high correlation between quality of experience and pricing.

The rock stars within the sector have an important combination of business acumen,

extensive nonprofit experience, and strong consultative skill set. Currently, this skill-set

is hard to find, but with the influx of talent it will become more commonplace. The best

13 Incubator Research and Analysis - January 18, 2011

firms customize their experience for each client and understand that their business

model is dependent on repeat business and referrals.

Taken together, Flywheel has filtered these best practices and developed a business

model that leverages the best practices from each segment. Primarily, we believe that

the experience of the client is paramount. It will start with an individualized experience

based on which customer segment they are in and providing resources consistent with

each segment‟s needs. From the very beginning, we will assess readiness and

organizational attributes, such as culture, social enterprise attitude, and board

awareness. Once we engage with a client, we will provide them with an advisor through

a matching process based on consulting style and subject matter expertise. Once

engaged, we will focus on two outcomes – fulfilling the needs for the engagement and

increasing the capacity of the organization to increase their likelihood of success.

Throughout the experience, we will be using a rigorous quality improvement and

evaluation process to assess real-time satisfaction and improve our services in the long-

term. Within the nonprofit sector, positive and consistent “word of mouth” is required

to survive and thrive in Greater Cincinnati. Once we have developed a strong track

record of consistent high-quality experiences, the best practices suggest that client

acquisition becomes a virtuous circle of repeat engagements and referrals.

3.4 Description of Market Need

3.4.1 Customer Need

Flywheel surveyed 123 nonprofits in the greater Cincinnati area about their social

enterprise needs and current resources available to meet their needs.14 As a follow-up to

this survey, we conducted 3 focus groups with each of the main target customer groups

(have not considered and are interested social enterprise15, have considered social

enterprise16 and currently operating one or more social enterprises17) to better

14 Flywheel Social Enterprise Survey Results - February 1, 2011 15 Flywheel Focus Group Summary – Interested in Social Enterprise - March 8,2011 16 Flywheel Focus Group Summary – Considering Social Enterprise - February 28,2011 17 Flywheel Focus Group Summary – Operating Social Enterprise - March 11,2011

understand the needs of each group and generate insights on how we could best meet

the needs of each group. As discussed in the previous section, our analysis of this

primary research led us to identify 5 unique social enterprise segments based on their

current social enterprise knowledge and experience and their social enterprise launch

phase. Each segment has very distinct needs and social enterprise challenges. In order

to illustrate these needs and develop a marketing strategy, we developed unique

customer profiles:

Sally Seeker has become interested in social

enterprise in the past 3 to 6 months after hearing

about social enterprise from other nonprofits and

becoming intrigued by a free social enterprise

workshop. She is generating board support and

testing board members for skill and interest in

leading the investigation of social enterprise. She is

studying existing social enterprises in the youth

services sub sector to find successful benchmarks

and best practices. She has used her board and

existing network but no paid capacity builders at this

stage. To become a “Gatherer” she needs help to find the right type of social enterprise

venture, energize the board, recruit a board champion and continue her steep social

enterprise learning curve.

Gail Gatherer has been learning for about a year

and understands social enterprise but does not

know how to go about it. She is being pressured by

her key funders to launch a social enterprise in the

health sector in the next few years. She may have a

key volunteer willing to provide a revenue

generating service or resource at no charge to the

agency. She has learned enough to realize the high-

risk/reward potential of social enterprise and the key specialized skills and experience

such market research and business skills are required. Her staff does not have the

capacity to take on this work. She has tried to work with some existing social enterprise

capacity builders but feels they are too general and not very effective for her specific

needs. To become an “Ideator” and “Tester” she needs tailored consulting and

leadership help to develop a plan to manage risk, improve venture fit, conduct market

research to scope out options and energize the board.

Tom Tester was assigned 2 years ago to lead and

develop a workforce development social enterprise that

will hopefully launch in 2012. He has been struggling to

find the “magic bullet” venture that will fit perfectly

with his very large agency‟s overall mission, be

appealing to the board and breakeven in 2 years. His

two years of experience has built up his social

enterprise skills and knowledge but he needs help on

board alignment and decision-making. He needs an

external resource to lead the development of additional

venture ideas with better fit, provide a comprehensive

analysis and evaluation/decision making process to test

a few key ideas and progress them to a full business

plan and launch or reject the ideas. The current

internal process has been consuming too many internal

staff resources. He has been very frustrated with the low effectiveness of current local

social enterprise capacity builders. In order to meet his 2012 launch date, he is

convinced he needs a specialized social enterprise hub such as Flywheel that can

provide a feasibility assessment at the quality level of a national provider at affordable

regional pricing. He has budgeted for this external help over the next 12 months.

April Apprentice is a newly minted MBA with 5 years

business experience in the private sector. She has

recently been hired to run an education social enterprise

with $90,000 annual revenues that has been running for

8 years with 3 staff members. She is new to the

nonprofit sector and is struggling to learn the nonprofit

culture in order to effectively develop her staff. She has

been asked to investigate the launch of an additional

education social enterprise in the next 3 years while

operating the current enterprise. She is on a steep

learning curve for both social enterprise and nonprofit

culture and expectations. She is very dissatisfied with

current social enterprise capacity builders because they are either too basic or too

advanced for her needs. She needs to develop a strong network in the educational

nonprofit sector. She is willing to share her marketing skills with other social enterprise

apprentices in exchange for nonprofit cultural understanding. She needs an intense

peer learning “boot camp” experience to quickly build her network, come up to speed to

optimize the current enterprise and learn how to launch a new one.

Edward Expert has been the director of a $1

million annual revenue human services social

enterprise managing a total of 15 staff members.

He is trying to maintain revenue growth to

build the enterprise and support the agency

mission. His main concerns are facilities

improvement and staff development although

he is constantly on the lookout for new social

enterprise opportunities that could be launched

in the next 3 years. He has a very high level of

social enterprise skills and tacit knowledge and

is satisfied with many of the current social enterprise capacity builders. He has very

specific needs such as legal or intellectual property advice and estimating the right

amount of capital and raising it in a timely fashion through access to venture capitalists.

He needs market research, marketing, business plan writing, cash flow management,

entrepreneurial mindset, cost projections, fixed cost allocation, variable profit margin

and business building skills for his key staff. He also needs overall strategic planning

help to prevent mission drift and select the best fit areas for future venture

opportunities. He is very interested in joining an expert social enterprise membership

group that could provide access to “prequalified” social enterprise expert resources and

learn advanced best practices.

3.4.2 Ability to Pay

The Testers, Planners and Pilots have the highest willingness and ability to pay for

Flywheel’s services because they recognize the clear return on investment for using

Flywheel vs. internal resources. In the focus groups, we found out that several

nonprofits have been working on social enterprise for several years trying to find an

appropriate venture that fits all the requirements of mission fit, board approval and 2-

year payout. They are moving from one suggestion to the next without an organized

approach. They seem paralyzed from making the go/no-go decision. If an organization

spends about 25% of a person for 2 years on this non-decision, the resource cost could

be as much as $50,000. Focus group participants were willing to pay $10,000 for a

feasibility assessment, which represents an ROI of five to one. There is great value in a

rapid high-quality, data-driven decision. This ROI does not even include the potential

revenue from the social enterprise launch.

Our research18 found that nonprofits in these segments have budgeted $1,000 to

$10,000 for social enterprise feasibility assessment or other consulting services in the

next 12 months. 65% of them have worked with external social enterprise capacity

builders and they rate their effectiveness at a fairly low level,19 which would make

Flywheel an interesting alternative among this segment. This segment is looking for

high-quality services at the affordable price. 18 Flywheel Focus Group Summary – Considering Social Enterprise -February 28,2011 19 Flywheel Social Enterprise Survey Summary - March 15, 2011

The Expert segment, which included larger organizations with higher revenues, is also

willing and able to pay for services. 89% of this segment has worked with external

capacity builders with an average of 54% rating them as effective or very effective.20 This

lower-than-expected satisfaction rate gives Flywheel room to compete for services.

Some are also willing to pay $1,000 per year to join an expert resource network to get

access to best practices and prequalified resources.21 This has clear ROI based on the

time factor to individually recruit and qualify expert resources.

We also believe the Apprentice segment is willing to spend a portion of their training

and development budget to accelerate the development of new social enterprise leaders,

which they have spent a fair amount of time and money to recruit. There is clear ROI in

developing and retaining this talent.

The other segments – Seekers and Gatherers – have much more limited willingness and

ability to pay for services. For obvious reasons, they are not yet convinced that social

enterprise is the right direction for their organization and/or they have not found the

right idea to invest in. Because these segments are critical to our mission of developing

social enterprise capacity, Flywheel plans to provide subsidized and free services to

these segments. We feel it is appropriate to invest in free training and 2 to 6 “free”

consulting hours with the Seekers and Gatherers to help them develop enough capability

to understand the benefit of social enterprise, find some opportunities to explore, and

appreciate the value provided by using Flywheel.

3.5 Description of Customer

Flywheel’s ideal target customer is the nonprofit considering launching a new or

additional social enterprise in the next few years. This customer is already spending a

significant amount of Executive Director and staff time trying to develop and decide on

the appropriate venture that will fit their mission and financial goals. They can readily

see how a high-quality expert in social enterprise can save them money and time. The

20 Flywheel Social Enterprise Survey Summary - March 15, 2011 21 Flywheel Focus Group Summary – Operating Social Enterprise - March 11,2011

most important factor in the decision to hire an expert is the level of experience and

knowledge of social enterprise as well as subject matter expertise in the nonprofit‟s area

or venture. They need someone who is an outsider with a different set of skills to

facilitate idea generation, market research, financial analysis and decision-making. To

make it financially manageable, they need high-quality, but lower-cost services and

cannot afford consulting firms from outside of the region. The experience is important

to them - they value learning new capabilities by participating in the process and

retaining ownership of the ultimate decisions. In other words, they are looking for an

advisor that understands their organization and they can trust to lead them through the

social enterprise process. This is the perfect customer for Flywheel – someone with a

moderate level of knowledge, high expectations for service, and the ability to pay for

high-quality work.

Many nonprofits need alternate sources of unrestricted income to grow and even sustain

their current missions. Many organizations are spinning their wheels trying to get the

“perfect” social enterprise. As other organizations become successful, the pressure is

building to try to find an appropriate social venture that fits their mission and revenue

needs. We feel it is vital to build and develop capability for this at the early stages before

nonprofits take unsupported risk and conclude this is not a viable funding source.

There is a perfect storm for the Flywheel concept in the Greater Cincinnati region.

Many nonprofits have seen the results that can be provided by social enterprise support

services, such as those provided by the Health Foundation and Community Wealth

Ventures. It is up to Flywheel to deliver on this promise and build a hub that will meet

and exceed their expectations.

4.0 Competitive Analysis

4.1 Competitive Environment

The competitive landscape in Greater Cincinnati is complex and fragmented. This

environment will work to Flywheel’s advantage, because of its coordinated and

comprehensive offerings through its hub business model. Flywheel’s direct

competition is wide-ranging, including:

 National nonprofit consulting firms (e.g. Community Wealth Ventures, Root Cause)

 Local consultants (e.g. Social Impact Architects, JPS)

 Local business incubators (e.g. Cincy Tech)

 Local foundations (e.g. Health Foundation)

 Executive Service Corps

 Universities

In the recent survey of 123 nonprofit organizations, the top two direct competitors were

the Health Foundation with 38% of organizations using them for capacity building and

Executive Service Corp with 20% of organizations. While the intensity of competition

with and between these direct competitors is not strong, the impact should not be

underrated.

In addition, within each customer segment, they had different experiences with each of

these competitors. In general, as the customer was more experienced and

knowledgeable about social enterprise, the more satisfied they were with our

competition within the community. We can conclude from these results that early-stage

organizations will be more receptive to Flywheel than mezzanine-stage organizations.

Flywheel is more concerned with the indirect competition. The first category includes

using volunteers or staff to do it themselves. In the recent survey of 123 nonprofit

organizations, 38% of organizations used volunteers. While in the long-term, we hope

that nonprofit organizations will be self-sufficient, the recent experience with failed

enterprises in Greater Cincinnati has happened, in part, due to lack of conducting

feasibility assessments and insufficient care given to the financial modeling. These

experiences could influence others and lead them to not even consider social enterprise.

The second category is the nonprofit who has never considered social enterprise as an

option. While social enterprise is not for every organization, we hope to create an

environment where each organization carefully considers social enterprise as an option.

4.2 Profile and Analysis of Direct Competitors

Flywheel National firms

Local consultants

Local incubators

Universities

Target Market

Nonprofits Nonprofits & For-profits

Nonprofits & For-profits

For-profits Nonprofits & For-profits

Key Products &

Services

Education Coaching

Consulting Mentoring

Networking Resources

Education Consulting

Consulting Coaching

Mentoring Education

Networking Resources

Education Consulting

Price Local Market National Market

Local Market Reduced Free

Talent High-quality High-quality Varies Varies Varies Key

Strengths

Coordinated Hub Model Full Service

Local

Reputation

Reputation Local

Expertise

Track record Local

Connection to capital

Price Connection to

experts

Key Weaknesses

New to Marketplace

Not Local Price

Availability Mixed

reputation

Lack of nonprofit

knowledge

Availability Mixed

reputation Business Structure

Nonprofit Varies For-profit Varies Nonprofit

Because we are collaborating with the Health Foundation and ESCC through Flywheel,

we have not included them as direct competition. Instead, we hope to develop

partnership agreements that create win-win referral and resource arrangements. We

also hope to work cooperatively with local business incubators and have already have

promising conversations with C-Cap/Queen City Angels to serve as subject matter

experts and mentors and cross-pollinate best practices.

4.3 Porter’s Five Forces Analysis

Another method of evaluating

attractiveness of a market is Porter‟s

Five Forces analysis. Using this

analysis, we believe that the market

is relatively attractive. The highest

threat comes from the threat of

substitutes – doing nothing or using

volunteers. Flywheel can overcome

this through marketing and

cooperation with the nonprofit

needing to use volunteers due to

availability and funding constraints.

The lowest threat comes from the

nonprofits themselves – currently, they do not have a lot of buyer power as a group.

Flywheel needs to continue to monitor other threats, including suppliers (e.g.

Flywheel talent pool) and potential entrants.

4.4 Competitive Advantage

Among direct competitors, we are the only provider who exclusively serves nonprofit

organizations with a wide range of services offerings and resources in the Greater

Cincinnati region. We will win over customers to try Flywheel through our high-quality

talent pool and our value-based pricing. Among indirect competitors, we need to

continue to raise awareness through our marketing efforts about social enterprise and

Flywheel’s services. If they choose to use a volunteer, we will provide support for that

volunteer. Hopefully through that support, the volunteer will recognize the value of

bringing in an expert in social enterprise when needed. Because of the increased interest

in social enterprise, we also anticipate that new and existing organizations will enter the

marketplace with social enterprise/business support services. It is our hope that we will

be able to work cooperatively with these organizations and provide referrals to our

specific niches.

In every case, Flywheel will position itself as the market leader in the social enterprise

marketplace through its coordinated and comprehensive resources, high-quality talent

pool, value-based pricing, and mission-based efforts at larger scale change. Based on our

market research, we know that this positioning is valued by our customers and will drive

mind share and heart share, which ultimately leads to market share. In addition, our

uniqueness as the local community-owned hub and as a social enterprise ourselves

provides us with an advantage that would be difficult to replicate.

5.0 Organization and Management

In the next 6 months, Flywheel plans to move from underneath the incubation

provided by the founding partners toward an integrated organization governed by an

Advisory Council and staffed by its own employees/contractors. As stated in the

Introduction, the founding partners believe this is the best operating structure that

supports this business plan‟s customers, community, and value proposition. The only

open question is the exact legal structure, which will be discussed and decided upon by

the Advisory Council when officially formed. Based on our step-up model, we will

continue under incubation during the spring and move toward an integration over the

summer.

5.1 Organization Staffing Model

Starting this summer, Flywheel plans to staff projects through a flexible staffing model

– part-advisor (paid), part-volunteer. We will be using a mastery learning model to staff

projects and train staff/volunteers to their desired level. All individuals will enter at the

apprentice level and move up as they acquire skills and knowledge. The requirements

for each level are as follows:

 Apprentice: Assists as a volunteer on

projects as subject-matter expert or market

research assistant

o Nonprofit Essentials Training

o Social Enterprise 101/201

o Coaching Skills

o Market Research

 Journeyman Advisor: Assists on

projects or leads less complex project under

supervision

o All of the above

o Facilitation Skills

o Project Management

o Advanced Business Skills

o 50 hours of shadowing

o 100 hours of supervised work

 Master-Class Advisor: Leads projects/mentors staff without outside

assistance or support

o All of the above

o 300 hours of supervised work

o High rankings in all four components of learning agility – mental, people,

results, and change

For example, for a complex feasibility assessment for a human services organization, we

would staff the project with:

 Master-Class Advisor - leader; sets project plan; manages client relationship

 Journeyman Advisor – observes project; assigned 1 or 2 major tasks

 2-3 Apprentices – one who is a subject-matter expert on healthcare issues and

one who will assist with market research efforts.

We will be using a revenue-sharing, incentive-based compensation structure. At least in

the first year, the advisors will be contract staff and be paid through a 60/30 revenue

split for master-class and 50/40 for journeyman, which is a similar arrangement to

other management service organizations. This split has a number of advantages – it

incentivizes the contractors to negotiate for higher payments and allows us to flex

compensation based on the needs of the client. The remaining 10 percent will be paid to

the advisor(s) based on client satisfaction and meeting deadlines. This balanced model

between paid contractors and volunteers gives us the best of all worlds – flexible

capacity, a consistent experience, and subject matter experts on a range of topics.

The engagement staff will be supervised by an Executive Director who will lead

Flywheel’s strategy and will be available as needed as a Master-Class advisor. Ideally,

s/he will be an experienced professional with an advanced degree, preferably an MBA,

and extensive nonprofit and consulting experience. S/he will start as a contractor and,

as Flywheel scales and forms a legal structure, will be moved to employment status.

S/he will be responsible for the handling and assisting nonprofits as they start the

process of engaging in social enterprise to assess their interest and ensure that they have

the right plan in place. S/he will manage external relations, including the Advisory

Council, stakeholder groups, and founding partner relationships. S/he along with the

Advisory Council will be responsible for fundraising and managing the finances for the

organization. S/he will lead, along with support from the Advisory Council, advocacy

projects, including SEA Chapter formation, social enterprise directories and certification

projects, and advocating for capital for social enterprises. S/he will also be responsible

for all quality control initiatives, including monitoring of projects and random quality

checks, and serving as the liaison to Miami and CWV for evaluation efforts.

During the spring/summer, Flywheel will contract with Suzanne Smith, who currently

serves as lead partner for Flywheel for this role with the aspiration of finding a

permanent replacement by the fall. Suzanne Smith will continue in her role as executive

director of the Leadership Council for Human Service Executives. She is founder and

managing director of Social Impact Architects, a nonprofit consulting firm. She is a

former senior consultant for Community Wealth Ventures, a Washington, D.C.-based

consulting firm that specializes in nonprofits where she led their Cincinnati work from

2008-9. She holds a research fellowship at the Center for the Advancement of Social

Entrepreneurship at Duke University. She serves on the national board of the Social

Enterprise Alliance, the national member-driven organization for social enterprise. In

2010, the Alliance gave her the Next Generation Social Entrepreneurs Award,

recognizing outstanding social entrepreneur under age 35. She earned an MBA from

Duke University's Fuqua School of Business, where she was a scholar at the Center for

the Advancement of Social Entrepreneurship. (See resume in Appendix).

The Executive Director will be assisted by two other contract positions. Flywheel will

hire a contract/part-time Volunteer Manager who will be responsible for recruiting,

hiring, and tracking volunteers interested in assisting with engagements. S/he will have

past experience with volunteer management either at a nonprofit or through a CSR

position at a corporation. We will also hire a contract/part-time Administrative

Assistant who will help with operations, including bookkeeping, website maintenance,

and event coordination.

5.2 Succession Planning

Flywheel will follow best practices developed by Tim Wolfred of CompassPoint

Nonprofit Services, a management service organization in California. We will have plans

for the two types of succession – planned and emergency. For each, we will have a

leadership development plan in place. The mastery level would be elevated to have an

extra level to work with our master-class talent to be groomed to take on the Executive

Director role when needed.

5.3 Advisory Council

Based on best practices gathered through interviews and secondary research, Flywheel

has developed a two-tiered governance structure – with groups representing each

interested group (investors, corporations, and community), which filters into a larger

Advisory Council. The Council will be responsible for overall governance of Flywheel.

We will use John Carver‟s policy governance model, which is based on a shared staff-

board responsibility. Once the Council is formed, we will share these best practices and

develop a charter and job description for each group.

Flywheel DRAFT Partnership Model

Investors Circle

Corporate Roundtable

Legal Champion

$20K

Finance Champion

$20K

Flywheel Partners

Marketing Champion

$20K

Operations Champion

$20K

Media Champion

$20K

X X X XAdvisory Council

Community Partner Team

X X X X

X X X

Flywheel Partnership & Funding Model Description Investment Promotion

Founding Partners

• Original 4 partners – Miami, Centric, Leadership Council, and ESCC • Has 1 seat on Advisory Committee

• As defined by proposal

• Included on logo as defined by Branding Guidelines during spring/summer

Investors Circle •Original & new philanthropic partners who will provide assistance to support overall initiative or provide scholarships for nonprofits to participate • Has 3 seats on Advisory Committee – 2 private foundations and 1 corporate foundation

• At least $25,000 • No exclusivity

• Included on website as funder • Varies based on partner – connection to nonprofit, guest speakers/evaluators, and service on Advisory Committee

Corporate Roundtable

• Corporate partners who will provide cash assistance to offset costs and/or in- kind services to assist nonprofits • Has 2 seats on Advisory Committee

•At least $20,000 cash & in-kind donation •Exclusivity possible

• Included on website as partner • Varies based on partner – assistance with curriculum on topic area, guest speakers/evaluators, connection to nonprofits, service on Advisory Committee

Community Partner Team

•Community partners who will provide assistance with goals of project – connection to nonprofits and/or assistance to nonprofits. • Has 3 seats on Advisory Committee

• None • Included on website as partner • Varies based on partner – service on Advisory Committee, connection to nonprofits

Advisory Council

•Votes on strategic issues related to Flywheel • Has 15 seats total, including 3 at-large seats

• N/A

5.4 Performance & Knowledge Management

Beyond the independent Monitoring & Evaluation of Flywheel provided by Miami

University, we will have an internal performance management system to ensure

Flywheel has high-quality people, processes, and content. The Executive Director as

the gatekeeper to the initial work will continue to monitor engagements, check-in with

clients throughout the engagement and at midpoint, and conduct random quality

checks. The engagement team will also be monitoring progress toward project goals as

well as satisfaction and at the end of the engagement through an After-Action Review.

This will be enabled by establishing “cookbooks” for each engagement process to assist

advisors with content and ensure consistency among engagements.

In addition, through Salesforce, we will keep comprehensive client records of meetings,

interactions, and growth. These entries will be monitored and we will have regular

meetings to discuss progress toward goals, troubleshoot issues as a team, and review

after-action review results and learnings. Through our online sharing service, we will

create a document hierarchy and keep all documents created for engagements. At the

end of every engagement, before incentive pay is paid, the online sharing service and

Salesforce record will include all client engagement documents and be up-to-date.

5.4 Legal Issues

While Flywheel will be an environment of sharing and co-creation, we will still need to

protect our proprietary content and process. In order to accomplish this, we will have a

brief contract with staff/contractors/partners that limits their ability to use the

materials without Flywheel’s permission and to compete with Flywheel for social

enterprise clients within the region. Upon exit from Flywheel, we will also have an exit

checklist to ensure that all passwords are changed and materials are collected. It is our

hope that what staff/contractors/partners have learned is retained and used for the

betterment of the community in their future work; however, Flywheel needs to do

everything possible to protect itself from competitive threats.

6.0 Operations

Flywheel is a service-based operation, which is defined as one that derives more than

50 percent of its sales from providing services. The service operation relies more heavily

on people and processes to provide services and maintain quality standards than on

equipment, location, and procedures. Services are economic activities that produce time,

form, or psychological utility. As suggested earlier, Flywheel produces a number of

benefits, including reduced time deciding on and starting a social enterprise, increased

confidence, and increased enterprise success due to our process.

Based on the Wheelwright and Hayes product-process matrix and later the Schmenner

Service process matrix, Flywheel is best classified as a professional services firm. As

such, Flywheel will need to tailor services to customers‟ specifications (with

opportunities to standardize routine tasks; it is important to note this development in

the legal profession around divorce and bankruptcy cases), be customer-oriented and

quality-centric, and gain employee loyalty. They are also characterized by heavy needs

for workload scheduling, employee interactions, and managing growth.

Flywheel’s operations needs to support these strategic issues, including providing a

high-touch customer experience and high-quality and consistent service delivery. Over

the next few months, Flywheel will be developing management policies and systems to

support these goals. We also recognize that during our step-up process, we will be

maturing as a professional services firm as articulated by Marc McCluskey‟s service

maturity model:

 Stage 1: Baseline services – focus on responding to requests in a timely manner;

 Stage 2: Operational efficiency – focus on cost reductions;

 Stage 3: Customer support excellence – focus on efficiency; and

 Stage 4: Service excellence – balance between service efficiency and customer

satisfaction

It will be important over time to deepen our understanding, beyond market research, of

our customers, their needs, and their ability to pay. This will allow us to differentiate

services and evaluate how current systems are at meeting customer needs and profit

objectives, which will make service more effective on all levels.

Given these insights, we have four distinct operational tactics and processes that will

support Flywheel – staff development (which was provided in Section 5.0), customer

experience (via customer process flow, service process flow, and engagement process

flow), use of information technology, and use of monitoring and evaluation.

6.1 Customer Experience

To illustrate our current thinking on customer experience, we have chosen to include

process flows on customer, service, and engagement on the next three pages of the

business plan.

6.2 Information Technology

Flywheel will leverage technology best practices and innovative solutions that enable

the Flywheel organization to be nimble and responsive to social enterprise customer

needs. The systems we implement will be best of class, and implemented with ease of

maintenance in mind.

6.2.1 Flywheel Communications (e-mail)

Flywheel will have an e-mail capability that enables its members to communicate with

nonprofits, funders, and other third parties on behalf of Flywheel. The requirements

for the e-mail solution are as follows:

1. The e-mail solution should be “light” on Flywheel managed infrastructure.

2. We will implement a solution that enables synching with smart phones and

other e-mail solutions, such as Outlook.

3. The e-mail solution should not limit the number of e-mail addresses

Flywheel will require (currently 20). We are planning for 200.

4. Flywheel’s e-mail address suffix should be „Flywheelcincinnati.org”.

5. We will implement a solution that is cost effective.

Status: Based on the above criteria, Flywheel has chosen to implement Google mail.

All members of the Flywheel organization have a Flywheel e-mail address.

The Flywheel Google mail solution will be implemented by consultants experienced in

setting up and administering this type of solution. At this time, and for the foreseeable

future, Centric Consulting will configure and administer Flywheel Google mail.

Centric will also train all Flywheel members on how to use Google mail.

Status: Google mail is fully operational, and is being used by the Flywheel

organization. Since this is a SaaS e-mail solution, the time required to administer

and maintain the solution is negligible.

6.2.2 Flywheel Scheduling

The Flywheel organization will have a calendaring capability that enables its members

to schedule meetings and plan events. The requirements for the e-mail solution are as

follows:

1. The calendaring solution should be “light” on Flywheel managed

infrastructure.

2. We will implement a solution that enables synching with smart phones and

other calendaring solutions, such as Outlook.

3. The Flywheel calendaring solution will enable overlay of member calendars

to facilitate review of member availability.

4. We will implement a solution that is cost effective.

Status: Based on the above criteria, Flywheel has chosen to implement Google

calendar. All members of the Flywheel organization have access to Flywheel

google calendar. Google calendar is fully operational, and is being used by the

Flywheel organization. Since this is a SaaS calendar solution, the time required to

administer and maintain the solution is negligible.

6.2.3. Flywheel CRM

The Flywheel organization requires a customer relationship management (“CRM”)

solution to track contacts, new social enterprise venture candidate “accounts,” and the

status of new ventures as they progress from concept through being self-sustaining.

Flywheel determined that it needs to complete a CRM software evaluation to

determine the “best fit” solution for our organization. The requirements for the CRM

solution are as follows:

1. CRM Scope (Functions):

a. Account Management

b. Contact Management

c. Pipeline Management

d. Outcome/Impact Measurement

e. Quality Improvement

f. Account Status Management

g. Analytics and Reporting

h. Key Word Search

2. The CRM solution should be “light” on Flywheel managed infrastructure.

3. We will implement a solution that is cost effective.

4. Up to 20 users at any given time would need to access the CRM solution.

5. Will need to have role based security to prevent unauthorized access.

6. Will need to have the ability to do email blast (not spam)

7. Will need to be configurable for nonprofits.

Status: Based on the above criteria, Flywheel chose to implement Salesforce.com

(“SF.com”). Centric Consulting facilitated the evaluation and selection process, and

has implemented a Flywheel “customized” SF.com solution. Currently, only

members of the Flywheel “Core Team” have access to our Flywheel SF.com site.

The Flywheel CRM solution will be implemented by consultants experienced in setting

up and administering this type of solution, with input from the Flywheel Core Team to

make sure that we incorporate fields and processes specific to the Flywheel Social

Enterprise Hub business model and processes. At this time, and for the foreseeable

future, Centric Consulting will configure and administer the Flywheel CRM solution.

Centric will also train all Flywheel members on how to use the CRM solution.

Status: Flywheel SF.com has been implemented, and is ready to be used by the

Flywheel organization for contact and pipeline management. Flywheel is

currently populating the SF.com site with data from our pilot feasibility study.

6.2.4 Flywheel Project Document Repository

Flywheel has determined that we need to have a virtual document repository for

Flywheel materials that need to be version controlled and shared across the

organization. Examples of the documents that we will maintain in a document

repository include:

1. Flywheel response to bid on Social Enterprise Hub

2. Flywheel proposal to Funders

3. Memorandum of Understanding

4. Business Plan

5. Partnering Agreements

6. Financial Documentation

7. Project Documentation

8. Business Process and Policy Information

One of the most important Flywheel assets is its growing social enterprise knowledge

base. As we extend our capabilities to offer services to nonprofits interested in

launching social enterprise ventures, we will need to capture this project documentation

so that it can be leveraged for future use. We also have collected a great deal of market

research and social enterprise survey data. All of this documentation will be stored in a

document repository.

Status: Flywheel has implemented a SharePoint site in which all documentation

will be stored and maintained. Flywheel is currently populating the document

repository with all Flywheel’s organizational and project documentation. Centric

Consulting manages the infrastructure for the site currently. At some point this

SharePoint site could transition to a hosting provider.

6.2.5 Flywheel Website (www.Flywheelcincinnati.org)

Flywheel recognizes that one of the most public facing aspects of our organization is

the Flywheel website. It communicates our mission, services and brand, and we feel it

is essential that the site is done well. The Flywheel website will contain the following

sections initially, but will be expanded as our organization and service offerings grow.

1. Show

a. About Flywheel

b. About Social Enterprise

c. Flywheel Services

d. Events & Resources

2. Tell

a. History of Social Enterprise in Cincinnati

b. Success Stories

c. Share your story

3. Connect

a. Get Engaged

b. Contact Flywheel

The Flywheel website will be implemented by Centric consultants experienced in

setting up and administering this type of solution, with input from the Flywheel staff,

to make sure that the site communicates our mission, services and brand effectively. At

this time, and for the foreseeable future, Centric Consulting will develop and maintain

the Flywheel website. Content will be managed by the Flywheel Partners, and access

to the website administration tools will be restricted to a designated administrator.

Status: www.Flywheelcincinnati.org is currently going through a final iteration of

development, though the url is active, and is being used for event registration. It is

currently being developed and administered by Centric Consulting with input from

the marketing team and Flywheel Partners.

6.2.6 Flywheel Technical Support

Technical support for all Flywheel system users is to be available during standard

business hours, or “normal business hours,” as defined below.

Suppor t

Type

Day of the Week

Mon. Tues. We d. Thurs. Fri day Satur day Sunday

Norma l

Business

Hours

8 AM– 6 PM

EST /EDT

8 AM– 6 PM

EST /EDT

8 AM– 6 PM

EST /EDT

8 AM– 6 PM

EST /EDT

8 AM– 6 PM

EST /EDT

Not

applicable

Not

applicable

http://www.flywheelcincinnati.org/

Users requiring assistance with Flywheel business systems will eventually contact the

Flywheel Technical Support Team at [email protected].

Initially, Centric Consulting will be providing technical support via its Solution Center,

located in Blue Ash, Ohio.

Status: Centric Consulting is currently providing Level 1 technical support services

for all Flywheel technical solutions, including the website. The effort required to

support our business systems is approximately 20 hours per month.

6.3 Monitoring and Evaluation

Flywheel has and will continue to use a combination of strategies to develop and

improve monitoring and evaluation (M&E) of its services. To this end, Flywheel has

focused on building evaluation capacity within the organization. The four keys to

building evaluation capacity22 are:

 Evaluation culture – regular assessments to improve programs. The evaluation culture is central to everything we do at Flywheel. M&E will be

conducted at multiple levels – the individual (clients and Flywheel management

team), organizational (engagement, satisfaction and impact of Flywheel on

client organizations and enterprises), hub (awareness and social return on

investment – SROI), and ecosystem (awareness, engagement, impact and

funding). Each program, service, partner and service provider will be evaluated

and held accountable to delivering the identified services in the spirit of

continuous improvement. This culture has already been established and initially

implemented through our pilot program that resulted in revision and

improvements in Flywheel’s services.

 Analytic expertise – knowledge of social enterprise and research methods. The analytic expertise at Flywheel is critical to the effectiveness of the M&E

activities. Flywheel combines practical knowledge of social enterprise, academic

research agendas (including the drivers of scaling social impact and attitudes

toward social enterprise) of leading academics/institutions (such as Miami

University‟s Center for Social Entrepreneurship and Duke University‟s Center for

the Advancement of Social Entrepreneurship), and appropriate scientific

research methods to develop and execute M&E activities.

 Data quality –validity and reliability, leading to credibility.

22 United States General Accounting Office: Program Evaluation – An Evaluation Culture and Collaborative Partnerships Help Build Agency Capacity (GAO-03-454, 2003).

mailto:[email protected]

In a perfect world, M&E would consist of large-scale, randomized control tests in

a lab experiment. Given the real world limitations of a small sample size, lack of a

control group, and limited control for external variance, the validity and

reliability of using of quantitative data is marginalized. Therefore, M&E will be

carried out primarily through longitudinal qualitative research. To increase the

validity and reliability of the qualitative data, Flywheel has begun

implementation of a rigorous, scientific process to insure credible data through

semi-structured interviews, data collection (recorded and transcribed), and data

analysis (multiple coders, data coded for major themes, and data auditing).

Quantitative data will be added – where valuable – to triangulate the findings.

 Collaborative partnerships – sharing of sources and expertise. Flywheel has and will continue to leverage and to share the best-in-class

expertise in M&E through important partnerships. To date, the sharing of

expertise has included the leveraging of intellectual and human capital across

founding partners (including social enterprise expertise, program evaluation

expertise and national social enterprise survey expertise), across leading

academic institutions focused on social entrepreneurship (Miami University,

Duke University and Catholic University of Milan), and across leading consulting

organizations (IDEO and CWV). In each case, the partnership activities are

focused on identifying and leveraging the best knowledge on social enterprise to

improve the overall M&E of both Flywheel and our collaborative partners.

The M&E activities of Flywheel have and will continue to be based on a development

process intended to create M&E tools for the purpose of assessing and improving the

services of Flywheel to improve the effectiveness of social enterprises in Greater

Cincinnati and Northern Kentucky area and for possible replication in others regions

around the country. Following is a brief summary of the process and progress on each

activity.

1. Survey of Social Enterprise in Greater Cincinnati: In conjunction with CWV, Flywheel has developed, administered and completed

a baseline survey of nonprofits in the Greater Cincinnati and Northern Kentucky

area to assess the awareness, practice and challenges of social enterprise. For the

purposes of M&E, the survey provides both an initial baseline of awareness and

engagement of social enterprise and an opportunity to compare activities in the

area to a larger national sample database of social enterprise activities previously

conducting using a majority of similar questions (to identify

similarities/differences and to allow eco-system analysis). Initial data analysis

has been conducted to align service offerings and to provide input into the

qualitative interview protocol.

2. Development of Qualitative Interview Protocol: For the purposes of M&E of Flywheel’s services and the impact on client

organizations, a qualitative interview protocol has been developed for use in

conducting assessments of client engagements. The interview protocol was

developed based on the baseline survey and prior research in the areas of social

enterprise and consulting engagements. The key areas of inquiry include: overall

evaluation of the client engagement, positives/negatives of the engagement,

evaluation of the people, evaluation of the content, evaluation of the process, and

intent to use again/recommend to another.

3. Qualitative Data Collection: After the development of the interview protocol, the collection of data began with

our pilot organization, Council of Aging. At the conclusion of the first milestone,

in-depth phone interviews were conducted with the two primary contacts

involved in the pilot project with Council of Aging. Semi-structured interviews

were conducted that allowed for consistent data collection across both

respondents and probing of emergent themes. The phone interviews were

conducted, recorded and transcribed.

4. Evaluation of Data: The evaluation of data has begun and will continue for both the baseline survey

and the qualitative data collection. For the baseline survey, data analysis is being

performed on both drivers of social enterprise scaling and the role of attitudes

toward social enterprise.23 For the qualitative data, the preliminary analysis has

yielded some initial themes. In evaluating their initial consultation with

Flywheel, the respondents of the pilot organization appreciated subject matter

expertise, liked the idea and services of the hub and would recommend the use of

Flywheel to other nonprofit organizations. The respondents also indicated areas

for improvement of Flywheel: matching of consultant/project fit, clearer

definition of roles/responsibilities, and additional content within the process.

While additional data collection and analysis is necessary, Flywheel has taken

these initial findings and begun to make changes to the consulting process before

engaging in another project. This was an intentional part of the pilot program

and consistent with Flywheel spirit of implementing an evaluation culture.

5. Development of Quantitative Tools: Following the evaluation of data and borrowing from previous program

evaluation experiences, an initial tool has been developed to provide quantitative 23 Both of these areas leverage existing academic research agendas of the founding and collaborative partners of Flywheel related to the topic of social enterprise. For more information, see Bloom and Smith article in Journal of Social Entrepreneurship (2010).

data to augment the qualitative data collection. The development of quantitative

tools is in the early stages and will be complemented based on the initial and

ongoing knowledge sharing with CWV. The quantitative tools will be used at the

end of workshops, consultations and project milestones.

6. Collaboration with CWV: Based on the goal of developing the most effective evaluation system, Flywheel

has begun initial conversations with senior leadership at CWV to identify ways to

collaborate. Following initial conversations, a sharing of data collection processes

and tools has begun. Both Flywheel and CWV have confirmed the potential of

mutually-beneficial knowledge sharing to leverage existing best practices and to

extend new knowledge in the practice of M&E of social enterprises. Additional

conversations are ongoing.

7. Finalize Tools for Evaluation: The final step in the M&E development process will be the finalization of initial

tools to assess and evaluate the activities of Flywheel. As these tools are

implemented, their utility will be judged for all stakeholders and will be

continually improved to insure effective M&E at all levels.

6.4 Description of Daily Operations

As a professional services firm, Flywheel does have some important considerations

that impact client services and employee satisfaction. First, we have decided to follow

Centric‟s model of being a virtual firm, but will have office space for meetings and staff

interested in office space. This decision will keep overhead low and allow our advisors to

work alongside our customers as needed. We are in discussions with a few people for

free or reduced office space, both of which have office equipment that can be used for a

fee. For now, this is a better alternative for Flywheel.

Flywheel also has the need to develop content – currently, staff is developing

cookbooks for each engagement process using publicly-available materials. We may

consider licensing Business Plan Pro for clients in need of a straightforward business

plan.

7.0 Branding, Marketing and Sales Strategy

7.1 Branding

Flywheel’s brand is part of our identity – the descriptive-style brand name symbolizes

the two concepts we have imbedded in our identity – the heart of a nonprofit (mission)

and the energy needed to sustain it (learning, skills, and capital). Our identity is also

connoted by our new logo, which is progressive, energetic, and connected to Cincinnati

through its color

palette. We also

were purposeful

about our brand

positioning and,

because we are

teaching business planning and want to connect it to the community, we needed to

embrace the latest identity and attitude marketing techniques to build our brand. When

people think about Flywheel, we want them to connect with it, feel part of Flywheel,

and be proud of their connection. Our brand promise and traits will be connected to our

guiding principles – Quality, Energy, Cutting-Edge, and Community. Our visual

presentation will be an extension of all these traits and will be created to be consistent

and distinctive. As stated previously, all the market research points that our competitive

advantage is this progressive experience and our fulfillment of these brand promises.

Our branding is one of the most important factors in achieving this sustained

connection and our market leader positioning.

Over time, we hope to build brand awareness – starting in the social sector and building

to business and government. We will measure this through webhits, contacts for

additional information, volunteers, and attendance at events. We will used both logos –

Flywheel by itself and with the founding partners – intentionally based on the

audience and over time, as recognition grows, we will begin to drop the partners from all

visual presentations.

7.2 Plan to Reach Target Market

Marketing strategy is built on three things – segmentation (which was detailed in

Section 2.2), targeting (which was detailed in 3.2), and positioning, which will be

discussed in this section. To accomplish our organizational objectives, Flywheel’s

arketing communications will include two messages – first, we need to sell them on the

value of social enterprise and second, we need to sell them on the value of working with

Flywheel.

7.2.1 Positioning Statement

Flywheel’s positioning statement will be focused not on our services themselves, but

what they will do for our customers. It is also consistent with our desire to be perceived

as trusted advisor and resource and less with being a consultant, which can send less

positive and cooperative messages to our clients. To the end, our positioning statement

is:

o Flywheel will create a hub-like experience where we will work alongside nonprofits to design sustainable social enterprises and community leaders to create an environment that supports this work. To nonprofits seeking a new direction, we will save them time and money and build their confidence and skills in their ability to start profitable businesses and create a 21st century nonprofit organization. Coupled with this, we also will work with other efforts to build a stronger and more impactful social sector in the Greater Cincinnati/Northern Kentucky region.

Based on the value disciplines framework, Flywheel will focus first on becoming the

best at customer intimacy and working toward strong positions on product leadership

and operational excellence. These disciplines will take longer to develop and refine as we

get experience within the marketplace and scale-up our operations.

7.2.2 Pricing

Because our target customers are nonprofit organizations, our pricing strategy is value-

based pricing, which requires us to develop operational and management strategies to

create lower costs and pass those savings onto our customers. We will base our price on

three things – our costs, customer perceptions, and competitors‟ prices. We will charge

customers differently based on a number of factors, including agency size/revenue,

complexity of project, service bundling, and past social enterprise experience. Based on

our social goals and our marketing goals to encourage “trial,” we will offer some services

for free or at a greatly reduced rate. We are hopeful that these social goals are shared by

others and we can get support from philanthropy to support these projects.

Based on our market research of consulting firms and management service

organizations, we found that pricing was based on the following formula. First, based on

the scope of work, they estimate the number of days/hours needed to complete a project

and by whom. Second, they multiply this by “loaded daily rate” (inclusive of overhead

costs) for each consultant involved in the project, which is determined by experience

level. Finally, they add the other estimated cost considerations for the project (e.g.

travel, research). Part of Flywheel’s cost savings will come from reduced overhead and

travel expenses.

As expected, the loaded daily rate charged for consulting firms varied based on firm

reputation and overhead requirements. The following is a synopsis of average daily fees

per consultant for small (1-2 employees), medium (12-15 employees), and large

consulting firms (15+ employees).

Small Medium Large

$1000 $1500 $2500

Our price ceiling based on competitor research will range between a small and medium-

sized firm with a daily rate of $1000-1550 for our paid advisors depending on the factors

above. This will be mitigated, in part, by the value provided by volunteer subject matter

experts.

Flywheel took the next step of calculating cost estimates and price ranges associated

with our major services based on this research:

Cost Price Range

Workshop/Trainings $750 FREE

Clinics $300 FREE

Feasibility Assessment $6,000-$9,000 $9,000-$11,000

Business Plan $13,000-$17,000 $17,000-$22,000

Pilot Coaching $2,000-$4,000 FREE

7.2.3 Place

Because Flywheel’s services are not place-based, our focal point will be our website

and one-on-one interactions via phone, email and in-person. Moving forward, the

website will function as a stopping point to learn about social enterprise, Flywheel, and

connect customers/volunteers with us through an inquiry process (aka “contact form”).

Because of the individual reputations of the founding partners, we will also set up a

referral system with the 4 founding partner organizations to ensure all clients needing

assistance get the best provider for their needs. Referrals will broaden our marketing

and sales reach as well.

7.2.4 Promotion and Sales Strategy

Our promotion strategy will be built on the AIDAS funnel model– Attention/Awareness,

Interest, Desire, Action, and Satisfaction – which dovetails nicely with our client flow.

First, we will build initial attention for Flywheel through our launch event on April 6,

which is tied to Cincinnati Chamber “Securing the Future” event. This event will attract

nonprofits seeking (aka Flywheel customer segment “seekers”) information on cutting-

edge topics, including nonprofit sustainability. We also have subsequent events through

the founding partners, which will also garner attention and raise awareness.

Based on our focus groups, key organizations such as United Way, the Greater

Cincinnati Foundation, and Leadership Council are all key to driving information to the

nonprofit sector. Our market research suggested that the two best ways to garner

awareness is through conducting workshops and word-of-mouth from peer groups. We

will be working cooperatively with these organizations and others, such as Artswave and

Strive, to ensure that Flywheel reaches out to all nonprofits despite their size, issue

area, or geography. Based exclusively on the demographics of our survey respondents

and our focus group participants (See Appendix), we are confident that we will be able

to reach out to a broad range of nonprofits and Flywheel’s messaging will resonate

with them.

In addition to events, we also have a public relations strategy to build attention and

awareness, which includes news media relations both in Greater Cincinnati and the

national social sector media. Through our focus groups, we were able to find the media

channels that local nonprofits tend to use, but we will continue to monitor our reach to

determine the effectiveness and efficiency of our messages and modes of

communication. We will also be posting about our launch on blogs, such as The

Nonprofit Times, Deep Social Impact, and the Social Enterprise Reporter to reach a

national audience. This strategy will allow us to reach out to our primary audience –

nonprofit and the social sector – and our secondary audiences – the business

community and the general public. We will ensure through all modes of communication

to stay consistent with our identity and reinforce our points of differentiation. After the

launch, our public relations efforts will appear on a pulsing basis – to maintain brand

communications and as we need to drive increased attention and awareness.

Second, we will build interest by fielding inquiries through our website and conducting

workshops. Through our relationships, we will market these workshops to a diverse

audience. In fact, our first Social Enterprise 101 workshop is already scheduled for May

16th. These seminars will allow us to determine which nonprofits are serious about

social enterprise and could benefit from Flywheel services.

Upon completion of the workshop, we anticipate a percentage of the nonprofit attendees

will need additional assistance overcoming resistance or barriers within their

organization. We will offer each attendee organization a coupon for a free

consultation/clinic or free training for staff and/or board groups as an incentive to seek

this assistance. We got an overwhelming great response to this incentive for the focus

groups and plan to continue to use it.

Third, as we engage with nonprofits beyond the workshops, they will be better able to

assess whether social enterprise is right for them, but also if Flywheel’s services are

consistent with their needs. If so, as discussed in the Operations Section, we will move

them from desire to action through our engagement process. For the first year, this

process will be exclusively handled by the Executive Director. In future years, we are

hoping that our team of master class advisors will also be able to assist us with this role.

Finally, we also believe it is essential to our model to satisfy the customer to ensure that

they become a repeat customer and refer peers to Flywheel. We have a two-step

process to ensure satisfaction – an on-going quality improvement process led by the

Executive Director and a formal evaluation led by Miami University. Through both of

these efforts, we hope to test our people, content, and processes to ensure that it is

meeting or exceeding our clients‟ expectations. See the Section on Operations for more

details on these efforts.

8.0 Financials

8.1 Financial Overview

To frame the business model

analysis, Flywheel utilized the

latest thinking from

“Reinventing Your Business

Model,” a Harvard Business

Review article by Mark W.

Johnson, Clayton M.

Christensen, and Henning

Kagermann.24

The target customer is

nonprofits, especially those

interested in social enterprise. Flywheel’s value proposition is (repeated from Section

7.0):

As discussed previously, the core “product” is different based on the organizational need

and the intensity needed for the capacity-building services. However, despite these

differences, Flywheel values the same key resource - the staff/contractors/volunteers

who deliver the capacity-building services. In general, Flywheel is looking for a social

24 Johnson, M.W., Christensen, C., Kagermann, H. (2008). Reinventing Your Business Model. Harvard Business Review.

Business Model Framework

http://hbr.org/search/Mark+W.+Johnson

http://hbr.org/search/Clayton+M.+Christensen

http://hbr.org/search/Henning+Kagermann

http://hbr.org/search/Mark+W.+Johnson

http://hbr.org/search/Clayton+M.+Christensen

http://hbr.org/search/Henning+Kagermann

“rock star” who has an important combination of business acumen, nonprofit

experience, and consultative skill set. Flywheel’s key processes, as discussed in Section

6.0 and 7.0, will include our marketing strategy, our talent management process, our

customer experience, our internal performance measurement process, and our external

monitoring and evaluation process. All of these processes work together to ensure that

Flywheel has a consistent high-quality and high-impact product delivered by master-

class talent.

Because of our joint social-business mission, Flywheel will run as a break-even venture

with any profit reinvested in services or scholarships for nonprofits and community-

wide systemic change projects.

8.2 Earned Income Strategy

Flywheel will be focused as a social enterprise on earning income from nonprofits

seeking to launch, grow, or troubleshoot their social enterprise. Some nonprofits, as

discussed previously, will have an ability to pay for our services and will pay on a sliding

scale based on the value of the services, the project needs, and their ability to pay. Other

nonprofits, while interested in social enterprise, will not be able to afford the costs

associated with a feasibility assessment or business. With these nonprofits, we are

hoping to partner with individuals and foundations interested in their specific cause to

sponsor the funds needed. We have spoken with a number of prospects who are

interested in supporting Flywheel and support the value proposition, but prefer to

support a specific organization rather than provide operating support for Flywheel

itself.

8.3 Corporate Development Strategy

Based on the target customer and their projected ability to pay, Flywheel will not be

able to depend solely on earned income, but will need a diverse revenue base. We will

seek corporate support through a cause marketing relationship ($20,000 annually).

Their support will give them:

 Marketing rights to be a corporate partner of Flywheel, which shows their support of the community‟s economic and social goals;

 Ability to serve as the community leader in their core competency leveraging their skill-set for the benefit of Flywheel and our customers; and

 High-impact and high-quality volunteer engagement for the rising starts within their company.

Through our step-up strategy, we have estimated revenue of $60,000 from corporations

in year one with a steady increase over time.

8.4 Fund Development Strategy

While Flywheel is a social enterprise, we also have a number of community goals,

which are not covered by earned income. We believe – for community benefit – it is

important to provide many services free-of-charge, including workshops/trainings,

clinics, and follow-up services. We also believe that the inclusion of these services will:

 Reduce the time spent on social enterprise – instead that time can be spent on their mission;

 Reduce the number of false starts and failed enterprises – instead nonprofits can focus on promising ideas and fail during feasibility; and

 Reduce the time to break-even and profitable ventures – instead nonprofits can go to scale more quickly.

To that end, we have included on-going support from the Investors Circle, which

declines as the Corporate Support increases, as well as start-up assistance.

8.5 Projected Financials

8.5.1 Financial Summary (next page)

8.5.2 Service Assumptions

8.5.3 Operations

8.6 Financial Targets

Because Flywheel plans on a diverse revenue base, we will develop a system to

regularly monitor our status on financial targets – both costs and revenue. Based on the

current 5-year financials, we have developed the following cumulative snapshot and

revenue summary. As you can see, revenue over time will increasingly become more

dependent on earned income from our customers.

Start-up (2010- 2011)

2011 2012 2013 2014 2015

REVENUE $116,500 $432,265 $676,190 $716,930 $792,965 $916,190

COSTS $90,500 $420,250 $662,428 $697,727 $760,392 $859,578

CUMULATIVE PROFITS $26,000 $38,015 $51,777 $70,980 $103,553 $160,165

$- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000

$1,000,000

Macro Level Flywheel Snapshot

20%

40%

60%

80%

100%

120%

2011 2012 2013 2014 2015

% Revenue by Type

Revenue - % Grants, Sponsorships, Other

Revenue - % Service Fees / In Kind

If we happen to not meet these targets, for whatever reason, our business model is based

on a flexible staffing pattern and we can scale back our efforts without harm to the

overall organization.

8.7 Return on Investment & Community Impact

As stated in the previous section on Monitoring & Evaluation, Flywheel plans to track

financial return-on-investment, social return-on-investment, and community impact.

We already know based on a national study that each job generated through social

enterprise will bring a net value of $80,000 per year to the region‟s economy. We

believe that the start-up costs and investments associated with Flywheel over the next

five years will create a substantial payoff in jobs created and taxes paid as well as

reduced opportunity cost associated with failed or less than successful social

enterprises. We also know that the jobs created, especially for the hard-to-employ, will

reduce dependence on social programs.

9.0 Risk and Mitigation Strategies

9.1 SWOT Analysis

Flywheel, by its very nature, is built to leverage the strengths of its founding partners

and also is composed of strategic thinkers who are adept at contingency planning and

risk management. We worked together to complete the following SWOT Analysis

during the application process and updated it for the 1.0 version of the Business &

Strategic Plan:

Strengths

 Comprehensive solution

 Robust team with diverse expertise and resources

 Deep domain experience with social enterprise – both academic and in practice

 Plan to run as social enterprise

 Direct connection to the nonprofit sector

 Flexible business model – can shift as needed

 Comprehensive market research

Weaknesses

 Coordination between founding partners

 Coordination across moving parts of “hub”

 Need for additional support around legal services, tax assistance, and grant writing

Opportunities

 Serve as a leader in the nation for a coordinated approach to social enterprise

 Possible extension to social innovation, social entrepreneurship and CSR

 Possible contribution to knowledge creation and dissemination around social enterprise

 Ability to attract funding for efforts beyond the local environment

Threats

 Lack of support and/or funding for social enterprise or for “hub”

 Unrealistic expectations of nonprofits as a panacea

 Failed social enterprises will inevitably happen and could deter nonprofits and funders

9.2 Risk Analysis

Flywheel’s partners recognized several key risks and business model challenges during

the planning phase for the Flywheel Social Enterprise Hub. Major risks were identified

that could significantly impact Flywheel’s ability to deliver social enterprise services to

nonprofits and community organizations. These risks have been strongly evaluated by

Flywheel’s partners and core team members, and are presented to help inform readers

of Flywheel’s assessment of these risks and its contingency plans to mitigate them.

9.2.1 External Environment

In assessing external factors that could create substantial risks for Flywheel, the

table below was created to clearly define Flywheel’s major risks and their impact on

Flywheel’s potential success as a social enterprise business.

Risk Area

Impact on Venture

Contingency Plan

Funding and Investment

- Investors‟ willingness to

support start-up of Social Enterprise Hub

- Focus on long-term viability

of Flywheel Social Enterprise Hub

- Shifting sources of funding and investment for social enterprise

- Ongoing in-kind investment of founding partners

- Expectations of

stakeholders and customers

- Financial health of nonprofits to afford Flywheel’s services

As stated in the Introduction, it is important to communicate out step-up plan and set realistic expectations with all partners. In order to succeed, Flywheel will draw from a diverse base of funding sources to support the following areas of funding need: program development and service delivery, scholarship assistance, and access to capital to launch social enterprises. Flywheel will have a value- pricing model so rates are affordable and sufficient to support Flywheel’s operations. Flywheel will work to educate local and state policymakers on the importance of social enterprise for the sustainability of the sector.

Risk Area

Impact on Venture

Contingency Plan

Legal Entity

- Flywheel’s business model

moving forward is based on a strategic integration approach. This model establishes an entity separate from the direct management of Flywheel’s founding partners. As a separate organization, Flywheel will be able to more clearly define its purpose to the social enterprise marketplace as a service provider and capacity builder.

- Creates another nonprofit

- Time and costs to create a nonprofit - legal filings, additional staffing, professional and organizational liability, and taxation

Based on the integrated business model, Flywheel will be structured as either a 501(c)(3) or a L3C. In order to define and promote Flywheel’s services and promote Flywheel as community- driven, founding partners have determined that Flywheel should operate as a separate integrated entity. This strategy calls for Flywheel to be managed by an executive director with a community advisory board. We will engage Council members who will be well- versed in these topic areas and advise us on them.

Quality of Advisors and Volunteer Subject Matter Experts

- Based on market research,

paid talent must be master- class professionals with a mix of nonprofit experience, social enterprise knowledge, and a strong consulting skill-set

- Access to and availability of talented volunteers as subject matter experts

- Commitment of time and range of skill sets of volunteers

Flywheel will provide a cadre of social enterprise professionals from across business and industry, nonprofit, and community service sectors. We will conduct a staff and volunteer recruitment strategy to attract top talent to Flywheel. Professionals will be selected based on their skill, talent and ability to help train and advise Flywheel’s customers in developing successful social enterprises.

Flywheel expects to operate

These external factors are critical challenges for Flywheel to overcome and have

influenced Flywheel’s planning for its business, program and partnership model. An

analysis of external factors contributed to a deeper understanding of Flywheel’s

internal environment by Flywheel’s partners and core team. Accordingly, key

contingencies were established to manage Flywheel with a clear focus and to mitigate

risk.

9.2.2 Internal Environment

In assessing internal factors that could create substantial risks for the Flywheel

Social Enterprise Hub, the table below was created to clearly define Flywheel’s major

risks and their impact on Flywheel’s potential success as a social enterprise business.

with a mix of volunteer and paid contractors. This mix actually provides a safety net, so we can flex the model as needed to support demand.

To support service delivery to its customers, Flywheel professionals will be trained in the principles and best practices of social entrepreneurship and enterprise through an apprenticeship model.

Risk Area

Impact on Venture

Contingency Plan

Management Structure

- Initially, a strategic

alliance was employed by Flywheel’s founding partners. This alliance can be characterized as a more decentralized alignment and shared decision making approach. Early benefits of this approach helped to build trust and respect among the partners and gave partners the

Flywheel’s partners have determined that for Flywheel to operate successfully, Flywheel must be an integrated separate entity. This strategy calls for Flywheel to be managed by an executive director with a community advisory board developed from a pool of community-wide collaborators.

opportunity to become fully engaged in the planning process. This approach resulted in slower decision making and longer review periods for work plans.

- The strategic alliance approach was changed at midpoint of the planning project by Flywheel’s partners. A strategic integration approach was implemented for the purpose of clearly identifying a team leader for Flywheel, streamlining decision making, and to focus partners on Flywheel’s critical priorities.

Suzanne Smith, Executive Director of the Leadership Council of Human Services Executives, was designated as Flywheel’s team leader and asked by partners to serve as interim director until an executive director can be hired to manage Flywheel on a regular basis. This depends on Flywheel’s ability to attract investment and fund its operation. Flywheel’s partners believe investors want to see a high degree of accountability and evidence- based outcomes. An integrated operation provides stronger focus on Flywheel’s social enterprise development and achieves a faster return on the investment for investors.

Succession Plan

- Assures the continuity and

stability of Flywheel

- Creates long-term value for Flywheel’s investors, customers, and the community at large

- Promotes a high degree of organizational quality

- This is consistent with the founding partners‟ intention of having the Flywheel Greater Cincinnati Social Enterprise Hub become a community-driven collaborative.

As a separate entity managed by a professional executive director, Flywheel will be able to follow a succession strategy based on the resources of internal management and the involvement of Flywheel’s community advisory board. Flywheel’s business plan details its legal status, management and operating structure.

Program Delivery

- Lack of coordination in

Flywheel’s process under- delivers services to clients

- Lack of knowledge and

understanding of social enterprise by Flywheel’s advisors undermines quality

- Need for expanded resources and specialists to support Flywheel’s delivery and operation

To support service delivery to its customers, Flywheel’s professionals will be trained in the principles and best practices of social enterprise.

Flywheel will conduct not only a comprehensive evaluation, but also a quality improvement process to ensure high- quality services.

Quality of Advisors and Volunteer Subject Matter Experts (Both an internal & external threat)

- Based on market research,

paid talent must be master- class professionals with a mix of nonprofit experience, social enterprise knowledge, and a strong consulting skill-set

- Access to and availability of talented volunteers as subject matter experts

- Commitment of time and range of skill sets of volunteers

Flywheel expects to operate with a mix of volunteer and paid contractors. This mix actually provides a safety net, so we can flex the model as needed to support demand.

To support service delivery to its customers, Flywheel’s professionals will be trained in the principles and best practices of social entrepreneurship and

These are the major external and internal risks Flywheel faces in establishing a social

enterprise hub in Greater Cincinnati. During the planning process, additional risks and

challenges were identified by Flywheel’s core team and each risk area received

consideration relative to its impact on Flywheel’s ability to implement and operate the

social enterprise hub. Some of these additional risks are listed to present a broader view

and scope of what these risks are and how they could impact Flywheel’s operation.

Related Risks:

Risk Area

Impact on Venture

Contingency Plan

Technology

- Will speed-up or slow down

Flywheel’s ability to provide services and communicate with customers, stakeholders, and service providers.

- Interactive website will educate, inform and invite site visitors to consider social enterprise for their organization.

- Must be dependable, accessible and easy to navigate.

Flywheel’s partners have demonstrated their knowledge and experience in technology during the planning phase. Partners have shared services and cross-trained each other to utilize technology better. This is a strength for Flywheel.

Communications

- Flywheel’s customers,

stakeholders and partners, the community at large

Flywheel will use relationship management via Saleforce, a robust website, and training and development to communicate results and successes of the hub.

Flywheel has conducted research with stakeholders on desired communication patterns.

enterprise through an apprenticeship model.

Market Demand

- Economic pressures might

limit the capacity of nonprofits to engage in social enterprise.

- Understanding of the longer term nature and potential benefits of successful social enterprise

- Initial pent-up demand could create a rush of nonprofits to Flywheel and impact Flywheel’s capacity to deliver.

- Clearly defined market segments will determine Flywheel’s customers

Flywheel will create a pipeline for nonprofits to engage in social enterprise. This “flow” of social enterprise development can be described as building the foundation, testing feasibility, and finishing the plan for launch. The nonprofit industry is expected to encounter continued budget challenges over the next several years. As a result, more nonprofits are seeking strategic solutions that will contribute revenue and help them sustain themselves for the longer term. Our flexible staffing model will assist us with changing to meet the demand of our customers.

Risk Area

Impact on Venture

Contingency Plan

Year One Financial Pro Forma

- Realistic view of resources

and funding required

- Milestones for first year

- Ongoing in-kind investment of founding partners

- Expectations of stakeholders

and customers

- Financial health of nonprofits to afford Flywheel’s services

Flywheel’s step-up approach to the business plan will allow us to adjust to the marketplace as needed.

Flywheel’s business plan relies on sufficient financial resources from funding collaborative.

Flywheel will charge value-based pricing so customers have “skin in the game” but rates are affordable and sufficient to support Flywheel’s operations.

Capacity Gaps

- Will hinder development of social enterprise

- Properly matched advisors and resources are critical to customer success and Flywheel’s value to the market.

- Understanding of breadth and depth of current capacity gaps in the nonprofit industry and capacity builders

Flywheel will provide a cadre of social enterprise professionals from across business, nonprofit, foundations, and community service sectors.

Flywheel professionals will be trained in the principles and best practices of social enterprise.

Flywheel is focused not only on the organizational needs, but system needs and will be working to fill gaps in the system to ensure that resource needs are met.

10.0 Appendices

a. History of Social Enterprise, Social Entrepreneurship, and Social

Innovation in Greater Cincinnati

b. Definitions of Social Enterprise, Social Entrepreneurship, and Social

Innovation

c. Survey demographics

d. Focus Group participants

e. Primary research interview list

f. Resume of key management

g. Sample marketing materials