A Toolkit for Developing a Social Purpose Business Plan

Transcription

A Toolkit for Developing
a Social Purpose Business Plan
Funding provided by Mizuho USA Foundation
Seedco
Innovations in Community Development
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Copyright © 2004
Structured Employment Economic Development Corporation (Seedco)
All rights reserved.
CONTENTS
Introduction
Acknowledgements
How to Use this Toolkit
Seedco and the Nonprofit
Venture Network
Part I: Getting Started
Key Elements of a Social
Purpose Business
Testing for Mission-fit
Taking Inventory of the
Organization
External Context
Tying it all Together
Building a Business:
Recycle-A-Bicycle
A Framework for Planning:
Introduction to PM&MSM
Addressing
Organizational Change
Seedco
Innovations in Community Development
Part II: The Business Plan
The Executive Summary
Market Opportunity
Business Model
Operations
Management and
Stakeholders
Social Outcomes
Financials
Part III: Resource Guide
Pitching Your Business
Working with Consultants
Understanding Financial
Statements
Glossary
Part IV: Worksheets, Templates
and Examples
Part V: Sample Business Plan
introduction
Foreword and Acknowledgements
A Toolkit for Developing a Social Purpose Business Plan grows out of
Seedco's recognition that many nonprofits are eager to launch business
ventures but lack targeted resources to help them through the planning
process. Over the past three years, the Nonprofit Venture Network (NVN)
has provided intensive technical assistance to 21 nonprofit organizations
in New York City and Tampa Bay and has conducted introductory
workshops with more than 250 nonprofits interested in developing social
purpose businesses. Based on our experience and expertise, we designed
this step-by-step business planning guide especially for nonprofit
organizations. It is our hope that it becomes a valuable resource to
organizations exploring the possibility of social enterprise and to more
seasoned entrepreneurs.
The Toolkit was created under the supervision of Jaycee Pribulsky, Senior
Program Manager. Content was developed by a Seedco team including
Sarah Eisinger and Rosanna Perry-Stephens, and led by Dawn Techow. A
team of Seedco staff including Tracey Allard, Khary Cuffe, Rachel
Bluestein and Nikhil Gadkari reviewed the document and provided
insightful feedback. Asif Karmally, an intern from the New York
University, Stern School of Management also assisted in writing and
editing this document. Mimi Grinker and Betty Rauch kindly edited and
produced the document. Giona Maiarelli of Maiarelli Rathkopf Design
designed the Toolkit with assistance from Josh Reisner at Seedco.
Special thanks to Karen Overton, Executive Director of Recycle-ABicycle, for graciously allowing us to pick apart her business plan and use
it as an example. She has been a strong supporter of the Nonprofit
Venture Network and we value her enthusiasm and dedication to social
enterprise.
The development of the Toolkit would not have been possible without
support from the Mizuho USA Foundation. We are especially thankful to
the foundation's Executive Director, Lesley Harris Palmer, for her
support of the Nonprofit Venture Network since its inception.
NVN has also been supported by the MetLife Foundation, the United Way
of New York City, the Eckerd Family Foundation and the World Trade
Center Small Business Fund.
DIANE BAILLARGEON
President
Seedco and the Non-Profit Assistance Corporation
January 2004
developing a social purpose business plan
i
introduction
Social Purpose Business Development:
How to Use this Toolkit
Why a Social Purpose Business Planning Toolkit?
A social purpose business is a business activity started by a nonprofit
organization that applies market-based solutions for the purposes of
furthering the mission of the organization, generating income, and
addressing social needs. Over the past five years, the social enterprise field
has grown significantly. Nonprofits are seeking innovative methods of
diversifying their revenues and building more sustainable organizations.
As a result, nonprofits are seeking assistance in developing and launching
these ventures.
While starting a social purpose business shares many characteristics with
developing a traditional small business venture, there are marked
differences. Most importantly, you are not an individual entrepreneur.
You have stakeholders and clients, funders and staff who follow a mission
to provide a needed service to the community. All of these constituents
have opinions and ideas about how the organization should best use its
resources. In addition, decision-making may happen at multiple levels,
the organizational culture may be resistant to becoming more businesslike and staff may fear mission creep. On the flip side, as an organization
rather than an individual, you may have access to more resources, be able
to build a planning team consisting of diverse backgrounds and expertise,
and have a proven reputation in the community.
This Social Purpose Business Planning Toolkit takes the organization into
consideration throughout the planning process. In addition, the Business
Plan you develop with this toolkit will highlight the social components and
social outcomes of the business. As a communications tool, these sections
are important to your staff, Board and clients as they show the way that the
organization and clients will benefit. In addition, these sections are
important to socially conscious funders who are seeking a social return on
their investments.
Who Should Use this Toolkit?
The Social Purpose Business Planning Toolkit is designed for nonprofit
organizations that are considering starting a revenue-generating activity or
a business venture. The toolkit begins with the assessment of an idea in the
context of your organization, so to begin, you will need to have a few ideas
percolating. In addition, organizations that are currently operating a
business might use the Toolkit as a guide for developing a plan for
expansion or for revising their business model.
iii
introduction
Developing a Business Plan
Developing a business plan is an exciting, but challenging process.
Developing your business and then writing the business plan can take
anywhere from several months to over a year. Staff time, organizational
resources, outside consultants or experts in the field are required for the
process. In the end, the business plan serves as both a communications
tool and a management tool to evaluate your performance and revise your
assumptions. It will justify the risks and explain the rewards associated with
the business. A good business plan will:
•
•
•
•
•
•
Illustrate demand for your product
Demonstrate stakeholders' interests and needs
Confirm that the business concept is viable
Post healthy and realistic financial projections
Demonstrate staff and management expertise
Explain your ability to meet the proposed social outcomes
The Case Study
Throughout the Toolkit, we use an organization that Seedco has worked
closely with for the past four years. This organization, Recycle-A-Bicycle,
is an established social enterprise that has completed a business plan for
expansion of the business and programmatic activities. We will refer to the
Recycle-A-Bicycle business plan and pull examples to illustrate key points.
The full text of the plan is available in Section V.
Using the Toolkit
Throughout the Toolkit, you will find a number of icons, illustrated on
the following page, indicating special sections. In addition, a disk is
provided that contains the Financial Projections Workbook. This is an
excel file that is meant to help you build your financial projections. If you
have difficulty using the disk (PC-format), please go to www.seedco.org/nvn
to download the files. You will need the user id and password below.
User id:
Password:
toolkit
business
If you have comments, would like to purchase additional copies of the
Toolkit or are interested in learning more about Seedco or the Nonprofit
Venture Network, please email us at [email protected].
iv
introduction
Helpful hints are provided to give you specific information
on a topic.
Actions refer to templates, worksheets and examples which
offer hands-on opportunities to put the concepts into
practice. We encourage you to stop each time you see the
Action symbol and pull out the corresponding worksheet
from Part IV.
These are actual or “modified” examples of social
purpose business.
These are questions to help you develop the Market
Opportunity and Business Model Sections of your plan.
This section will assist you in developing your Logic Model
or Action Plan with regard to different sections of the
business plan.
v
introduction
About Seedco
Founded in 1986, Seedco provides financial and technical assistance, and
management support, for the community-building efforts of nonprofit
organizations and small businesses in targeted disadvantaged communities
throughout the United States. Working in partnership with local
community organizations, universities, and other local and national
groups, Seedco develops wide-ranging initiatives that support working
families, promote community economic development, and strengthen
community-based nonprofits. Seedco's approach focuses on increasing its
community partners' capacity to implement high-impact projects that
build community and individual assets.
Seedco's programs focus on workforce development, affordable
homeownership, and entrepreneurship to achieve our community
revitalization goals, including:
• Supporting working families;
• Promoting economic development;
• Strengthening community organizations; and
• Providing creative financing to support program activities.
HOW WE WORK
Seedco is committed to innovative, high-impact program development
and delivery. We provide intensive financial and technical assistance to our
networks of neighborhood-based partners, enabling them to launch
model projects and realize their community-building goals.
We Build Community Networks
Central to Seedco's work is the belief that neighborhood organizations are
invaluable partners in planning and implementing community and
economic development projects. Community-based organizations have
the cultural competency and understanding of local needs that are
essential in creating meaningful community-building initiatives. As part
of our programs, Seedco brings our network of partner organizations
together to foster peer learning and collaboration.
We Create, Develop, and Implement Model Projects
Seedco develops model projects designed to enable community partners to
devote their critical resources to program implementation. Model projects
may include fully developed business plans and financing strategies,
program protocols, and web-based information systems that can be
adapted to local needs.
vii
introduction
We Provide Technical Assistance and Capacity Building
To help our community partners achieve their goals, Seedco provides
intensive technical assistance and capacity-building services, focusing on
program implementation that leads to measurable outcomes. One tool
that Seedco uses to assist organizations is its Performance Measurement &
ManagementSM (PM&MSM) process, a technical assistance process that helps
organizations plan, measure, improve, and be accountable for programs.
PM&M helps managers articulate outcomes, collect data about these
outcomes, and use that data to make and implement informed decisions.
We Offer Financial Assistance
Seedco's Community Development Loan Fund provides low-cost
financing for community-based organizations undertaking development
activities. We also help community groups gain access to pre-operational
and recoverable grants to enable them to absorb some of the early costs
associated with developing business plans and other activities that build
their organizations' assets. Seedco creates targeted loan products around
three program areas: Affordable Homeownership, Workforce
Development and Community Economic Development. In response to
changing needs in the market, Seedco has launched our WTC Small
Business Fund, which includes loan funding for small businesses affected
by the September 11th attacks.
viii
introduction
About Seedco’s Nonprofit Venture Network
The Nonprofit Venture Network (NVN) was established in 2001 with
support from the MetLife Foundation, United Way of New York and
Mizuho USA Foundation. NVN offers community-based nonprofit
organizations a comprehensive package of technical assistance and
financing designed to enhance their capacity to launch social purpose
businesses. While there are several definitions of a social purpose business,
we define it as a business activity started by a nonprofit organization that
applies market-based solutions for the purposes of furthering the mission
of the organization, generating income, and addressing social needs.
In this context, social purpose businesses serve to:
• Promote innovative programs;
• Create job and training opportunities;
• Encourage entrepreneurial endeavors; and,
• Contribute to the financial viability of the parent nonprofit
organization.
The Challenge
In a demanding operating and funding environment, nonprofit
organizations must look to new models of generating revenue streams
while also fulfilling their expanding missions. Launching a social purpose
business is an innovative economic development strategy that has emerged
in recent years as a way for community-based nonprofits to do both.
Through these ventures, nonprofits can increase their ability to fulfill the
organization's mission while serving their constituents in new ways and
diversify revenue sources.
Starting a social purpose business venture can pose risks for the
sponsoring nonprofit. When a nonprofit launches a new business venture,
it strives to earn income and achieve tangible social outcomes. This
undertaking can quickly test an organization's culture and management
practices. The organization must constantly strive to balance its internal
goals of supporting a social mission and generating revenue. NVN helps
organizations find that balance through a comprehensive package of
technical assistance services and low-cost financing.
ix
introduction
The NVN Model
NVN technical assistance and services are delivered in three phases.
Phase I: Learning. This phase provides organizations with assessment and
capacity building tools through the MetLife Introductory Workshop Series
on Social Purpose Businesses.
Phase II: Planning. Organizations that have completed the introductory
workshop series are eligible to apply for pre-development grants generally
in the range of $5,000 to $10,000 through Seedco's Entrepreneurial
Assistance Fund, which begins Phase II of the program. Over the course of
the year-long grant period, Seedco will work with organizations in group
settings and one-on-one to develop a business plan.
Phase III: Implementation. Phase III offers grantees access to several
forms of financial assistance to support their efforts in pursuing a social
purpose business, ranging from grants to below-market loans and nearequity instruments. In order for organizations to move from Phase II to
Phase III, eligible organizations must have a business plan and meet
Seedco's due diligence requirements.
NVN held its Introductory Workshops Series in New York City and Tampa
Bay in Fall 2003 and will bring on new cohorts in 2004. In addition,
NVN plans to expand nationally and is exploring opportunities in several
new cities.
NVN Grantees
To date, Seedco has provided funding through the Entrepreneurial
Assistance Fund and technical assistance to the following organizations:
NVN: New York City
Bedford Stuyvesant Restoration Corporation (BSRC) is developing a
multi-purpose technology store, an outgrowth of BSRC's computer access
and training program, to offer employment and training opportunities
for local youth.
Brooklyn Children's Museum is creating a museum store to provide
employment and training opportunities for local youth.
Brooklyn Woods, Inc. is creating a woodworking business to provide
employment and training to low-income and unemployed individuals.
Center for Alternative Sentencing and Employment (C.A.S.E.S)
explored the creation of a greeting card business targeting the youth
market that would develop the artistic and business skills of youth
offenders participating in its community alternative sentencing program.
x
introduction
The Children's Village is developing an automotive repair and gasoline
business to provide employment and training to youth in its residential
treatment center.
The CityKids Foundation will launch MUSE Productions (Making
Urban Solutions for Education), a youth development and educational
product company specializing in issue-based video curricula and music, as
well as youth outcome-measurement solutions.
The Fifth Avenue Committee is creating Brooklyn Moves, a
transportation and trucking business to provide employment to
participants with multiple barriers to employment, including a history of
incarceration.
Gay Men's Health Crisis is developing a food service business that will
serve staff, offer catering to groups using GMHC's office for events and
meetings, and provide training and employment to clients who have
experienced unemployment due to HIV/AIDS.
Groundwork, Inc., a new Brooklyn-based youth leadership development
program, is developing youth-run ventures that will provide community
services to youth and families in East New York.
Harlem Textile Works, a design and printing business that provides
employment training to youth in the textile and fashion field, is planning
to expand its operations through new urban designs and additional
product lines.
Managed Work Services of New York, a joint venture between VIP
Community Services and the National Association on Drug Abuse
Problems, Inc., provides employment to individuals with histories of
alcohol/substance abuse through a temporary employment agency.
Neighborhood Coalition for Shelter (NCS), a Manhattan-based housing
provider, is developing an online business to sell donated new and used
goods including CDs, DVDs, video games and books. NCS will employ and
train homeless and formerly homeless individuals to operate the business.
New Horizon Courier Service, an outgrowth of Lenox Hill
Neighborhood House's vocational training program, recently closed its
courier business that provided employment for formerly homeless
individuals.
Pratt Area Community Council is developing a property management
business to provide employment and training to residents of low- and
moderate-income neighborhoods in Brooklyn.
Project Reach Youth in Brooklyn is creating a catering business to
provide training in the culinary arts and employment to local youth.
xi
introduction
Recycle-A-Bicycle is expanding its business which teaches low-income
youth affiliated with the Henry Street Settlement House to refurbish used
bicycles, which are then sold at two retail outlets in Manhattan and
Brooklyn.
TADA!, a youth theater company in Manhattan, is developing a business
to market and provide short-term theater opportunities for New York
City youth during holidays and other school breaks.
NVN: Tampa Bay
The Corporation to Develop Communities of Tampa will develop a
plan and marketing strategy to increase traffic to an existing cluster of
social purpose businesses on 29th Street: a coin laundry, an ice cream
shop and an open air market.
Eckerd Youth Alternatives (EYA) plans to develop a copy and computer
services shop to provide training and job opportunities for rural youth in
the Tampa Bay area.
Tampa Bay Academy of Hope publishes the African American Listing, an
annual reference manual with information on local minority-owned
businesses and services that generates revenue to off-set the Academy's
youth programs. The Academy plans to publish the listing on-line and
employ and train youth in aspects of creating and publishing the Listing.
The YWCA of Tampa Bay runs a successful youth development program
for low-income girls, ages 10-16, which it plans to adapt into a for-profit
venture called Y Girls, targeted to more affluent communities in Pinellas
County with an aim to subsidize the Y's other programs.
xii
part i: getting started
Part I of the
Toolkit will
provide you with
frameworks to
think about
business planning
in general and
your idea and
organization
in particular.
Part I
Getting Started
I.1
I Have an Idea!!
Pa r t I
Getting Started
OV E RV I E W
You probably come to the business planning process with an idea born out
of your organization’s need to generate new sources of revenue or address
a new need among the population that it serves. But how do you know if
the idea is sound? This section helps you evaluate the idea and poses
questions to answer as you look at the organization’s capacity to take on a
major new endeavor. It will cover the following topics:
• Five Key Elements of a Social Purpose Business
• Testing for Mission-fit
• Taking Inventory of the Organization
• Looking at the External Context
• Tying it all Together
• Building a Business: The Example of Recycle-A-Bicycle
• A Framework for Planning: Introduction to Performance
Measurement and ManagementSM
• Special Section: Addressing Organizational Change
I.1
p a r t i : Five Key Elements of a Social Purpose Business
Five Key Elements of Your Social
Purpose Business
Starting a social purpose business is challenging and will require a project
champion, staff resources, a significant amount of time and financing. As
you create your business, you will take into account five key elements:
mission, the business idea, your organization, relationships and the environment.
1.
Mission. Your mission is central to all the activities that you will pursue in
forming the business. Seedco defines a social purpose business as a venture
that applies market-based solutions for the purposes of furthering the
mission of the organization, generating income and addressing social
needs.
2.
Business Idea. Your idea will evolve into a full-fledged business that
includes what you are selling, the customers to whom you are selling and
your “market advantage” (i.e. why customers will buy your product/service).
3.
The Organization. Your organization consists of an overlying culture and
the individuals and groups that have a direct stake in the success of the
business. These stakeholders include the management, staff, volunteers,
target population or clients, board members and funders.
4.
Relationships. Relationships describe the way your business interacts with
people or other businesses who are not direct stakeholders, but who have
an influence on the success of the business. Relationships may include
vendors, suppliers and strategic partners.
5.
Environment. The environment consists of the external forces that affect
the business. These are circumstances outside of your control that will
influence the planning or operations of the business.
A successful business builds strength in all five areas but also understands
the relationship between these areas. For example, you need the right
people to run your business, negotiate effective relationships and maintain
focus on the mission and social outcomes. In addition, your business idea
must provide an opportunity to further the mission of the organization
and also must make sense within the environmental context. Though this
seems very straightforward, continually assessing your business around
these five areas will help during both planning and operating stages. The
inter-relationship of the elements is illustrated on the next page.
I.3
RE
LA
TI
O
N
IO
AT
IZ
AN
RG
O
N
SH
IP
S
BU
SI
N
ES
S
T
EN
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N
RO
VI
EN
ID
EA
Mission
As you plan, launch and operate your business, revisit these five elements
and evaluate each one in relation to the others. The elements are dynamic
and may change over time. These changes may be deliberate or may
happen outside your control. When one element changes, you may have to
adjust other elements to compensate.
I.4
p a r t i : Testing for Mission-fit
Is there a Fit Between Your Business Idea
and Your Organization’s Mission?
A key step in the development of a social purpose business is determining
how it aligns with your organization’s mission and program activities. It is
also important to think about the needs and interests of the clients you
expect to serve through your social purpose business.1 The mission of your
organization and your clients are key factors in developing and assessing
your business idea.
One way to ensure that your business idea makes sense to your
stakeholders and clients is to include them in the development process.
Ask them for input before starting the social purpose business. The
following Strategic Questions provide a way for you to articulate your
initial social and financial goals.
1.
What is the mission of your organization?
2.
What is your social purpose business idea? What product or service do you
plan to offer and who are your target customers?
3.
What are the demographics and the needs of the clients that you expect to
benefit from this idea?
4.
How will the venture benefit your clients? What needs, interests and skills
sets do they bring to the venture?
- What programs do you have that currently serve the needs of
your clients?
- Have your clients expressed a special interest for new services?
What kinds of new services/programs are they interested in?
- What are your client's key skill sets in terms of what is needed
for the business venture? How would you rate their skill level
(low, medium, or high)?
5.
What assets will you use to create the business venture, e.g. building,
property, equipment, intellectual property, proprietary processes?
6.
What other ways might you use these assets, e.g. sell the building or
equipment, use the equipment for a new program?
7.
What are the anticipated benefits or outcomes for your clients and the
organization that will result from starting a social purpose business?
8.
What are the financial goals of the business (break-even, generate profits to
be used for additional training or spin off revenues for other programs)?
1 “Organization” refers to the nonprofit that is developing the business and “client” refers to the target population that is
served by the nonprofit.
I.5
Distribute the Strategic Questions Worksheet, located in
Part IV of the Toolkit, to a group of staff, managers and
Board members in order to evaluate the idea from
multiple perspectives within the organization.
Action
After completing the Strategic Questions and reviewing the responses
received from other stakeholders, you, your staff and Board members
should be better able to assess whether the business idea truly does
"extend" the mission of the organization.
Lessons from
the Field
I.6
Is the business venture consistent with the overall mission of the
organization or is it a major shift from the work you do?
Are the goals and outcomes of the business venture in line with the
organization's mission? Do they make sense?
Does the business serve the needs, interests and abilities of your
clients?
Will the business meet the needs of other stakeholders in
meaningful ways?
An organization working with ex-offenders opened a thrift
store to provide job training and employment to its clients.
Despite writing a business plan and successfully capitalizing
the store, the business manager found that the shop had a
very low job retention rate. After talking with several
employees, the manager learned that most employees were
not interested in selling clothing at a thrift shop. For an
adult population, and particularly a male population, the
work opportunity did not fit their interests and long term
goals. The organization did not close the thrift shop, but it
has modified the training program to meet the needs of this
population: now, the men work in the thrift shop for 4-5
months. At that time, if they meet performance targets that
focus on attendance, punctuality and customer service, the
men are eligible to move to other job opportunities
including a new landscaping service and a print shop.
p a r t i : Taking Inventory of the Organization
Taking Inventory of Your Organization
Now that you have examined the relationship between your business idea
and mission, you are ready to assess the business idea in the context of
your organization. Social purpose businesses succeed when there is a
sound opportunity (the right "Business Idea") and an entrepreneurial
management team (the right "People") to carry out the task of launching a
business. Using the Organizational Assessment Survey, you will evaluate
what your organization already possesses to help you develop the "Business
Idea", and what "People" are in place to lead the effort. By examining your
organization's core competencies and the expertise you bring to the
process you will be able to better determine if this business makes sense for
your organization. The Organizational Assessment includes:
Action
1.
Articulation of the organization's values and strengths.
2.
Assessment of the financial, staff, and physical (equipment, property, etc.)
resources that are needed and available for the business planning process
and launch.
3.
Identification of advocates, stakeholders and partners that will provide
assistance for the planning and launch of the business.
4.
Recognition of the potential challenges and difficulties with planning and
launching the business.
5.
Definition of roles and responsibilities among current and potential staff
for the business.
Use the Organizational Assessment Survey, located in Part
IV of the Toolkit, to take stock of the organization, map
your resources, and evaluate the missing pieces.
I.7
Organizational Commitment Checklist
Review your Organizational Assessment Survey to evaluate whether your
organization is able and willing to make a commitment to developing a
business. It is okay if there are missing pieces and unanswered questions
during the initial planning phase. However, the organization should
recognize that the following are needed:
Dedicated resources to support the business planning process.
A strategic plan that includes the development of a social purpose
business as a near-term strategy and/or a board resolution that
supports the development of a social purpose business.
A clear vision of the goals of the business.
A set of core values that can drive the development of the social
purpose business.
A general understanding of the risk factors involved in starting a
social purpose business.
Mitigation strategies to address resistance to change among staff,
clients and stakeholders.
Entrepreneurship Team ("People") Checklist
Review your Organizational Assessment Survey to evaluate whether your
organization has the people in place to support the business planning
process:
Project champion to lead the business planning process.
Management team that understands the risks and is realistic about
possible results of the social purpose business.
Board of Directors that supports the development of the social
purpose business.
Board of Directors and staff who understand that the desired
outcome for a social purpose business is a mix of social and
financial returns.
The Organizational Assessment Survey is meant to help you understand what
you have and what you might need. Making the decision to launch a social
purpose business is a significant one and requires a sound business idea and
organizational readiness. Based on what you've learned thus far, are you
ready to begin the business planning process?
I.8
p a r t i : Looking at the External Context
Beginning the Business Planning Process:
An Initial Look at the External Context
Now that you have evaluated your business idea in the context of your
organization, it is time to take a look at the market opportunity (i.e. the
potential to sell your product or service) and the external environment.
When you write your business plan, you will conduct the research into
your potential market. However, at this time, it is important to take a
preliminary look at what's happening outside of your organization that
can potentially affect business development. The External Environment
Assessment will ask you to look at the following:
Action
1.
Who are your potential customers? Describe them demographically.
2.
What similar products do these customers currently buy? What do they
look for when buying similar products/services?
3.
Do you know who else is operating in the same market and targeting the
same customers? Who are your competitors?
4.
How will you compete? How will your business be different?
5.
What is happening with the economy and your industry in particular?
6.
Are there major changes in what customers need and want, how they access
the product or the price? How might this affect your business?
Complete the External Environment Assessment located in
Part IV of the Toolkit. You may not be able to answer all of
the questions at length, but you should have a general sense
of what kind of opportunity exists.
Through the External Environment Assessment you should have
considered your potential to sell your product or service in the context of
your prospective customers and existing competition. Overall, how will
the external environment affect the development of your business? How
can you mitigate the associated challenges? One solution may be to revise
your business idea. Perhaps you need to scale back the idea or even change
it if these conditions prove to be too much of a challenge. You can go back
to the Strategic Questions Worksheet to think through a new idea. Keep in
mind that sharpening your business idea can be, and oftentimes is, an
iterative process.
I.9
p a r t i : Tying it all Together
Conclusion: Tying It all Together
Understanding where your strengths lie and where you need assistance will
enable you to make smart decisions about the business planning process.
In the next section you will begin to develop your social purpose business
plan and learn techniques to communicate your ideas to others.
The worksheets and questions in this section will allow you to examine
your idea and organization. After doing this work, you should be able to
answer the following questions:
• Does the business venture further the mission of your
organization?
• Is the business venture an undertaking your organization wants to
pursue?
• Does your organization have the capacity to develop a social
purpose business?
• Do the organization and Board of Directors understand the risks
involved and are they willing to take such risks?
• Is the organization being realistic about possible results?
• Is the timing right to develop a social purpose business?
• Does the organization have the right people with the right skills and
is it willing to give them the freedom, responsibility and authority
necessary for entrepreneurial success?
• Does the organization have enough staying power in terms of time,
energy and money?
• Is the organization willing to make mistakes?
I.11
Lessons from
the Field
Seedco’s Nonprofit Venture Network (NVN) social
entrepreneurs offer this advice on the planning process:
• Business planning takes a lot of TIME.
• A business "champion" or point person is vital to
•
•
•
•
•
•
•
•
maintain focus and motivation during the planning
process.
Define the decision-making process early on to avoid
getting mired in the details.
If your nonprofit clients are going to become
employees, start the transition early through training
and communications.
Acknowledge and manage organizational culture
changes as they occur.
Secure executive staff and board buy-in during the
pre-development phase.
A business advisory board may increase the time
required for the planning process, but can provide
invaluable thoughts and perspective.
Acknowledge the risks and determine realistic
mitigation strategies.
Make sure you understand the numbers.
Don't be afraid to sell your products and services!
NVN social entrepreneurs identified the following common
stumbling blocks:
• Failure to recognize that the business needs a
manager with the experience and skills to operate a
business.
• Resistance to change within the organization and to
new staff roles and responsibilities.
• Securing the financial resources to move from
planning to launch.
• Understanding the targeted business customers and
market opportunity.
I.12
p a r t i : Building a Business: The Example of Recycle-A-Bicycle
Building a Business:
The Example of Recycle-A-Bicycle
RE
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SH
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Recycle-A-Bicycle (RAB) is a successful social enterprise in New York City
that demonstrates strength in the five key elements and has recognized the
importance of how the elements fit together.
BU
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ES
S
T
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RO
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Mission
• Mission: Recycle-A-Bicycle provides youth development to at-risk
populations through the operation of two successful full-service
used bicycle shops that employ youth trained in bike repair and
mechanics. Through these shops, RAB also furthers its second
mission to promote environmental stewardship by offering
affordable and sustainable transportation options.
• Organization: Recycle-A-Bicycle is led by an energetic Executive
Director (ED) who is skilled in bicycle repair and maintenance and
who is an avid cyclist. Through her networks within the cycling and
community development arenas, she has maintained a strong supply
of donated bikes and has built a solid customer base at the retail
stores. The ED has learned business management skills on the job.
In addition, to further strengthen Recycle-A-Bicycle, she actively
recruits volunteers, Board members and others to fill additional
I.13
needs. Shop managers oversee the youth interns and ensure high
quality repair services for customers. Finally, the youth involved
with the program are vital to the success of Recycle-A-Bicycle as
they bring both enthusiasm for the program and a source of labor.
• Business idea: Recycle-A-Bicycle's founder responded to a
proposal to create an employment and training program for youth.
The program provided valuable hard and soft skills for the youth.
At the same time, Recycle-A-Bicycle began to think about its
customer base. Residents of New York’s East Village neighborhood,
where the program was located, were either young, low- to
moderate-income individuals or residents of low-income housing.
Most customers could not afford a new bicycle or did not want to
pay a high price given the high rate of theft in New York City.
Recycle-A-Bicycle established its competitive advantage through its
location, pricing and the quality of the refurbished bikes and repair
services.
• Environment: Recycle-A-Bicycle makes sense in New York City.
The terrain is relatively flat and the city is extremely dense. In
general, it is faster to bike to a destination that is within 5 miles
than to walk, drive or take public transportation. Recently, the New
York City Council began talking about finding better options for
those who bike to work to store their bikes during the work day. In
addition, subway fare hikes in spring 2003 and the relatively mild
New York City weather makes biking an attractive option.
Despite the economic downturn that has plagued other small
businesses during the past three years, Recycle-A-Bicycle has
thrived because it (1) serves a niche market of delivery and
messenger personnel, who rely on bicycles to perform their jobs
and (2) provides an inexpensive alternative to a new bike for cashstrapped young New York City cyclists.
• Relationships: Recycle-A-Bicycle partners with the Henry Street
Settlement House and Children's Aid Society. These partnerships
allow Recycle-A-Bicycle to focus on job training, knowing that its
partners will provide other youth development activities such as
academic tutoring or personal counseling.
Recycle-A-Bicycle also has relationships with building
superintendents and community leaders who donate abandoned
bikes. Funders and technical assistance providers offer needed
services and support. Recycle-A-Bicycle also has relationships with
several cycling organizations including the Montauk Century and
Bike New York who provide opportunities to market the business as
well as offer youth additional part-time work.
I.14
p a r t i : Building a Business: The Example of Recycle-A-Bicycle
Recycle-A-Bicycle Success
Recycle-A-Bicycle did not start out with all of these elements in place, but
they have built strength in each area of the business. The key to RecycleA-Bicycle's success has been the way that the elements fit together.
Several examples of this include:
• Recycle-A-Bicycle's relationships with youth service providers helps
them focus on their employment and training mission and their
environmental stewardship mission because they do not offer other
youth development services. In addition, these service providers are
successful in obtaining youth summer employment stipends from
the city government, allowing Recycle-A-Bicycle to maintain low
labor costs.
• By collecting abandoned and discarded bikes, Recycle-A-Bicycle
provides a valuable service for superintendents and others who
would have to pay to dispose of these items.
• The business idea of refurbishing and selling used bikes promotes
sustainable transportation alternatives for New York City residents.
• The environmental factors such as the subway and bus fare hike in
spring 2003 and the economic downturn actually create new
opportunities for business with Recycle-A-Bicycle.
• The founder and shop managers are dedicated to the mission and
also have the skills to provide quality products and services.
I.15
p a r t i : A Framework for Planning: Introduction to PM&MSM
A Framework for Planning: Introduction to
Performance Measurement & Management
SM
Now that you are ready to begin business plan development, it is essential
that you begin to think about what needs to take place during the planning
process, how these activities will be accomplished, who will be responsible
for completing the work, how results will be measured and the timeline
for completion.
In this section, we introduce Performance Measurement & ManagementSM
(PM&MSM), a process to help you plan, measure, improve and be
accountable for your organization's activities. PM&M is a process that
identifies how your organization's activities lead to desired outcomes. In
this Toolkit, you will learn how PM&M can help you to articulate social
outcomes, collect and measure data about these outcomes, and use the
data to make and implement informed decisions.
Social purpose businesses focus on the double bottom line - the social and
financial outcomes that are expected from the venture. PM&M is a tool
that will help you to define each of these outcomes and develop
mechanisms for tracking your results. There are four elements in the
PM&M process:
1.
The Logic Model. The Logic Model is a graphic representation of how
the various resources and activities will lead to the benefits created for the
organization, its clients and stakeholders. It can be used to communicate
how the business will work and what outcomes will be achieved to people
within the organization, potential investors and other stakeholders.
Examples are provided in Part IV.
2.
The Action Plan. Action Plans guide the business planning process by
clarifying and coordinating tasks, assigning responsibilities and specifying
timeframes and due dates. Action plans are management tools used to
help in project management, and are most useful during the business
planning process. Action Plans stem from the Logic Model and the two
elements are used together.
3.
Gathering Evidence and Data Collection. This is the "measurement"
component of PM&M. This process involves setting targets and developing
indicators that measure your performance, and then establishing systems
for gathering evidence to track the indicators and determine if you met
your targets.
4.
Management. PM&M provides techniques and tools that can be used for
day-to-day and long-term assessment and management of the
organization's activities.
I.17
Elements One and Two will be explained in the following pages. Elements
Three and Four will be discussed in Part II of the Toolkit as they relate to
tracking and measuring the social outcomes of the business and writing
this into your plan.
Laying the Groundwork: Developing the Logic Model
A Logic Model is a way to articulate the theory of change behind your
social purpose business. This theory of change is based on the notion that
an activity creates an output that generates an outcome or change. Here is
a simple example:
Activity: Youth
clients work at a
copy shop filling
customer orders
and performing
customer
service.
Output: Youth
gain tangible
work experience
and knowledge
of customer
relations.
Short-term
Outcome:
Youth gain selfesteem and soft
skills.
Long-term
Outcome:
Youth complete
high school
and continue
to higher
education.
Had the work opportunity not been available, these youth might not have
developed the self-esteem and soft skills necessary to go on to higher
education.
The graphic representation of this theory of change is the PM&M Logic
Model. The Logic Model demonstrates links between the resources,
activities and benefits of the social purpose business, both in terms of
changes or benefits to your clients and for the organization.
The Logic Model consists of five elements described below. Two examples
and a template for building your own Logic Model are included in Part IV
of the Toolkit.
• Inputs. What are the assets that the business possesses today?
These are the resources dedicated or consumed by the business.
For example: funding, staff, facilities, partners, franchise,
consultants, participants/clients, knowledge/expertise.
• Activities. What are the tangible actions that need to take place
using the inputs to fulfill business objectives? Think of the
activities related to both the business and program side of the
venture. Some business activities could include: develop/finalize
business plan, pilot the business, make sales calls or conduct
advertising. Program activities may include develop/modify the
training curriculum, and screen and recruit the participants. The
best way to express the activities is as action verbs.
I.18
• Outputs. What is produced as a direct result of business activities?
Outputs generally depict the completion of an activity or are
quantified as the number or percent of units produced as a result
of the activity. For example: business plan developed, customer
survey completed or 15 participants complete job training program.
• Outcomes. What are the benefits or changes for your clients or
participants and for the parent organization as a result of the social
purpose business? Think of outcomes as the goals that your
business seeks to achieve. Outcomes are expressed as initial (within
0-2 years), intermediate (within 2-3 years) and long-term (within
3-5 years). Examples include: business generates net operating
income, participants obtain work experience and organization
becomes more entrepreneurial. The Logic Model should capture
financial, programmatic and organizational outcomes.
• Arrows. The arrows on the Logic Model are used to show the cause
and effect relationships between each of the elements. For
example, because you have a set of assets, you can operate an
activity. In general, arrows move linearly from input to activity
to output to outcomes. However, other cause and effect
relationships are possible. For example, an output may become an
input such as when the activity involves creating a training
curriculum or marketing plan. Arrows which represent causal
relationships are the key to showing how your social purpose
business will work.
If you refer back to the Strategic Questions, you will notice that you have
already thought through many of these Logic Model elements particularly the assets, activities and outcomes.
Action
Use the Logic Model Template and examples located in Part
IV of the Toolkit to craft a Logic Model for your social
purpose business.
I.19
Action
Helpful Hints
Helpful Hints on Building your Logic Model
• Add arrows to show the causal linkages between
inputs, activities, outputs and outcomes. Generally,
inputs will lead to activities, activities to outputs, and
outputs to outcomes.
• Some inputs may lead to more than one activity,
some activities may lead to more than one output,
and some outputs may have more than one outcome.
• Are the inputs sufficient to support all listed
activities? Are outcomes plausibly related to the
business and programmatic activities? Do the
outcomes genuinely represent a change or benefit for
the clients/participants/customers?
• Use if/then statements to check if the Logic Model is
"logical". Example: If we have dedicated staff, then
we can pilot the business plan. Or, if participants
attend training, then they will be placed in a job.
• Add or eliminate boxes on the template - you do not
need to fill in every single box!
• In filling in the boxes, if it is easier, you may want to
start with the outcomes and work backwards.
• The Logic Model can be used as a planning device, to
manage the development of your business and later
when your business is up and running.
Putting it Together: Building the Logic Model
Developing your Logic Model often takes one of two directions. Your
thought process might be direct - you know what activities you will
undertake and these will lead to certain outcomes. On the other hand,
you might know what outcomes you want and work backwards to determine
the activities that will lead to such outcomes.
Uses of the Logic Model
There are many uses of the Logic Model. Most commonly, it is used as a
planning, communications and operations tool. For the purposes of the
social purpose business, the Logic Model is best used to convey the entire
scope of the business and its outcomes to staff, prospective funders and
clients/participants.
I.20
The Logic Model can be used in communications to staff, potential
funders and clients/participants to:
• Reach a shared understanding of the business within the
organization
• Help staff understand how their work fits into the business and
organization
• Explain the business to new staff and the Board of Directors
• Clearly describe the business to funders, potential funders and
other stakeholders
The Logic Model can also be used in business planning to:
• Structure the business planning process
• Guide business implementation
• Identify gaps in service production
• Show the relationship between social, financial and organizational
outcomes
Finally, the Logic Model helps with operations management to:
• Guide measurement efforts and provide a framework for data
analysis
• Understand how activities are linked to business and programmatic
outcomes related to clients
• Identify hiring and staff training needs
• Encourage staff collaboration by illustrating shared purposes and
common outcomes
I.21
Making Things Happen: Action Plans
An Action Plan is a planning tool that can organize the key activities for
the business planning process. Overall, the Action Plan delineates:
• What activities/tasks will be done
• Who is responsible for doing these activities and tasks
• When each activity/task will be completed
The action plan can be used to communicate expectations and accountability.
To create your Action Plan, refer to your Logic Model which should
organize the tasks of the business. Also, review your Organizational
Assessment Survey and identify the tasks that need to be completed as part
of the business planning process. Next, examine the resources and
expertise you have in place to outline how the work will be accomplished.
In the Action Plan, you need to include the activities, the deadlines and
the responsible individuals.
You will want to return to your Action Plan on a regular basis to assess
whether tasks have been completed.
Task
Due Date
Person Responsible
Status/Notes
Conduct Market Research
July 2004
Marketing Assistant
Research in progress
Develop financial plan
September
2004
Business Manager
Financial statements
developed
Identify staffing needs
December
2004
Business Manager
Organizational chart
developed
Recruit participants for
training program
December
2004
Program Manager
Questionnaire sent out
to current trainees
Adapt current training
and curriculum
October 2003
Program Manager
Training curriculum
developed
Business-related Activities
Program-related Activities
I.22
Action
Use the Action Planning Template located in Part IV of the
Toolkit to plan the primary activities associated with
developing a business plan for your idea.
Reviewing the Action Plan
To complete the action planning process, answer the following questions:
• Are any key activities (or staff) missing from the plan?
• Are there potential bottlenecks or delays in any part of the plan that
might cause problems moving forward during implementation?
• Which activities have flexible deadlines? Which do not?
Conclusion
Developing a social purpose business is intensive and requires a sound
business idea, organizational readiness and a strategy that guides business
development. The work you have completed in this section has provided
you with an important opportunity to think strategically about your
organization and the way in which a business venture can strengthen its
work and further its mission. In developing the specific components of
the business plan, revisit this section and use it as a guide for shaping the
story you want to tell about your social purpose business.
In this section, you have assessed your business idea and how it relates to
your organizational mission. You have also explored the ways in which the
external environment can impact your business idea.
As a result, you should be able to:
• Articulate the outcomes for your social purpose business
• Describe your business idea and its relationship to your mission
and programmatic activities
• Describe the potential impact of the external environment on
your business idea
• Lay out the business on a Logic Model
• Establish an Action Plan for moving forward on the business
planning process
Now it is time to get to the real meat of the business planning processdrafting your business plan. The second part of this Toolkit details the
components of the Business Plan and provides a how-to manual to
formulate a strong and compelling document.
I.23
p a r t i : Special Section: Addressing Organizational Change
Special Section - Addressing Organizational
Change
Whether this is your first or fifth social purpose business, planning and
launching a new venture will cause organizational changes. These changes
may lead to tensions and uncertainty among staff, clients and other
stakeholders. The cultural change that accompanies the opening of the
new business can be one of the major challenges you will face.
The best way to address organizational change is through transparency and
communication. People often resist change when they are unsure how it
will affect them. Your staff and stakeholders may resist change because they
do not understand the goals of the new business venture or because they
do not feel that their ideas or concerns are being heard.
To help staff and stakeholders understand the changes that occur when
developing a social purpose business, it is important to clearly
communicate what is happening through formal mechanisms such as
meetings, reports and memos.
Action
Helpful Hints
Communicating Organizational Change
Address strategic questions:
• Why are we doing this?
• Why a business venture?
• What does this mean for staff and clients?
• What does this mean for the organization?
• What are we trying to accomplish?
Address practical questions:
• Explain what will happen and when. Show where
change will occur and provide structure with an
anticipated timeframe for roll-out.
• Outline the differences between how the program
functions now and how the business will operate in
the future.
• Explain how staff roles will change and how the role
of clients will change.
• Establish who the staff/stakeholders should talk to
with questions or concerns.
I.25
part ii: The Business Plan
Part II of the
Toolkit will
provide you with
step-by-step
instructions for
developing your
business and
creating a written
plan.
Part ii
The Business Plan
ii.1
part ii:The Business Plan
Ready, Set, Go.
Pa r t I I
The Business
Plan
The first Part of the Toolkit walked through the process of assessing an
idea in the context of the parent organization and introduced
Performance Measurement and ManagementSM (PM&M) a method of
systematic thinking that will be helpful throughout the planning process.
Part II: The Business Plan introduces the seven sections of a social
purpose business plan and provides tools and techniques for planning and
writing each section. Portions of the Recycle-A-Bicycle business plan are
included as an example throughout this section. The full text of the
business plan is available in Part V of the Toolkit. Each section also
includes information on integrating the tools of PM&M.
The sections of the plan are laid out in the order in which they should
appear in the final business plan. However, the Executive Summary will be
written last, incorporating language from other parts of the business plan.
In addition, during the planning and writing process, it may be necessary
to jump around between the sections as business development is not a
linear process.
The Social Purpose Business Plan includes the following sections:
• The Executive Summary
• Market Opportunity
• Business Model
• Operations
• Management and Stakeholders
• Social Outcomes
• Financials
• Exhibits
ii.1
p a r t i i : The Executive Summary
You never get a second chance to make a first impression.
The Executive Summary of the business plan is often the first and sometimes the only part of the plan
that an investor or potential partner will read. You have only a few pages to make a compelling and
concise case for your idea, the funding needs, time frame and your ability to execute the plan.
OV E RV I E W
The Executive Summary is usually the last section to be written. Return to
the Executive Summary once the other sections of your plan are near
completion. After reading the Executive Summary, the reader should have
an understanding of the core business and be interested in learning more.
Helpful Hints
Because it is written last, the Executive Summary can sometimes
get short changed in terms of refinement and revision.
However, this section should receive significant attention.
•
Try to convey your passion for starting this venture.
•
Have someone who knows nothing about your business
read it to be sure that you are clearly explaining the
idea and to give you fresh perspective.
•
Use formatting such as bullets, charts and numbered
lists to reinforce key points.
The Executive Summary should be 3-5 pages in length and will summarize
key parts of the business plan.
1.
Overview: The business idea. Explain what are you selling and to whom
and include a brief description of the mission and objectives of both the
nonprofit and the business. (Business Model Section)
2.
Relationship of the business to the sponsoring nonprofit organization.
Describe how the business venture is supported by the parent organization
and the legal structure under which the business will operate. (Operations
Section)
3.
Opportunity: Market summary. Convince the reader that you understand
the marketplace for your product or service by providing highlights of the
size of the market, your target customer base and the competition.
(Market Opportunity Section)
ii.3
4.
Competitive advantages and key partnerships. Explain why your venture
will succeed. What do you bring to this market that others do not? What
strategic relationships are already in place to help your business succeed?
(Business Model and Operations Sections)
5.
Management team highlights. Who will operate this business and why are
they qualified to do this? (Management and Stakeholders Section)
6.
Expected social impact. Outline your social outcomes and the indicators
and targets for these outcomes. (Social Outcomes Section)
7.
Goals, timeline and benchmarks. Explain how the business will proceed
and the key milestones for success. (Operations Section)
8.
Financial overview. Describe the financial outlook of the business
including expected year of break-even, upfront costs and the financial
strengths. How much do you need and when do you need it? What will
these funds support? (Financials Section)
9.
Contact information. Who should the reader contact if they want to
know more about the business? Provide the name, title, address, phone,
fax and email information for the key contact at the organization.
Including this information is extremely important because the Executive
Summary might be separated from the body of the business plan and
circulated.
The following example from the Recycle-A-Bicycle business plan provides
a comprehensive view of the business. Projections of social outcomes and
financial performance are clearly delineated in charts.
Every business opportunity is unique, therefore sections of the Recycle-ABicycle Business Plan may not be relevant to your business. For example,
because Recycle-A-Bicycle is a social enterprise that is not a subsidiary of a
larger, parent organization, the legal structure and information about the
parent organization are not included. Instead, Recycle-A-Bicycle focuses
on its partnerships with other organizations. If your business is a
subsidiary of another nonprofit, a brief description of the parent
nonprofit should be included.
ii.4
Recycle-A-Bicycle
EXECUTIVE SUMMARY
Overview
Recycle-A-Bicycle, a thriving 501(c)3 nonprofit, has a dual mission: to provide youth development
opportunities to at-risk populations in New York City and to promote environmental stewardship. The
nonprofit operates two successful full-service used bicycle shops that employ young people trained in bike
repair and mechanics. Through these bicycle shops, Recycle-A-Bicycle offers affordable and environmentally
sustainable transportation options for commuters, recreational bikers and messenger/delivery persons. As a
social enterprise, Recycle-A-Bicycle has a triple bottom line in which the social and environmental missions
are balanced with financial returns. Since 1997, Recycle-A-Bicycle has salvaged bikes from the waste
stream and refurbished them to sell to the public. Recycle-A-Bicycle also trains young people to fix bikes
and assists them in acquiring the soft skills required in today’s competitive job market.
Working closely with the Henry Street Settlement and Children’s Aid Society, Recycle-A-Bicycle integrates
financial, social and environmental concerns into a successful business model. Recycle-A-Bicycle currently
operates two retail stores, one in the East Village of Manhattan, the other in DUMBO, Brooklyn, New York.
ii.5
Toward these goals, Recycle-A-Bicycle:
1
2
3
4
5
6
7
Collects donated bicycles destined for dumping.
Trains at-risk youth for positions as bike mechanics and sales people, builds skills in basic business
concepts and computer training, and provides a safe alternative that is a positive influence on their
development.
Refurbishes used bicycles through a training program.
Sells the bicycles to the community as an affordable, quality transportation option.
Employs graduates of the training program.
Operates retail stores that also sell accessories and repair services that diversify the revenue stream and
create additional profit.
Offers classes to adults on bicycle repair.
Recycle-a-Bicycle is at a critical juncture in its growth. While the business is currently profitable, the
potential for further growth is significant. To better serve its mission and to address the demand for used
bikes, Recycle-A-Bicycle plans to create a new production facility, fill key staff positions and enhance its
infrastructure. By pursuing these strategies, Recycle-A-Bicycle can increase its youth outreach by more than
100%1 in the next two years as well as create an organization that is sustained on its operating cash flow,
thus reducing dependency on corporate grant funds.
MARKET OPPORTUNITY
The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the United
States. Recent studies show that in the Northeast, 28% of adults participated in biking activities during a oneyear period. New York City boasts a healthy cycling community consisting of commuters (over 100,000 people
commute by bike each day), bike messengers/delivery persons and professional and recreational riders.
Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in many
cyclists wanting to purchase an affordable bike as well as one that is less likely to be stolen. The prohibitive
cost of a new bike also generates business at used bike stores. Demand has outpaced Recycle-A-Bicycle’s
capacity to deliver for the past three years. Despite the demand, used bike stores are not prevalent in New
York City. Within Recycle-A-Bicycle’s trade areas, there are few other used bike sellers due to the high costs
associated with used bikes including labor to repair, inventory system requirements and insurance.
Year
Bicycles consumed
(Millions)
U.S. ridership
(Millions)
Bicycles consumed
per rider
1995
16.2
56.3
0.28
1998
15.8
43.5
0.36
2001
16.7
39.0
0.42
Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001
Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year.
Consumption refers to the number of bicycles purchased.
1 Outreach refers to the number of youth involved in any RAB activity, including both youth training and
organized youth bike rides.
ii.6
The supply of used bikes is also strong. National trends in cycling report that the number of bicycles
purchased each year remains relatively constant while the number of people riding is declining. This
indicates that more bicycles are being consumed per rider.
COMPETITIVE ADVANTAGE OF RECYCLE-A-BICYCLE
Recycle-A-Bicycle offers a unique product and service. Its social and environmental missions make it the
only socially responsible bicycle retailer in New York City.
Recycle-A-Bicycle has built a trusted brand name and its products are well known as quality alternatives to
traditional new bicycles. Customers often say these bicycles are better than new, referring to both the
quality and the social mission. Many customers are attracted by the low prices but feel even more
compelled to purchase when they learn of the social and environmental stewardship that the organization
embodies.
Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City.
Because of low labor and materials costs, Recycle-A-Bicycle is able to offer bicycles at very affordable
prices, most at 50% less than a comparable new bicycle.
The youth programs inspire young people to make better life decisions and touch many aspects of their
lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-being, provides a goaloriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An
“I can do it” attitude pervades Recycle-A-Bicycle.
MANAGEMENT TEAM
The management team consists of three highly skilled and dedicated staff with over 10 years of experience
in bicycling retailing, 13 years in transportation advocacy, and over 7 years experience in youth education.
The team has proven its ability over the years and is continuing to develop new strengths. The three key
staff members are:
•
Karen Overton - Executive Director
Ms. Overton is the founder and leader of Recycle-A-Bicycle. Ms. Overton worked as the Bikes for
Africa Project Director at the Institute for Transportation and Development Policy; a consultant for
the World Bank, in the International Development Bank, African American Institute; and Pedals for
Progress.
•
Jared Bunde - Manager, DUMBO Shop
Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as a
messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as a
bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. He
has also excelled in his racing career, winning a silver medal for the NY State Track Cycling
Championship in 2000 and 2002.
•
Yoandy Ramirez - Manager, East Village Store
Mr. Ramirez started his career with Recycle-A-Bicycle as a Summer Youth Employment student in
1999. Based on his hard work, Mr. Ramirez was promoted to Assistant Manager in June 2002 and
most recently became the East Village Store Manager. He will graduate from high school this summer
and aspires to pursue a degree in computer science.
ii.7
Members of the Board of Directors complement the skills presented by the management team. The Board
consists of dedicated individuals from the following professions: education, finance, social work and
transportation advocacy. Each Board member brings enthusiasm, a unique skill perspective and a broad
network of contacts to the organization.
SOCIAL AND ENVIRONMENTAL IMPACT
To date, Recycle-A-Bicycle has worked with over 4,500 youth and staffed an average of 15 positions per year.
Recycle-A-Bicycle improves the lives of at-risk youth in the New York City metro area through a hands-on,
formal training program in bike repair, small business and environmental education. After completing the
training program, many youth fill the part- and full-time positions available at the Recycle-A-Bicycle retail
stores. In addition, some secure positions in other bike shops across New York City. The organization’s
strategic partners provide qualified youth counselors that recruit and work with young people who need
assistance with basic job readiness skills and who can intervene in the case of serious issues regarding the
social or mental well-being of participants.
In 2002, Recycle-A-Bicycle worked with 772 youth through its training program. Over the next five years,
the organization will increase its youth impact by 54%.
In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New York City. In
2002, Recycle-A-Bicycle recycled over 14 tons of material destined for New York City’s landfills. Recycle-ABicycle expects to increase the amount of materials recycled to over 27 tons in 2007.
ii.8
2003
2004
2005
2006
2007
Youth participants to be trained
780
850
950
1050
1200
Number of positions to be filled
22
28
31
34
37
Tonnage of material to be removed
from the waste stream
17
22
24
26
27
FINANCIAL OVERVIEW
Recycle-A-Bicycle plans to make three key investments over the next three to five years to expand its
programs and create opportunity for revenue growth:
•
Acquire a production and training facility that will provide an expanded and dedicated space for
training youth as well as refurbishing bikes, therefore meeting more of the demand for used bikes in
New York City;
•
Acquire a van and hire transportation staff to allow for more strategic and coordinated pick-up of
donated bikes as well as transfer of inventory between production facility and retail stores; and
•
Hire additional staff to enable the organization to raise capital from institutional grantors for business
expansion as well as for increased training and youth program services.
Recycle-A-Bicycle projects net operating losses in 2003 while development and fundraising efforts are
invigorated, and the marketing, internet sales capacity, retail signage/merchandising, and other critical
corporate infrastructure projects are further developed. The results of this investment will be greater sales
revenue and significant improvement in net margin.
SUMMARY OF REVENUE PROJECTIONS AND NET INCOME
2003
2004
2005
2006
2007
Sales Revenues
$167,657
$232,932
$290,281
$318,775
$334,446
Grant Revenues
$ 71,091
$176,396
$172,049
$188,875
$198,129
Net Income
$ (11,472)
2
n/a
$ 47,868
$ 80,105
2006
28%
$111,275
2007
35%
$126,475
Net Retail Margin
21%
38%
Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year Strategic
Plan. These grants will be pursued through institutional funders with an interest in environmental
stewardship and/or youth development.
2003
Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000 in grant funding will serve as
working capital to support current operations as well as implement new marketing efforts. The additional
$100,000 will support hiring a Development Officer, support costs associated with sourcing and obtaining
the new production and training center and provide for other infrastructure improvements.
2004
Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds will be used in part
for working capital and in part to support more of the Five-Year Strategic Plan. This includes hiring a
Production Assistant to staff the production and training center, hiring a van driver to facilitate the pick-up
of supply and transfer of bikes between facilities and funding to pursue e-business strategies. In addition,
part of these funds ($38,000) will be used for a down payment on the production and training center.
ii.9
Recycle-A-Bicycle will raise the additional $106,000 through fundraising efforts spearheaded by the new
Development Officer.
2005
Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional costs related to
expansion including research into new retail opportunities. In 2005, Recycle-A-Bicycle will also launch the
Tours by Teens program.
Recycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track record of
growth and is now looking for capital in order to expand the social and environmental outcomes and
develop more sustainable systems within the business.
Recycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer and small
business in New York City. The organization serves a triple bottom line, benefiting the at-risk youth and the
New York City environment through a business model that is moving toward sustainability. Recycle-A-Bicycle
is seeking to increase its effectiveness in all three areas – social, environmental and financial. As one of the
leading organizations combining youth education, recycling and bicycling, Recycle-A-Bicycle has the
capability to expand locally as well as develop a national reach.
For more information on Recycle-A-Bicycle, please contact Karen Overton, Executive Director, at
[email protected].
ii.10
p a r t i i : The Market Opportunity
The Market Opportunity
So you think you have a great idea…
The Market Opportunity Section is intended to convince your reader that there is both a need and
demand for your product or service. The Market Opportunity Section should demonstrate an
understanding of your customers in terms of demographics and the factors that will influence their
decision to purchase your product or service.
OV E RV I E W
The viability of your business is based on a variety of factors - the market
opportunity, the business model, the social and financial outcomes and
the management team. In this Section, you will explain in detail the
rationale for the business venture by describing the opportunity that exists
for your product or service. Why is the business needed and by whom?
The key items that you want to convey are demand for your product or
service and the overall characteristics of the market itself. It includes:
1.
External and Industry Context of the business.
2.
Market Description, including size, growth rate and level of demand for
your product offering.
3.
Customers, including target segments, demographics, purchasing power
and decision factors.
4.
Competition at the local, regional and national levels.
5.
Summary of the market opportunity.
This part of the business plan presents an overall picture of where your
business will fit within its industry and market. You should begin with a
macro-level look and then narrow the focus down all the way to your
target customer. Finally, you will show where your competitors fit within
both the market and your target customer base.
Market research will provide you with the information needed to craft
your story. At the end of this chapter you will find sources of information
and guidance on how to conduct your research as well as helpful hints for
creating your story. In Part I: Getting Started, you began to think broadly
about your market opportunity. You may want to review your answers to
the External Environment questions before you begin.
ii.11
I N D U S T RY A N D E X T E R NA L C O N T E X T
Begin the Market Opportunity Section by discussing the industry in
general and analyzing changes or events that are taking place at
international, national, regional and local levels. You should also describe
the technological, economic, regulatory, labor market, political and
environmental occurrences that could impact your selected industry. An
analysis of the external environment provides an overview of the arena in
which your social purpose business will operate. The size and scope of
your proposed business will dictate the importance of these factors on
your sales and operations.
Industry: Your industry refers to the type of business you are operating. The
Department of Labor has created industry divisions from the North American
Industry Classification System (www.census.gov/epcd/www/naics.html):
•
•
•
•
•
•
•
•
•
•
•
Agriculture, Forestry, Fishing and
Hunting
Mining
Utilities
Construction
Manufacturing
Transportation and Warehousing
Information
Finance and Insurance
Real Estate and Rental and Leasing
Professional, Scientific and Technical
Services
Management of Companies and
Enterprises
•
•
•
•
•
•
•
•
•
Administrative and Support and Waste
Management and Remediation Services
Educational Services
Health Care and Social Assistance
Arts, Entertainment, and Recreation
Accommodation and Food Services
Other Services (except Public
Administration)
Wholesale Trade
Retail Trade
Public Administration
Examples of relevant industry information include:
• A silk screening business discusses that the industry has been
shifting from manual screen printing to digital printing, which
results in lower quality, but faster production time for printing
T-shirts and other items. If the business focuses on manual
production, it will need to show that there are customers who are
looking for the higher quality printing services.
• A new hardware store examines the trend in retail sales moving
from small neighborhood stores to large chain stores such as
Wal-Mart, Lowe's or Home Depot. If the business were also a large
chain store, this information would be helpful in making the case
for the new store. However, as a small community-based store, the
business needs to prove that customers will shop there.
ii.12
• A copy shop outlines how the industry has been affected by
new recycling laws or describes the way that technological changes
such as the trend to provide Print on Demand services (a new
printing technology that allows printers to efficiently produce small
quantities of printed material at a time) are requiring businesses to
make new capital investments. If the business wants to offer the
most up-to-date services, the industry data will support the need
for investment in technology.
The following excerpt from Recycle-A-Bicycle begins with statistics about
the bicycling industry in the United States. This information leads the
reader through an explanation of the trend in the industry toward greater
consumption of bikes per rider. It becomes clear that bicycles are viewed
as a disposable commodity.
R E C YC L E - A - B I C YC L E I N D U S T RY A N D E X T E R N A L C O N T E X T
DEMAND FOR BICYCLES CONTINUES TO GROW NATIONALLY
Bicycling has long been a pastime of children and adults alike and are used most often for social and
recreational purposes. In fact, bicycle riding is now the seventh most popular sport in the country (out of
62). In July 2001, the Bureau of Transportation Statistics estimated that approximately one in four adults
(25%) in the United States had used a bicycle in the last 30 days. An Outdoor Industry Association Report
found that within the Northeast, over 28% of adults participated in biking activities during 1994-1995.
However, cycling is highly seasonal and usage declines to as low as one in ten in the winter months.
Statistics show that the number of bicycles purchased each year remains relatively consistent while the
number of people riding is declining. This indicates that more bicycles are being consumed per rider.
Year
Bicycles consumed
(Millions)
U.S. ridership
(Millions)
Bicycles consumed
per rider
1992
15.4
54.6
0.28
1995
16.2
56.3
0.28
1998
15.8
43.5
0.36
2001
16.7
39.0
0.42
ii.13
With fewer people cycling and a constant number of bicycles being consumed, either consumers are
accumulating more bicycles or disposing of more bicycles. RAB's experience points to the latter.
Further evidence of this "disposable" bike culture was indicated in the keynote presentation at the 2002
Taipei International Cycle Show, when Yoshizo Shimano, Chairman of Shimano Inc. said: "American
consumers buying mass-merchant bikes ride them fewer than 60 miles before hanging them up in their
garages. In Japan the bicycle is so devalued that consumers dumped them in the streets creating a public
nuisance. They [bicycles] have become a throw-away commodity."
Source: Bicycle Retailer and Industry News, May 1, 2002
Recycle-A-Bicycle provides a unique solution to the commodification of bicycles while offering affordable,
environmentally sound transportation and recreation options to residents of New York City.
Developing
your Story
Developing Your Story is meant to guide both the research
and writing of the Market Opportunity Section. These
questions are included after the explanation of each major
part of the Market Opportunity section. As you are writing
your business plan, only include information that is
relevant in the context of your business. Ask yourself: Why is
this important and what does it mean for the potential of
my business? Then ask yourself how the information fits
into your story.
Macro Context: Taking a Look at the Operating Environment
•
What is the economic outlook for your industry? How
might this affect your proposed business?
•
Are there other current or potential events that might
affect the industry? What effects do you anticipate?
Industry Context: Exploring Your Industry
ii.14
•
Define the industry that you will operate within.
•
Describe what is currently happening within your
industry (e.g. trends in employment, consolidation of
companies, labor issues, new legal or regulatory issues,
etc.) and compare this to past trends. How will these
changes affect the industry?
•
How is new technology affecting the industry?
MARKET DESCRIPTION AND CUSTOMERS
Once you have provided a snapshot of the external environment and
industry, you will need to describe the market in which you will operate
your business. The market is defined by the universe of potential
customers for your product or service. In this section of the business plan,
include the following:
• Description of your market including size and geography of your
target customer base.
• Market trends.
• A discussion of your customer segmentation strategy.
• Your expected share of market or the level of demand anticipated.
Some questions to consider as you conduct research are: How large is the
market and how much of the market do you expect to capture? Is the
market growing? Are you entering an emerging market or one that is
relatively well-established? What does this mean for your business?
Customer segmentation is a critical component in demonstrating your
understanding of the market. When describing your customers, it is
essential that you include data that proves that there is a strong demand
for your product or service. In particular, you want to focus on the
following:
• Demographic information: age, gender, ethnicity, socio-economic
background, educational attainment, employment status and
population size.
• Psychographic information: motivation, buying trends, interests,
social concerns, political views and values.
Both demographic and psychographic information will allow you to create
a detailed profile of your customer base. In gathering this data, you will
also be able to break your target market in various subsets, or segments, of
the general market. Segmenting the market into specific, smaller groups
allows you to hone in and describe your special niche and the particular
needs and/or wants that the social purpose business will address.
It's important to be realistic about your target market. As you describe the
market and the expected market share (i.e. the number of customers that
will buy your product/service), keep in mind the capacity of your social
purpose business. Can the social purpose business effectively support the
number of customers you expect to serve? Careful consideration of all of
these questions will allow you to describe the opportunity that exists for
your business in quantifiable terms.
ii.15
Helpful Hints
Thinking about Customers
Do not assume that customers will buy your product just
because you are selling it. People are creatures of habit and
they tend to purchase what they know. Think about your own
purchasing behaviors:
•
Do you always purchase the same brand of toothpaste?
Why or why not?
•
What factors might cause you to start shopping at a
different grocery store?
•
How do you decide whether or not to try a new product?
Chances are that your social purpose business will offer a
product or service that is already sold by someone else. In
that case, you will have to convince a customer to stop buying
their regular product and switch to something new.
R E C YC L E - A - B I C YC L E M A R K E T D E S C R I P T I O N
CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG
New York City boasts a healthy cycling community consisting of commuters, bike messengers/delivery
persons, and professional and recreational cyclists. The New York City Department of Transportation
estimates that 100,000 people commute by bike daily. In addition, there are several active bike-oriented
organizations and clubs with memberships totaling over 10,000. The Five Borough Bike Tour, the largest
cycling event in the U.S., takes place in New York City with a ridership of 30,000. Cyclists flock to New York
City parks on the weekends during good weather. There are also New York City industries dependent on
cyclists: messenger services, food delivery and pedicabs.
New York City has over 100 miles of bike lanes and an additional 75 miles of Greenways for use by cyclists.
For the most part, New York City's terrain is flat, and the high density and mix of land use lend themselves
to cycling. Traffic and parking are constant problems facing drivers and cycling is generally a faster mode
of transport for trips within a five-mile range. According to one bike shop manager, cyclists will be active in
temperatures of 50 degrees Fahrenheit and above, leaving only the winter season unpopular for biking.
The events of September 11th converted some commuters into cyclists. At this time, many people's access
to public transportation was disrupted or they became anxious about the possibility of biological warfare in
the subways. The East Village shop did a record volume of sales and repairs from September to December.
With a bus and subway fare hike scheduled for May 2003, the number of commuters cycling to work is
expected to increase as commuters will choose to cycle rather than pay $4 daily for a round trip.
ii.16
On a more positive note, the government's recent investment in New York City's bicycle infrastructure,
perceived to make conditions safer, helps to encourage cycling. These investments include $1.5 million,
received in 1994, to plan and implement a comprehensive bicycle network for New York City. Through this
effort, 500 miles of bicycle routes have been identified and New York City has produced the New York City
Bicycle Master Plan as well as the first-ever New York Cycling Map. In 1996, an additional $2.4 million was
invested in the implementation of the Master Plan.
Both of Recycle-A-Bicycle's shops directly benefit from these improvements. A new bike lane is being
painted along Avenue C in the East Village, directing cyclists from the Williamsburg Bridge to pass by the
shop. More impressively, a dedicated bike/pedestrian path is under construction that will run along the East
River on the Brooklyn side. One of the main entrances is located at Washington Street just one block from
one of RAB's shops.
After describing the cycling industry in the U.S., Recycle-A-Bicycle
narrowed its story down to the local level. Recycle-A-Bicycle included data
on bicycle consumption in New York City and Brooklyn as they relate to
its retail locations. This data demonstrates the size of the target market. In
addition, RAB included specific data on New York City's cycling
community as well as information on bike lanes and other roadways used
by cyclists. By including this data, RAB demonstrated that a healthy market
exists for its product.
In the next excerpt, Recycle-A-Bicycle effectively uses demographic and
pyschographic data to segment its market and illustrate demand for its
product. While the overall target market is the New York City cycling
community, the market has been segmented into specific targets:
socially/environmentally conscious cyclists, students, individuals that have
experienced bike theft and commuters.
R E C YC L E - A - B I C YC L E TA R G E T C U S T O M E R S
CUSTOMERS SEEK VALUE IN THEIR BICYCLES
A strong market exists for used bikes because many consumers are unwilling or unable to purchase new
bikes that typically start at $200 - 250. A typical RAB customer is 20 - 45 years old, will use a bicycle as a
primary means of transportation, and has a median income of at least $20,000. Secondary customers are in
a similar age range, but will use the bicycle primarily for recreational purposes. Repair services and parts
are sold to a wider variety of cyclists, and Recycle-A-Bicycle is a strong supplier to the messenger and
delivery bicycling communities.
One in three customers shop at Recycle-A-Bicycle because they recently had a bicycle stolen. This was
determined during a survey of shoppers conducted over a month in summer 2002. These customers
reported that they were interested in purchasing a cheap, beat-up looking bicycle to reduce the likelihood of
theft. Customers in this situation are also happy to learn that Recycle-A-Bicycle tracks every bike - from its
source of donation to its final destination. Business is built on its reputation to avoid dealing in stolen bikes.
The majority of customers purchase a bicycle to meet their primary transportation needs.
Parts and repair sales tend to sell to the messenger and commuter communities. The fix-a-flat stations are busy
in the summer serving these two communities and the enhanced accessory lines also appeal to these groups.
ii.17
RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE
EAST
VILLAGE
ALL OF
MANHATTAN
DUMBO
ALL OF
BROOKLYN
Resident Population
58,595
1,459,596
47,746
2,465,326
Over Age 18
46,290
1,213,652
40,687
1,802,827
Ages 20-45
35,687
709,052
23,692
941,531
92.6%
80%
64.8%
72.9%
$43,767
$48,281
$56,293
$31,896
2.9%
0.9%
0.7%
0.5%
ATTRIBUTE
% Renters
Median Earnings
% Bike to Work
Source: 2000 Census, Census 2000 Summary Files (SF-1, SF-3) by Zip code; Manhattan = 100 3-Digit ZCTA;
Brooklyn = 112 3-Digit ZCTA
As evidenced from the above chart, Recycle-A-Bicycle is located in prime home markets for bicycle
commuters. East Village residents ride their bike to work nearly three times that of other Manhattan
residents. The DUMBO trade area rate of cycling is also higher than the Brooklyn average, and should
continue to grow.
ii.18
Developing
your Story
Micro Context: Describing the Market and your Customers
•
What is your market? Describe the demand, geography
or other criteria used to define your marketplace.
•
Identify trends taking place in the market. For
example, are sales growing, declining or stagnant, and
at what rate? Are sales growing because new customers
have entered the market (e.g. the cell phone market in
the early 2000s) or have existing customers started to
purchase more frequently (e.g. home computer market
in the 1990s)? Have prices been changing? Have
products or services changed?
•
Who are the customers for your product or service?
How many potential customers are there? Describe
them in terms of demographics, segmentation and
trends, including future projections regarding size,
demographics and decision-making to purchase
goods/services.
•
How does the customer make decisions about what
product or service to purchase? What factors are most
important in these decisions?
•
What price are customers willing to pay? Will
customers switch to your product? How much will it
cost them to change to your product/service?
•
How do customers typically hear about products and
services similar to your offering? How will this affect
your ability to attract customers?
•
How much will it cost to acquire and support a
customer?
•
How easy is it to retain your customers? Relate your
customer retention information to the costs to acquire
a new customer as well as the cost to the customer to
switch to a new product or service.
•
Are there secondary customer segments that you will
target? If so, describe them.
21
ii.19
COMPETITION
There is always competition for your product or service. The competition
section of the business plan is meant to demonstrate how the needs of your
potential customers are currently being met. With this information, you can
show how your product or service is differentiated. The section will tell the
reader where your potential customers currently shop and describe the
product or service offerings that are currently available.
Competition can exist at multiple levels - local, state and national and can be
either direct or indirect. Direct competitors offer similar products or
services. Indirect competitors offer a related product or service that fulfills
the same need. For example, direct competition for Recycle-A-Bicycle
includes mass merchants and department stores that sell bicycles at affordable
prices. Local bike merchants in New York City represent indirect
competition because they cater to the high end market that is willing to buy
expensive and/or specialized bicycles.
As part of your research, you should conduct a detailed assessment of your
direct competitors, including strengths, weaknesses and business
performance. The overall goal in discussing the competition is to
differentiate your business, discuss how it meets gaps in service and justify
why it can compete effectively against other businesses.
Recycle-A-Bicycle explains how, as a used bike dealer offering quality
refurbished bikes, the business is highly differentiated from other bike shops
in New York City.
R E C YC L E - A - B I C YC L E C O M P E T I T I O N
RECYCLE-A-BICYCLE COMPETES WELL AGAINST OTHER BICYCLE STORES
Overview
The retail bike industry in New York, like most cities in the country is comprised mainly of small,
independent bicycle retailers that primarily serve neighborhood clientele. Mass merchants like KMart and Toys-R-Us and sporting goods stores like Sports Authority also sell bicycles.
Among sellers of new bikes, mass merchants and department stores are the greatest competition
for Recycle-A-Bicycle because they offer products at affordable prices. However, these competitors
are not equipped to handle adjustments or repairs and do not employ professional bike mechanics
trained to offer appropriate customer service. In addition, the selection is often limited and the
bikes may not be assembled properly.
Recycle-A-Bicycle is not in direct competition with most independent bicycle shops in New York City
because the majority of these shops cater to the high-end market. The price of a new bicycle in
these shops typically begins at $200. Recycle-A-Bicycle maintains favorable relationships with
many of these stores and often will receive donations of materials from them. However, bike shops
make their highest profit margin from the sale of parts and accessories and Recycle-A-Bicycle
competes with these stores for accessory sales.
ii.20
Few barriers exist to opening a bicycle retail store, though a capital outlay of approximately to
$100,000 is required ($80,000 investment in inventory, $10,000 in tools, and $10,000 in other
various costs, plus a good credit history). In general, dealer margins have been declining on
bicycles and accessories, and more retailers are closing. Recycle-A-Bicycle does not anticipate any
new retailers opening in the East Village or DUMBO trade areas in the immediate future.
New York City Market for the Sale of Refurbished/Used Bikes
Most bike shops do not offer used bikes because the cost of labor to repair them is high, and
because selling used bikes requires an additional inventory system and liability policy (new bikes
are insured by the manufacturer). Furthermore, due to the high rate of theft in New York City, many
consumers want assurance that the bikes are sourced from legitimate places, requiring bike shops
to develop additional inventory and sourcing systems. Used bicycle dealers are the primary
competition for RAB and will be discussed in detail with regard to the trade area of each of the
retail stores.
Thrift stores are another source for used bicycles. These stores offer inexpensive bicycles. However,
the supply is not steady and a bike is sold "as is", meaning that it has not been repaired and may
not be safe to ride.
RAB has identified a market niche, used bicycles. Given the additional requirements such as a
liability policy and inventory system, the majority of bike shops only sell new bicycles. While RAB
directly competes with these shops for the sale of accessories, its core product of affordable,
refurbished bicycles distinguishes it from other bike retailers.
23
Developing
your Story
Competition
•
Who else offers your product/service? Where are they
located? What are their strengths?
•
Who are the target customers for your competitors? Do
your competitors plan to expand?
•
How important are your target customers to the
competition? What share of your target customer
market does each competitor have?
•
What are the competitive advantages of your
competition (e.g. high quality product/service,
customer satisfaction, strong management, brand
awareness)?
•
What are the barriers to entry for new competitors?
How will the barriers to entry change over time?
•
Who has the potential to enter this market? When?
•
What are the weaknesses of your competitors?
ii.21
M A R K E T O P P O RT UN I T Y S U M M A RY
The Market Opportunity Section can be lengthy and rather detailed.
Therefore, it helps to conclude with a short summary that highlights the
points about the demand for your product or service.
Recycle-A-Bicycle provided a summary of the market opportunity at the
end of the section. The following excerpt encapsulates the key pieces of
information conveyed.
R E C YC L E - A - B I C YC L E M A R K E T O P P O RT U N I T Y S U M M A RY
Recycle-A-Bicycle faces a welcome challenge: to recycle the supply and meet the demand for used
bicycles in New York City.
The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the
United States and studies show that adults frequently participate in biking activities. New York City
boasts a healthy cycling community consisting of commuters (over 100,000 people commute by
bike each day), bike messengers/delivery persons, and professional and recreational riders.
Used bicycles are in demand in New York City. The high rate of bike theft in New York City results
in many cyclists wanting to purchase both an affordable bike as well as one that will be less likely
to be stolen in the future. The prohibitive cost of a new bike also generates business at used bike
stores. Demand has outpaced Recycle-A-Bicycle's capacity for the past three years.
Despite this demand, used bike stores are not prevalent in New York City. Within Recycle-ABicycle's trade areas, there are few other used bike dealers. In addition, most retail bike shops do
not carry used bikes due to the high cost of labor that is required to refurbish the bikes.
The supply of used bikes is also strong. National trends in cycling indicate that bicycle consumers
are purchasing more bikes, though ridership remains constant. This creates a situation in which
there are many bikes either sitting idly in storage or being thrown out or abandoned. In New York
City, because space is at a premium, the latter situation is more likely. Recycle-A-Bicycle estimates
that the supply of used bicycles is ten times greater than what the business can currently collect;
these unused bicycles currently end up in landfills.
ii.22
MARKET RESEARCH
The information captured in the Developing Your Story questions will
shape your Market Section and add depth to your business plan. By
conducting an extensive analysis of the market, you will strengthen the
story you have to tell about your business and fully demonstrate that there
is demand for the product or service that you are offering.
As you delve into the research, you may discover that the market is in
decline or that the economy will adversely affect your business.
Uncovering this information doesn't mean that you should cancel your
business plans. However, it does mean that you need to be flexible,
responsive and thoughtful about your business idea. Identifying the
market conditions, revising your idea and finding a viable opportunity are
the purposes of this section.
The Market Opportunity Section calls for extensive research on the
external environment, industry, market size, customers and competition.
Your story will be more believable if you can prove it with numbers.
You can use a variety of sources to gather data:
• U.S. Census Bureau
www.census.gov
At this site, you can access free demographic information about
potential customers living in particular areas. In addition, you can
access the Economic Census, an area of the website that contains
industry level information that can be sorted to a local level.
• Trade Associations
Trade Associations are a good source of market research as they are
the experts in their field. Trade Associations also have information
on industry trends. Some members of the trade association are
likely to be your competitors.
• EASI Demographics
www.easidemographics.com
Easy Analytic Software, Inc. (EASI) is a New York-based
independent developer and marketer of CD ROM and Internet
demographic data and software solutions that provide demographic
reports with unique search and analysis tools. EASI provides
targeted site analysis software and updated demographics and
related data for standard and customized geographies (block
groups, ZIP codes, cities, counties, etc.).
• Local and State Agencies
Government agencies may have information on competitive
companies, local demographics and data that is specific to your
region or locale.
ii.23
• Public Libraries
Libraries provide access to news services and other databases that
can provide market information at all levels - from industry-wide
to local news.
• Securities Firms
Securities and/or investment news firms such as Reuters may have
reports on your industry that indicate the size of the overall market
or information on competitors. In addition, these reports can help
you understand how your business should perform relative to
similar companies.
• Gallup Polls
www.gallup.com
This site offers timely industry level news and information.
• Colleges and Universities
Area colleges and universities may have small business development
or entrepreneurship departments that can assist with research. In
addition, a college library may have databases and research tools to
supplement what you find at the public library.
• Direct Industry Contacts
Talking with experts in your field is a strong way to verify or learn
the story behind the market trends and statistics that you have
found in your market research.
Market research is a business unto itself. There are firms that specialize in
different markets and are able to conduct in-depth research and analysis
into your market. However, you can do much of this research yourself,
especially if your market is easily accessible. You can collect data by
holding focus groups, administering surveys, distributing questionnaires
and by conducting "grandma research." Examples of "grandma research"
include "person on the street" interviews, observing the number of people
that frequent the competition's locations and picking up price sheets for
the competition. These are low-cost alternatives that can be accomplished
by your team.
Telling your Story
Once you have completed the research and answered the Developing Your
Story questions, you have to put it all together into a compelling case.
This is a very individualized process, but the Recycle-A-Bicycle example
lends a few lessons that might get you started.
Recycle-A-Bicycle included headlines to help guide the reader through
the Market Section. Each subsection begins with a headline that is proven
through data and conclusions. These headlines set the stage for the section
and also allow a reader to skim and still get a sense of the story.
ii.24
The headlines for RAB’s market opportunity story are:
• Demand for bicycles continues to grow nationally.
• Consumption of bicycles in New York City is strong.
• Recycle-A-Bicycle competes well against other bicycle stores.
• Recycle-A-Bicycle has a strong presence in its retail trade areas.
• Customers seek value in their bicycles.
• Residents in our trade areas are more inclined to commute by
bicycle.
The other key to writing your story is to use the market trends to prove
your case. Recycle-A-Bicycle describes the New York City cycling
environment in a positive light, describing the flat terrain, short distances
and miles of bike lanes as reasons that cycling is popular in the city.
However, RAB could also find evidence that many commuters who want to
bike to work cannot due to a lack of safe space to park bikes during the
day, or they could highlight the dangers of cycling in the city as cars and
cabs drive in designated bike lanes. Instead, Recycle-A-Bicycle uses data
such as the high level of theft as a way to discuss why the refurbished bikes
are in demand because they are less expensive and look a bit less shiny and
new, thus they are less attractive to thieves.
Recycle-A-Bicycle has been in operation for six years and therefore has a
strong sense of its market. Finding the right statistics and data to tell the
story is more difficult when a business is in the start-up stage. Talking to
potential customers and developing an idea of what you think the story will
be are good ways to get started.
ii.25
p a r t i i : The Business Model
The Business Model
What's for Sale??
The Business Model Section tells the reader what you are selling and why it will be successful in
the context of the market opportunity that you described earlier. The Section describes the social
component of the business, provides a pricing analysis and demonstrates how you will generate
income. After reading the Market Opportunity and Business Model Sections, the reader should
feel confident that you have a viable business idea.
OV E RV I E W
The Business Model Section tells the reader what you are selling and why
it will be successful in the context of that market opportunity.
The Business Model Section should include the following:
1.
Description of the Product or Service - what you are offering and to
whom.
2.
Social Component of the business - the social mission/goals that you are
trying to achieve.
3.
Competitive Advantages of both the firm and the product/service,
including strategic partnerships and relationships.
4.
Pricing Analysis - what you expect to charge for your product/service,
how much it costs to produce it and what your competitors charge.
5.
Revenue Model - the way in which you expect to make money from the
product/service.
Take a moment to review the Organizational Assessment Survey that you
completed in Part I: Getting Started. There, you began to describe your
business model and the way it will benefit a targeted group of people. As
you continue, you will build on this work and more clearly articulate your
product or service offering.
ii.27
D E S C R I P T I O N O F P R O D UC T O R S E RV I C E
The Business Model Section begins with a straightforward description of
your product or service and who benefits from it. If you have more than
one line of products or a package of services, you should describe each
one starting with the most important in terms of the amount of sales
revenues you expect to generate. Describe the attributes and benefits that
your product will provide to customers.
Attributes: The features of your product or service. Attributes are often
tangible aspects of your product or service. For example, the attributes of
a copier might be that it copies twenty-five pages per minute and creates
double sided copies.
Benefits: What the customer "gets" from using your product or service.
Continuing the copier example, the benefits to the customer are that they
receive fast, reliable copies.
Business Planning With PM&MSM
30
Performance Measurement & Management (PM&M) is a tool that can help you in
planning and communicating your business. PM&M utilizes a Logic Model to illustrate
your business concept and desired outcomes. As you work through Part II: The Business
Plan, we will provide suggestions on how to integrate your planning into your Logic Model.
Inputs
The staff and resources that are required for your
business activities (e.g. employees, donated items, the
building where the business will be operated).
Activities
You should include the main activities associated with
your business idea (e.g. operate ice cream shop,
refurbish bikes, print t-shirts).
Outputs
What will happen as a result of the activities mentioned
above (e.g. revenues generated, products sold)?
Outcomes
What are the changes or benefits associated with
conducting your business activities (e.g. financial
outcomes might include breaking even or generating
profits while social outcomes might include clients build
soft skills by working at the business)?
The Recycle-A-Bicycle Business Model Section opens with a synopsis of
their business model, including strategic highlights about their recent
accomplishments. It then moves into a description of product lines.
Because RAB has been in business for several years, these product lines are
well established. If you are a start-up business, you might not have as
much information. However, try to be as specific as possible when
describing your product or service.
ii.28
R E C YC L E - A - B I C YC L E D E S C R I P T I O N O F P R O D UC T O R S E RV I C E
Recycle-A-Bicycle's growing success can be attributed to the fact that it has moved to more
accessible locations and has built a solid reputation in the community. Repeat customers are
common, as well as visitors who were referred by word of mouth. A majority of customers choose to
patronize the Recycle-A-Bicycle shops because of the social and environmental missions.
Product Line -- Bicycles
Recycle-A-Bicycle offers a wide variety of refurbished bicycles. Over 50% of sales are in the road
bike category. This is due to the fact that it is the most common type of donation, and therefore
most available in stock. The shops experience high demand for mountain bikes, hybrids, three
speeds, and cruisers. These types of bikes offer the cyclist an upright position that is considered
more comfortable for commuting. Recycle-A-Bicycle also sells children's bikes, but has found that
few parents want to purchase second hand items for their children. Children's bike sales account
for less than 5% of the bikes sold. All bicycle sales come with a 30-day warrantee.
Product Line -- Repairs
Recycle-A-Bicycle offers full bicycle repair services for all models of bicycle. Customers come to
Recycle-A-Bicycle because many bicycle shops will not repair older bicycles. The percentage of
repairs to total income has ranged from 5% to 15%, gradually increasing over the years as staff
with professional experience have been added.
Offering repairs helps to further Recycle-A-Bicycle's environmental impact by reducing the number
of bicycles that become unusable. Furthermore, parts recycled from demanufactured bicycles are
not entering the waste stream and are put to productive use again. The shops are well positioned
to specialize in the repair of bicycles manufactured during the 1970's and 1980's. Repair pricing is
competitive with other bicycle retailers.
Product Line -- Parts and Accessories
Both stores sell new and used accessories that make cycling safe and comfortable. The number
and variety of accessories are currently being expanded, but the merchandise mix will remain
focused on the safety, commuting and security categories. The most popular safety and security
items that are sold include locks, helmets, lights, and bells. Commuting items include pumps,
patch kits, racks, baskets, and fenders. The mark up on new items ranges from 50-150%,
averaging 100%. Recycle-A-Bicycle offers discounted prices on used accessories acquired from
donated bicycles. These are priced at wholesale rates because they require no capital outlay. The
ability to stock and sell new accessories currently accounts for a little over 17% of total income
and growth is expected as product offerings increase.
Retail revenues have grown steadily throughout the past five years of operation. The trend in
revenues has been towards increased sales of parts and accessories, driven primarily by customer
awareness and loyalty. Recycle-A-Bicycle is also able to more efficiently special order items that
will further increase sales in this category.
Recycle-A-Bicycle's ability to quickly remanufacture bicycles, therefore meeting more of the
demand for used bicycles, has been impaired by the lack of a focused production facility.
Recycle-A-Bicycle expects the proportion of bicycle sales to increase once new inventory is
created, as selling bicycles is the most effective way to serve both the social and environmental
missions.
ii.29
32
Developing
your Story
Product or Service
•
Describe your products and services. What are you
selling? What are the attributes and benefits of each?
•
What market needs do your products/services fill?
•
How does your product/service fill that need?
THE SOCIAL COMPONENT
As a social purpose business, you are balancing the "double bottom line,"
or both financial and social goals. This Section shows the connection
between your business and the social goals you expect to achieve.
A description of the social component should include an explanation of
how the business furthers your mission and assists your clients. Describe
the number of clients you expect to serve through the business and the
types of training or skills the clients will gain.
Because the social component needs to make sense in the context of the
financial goals of the business, it is important to justify the costs that
would not otherwise be incurred in a traditional business. For example, if
your business offers supportive "first-work" positions, it may incur more
expenses than a traditional business because it must provide training and
support to its staff. The increased costs may mean that you will have a
difficult time competing on price or you may be quite susceptible to
fluctuations in sales volume. Alternately, if your plan is to cycle employees
into your business for training and then transition those employees into
external permanent jobs, you might incur additional human resources
costs associated with multiple hiring cycles.
On the other hand, your social component may provide an economic
benefit to your business model. For example, if your plan is to cycle
employees into and out of the business each year, your labor costs may be
lower because you will not need to offer wage increases each year. Or if
employing youth, you may save on the cost of fringe benefits that are
usually offered to adult employees.
ii.30
This chart is meant to provide suggestions to create or revise your Logic Model.
Inputs
Activities
Outputs
Outcomes
The population you serve or the resources/assets you
have developed through the organization may serve as
inputs to the business and program activities.
The social component of your business often
represents the second major activity in which you will
be engaged (e.g. culinary training program, firstwork experience including resume and soft skill
development).
If you are operating an employment/training
business, your programmatic activities might lead to
an output of trained clients. If you are utilizing
intellectual property, your programmatic activities
might lead to the production of a training manual or
other product.
What changes or benefits do you expect from the
outputs (e.g. clients who are able to obtain
permanent employment or move into supervisory
positions, more nonprofits are able to implement a
program using your training manual)?
R E C YC L E - A - B I C YC L E S O C I A L C O M P O N E N T
Youth Job Training
The youth involved with Recycle-A-Bicycle are recruited through the organization's strategic
partnerships with Henry Street Settlement and Children's Aid Society. These youth come from lowincome families and receive a wealth of services through the partner organizations. Recycle-ABicycle provides meaningful training and employment opportunities for these young people who in
turn provide a low cost labor input for the business.
Recycle-A-Bicycle works with over 750 students annually through a classroom training program
focused on the following areas:
•
•
•
•
Bike repair / mechanical overview;
Small business / setting goals;
Environmental education / recycling / stewardship; and
Safe cycling / road awareness.
ii.31
Recycle-A-Bicycle also delivers innovative on-the job training programs in the following areas:
•
•
•
•
•
•
Basic mechanics training / advanced mechanics training;
Customer service and communications;
Introduction to business management /entrepreneurship;
Accounting, marketing and business operations;
How cycling can create a healthy lifestyle and a social structure; and
Recycling and environmental stewardship.
Developing
your Story
The Social Component
•
Briefly discuss the mission of your organization and
how the business will further this mission.
•
Describe the social goals for the business (e.g. clients
trained and employed, intellectual property
distributed and utilized by others).
•
What positions will your clients fill in the business,
what skills do they have and what will they need to
succeed in the business?
C O M P E T I T I V E A D VA N TA G E S
Your competitive advantages are the reasons that your business will succeed
within the marketplace. Generally, your competitive advantages are a set of
characteristics unique to your business and its product or service. In
addition, these characteristics should be meaningful to your customers.
The most common examples of competitive advantage include:
• Highest quality provider (e.g. Sony, Mercedes, Ritz Carlton)
• Low-cost leader (e.g. Southwest Airlines)
• First mover advantage - being the first and most established player
in your market (e.g. Microsoft, Starbucks)
• Strategic relationships - the way your business is able to leverage
other parts of the supply chain to your advantage (e.g. distribution
of Coca-Cola products or Wal-Mart's just-in-time inventory
system)
• Patented technology (e.g. pharmaceutical products, biomedical
products)
Competitive advantages also include more subtle differences and can be
based on the perceptions of your target customers. Examples of such
advantages include location, customer service and management. Though
ii.32
less obvious, these advantages can differentiate your business from the
competition. For example, a neighborhood small business may have a
prime location on a busy corner. If the business owns or holds a long
term lease on the space, this may be a competitive advantage.
The other competitive advantage to consider is your social mission. This
may or may not be a strong advantage for your business. For Recycle-ABicycle, the social mission is a vital part of the competitive advantage. The
youth and environmental components attract customers, the youth
provide a low-cost supply of labor and the donated bicycles provide a lowcost supply of bikes and parts. The economic advantages are a result of the
social mission. A traditional used bicycle business would not be able to
produce the refurbished bicycles at such a low cost.
Many social purpose businesses assume that their competitive advantage
will be as the "low cost leader." They believe that they can undercut the
competition and therefore generate sales. Before you decide that this will
be your competitive advantage, it is important to consider how you will
price your product and also to consider what price says about the product.
Generally, people perceive higher priced products as higher quality while
lower priced items are considered lower quality. In addition, competing
on price can be a dangerous business. It is much easier to lower prices
than to raise them.
Finally, review your Organizational Assessment Survey results from Part I:
Getting Started. Here, you described your core competencies and the
relationships that your organization has in place. Are there other
relationships with partner agencies, suppliers or distributors that could
enhance your ability to sell your product or service? These relationships
are also a competitive advantage.
An ice cream shop opened in a low-income community.
They priced the ice cream at a low cost believing that the low
income market would not support a high-end ice cream
store. However, the product was actually premium ice cream.
The result was that customers did not patronize the store
because they thought the ice cream was an inferior product.
In addition, the ice cream store was not making a high
enough margin on its sales to support the business. After
re-evaluating the business model, the ice cream store
increased its prices and ended up attracting more customers.
ii.33
R E C YC L E - A - B I C YC L E C O M PE T I T I V E A D VA N TAG E
COMPETITIVE ADVANTAGES
Recycle-A-Bicycle offers a unique product and service. Our social and
environmental missions differentiate us from other bicycle retailers in New York
City.
On a product basis, Recycle-A-Bicycle bicycles are one of the most affordable modes of
transportation in New York City. Because of low labor and materials costs, a Recycle-A-Bicycle bike
is priced at least 50% lower than a comparable new bicycle from an independent bicycle retailer.
Recycle-A-Bicycle prices are also competitive against other used bicycle dealers. Additionally, the
30-day guarantee is unique in the used bicycle marketplace and because Recycle-A-Bicycle tracks
all inventory from its source, consumers are assured that they are not buying a product that was
stolen or illegally obtained.
The youth programs inspire young people to make better life decisions. Recycle-A-Bicycle touches
many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and
well-being, provides a goal-oriented social structure (earning their own bike by helping fix others),
and helps improve self-esteem. An "I can do it" attitude pervades Recycle-A-Bicycle.
Consumers feel good about making their purchases with Recycle-A-Bicycle. Many customers report
that they are drawn to Recycle-A-Bicycle because of the low prices, but feel much more compelled
to purchase when they learn of the social and environmental stewardship.
Recycle-A-Bicycle enjoys the following advantages in relationship to second hand dealers, chain
stores, and bike stores:
•
•
•
•
•
•
•
•
ii.34
A legal operation that does not deal in stolen bikes;
An indoor, year round, predictable space;
Competitive prices;
Higher quality bikes than the competition;
A 30-day warranty;
A selection of accessories and the ability to custom order special accessories and parts;
A full line repair services; and
A social mission in which all proceeds are applied to the social and environmental programs.
Competitive Advantage
Developing
your Story
•
What distinguishes your product or service? Do you
have:
- Superior product/service
- Production/service delivery efficiencies
- Experienced personnel
- Strategic location
- Brand awareness
- Knowledge/ intellectual property
•
Is your social mission a competitive advantage for your
business? If so, how will you use this advantage?
•
If your venture is successful, what will it look like? Is
there an analogy with a commonly known business?
P R I C I N G A N A LY S I S
This component explains your pricing strategy. Pricing is one of the facets
of marketing and represents the value of your product or service. The
price you set is driven by your customer's perception of the value of your
goods or services and their willingness to purchase your product. This
information will form the basis for analyzing the price people are willing
to pay, and ultimately, the price that you will charge.
Determining the optimal price for your product entails three steps.
Analyze your pricing opportunity using each method and then use the
results from all three to determine your final pricing structure.
Step 1: How much does it cost you to produce the product or service?
Step 2: What do your competitors charge?
Step 3: How much are customers willing to spend?
Step 1. How much does it cost you to produce the product or service?
At this point in the planning process you can no longer avoid the
numbers. In order to determine how much to charge, you have to know
how much it costs to produce and sell your product or services. Think
through all of the costs involved even if you do not think that you are able
to quantify them at this time. Later you may be able to estimate these costs
or determine that they are negligible.
The charts on the next pages illustrate examples of two businesses costing
out the main product that they sell.1
1
These are examples and the costs listed were created solely for the purpose of illustration.
ii.35
Used bike shop (like Recycle-A-Bicycle):
Costs to produce and sell one bike
Cost to pick up donated bike frame
Cost to store donated bike for 2 weeks
(average time before bikes are refurbished)
Labor time to refurbish the bike (youth
employees)
Cost of parts used in refurbishing bike
(including units of grease, new
handlebars)
Marketing costs (determined per bike based
on total marketing cost for generating both
supply of used bikes and demand for
refurbished ones)
Labor time to sell the bike to customer
including adjustments
Space and utilities used in 6-hours of
refurbishing plus one week on display in
retail store
Total:
ii.36
$2 for van rental
$4 (0.1% of storage space
used for 2 weeks)
6 hours @ $6 per hour
Average cost of $20 per bike
Average cost of $5 per bike
based on prior year
marketing/sales analysis
1 hour @ $6 per hour
$1.50
$74.50
Social purpose bakery:
Costs to produce and sell one cake
$3
Cost of ingredients including staples
already on hand such as butter, oil,
vanilla, baking powder, etc.
Cost of utilities used in refrigeration,
mixing and baking
$0.25
Labor cost for professional pastry chef
0.5 hours @$30/hour
Labor cost for assistant chefs (clients from
nonprofit who have attended training
program)
2 hours @ $8/hour
Cost of storing the cake in refrigerated case
(portion of cost of case, electricity used)
$3 (estimated)
Portion of cost of delivery van plus fuel and
maintenance
$2
0.25 hours @ $8/hour
Delivery van driver
Marketing costs determined on a revenue
basis (i.e. $2000 in marketing is expected to
result in $6000 of new sales)
Total:
$3
$44.75
After calculating the cost of the product, you may use cost-plus pricing to
effectively increase the price by a certain percentage. This percentage may
be based on industry standards or may be determined after assessing
competitive prices (see Step 2, below). A second method of pricing based
on cost is to use a standard mark-up rate. Mark-ups are common in retail
businesses that purchase inventory at wholesale rates. Cost-plus and markups allow you to set a base price that you can assess after completing Steps
2 and 3.
Step 2. What do your competitors charge?
Assessing what competitors charge allows you to benchmark your price and
gives you a sense of the "market price." This analysis will show the general
consumer's willingness to pay. Start by determining the prices of similar
products. Then place the products along a range based on your perception
of the quality of the product. For example, a range of toothbrush prices
would include the 99 cent version at the low end of the quality scale and a
sonic toothbrush at the high end of the quality scale with a number of
ii.37
other toothbrushes in the middle. Place your own product along the range
given your perception of its quality and other attributes to get a sense of
how you fit into the pricing landscape. This process should give you an
idea of the price range for your product.
(You might end your pricing analysis after completing Steps 1 and 2. After
you decide where your product fits in its landscape, make sure that the
price covers your costs and then price accordingly. In some cases, this is
adequate. However, a more sophisticated analysis will provide a greater
understanding of how your customers perceive the value of your product.
For this reason, you should work through Step 3.)
Step 3. How much are customers willing to spend?
Determining the price that customers are willing to pay requires testing
the different customer decision factors. For some products or some
people, the decision may be based solely on price. However, most people
weigh a number of factors to determine what to buy.
Conjoint Analysis is a process that helps you predict the price customers
might be willing to pay, based on the weight that customers place on
different decision factors associated with the product. To use this method,
follow these steps:
1. Choose 6 - 8 competitive products that you think are most like
your product.
2. List attributes that you think are important to the customer when
purchasing or using this type of product.
3. Ask some potential customers to rate the products on these
attributes and to rank the attributes in terms of importance in the
decision to purchase.
4. Use a weighted average calculation to determine the price customers
are willing to pay.
Review the example of Conjoint Analysis in Part IV of the
Toolkit.
ii.38
So what price should you charge?
If you have worked through all three steps, you should have a good sense
of the price that you should charge based on your costs, the competition
and what customers are willing to pay. If you tested one specific product,
you can use the customer knowledge to extrapolate pricing for other
products.
Ideally, your customers will be willing to pay more than the cost of your
product. If they are not willing to pay more than your cost, then you need
to rethink your product.
• Is there a way to produce the product more efficiently?
• Is there a way to increase the value of the product in a customer's
mind through marketing efforts?
THE REVENUE MODEL
The market opportunity and the pricing analysis provide the background
and basis for the assumptions you make about the financial performance
of the business. The revenue model shows what you expect to make
through the sales of your product or service.
It is hard to predict the future. As your business builds historical data and
a deeper understanding of customer behavior, sales projections should
become more accurate. It will always be difficult to estimate your sales
volume for years into the future. The point of projecting your sales is to
show how you intend to grow the business - at what rate and through what
means (increasing prices, increasing volume, increasing your margins,
etc.). The reader will judge whether your projections are reasonable and
realistic for your particular business based on information provided
throughout the business plan. The reader will expect your estimates to be
optimistic rather than pessimistic.
To construct the revenue model, you will look at each product/service line
on a per unit basis. The three assumptions that you will begin with are:
1.
Price - What will you charge for the product or service? What are the
"units" associated with this price (e.g. single product, package of services
or average product sales)?
2.
Sales Volume - How many will you sell at that price?
3.
Cost of Goods Sold - What is the unit cost for the business to provide this
product/service?
With these assumptions, you will calculate your revenues (price times sales
volume), gross profit (revenue minus cost of goods sold) and gross margin
(gross profit divided by revenue).
ii.39
Price
The rationale for the price you plan to charge should be developed in the
pricing analysis section. This section explains why you will charge below,
on par or above the prevailing market rates. This section should also
outline what the prevailing market rates are and the trends/changes in
rates over time (including forecast of prices if available). In developing the
pricing assumptions, you will determine what you will charge for each
product line both in the present and over the next five years. You will
need to estimate the price increases that will be implemented over time.
Information to assist you with estimating price increases might come from
talking to your suppliers and vendors about their own estimates and
assessing how prices have changed over the past few years.
UN D E R S TA N D I NG R E C YC L E - A - B I C YC L E P R I C I NG
Refurbished bikes are sold at approximately 50% of the market value of a similar, new bike.
Because this is an on-going concern, they know that the average revenue from a bike sale is $125.
In addition, Recycle-A-Bicycle assumes the same average price per bike over the next five years.
The rationale for the constant price comes from both the market and the cost of goods. First, the
market for new bikes has generally flat pricing, therefore if Recycle-A-Bicycle maintains its pricing
strategy of charging approximately 50% of the market value of a new, comparable bike, it will not
be able to raise prices significantly. More important is that the cost of goods will not increase
significantly and therefore Recycle-A-Bicycle does not need to raise prices to maintain its current
gross margins. The cost of goods will not rise because most of the parts used to refurbish the bikes
are sourced from donated bikes, and labor to repair the bikes is generated through youth
employment, which tends to remain a steady wage over time.
Sales Volume
Your market analysis will be the main guide as you estimate the volume of
sales. It is best to break down sales volume to the smallest time unit that is
feasible to estimate. Very few businesses experience the same level of sales
volume from day to day or month to month. For example, many retail
businesses experience most of their weekly sales on the weekends. Sales
volume is also often seasonal. For example, many retail stores experience
the majority of their sales during the months leading up to Christmas. On
the other hand, ice cream shop sales bottom out during the cold winter
months.
The more detailed you are at tracking your sales, the better your
projections will be in the future. Some retail operations will track sales
volume and projection by the hour. As a start-up, with no historical data
on which to base your projections, you might want to start at a more
macro level with monthly projections that estimate volume over the first 12
months. Think about all of the factors that are likely to affect sales volume
each month and estimate your volume with those factors in mind.
For Years 2 - 5, it is acceptable to determine a growth factor to apply to
each product line. You can base this factor on the level of marketing and
brand awareness that you will generate, predicted increases in market
ii.40
demand, your competitive advantage and general industry growth trends.
You may also calculate growth in reverse by determining the level of sales
needed to meet your financial goals and then determining if this is
reasonable given your market opportunity.
UN D E R S TA N D I NG R E C YC L E - A - B I C YC L E S A L E S VO L U M E
Recycle-A-Bicycle projects its sales volume by the day of the week and the month of the year. On a
weekly basis, bike sales tend to take place on the weekends. On a yearly basis, Recycle-A-Bicycle
does most of its business in the spring and summer. To account for the monthly seasonality,
Recycle-A-Bicycle estimated the number of bikes sold each day in the highest volume months and
then applied a "seasonality factor" to other months of the year based on historical data. For
example, Recycle-A-Bicycle estimates that in January, it will sell half as many (Seasonality factor of
0.5) bikes as during a prime month such as April (Seasonality factor of 1.0).
WEEKLY BIKE SALES
M
T
W
Th
F
Sa
Su
Total
Bike Sales - East Village
1
1
1
2
2
3
-
10
Bike Sales - DUMBO
1
1
1
1
2
2
-
8
Bike Sales - Total
2
2
2
3
4
5
-
18
$250
$250
$250
$375
$500
$625
-
$2,250
Daily Bike Sales Revenue
ANNUAL BIKE SALES
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Total
Seasonality Factor
0.5
0.4
0.5
1.0
0.8
0.8
1.0
1.0
0.8
0.7
0.7
0.5
0.7
Expected Sales - EV
20
16
20
40
32
32
40
40
32
28
28
20
348
Expected Sales - DUMBO
16
13
16
32
26
26
32
32
26
22
22
16
278
Expected Sales - Total
36
29
36
72
58
58
72
72
58
50
50
36
626
ii.41
Recycle-A-Bicycle has three other product lines: Parts, Service and Accessories. For projections of
Accessories, Recycle-A-Bicycle did not create a formal estimate for the volume of sales of each unit
stocked, but rather assumes that accessories are generally sold at the time a bike is purchased
and therefore revenues from accessories are estimated as a percent (30%) of the total revenues of
bike sales.
Parts are pegged to Accessories, based on historical evidence of a correlation between sales of the
two product lines. Finally, Service is pegged to Parts based on the idea that most customers
looking for parts will also purchase Repair Services to have the parts installed on the bikes.
OTHER PRODUCTS
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Total
Accessories ‘02 Sales
$ 1,350
1,080
1,350
2,700
2,160
2,160
2,700
2,700
2,160
1,890
1,890
1,350
23,490
Parts ‘02 Sales
$ 2,363
1,890
2,363
4,725
3,780
3,780
4,725
4,725
3,780
3,308
3,308
2,363
41,108
Service ‘02 Sales
$ 1,231
985
1,231
2,462
1,970
1,970
2,462
2,462
1,970
1,724
1,724
1,231
21,421
Cost of Goods Sold
The Cost of Goods Sold (COGS) also known as the Cost of Goods,
reflects the direct costs to the business to produce the amount of
product/service that you are selling. COGS is a specific accounting
convention that should reflect the costs that are directly associated with the
items that are projected to be sold. Other costs associated with the
business will be included in Fixed Costs. These include Selling, General
and Administrative (SG&A) expenses. These Fixed Costs will include
items such as salaried staff that work on the business, rent, utilities and
marketing activities. The Cost of Goods Sold is an expense related directly
to the revenues that you have earned during a particular time period.
There are two components to Cost of Goods: Direct Materials cost and
Direct Labor cost.
Direct Materials:
For retail businesses, direct materials cost is the cost of purchasing the
inventory. For example, a museum store will source its products from a
number of vendors in order to fill the store with merchandise that is
relevant to the museum experience. The cost of purchasing each product
from the vendor is the cost of the good.
For manufacturing businesses, direct materials refers to all materials that
can be traced directly to a unit of output. For example, the direct
materials for a catering business include the cost of the food used to fulfill
an order. The units of spices and other staple goods like butter, oil, etc.
are also included in the cost.
ii.42
Direct Labor:
Direct labor is the time spent working specifically on the production of
the product or service. For a retail business, labor costs are usually
included as a fixed cost (unless the employee works on commission). For a
manufacturing business, direct labor refers to the wages paid to line
workers who are involved in the production. For a service business, direct
labor usually refers to the wages paid to staff providing the service.
To estimate changes in the cost of goods sold over time, think about
factors affecting the cost of purchasing inventory and raw materials as well
as increases in wages that you will pay to direct laborers. Discussions with
your vendors and suppliers are a good way to get a sense of potential
increases in direct materials.
UN D E R S TA N D I NG R E C YC L E - A - B I C YC L E C O S T O F G O O D S
The Recycle-A-Bicycle business model is set up to minimize the cost of goods sold. For bike sales,
the direct materials cost is estimated to be 14% of the average price. This represents $15 - 20 for
supplies needed to refurbish the bikes (or $17.50 for an average bike price of $125).
All accessories are sold at a 100% mark-up on the direct materials cost except locks, which have a
50% mark-up. Based on the historical ratio of sales of locks and other accessories, the average
mark-up for accessories is 60%.
Parts are gleaned from donated bikes and are removed by youth during the training program and
therefore do not have any direct materials costs associated with them.
Direct labor consists of the youth, mechanics and retail managers associated with the two shops. A
portion of the direct labor is subsidized through summer youth employment contracts with the city
and through free labor generated by the youth training program. One way that Recycle-A-Bicycle
entices youth to volunteer their time is through the Earn-A-Bike program in which labor hours
translate into credits toward a bicycle.
ii.43
COST OF SALES 2003
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Repair Supplies
$
648
518
648
1,296
1,037
1,037
1,296
1,296
1,037
907
907
648
Accessories
$
540
432
540
1,080
864
864
1,080
1,080
864
756
756
540
PT Retail Mechanics
$
870
870
1,088
1,088
1,088
1,088
1,088
1,088
1,088
1,088
870
FT Storage Facility Mechanic$
-
-
-
-
-
-
-
-
-
-
-
870
T
-
432
432
432
432
432
432
432
432
432
432
432
432
Retail Mgr/Asst Mgr Labor $ 6,240
6,240
7,800
7,800
7,800
7,800
7,800
7,800
7,800
7,800
6,240
6,240
-
-
-
-
-
-
-
-
-
-
-
8,493 10,508 11,696 11,221 11,221 11,696 11,696 11,221 10,983
9,206
8,730
PS 218 Mechanic
$
PT Van Driver
$
-
TOTAL
$ 8,730
Use the Revenue Assumptions Template in the Financial
Projections Workbook to determine the revenue potential of
your business based on your projections of price, sales
volume and cost of goods sold. Instructions for using the
Template are provided in Part IV of the Toolkit.
ii.44
p a r t i i : Operations
Operations
How does this thing work??
The Operations Section explains how you will make the business idea a reality and proves that you
understand how the business will work from the inside (as compared to the market section which
shows how the business will work from the outside).
OV E RV I E W
For a start-up business, this Section will demonstrate what you have in
place and how you will continue to build up the operations. For an
expanding business, this Section will show a plan for growth and stability.
The Recycle-A-Bicycle example is a business in a growth and expansion
mode. The following subsections should be included:
1.
Legal structure/relationship of parent to business
This can be brief or extensive depending on the complexity of the
relationship and legal structure.
2.
Description of operations and/or production process
This subsection shows what actually happens internally in order for the
business to operate. It also details the fixed costs associated with your
business.
3.
Staffing
The staffing subsection lays out your staffing plan and gives a rationale for
how these staff will be used. To make your staffing plan, you will need to
assess the capacity of your operations and determine the number of staff
needed to meet your revenue projections. A staffing plan template is
provided to help you determine your staffing costs.
4.
Marketing plan
The Marketing plan describes the promotional strategies to be used to
launch or grow the business. This is a particularly important section of
your business plan.
5.
Implementation plan and timeline
This subsection shows the reality of putting your plan in motion and
includes a budget for start-up costs.
ii.45
R E L AT I O N S H I P T O PA R E N T O R G A N I Z AT I O N
Here, you need to explain the legal structure of the business and why this structure is appropriate
for your business.
Please consult a legal advisor to determine the best legal structure for your
particular business. In New York City, the Lawyer's Alliance for New York
offers a workshop entitled "Business Ventures for Nonprofits" that
provides introductory information on the ways to structure your business.
Other nonprofit lawyer groups in other cities may offer similar services.
There are three basic structures for your business:
1. Operate as a program of the parent nonprofit
2. Establish a subsidiary nonprofit entity
3. Establish a separate for-profit entity (LLC or corporation)
Additional structures that you might consider are joint ventures and or a
combination of nonprofit and for-profit entities. There are advantages
and disadvantages to each structure and your legal advisor will guide you.
Think through the following issues as a starting point in determining what
is best for your business:
• Control: Who will have day-to-day control of the business?
• Is the parent organization comfortable with establishing a separate
entity, especially a for-profit entity?
• Liability: Does the parent nonprofit need to be shielded from
potential debt or lawsuits that may result from the business
activities?
• Will the business generate substantial income and potentially
jeopardize the parent's nonprofit status?
• How will the legal structure affect your brand image?
• What is your timeline for establishing the business?
• Where do you plan to look for start-up and on-going capital?
ii.46
R E C YC L E - A - B I C YC L E R E L AT I O N S H I P TO PA R E N T
Recycle-A-Bicycle is an example of an organization in which the business operations are seamlessly
integrated into the parent nonprofit. Recycle-A-Bicycle began in 1994 as a project of
Transportation Alternatives and grew through partnerships with the Children's Aid Society and the
Henry Street Settlement. Through support from Henry Street, Recycle-A-Bicycle created a retail
business that soon became an integral part of the program. In 2002, Recycle-A-Bicycle received its
own nonprofit status. Recycle-A-Bicycle continues to thrive due to its strong partnerships. Because
there is not a formal parent-business relationship, Recycle-A-Bicycle included the details of its
organizational history in an appendix, under the title: History and Milestones.
O P E R AT I O N S A N D / O R P R O D U C T I O N P R O C E S S
This subsection outlines the key factors involved in creating your product
or service. It should include an overview showing how the business works
and the key success factors. In addition, this subsection should introduce
the Fixed Costs associated with the business.
Operations Processes
You will describe how your business works from an internal perspective.
In planning your operations, you need to determine your capacity -- the
maximum amount of product or service that can be created, produced and
sold in a given period of time. After you know your capacity, you can
conduct a reality check on your sales forecasts to be sure that you are able
to make, produce or service the sales volume predicted. If you do not have
the capacity, you will need to determine how to meet your demand. One
common technique is outsourcing.
Manufacturing/Production Companies
If you are producing or manufacturing a product, describe the process
that turns raw materials into the final products including the equipment
and labor that are needed. Discuss the challenges you face and the capacity
of your production facility. For manufacturing and production
businesses, capacity is the number of widgets that can be produced each
day (or week). For example, Recycle-A-Bicycle refurbishes 15 - 20 bikes
per week. Their capacity is set by the number of work stations in the two
stores, the number of youth involved in the program, the hours that the
stores are open, availability of used parts, the storage space for bikes
before being refurbished and the retail sales space. You may also want to
include a description of a system for quality control. Consider this Lesson
from the Field.
ii.47
The Food Project, a youth-serving organization that grows its
own organic vegetables and then sells them at a farmer's
market decided to expand its business by offering a line of
“Fresh Salsa.” The youth are involved in every aspect of this
business venture - they developed the recipe for the salsa and
did initial market research. The salsa is a seasonal product
and is marketed toward higher end grocery stores and
gourmet shops. While marketing and distribution seem to be
a major component of their success, business operations have
actually proven to be the critical success factor for the
venture.
The salsa operations begin with the production of the organic
tomatoes. As the product became popular, the organization
could not grow enough tomatoes to meet the demand and had
to purchase from tomato suppliers to supplement their own
crops. This meant that the cost to make the salsa was higher
than projected.
In terms of labor, the youth worked in a small kitchen and
originally followed a recipe that was time and labor
intensive. Again, as the salsa became popular, the youth had
a difficult time meeting the demand due to the time
required for each batch. By analyzing their process, they
developed a streamlined production schedule where they
could make 18 units per hour.
The “Fresh Salsa” venture is at a crossroads: the organization
may consider outsourcing production to a nearby plant to
have the salsa bottled. Quality of product and involvement of
the youth may be compromised, however. Through these
experiences, the organization now plans to have a more
thoughtful Operations Plan in place to meet demand in the
second season.
Retail Businesses
If you are opening a retail outlet, you should outline the hours of
operation, the inventory system and merchandising plan as well as the
layout of the store. Detail the furniture and fixtures that you have in place
and explain what you still need. Describe your retail strategy with regard to
inventory rotation and markdowns, if this was not included in the
business model/pricing sections.
A critical factor in effectively managing a retail business is supply chain
management. A company's supply chain is the process by which it acquires
the goods that it resells to customers; it starts from the basic raw materials,
covers the manufacturing, warehousing and transportation stages, and
ends inside the retail store where the product is ultimately sold to the
ii.48
consumer. Supply chain management refers to the process of limiting the
costs associated with each step in the chain. These costs can be controlled
by strategies such as bulk purchasing, developing strong supplier
relationships, as well as minimizing the time that inventory sits on the
shelves (or maximizing inventory turn). These initiatives help lower both
your costs and your funding needs, and therefore increase profitability
and financial independence.
Service Businesses
If you are operating a service business, describe the people, materials and
processes involved in delivering the service. Outline the steps involved in
the service process and your systems for customer service, management
and quality control. These should include specific measurable targets so
that management can track them. An example would be: 98% of all
customers should be served within 10 minutes of calling us and with no
errors in processing their requests.
A key factor to control in a service business is capacity. If you have excess
capacity (too many people providing services), you will erode your profit
margins because your employees are not generating adequate revenue. If
you have too little capacity, you risk losing customers due to long waiting
times or a decline in the quality of services provided. Therefore, capacity
planning involves a delicate balance between having too many or not
enough employees. One way to approach this problem would be to build
capacity slightly higher than a conservative sales estimate, thereby leaving
some cushion for excess demand during peak periods.
Supplier and Vendor Relationships
In addition to explaining the processes involved in your business, you also
should describe your relationships with suppliers and vendors. Having
strong relationships with suppliers or vendors can mitigate some of the
business risks and create economic benefits to your business. In addition,
your ability to operate the business is dependent on your ability to source
materials you need, when you need them and at affordable prices. For
example, a strong supplier relationship will allow you to negotiate the
payment terms that work with your cash flow needs. Other benefits might
include guaranteed delivery or the ability to return damaged merchandise
or materials that you do not need.
Fixed Cost Assumptions
Thinking through the operations of your business will lead you to examine
the Fixed Costs. In the upcoming subsection of your Operations Plan, you
will develop projections for staffing expenses and marketing costs. At this
time, you should begin to think about all other costs such as facilities
expenses (rent, utilities, equipment), administrative expenses (insurance,
payroll, office supplies), travel/conference expenses, training or other
program-related expenses.
ii.49
Examples of Fixed Costs include:
Facilities
Administrative
Program-Related
Rent/Mortgage
Personnel
Program-Related
Training curriculum
Utilities
Insurance
Furniture/Fixtures
Overhead charge
from parent
Equipment repair
Job development or
coaching
Training stipends
Office supplies
Legal fees
Complete the Fixed Costs Template in the Financial
Projections Workbook. A list of possible expenses is included
in the template, but this list should be modified to fit your
business.
52
This chart is meant to provide suggestions to create or revise your Logic
Model and Action Plan.
Inputs
Suppliers and vendors might be key inputs for
your social purpose business.
Activities
The processes that your business goes through to
create or add value to merchandise might be
important activities to include. This might lead
to another activity such as sales.
As a start-up or growth business, you may find it useful to
use an Action Plan to lay out the activities of the day-today operations.
ii.50
The Recycle-A-Bicycle Operation Section describes the process of "remanufacturing" a bike. This explains the current operation and describes
the way that the business sources the used bicycles. The remaining part of
the production section describes the process for expanding and improving
production in order to meet greater supply and demand. An excerpt from
the re-manufacturing explanation follows:
R E C YC L E - A - B I C YC L E O PE R AT I O N S A N D P R O D UC T I O N
"RE-MANUFACTURING" THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE
Materials Donation
RAB promotes reuse and recycling of bicycles. Over 1,000 used bicycles are collected annually.
Eighty percent (80%) of donations come from bike shops and apartment building superintendents,
with the remainder collected from individuals and corporate donors. Bike shops and apartment
buildings are the most prevalent source because bikes are often abandoned at these locations.
Donation saves the cost of disposal and provides a tax deduction. Additionally, individuals who want
to support Recycle-A-Bicycle's mission bring in bikes, parts and accessories. There are also several
reputable volunteers who collect bikes in their neighborhood on garbage night and deliver them to
RAB's facilities. Finally, corporations organize employee collections and one bike manufacturer,
Fuji, donates surplus inventory to the project. The organization will collect twice the number of
bicycles when greater storage, production and transportation capacities are available.
De-manufacturing process/re-manufacturing process
The Youth Classroom Training Program curriculum was developed to teach bicycle mechanics skills
through the disassembly and reassembly of key mechanical components. The first stage of the
youth training program involves de-manufacturing damaged bicycles. Upon arrival, bicycles are
assigned a number in chronological order of receipt and then logged into the inventory. All frame
damaged bikes and very rusty bikes are slated for immediate de-manufacturing. The component
parts are cleaned and inventoried for use in repairing other bicycles or for sale to consumers.
Approximately 20% of the bicycles are de-manufactured.
The remaining bikes are assessed for type, quality and amount of repair time necessary to
refurbish. Bikes that have the highest market value, that are in high demand (3 speeds and
mountain bikes), and that are quickest to repair are worked on first. In addition, some customers
put a down payment on a recent arrival and return to buy it fully repaired. These "pre-ordered"
bikes also receive priority in terms of the order in which bikes are refurbished. On average, a
refurbished bike requires six hours of labor.
ii.51
S TA F F I NG
This is a critical element of a successful business and should demonstrate the "people power"
required for your venture. The staffing template provided will assist you in determining the
staffing costs associated with the business.
Staffing Plan
When planning your business, remember that you cannot do everything
yourself. You will need staff to operate, serve, produce or sell products
and services. Staffing costs are one of the largest expenses for businesses.
Developing a staffing plan requires an honest and thorough appraisal of
what skills and experience are needed, when they are needed, and how
much you are willing or required to pay to acquire staff with the right
skills and experience. In addition, you need to assess how you will use your
clients, the skills that they bring and any additional staffing needed for
training and supervision.
Your staffing plan should outline the various job positions and include a
description of the roles and responsibilities for each position. It should
also explain what staff are currently employed and what positions will be
added in the future. In addition, the staffing plan should show how you
plan to increase staff as your business grows over the next five years.
Include an organizational chart to show the relationships between all the
staff members.
When developing your staffing plan, consider the following:
• Do you have a balance of skills to complement both the financial
and social goals of the business?
• Do you have enough staff to meet the revenue projections that you
have developed (e.g. are there enough staff to keep your retail store
open 60 - 70 hours each week)?
• Does the staffing plan match your operational needs?
• What skills are needed for each position?
• Can your client population fill these staffing needs?
• Are some positions meant to provide transitional employment to
your client population? If so, what level of turnover do you
anticipate and how will this affect your staffing, management and
training expenses?
• How flexible is your staffing plan if the business takes off either
more quickly or more slowly than projected?
ii.52
Complete the Staffing Plan Template in the Financial
Projection Workbook. Instructions for completing the
Template can be found in Part IV of the Toolkit.
This chart is meant to provide suggestions to create or revise your Logic Model.
Inputs
Your staff are valuable inputs for the business.
Activities
Similar to the Social Component part of the
Business Model Section, your activities might
include training or providing supportive services
to staff. Or, if you need to hire a significant
number of workers, then recruiting and hiring
staff may even be an activity.
R E C YC L E - A - B I C YC L E H U M A N R E S OU R C E S P L A N
Human Resources
Recycle-A-Bicycle currently supports eight staff positions. Five positions are filled by bicycle
mechanics who hold positions of store managers and head mechanics at its two retail stores. The
business manager is the executive director, Karen Overton, who manages the triple bottom line.
Adding staff to the team to diversify the skill sets and reduce the burden on the business manager
is a strategic goal for the organization.
The store managers understand and are able to deliver on the retail aspects of Recycle-A-Bicycle
operations. Though the managers have been working as a team for only a short time, they have
demonstrated strong potential. Because of their trade and industry expertise, the team
understands the social mission and how to integrate youth and learning into their operations. Retail
and program management are adequately served by the team.
Recycle-A-Bicycle relies heavily on volunteer labor to achieve several aspects of its corporate
activities such as tutoring youth, website development and maintenance, and fundraising. Though
there are a handful of motivated, talented individuals who donate their time, this labor pool is
unpredictable and does not provide a stable source of labor.
ii.53
MARKETING PLAN
Creating your product and identifying that a market exists are only half
the battle. Now you must convince customers to purchase your product.
To do this, you will need a marketing plan.
What is Marketing?
"Marketing means solving customers' problems profitably." Marketing is a
process of determining what those problems (needs) are and then
designing your product, price, distribution and promotions to solve those
problems.
What Does Effective Marketing Accomplish?
It is important to begin thinking about marketing at an early stage in the
business planning process. Effective marketing will help your business
achieve its objectives because it:
• Generates sales, utilization and public support for an organization.
• Represents the organization to its various publics - consumers,
government agencies and the press.
Formulating Your Marketing Plan
You will need to consider the following elements in developing your
marketing plan. They will also enable you to estimate marketing costs for
your start-up budget. Much of the information needed to develop this
plan is contained in other parts of the business plan.
1.
Situation Analysis
This will include a summary of the internal strengths and weaknesses of
your social purpose business and the external factors that may affect it.
Also include the results of any research you have done.
2.
The Marketing Mix
These are commonly referred to as the "Four P's": Product, Price,
Promotion and Place. The Four P's are dynamic and interconnected and
will change throughout the life of your business to meet the changing
needs of your customers.
Product: This is the product or service that you are selling. You have
already described the characteristics in the Business Model Section. Now,
you need to think about what is unique or different about the benefits that
your product or service provides. This niche or uniqueness will
distinguish you from your competitors and will help sell your
product/service. Over the life of your business, you may need to rethink
your product or service so that it better fulfills the specific needs of target
customers.
ii.54
Price: Price is based on your costs, the demand for your product or
service and what the competition charges for similar products or services.
Again, refer back to the Business Model Section for an in-depth
description of how to price your product. It is important to remember
that price is adjustable.
Place (of distribution): Place refers to where you are going to sell or
provide your product or service, how you are going to get it there and how
much it will cost for this distribution. Place can also refer to where and
how your product or service is accessed by your target customers. Is your
location convenient, safe and easy to reach? Do your hours of operation
fit the times that your target customers are available? Place may have been
included in your Business Model and Operations Sections.
Promotion: Promotion involves developing communications to convince
potential customers to buy the product or use the service.
Use the P-Flow Worksheet in Part IV of the Toolkit to think
through and refine your "Four P's." As you fill in the chart,
consider the extent to which one element makes sense in
terms of the others.
3.
Targeting
In order to make decisions about what combination of product, price,
place and promotion to employ, you will need to have a thorough
understanding of:
• The characteristics of your potential customers
• The specific needs the potential user of your product or service
• The ways they access information
• How they decide which product or service to use
4.
Positioning
Positioning begins with determining what you want your target customers
to think about you. (A positioning statement is not a mission or vision
statement - which is what you want your business to achieve or become.)
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A Positioning Statement has a formal structure:
[Product] is the brand of [Category] which to [Target] delivers [Unique Product Benefit]
Product = what you are selling
Category = the business you are in
Target = your target customer
Unique Product Benefit = why your target market will want your product
Helpful Hints
Positioning Statements
To determine your category, think about what business you
are in. You may need to "unpack" your business model and
consider the purpose of your business and the type of
product or service that you offer.
Determining your unique benefit comes from
understanding your customers and what they are looking for
in your product/service. For social purpose businesses, this
may or may not involve including the emotional value of
your social mission.
Positioning Statement Examples:
Recycle-A-Bicycle is the brand of Used Bicycle Retail Stores, which to
New York City cyclists delivers bikes that help create a better world.
Victim Service Hotline is the brand of telephone consultation, which to
victims of violent crime provides immediate, concrete, confidential
support from professional counselors.
Complete the Positioning Statement Worksheet in Part IV of
the Toolkit. Play around with the target customer, category
and unique product benefit to find the statement that truly
captures what you want your customers to think about you.
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5.
Setting your Marketing Goals
You are now in a position to set your marketing goals/objectives. These
will be the highest-level statement of your goals. Be sure to consider the
sales and revenue targets you projected. Marketing goals should have
quantifiable results that can be used to determine the success of the
marketing campaign.
6.
Determining your Marketing Strategy
Once your marketing goals are set, you will need to determine your
marketing strategies - or the broad logic of actions you will take to achieve
your goals. Basically, there are four kinds of strategies you will want to
consider. Do you want to:
• Create Awareness - or educate your customers about the attributes
and benefits of your product or service? Think about how you
might use Promotion and Place to create awareness.
• Generate Trial - or convince new customers to try your product or
service? Think about how Promotion, Place and Price all have a
role in generating trial.
• Build Preference - or convince customers that your product or
service is better than the competition? Think about how you might
need to utilize all 4 Ps - Product, Promotion, Place and Price - to
build preference.
• Generate Repeat - or retain existing customers? Think about why
Promotion and Price might be the best tactics to use for generating
repeat sales or usage.
7.
Deciding on the Tactics You Will Use
Tactics are the specific activities that you will use to achieve your marketing
strategy/ies. Although you may decide to manipulate any one of the four
"P’s" in a tactical way, generally most of your activities will be focused on
Promotion. In selecting promotional tactics, think about the following:
Advertising: Specific tactics include newspapers, magazines, TV, radio and
outdoor signage.
• Benefits: Reaches large groups.
• Drawbacks: Expensive. You may reach a far broader audience than
your specific target.
Personal selling: Specific tactics include face-to-face meetings with
individual customers in a personalized setting.
• Benefits: Most powerful promotion technique --it is much harder
to dismiss a sales rep than it is to ignore a newspaper ad.
• Drawbacks: Expensive and time consuming.
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Publicity: Specific tactics include news releases and feature stories.
• Benefits: Credible and free.
• Drawbacks: You can lose control of the message and it is very labor
intensive.
Public Relations: Specific tactics include lobbying, parades, press
conferences.
• Benefits: Reaches large groups of people.
• Drawbacks: Does not usually generate sales.
Sales Promotions: Specific tactics include trial packages and premiums.
• Benefits: It is non-recurring. Supplements both advertising and
personal selling.
• Drawbacks: Ineffective on its own.
The Marketing Plan
Now that you have formulated the elements, you are ready to write your
Marketing Plan. The Marketing Plan lays out your marketing goals and
explains how you will meet these goals. The sections of a Marketing Plan are:
1. Situation Analysis - Brief analysis of the External Environment
and your internal strengths and weaknesses.
2. Description of the Target Market.
3. Positioning Statement.
4. Marketing Goals/Objectives - should be consistent with your
business goals.
5. The Strategies you will use to achieve those goals.
6. Implementation.
• Tactics
• Action Plan
• Budget
Marketing Plan Outline for Recycle-A-Bicycle
Objectives: Highest-level statement of company goals.
• Example:
Sell 50 bikes per week from April to September out
of two retail stores.
Strategies: Broad logic of actions taken to achieve objectives.
• Example 1: Increase awareness of RAB among college students by
50%.
• Example 2: Increase flow of used bikes for repair by 4 units per
week.
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Tactics: How will the strategies be executed? (Related to example 1)
• Example:
Set up tables to distribute literature on-campus (6
tables).
• Example:
Place advertisements in student publications (10
ads).
• Example:
Create links to RAB website (100 new links).
• Example:
Utilize current volunteers to increase word-ofmouth.
Budget: How much will it cost to implement these strategies?
• Example:
On-campus tables: $200 per table
• Example:
Advertisements: $50 per ad
• Example:
Links to website: $1000 to hire sales intern
This chart is meant to provide suggestions to create or revise your Logic Model and
Action Plan.
Inputs
If your business is armed with a Marketing Plan, this
might be included as an input.
Activities
If you are in the process of developing that plan, then
the development is an activity that will lead to the
output of a Marketing Plan that will later become an
input for the business. Implementation of the
Marketing Plan is another activity that might be
significant to include.
Outputs
If the activity is developing a plan, then you will have
a plan as an output. However, if your plan is to
implement, you will have ads placed or presentations
made or other outputs related to your tactics.
Outcomes
The marketing outcomes are the goals you have
outlined in your plan (e.g. raise brand awareness or
increase sales)
Implementation of a Marketing Plan requires coordination of both
time and resources for creating materials and making sales calls.
Action Planning can help you organize who is responsible for each
item on the plan and allow you to track the success of your efforts.
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R E C YC L E - A - B I C YC L E M A R K E T I NG P L A N
When the production and training facility is in operation, additional marketing will be needed to
increase the supply of donated bikes and create demand among customers. New staff and
volunteers will be recruited with this task in mind, so that a concerted effort can be placed in
marketing the organization and merchandising and sales within the stores. While the production
center is in development, a formal sales and marketing plan will also be developed. Within this
plan, new product offerings will be considered that will increase the stores' revenues and
profitability.
Recycle-A-Bicycle can market its social and environmental missions much more aggressively within
the stores and their trade areas. A campaign will be developed that highlights these two areas. This
will include print media, an enhanced website, and a video that can be played in each store to
assist consumers in immediately understanding why Recycle-A-Bicycle is the best place to
purchase a used bicycle. In addition, Recycle-A-Bicycle will create and install much needed signage
at the DUMBO store.
Recycle-A-Bicycle will also investigate selling used parts on the internet. Two strategies will be
explored: using E-Bay as a mechanism for sales or tapping into the Bicycle Trader website that
specializes in the sale of second-hand bicycles, parts and accessories.
Strategy: Recycle-A-Bicycle will create an aggressive marketing campaign, make
improvements to point-of-sale merchandising in the stores, develop and implement
a customer service training program, add new accessory lines to both operations
and improve the website to better facilitate e-business.
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p a r t i i : Management and Stakeholders
Management and Stakeholders
The Buck Stops Here.
The Management and Stakeholders Section should explain who will lead the business venture and
ensure its success. The Section highlights the management strengths and shows that you recognize
where gaps exist and how to fill them. As you are writing this section, ask yourself "If I was an
investor, would I trust this team with my money?"
OV E RV I E W
Your management team is one of the most important elements of your
business. Your team will be the force behind both selling the business idea
to other stakeholders and executing the plan. For-profit and nonprofit
investors will look at this team for proof of experience, leadership and
vision. If the business idea needs to be revised or even completely
changed, investors and stakeholders want to know that there is a team that
is experienced and capable of "making things happen."
The Management Section should include:
1.
Introduction to the team including description of relevant experiences
and explanation of team's experience working together
2.
Explanation of key management team positions and bios for positions
that are filled
3.
Description of positions to be filled and skill sets sought for each position
INTRODUCTION TO THE TEAM
In constructing this section of the plan, it is useful to describe the years of
relevant experience across management team members. For example,
Recycle-A-Bicycle opens this section with:
Recycle-A-Bicycle's management has over 10 years of experience in bicycling retailing, 13
years in transportation advocacy, and over 7 years experience in youth education. The team
has proven its ability over the years and is continuing to develop new strengths.
In addition, include brief information about your Board of Directors,
Advisory Board or others who will have a direct influence on the success of
the business. These groups often provide significant business experience
that may be lacking in your management team. Recycle-A-Bicycle relies
on their Board of Directors for assistance in business development
activities. Recycle-A-Bicycle writes:
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Board of Directors membership complements the skills presented by the management team. Nearly all
Directors volunteer in capacities beyond their Board role. The Board consists of dedicated individuals with
experience in: education, financial management and analysis, social work and transportation advocacy.
Each Member brings enthusiasm, their unique skill perspectives, as well as a broad network of contacts to
the Board and the entire organization.
MANAGEMENT TEAM BIOS
The social purpose business will need a manager who has the skills to
pursue both the social and financial goals. To do this, your business
manager will need to have a unique set of skills, including:
• Industry expertise
• Entrepreneurial experience
• Enthusiasm and understanding of the social component
• Financial management capabilities
• Understanding of or interest in the nonprofit sector
• Knowledge of or familiarity with managing the double bottom line
• Sales and marketing background
• Operational experience
An optional way to structure the business management is to have two
managers with different responsibilities. One business manager could be
responsible for meeting the financial goals of the business and handling
the day-to-day operations. The other could be a social manager who
ensures that the business maintains its focus on mission.
The heart of the Management Section includes brief bios on the key team
members. These bios highlight the work experience that is most relevant
to the business activities. Taken together, the team should show
competence in the skills required to operate your particular business. In
addition, as a social purpose business, it is important to highlight
experience working with the target population and in the nonprofit
services field. Finally, this section should prove the commitment of team
members to this enterprise.
Recycle-A-Bicycle has a somewhat flat organizational structure and
therefore included a large number of staff members who may not be
typical "management team" level. However, by including these staff
members, Recycle-A-Bicycle was able to tell the story of how many
program participants have become full-time employees while also
pursuing other interests or additional education.
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p a r t i i : Management and Stakeholders
R E C YC L E - A - B I C YC L E M A NAG E M E N T B I O S
Karen Overton
Executive Director, Recycle-A-Bicycle, Inc.
Ms. Overton was the founder of Recycle-A-Bicycle when it began as the environmental education
initiative for Transportation Alternatives in 1994. Prior to that, Ms. Overton worked as Bikes for
Africa Director for the Institute for Transportation and Development Policy and as a consultant for
the World Bank, in the International Development Bank, African American Institute, and Pedals for
Progress. In 1998, Ms. Overton incorporated Recycle-A-Bicycle.
Through her various positions, Ms. Overton has developed skills in the areas of project
management (design, implementation and evaluation); research (data collection, analysis and
publication); writing (Ms. Overton has authored several cycling manuals, magazine articles, and
publicity pieces); training (design and implementation of training programs for youth and transport
planners/economists); and public speaking at several alternative transportation symposia. Ms.
Overton cycles year round.
Ms. Overton has a Masters Degree in Urban and Regional Planning from the State University of New
York-Albany, and is recognized as an expert in the field of alternative transportation planning.
Jared Bunde
Manager, DUMBO Shop
Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997 as a
messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three years as a
bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used bicycles. His
racing career has excelled, winning silver medals for the NY State Track Cycling Championship in
2000 and 2002.
Mr. Bunde brings with him an interest in the arts and the environment. He has taken photography
courses, permaculture and ecological design courses, and completed the Foundation Program at
the Parsons School of Design.
During his tenure with Recycle-A-Bicycle, Mr. Bunde has increased the shop's productivity and
profitability. Through his efforts, the shop experienced an overall increase of $20,000 in revenue in
2002.
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M A NA G E M E N T T E A M P O S I T I O N S T O B E F I L L E D
As the management team is assembled, you should note areas where skills
are still lacking. For example, your business manager may possess a wealth
of industry knowledge and operational capacity but be lacking in financial
management skills. In this case, you will want to be sure to hire a strong,
experienced financial officer or to identify a Board Member or volunteer
who has the time and dedication to fill this need.
As a start-up or growing business, you may not have all of your key
management positions filled. It is important to show what types of
individuals you are looking for and how those people will be integrated
into the organization. This is not a flaw in your business planning, but
rather demonstrates that you have planned for the appropriate
management.
66
This chart is meant to provide suggestions to create or revise your Logic Model and
Action Plan.
Inputs
Management and stakeholders are a critical input
for your business and programmatic activities.
Activities
Recruiting Board or key team management
members may be an activity.
If skills or training is needed for managers, you should
include these activities in your Action Plan to show the
importance of professional development for your managers.
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p a r t i i : Social Outcomes
Social Outcomes
The Business of Achieving Your Mission.
The Social Outcomes Section details how the business will help the organization meet its mission and
projects the extent of that impact. The Section will describe what you want to achieve and why you
believe these outcomes will be achieved. The Social Outcomes Section complements the Financial
Section, where you will project the financial outlook. At this point, you should pull out your Logic
Model and Action Plan to use as you think through your social outcomes.
OV E RV I E W
Social outcomes are the change or benefit to society achieved from the
social purpose business. Generally in the outcomes-measurement field,
outcomes are client focused. However, in the context of a social purpose
business, the concept of outcomes measurement has been expanded to
include programmatic or organizational outcomes. Social outcomes
should be quantifiable, and are measured against a target, and then
evaluated over time to determine if the goal was met.
Nonprofit organizations are often asked by funders, boards and other
stakeholders to quantify their achievements. The same holds true for
social purpose businesses. Investors are interested in the double bottom
line. Thus, performance is not solely evaluated on financial performance
but also on the social outcomes that have been achieved. The Social
Outcomes Section describes your social outcomes goals and your system to
evaluate performance.
Outcomes Measurement and the Social Purpose Business Plan
Nonprofits are generally skilled in setting goals, usually articulated in a
mission statement. Think of your own organization's mission - it is likely
to be representative of the philosophy that guides your organization's
work. Your organization may be skilled in measuring staff performance;
for instance, your fundraising department is likely evaluated on number
of dollars raised. However, assessing the performance of your programs
usually proves to be more vexing.
Does your organization currently track and measure the outcomes of its
programs? Do these outcomes inform management decisions in terms of
evaluation of staff and program performance? Even if you have systems in
place, as many nonprofits do, translating them to the social purpose
business arena is an added challenge. This is where Seedco's Performance
Measurement & ManagementSM (PM&MSM) comes in.
The Social Outcomes Section of the business plan uses PM&M to explain
the outcomes of the business and then helps business managers achieve
ii.65
those outcomes by developing measurements and indicators to assess
progress. This methodical approach to management can have a profound
impact not only on achieving the goals of the social purpose business, but
also throughout the parent nonprofit organization.
The social outcomes section should include:
1.
Background Information
• Origin of the social purpose business project and organizational
information.
• Description of relevant programs and services such as training
programs and job coaching that will be will utilized by or provide
support for the business.
• Explanation of how the business furthers the mission of the
organization.
2.
Implementation and Evaluation Strategy
• PM&M Logic Model (introduced in Part I: Getting Started).
• Narrative description of outcomes.
• 5-year projection of targets for achieving outcomes.
• Management reports/charts.
• Mitigation strategies if targets are not met.
I M P L E M E N TAT I O N A N D EVA L UAT I O N S T R AT E G Y
The implementation and evaluation strategy is the more difficult piece of
the Social Outcomes Section. We suggest utilizing PM&M as a framework
for this part of the section. The remainder of this chapter of the Toolkit
will walk you through this framework.
As described in Part 1: Getting Started, PM&M is designed to help
organizations plan, measure, improve, and be accountable for the
operational activities of the business and particularly for the social
outcomes that the business seeks to achieve. For a social purpose business,
PM&M helps managers articulate outcomes, collect data about these
outcomes, and then use the data to make and implement informed
decisions.
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PM&M can help you create management reports that can be used for a
variety of purposes:
• Monitor progress toward achieving desired social outcomes.
• Guide planning for new or expanded programs or ventures.
• Improve performance by identifying challenges.
• Create and implement incentive systems based on performance
indicators.
• Evaluate "return on investment" in terms of social goals.
In Part 1: Getting Started, you were introduced to two essential
components of PM&M - the Logic Model and the Action Plan. Using the
Logic Model as a starting point, this Section will assist users in articulating
social outcomes in the context of the social purpose business plan. It will
provide examples of how to quantify social outcomes and will include
worksheets on developing indicators and creating a data collection system
for measuring the achievement of those outcomes. Specifically, this
section will delve more deeply into PM&M to focus on the following:
• Gathering Evidence and Data Collection. This is the
"measurement" piece of PM&M and involves developing
indicators, setting targets and then gathering evidence to track the
indicators.
• Outcome-Driven Management. Using PM&M to manage the
business is the most complex aspect of the process. Here, several
techniques and tools are presented to ensure that outcomes tracking
is an integral part of the day-to-day operations of the social
purpose business.
Gathering Evidence and Data Collection: Measurement
While many organizations already conduct outcomes measurement,
PM&M's 5-step approach is a proven roadmap for how to incorporate
measurement into the management of the business. It is one approach,
and should be viewed in light of what is already taking place at your
organization.
Steps for Measuring Social Outcomes:
1.
2.
3.
4.
5.
Review Outcomes to be Measured
Describe the Outcomes
Develop Indicators to Measure Outcomes
Set Targets and Establish Assumptions to Quantify Outcomes
Collect Data
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Step One: Review Outcomes to Be Measured
On your Logic Model, you identified the initial, intermediate and longterm outcomes that you hoped to achieve. Review your Logic Model and
determine if there are any outcomes that have not been captured. Add or
remove outcomes to create an accurate representation of the scope of the
business.
Once all of your outcomes are captured, you will work through the next
four steps to create a plan for collecting data and track your progress on
these outcomes. Theoretically, you should track all of your outcomes initial, interim and long term. However, it is sometimes not possible to
collect data on certain outcomes because the process of collection becomes
too costly. For example, data collection may require surveying large
populations or an investment in infrastructure. At this point, plan to
track all of your outcomes. In Step Three, you will develop and test
"indicators" to determine if data collection is feasible.
Step Two: Describe the Outcomes
In this step, you will describe the outcomes that you seek to achieve. This
forces you to think how you would observe the achievement of each
outcome. In other words, what happens if the outcome is achieved? An
outcome such as "youth possess soft skills" may mean to one organization
that youth show up for work on time and are able to interact with
supervisors and co-workers. However, to another organization, "youth
possess soft skills" may mean that the youth have developed an
appreciation for customer service. In fact, describing the outcome can
also help to clarify its meaning among your own staff.
Example Outcome Description
Outcome:
Students gain skills in bicycle repair and customer
service
Descriptions:
For Recycle-a-Bicycle, this may mean the following:
• Youth know how to assess and execute basic bike
repair.
• Youth have increased comfort level with customer
interaction related to bike repair.
Step Three: Develop Indicators
Developing indicators, or measures, is key to the entire process of
outcomes measurement. Indicators are how you will determine whether
the outcomes have been achieved. Use the descriptions of your outcomes
from Step Two, to help develop your indicators. Start by brainstorming all
possible indicators for an outcome. You will then assess the indicators
using the "quick test" to see if they are both useful and practical.
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Assessing Indicators: Quick Test
Some of the indicators that you develop may ultimately prove to be too
difficult to measure or not particularly relevant to the outcome you want
to measure. You may need to be creative to come up with ways to measure
your outcomes. It is up to you and your organization to determine if the
cost of collecting the data is worth the benefit of being able to track that
particular outcome. To help determine if the indicator is feasible, ask
yourself the following:
• Is it useful? Does it act as a marker for progress? Does it contribute
information for decision-making? Does it truly measure the
outcome you want to achieve?
• Is it practical? Is the cost of collecting data for this indicator
justified by the benefit of having and using the data?
OUTCOME
DESCRIPTION IN
WORDS
INDICATOR
USEFUL?
PRACTICAL?
Youth gain skills in
bicycle repair and
customer service.
Youth are able to
make basic bike
repairs and youth
are comfortable
with sales and
other interactions
with customers.
Number/percent of
students leaving
the Recycle-ABicycle training
program for fulltime employment.
Yes. This indicator
shows the success
of the training
program in helping
youth develop soft
skills and gain
valuable work
experience toward
long-term success.
Yes. This indicator
builds credibility
for the program.
Youth transition
successfully to
permanent
employment.
Youth stay in a
new job for a given
period of time and
earn a living wage.
Retention rate
after one year of
employment in a
new job.
Yes. This indicator
builds credibility
for the program.
Maybe. Depending
on the number of
youth transitioning
out of the training
program, it may be
difficult to track
what happens to
each one of the
students.
OUTCOME
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Helpful Hints
Developing Indicators
•
Some indicators may be qualitative. You need to make
these observations and judgments credible by providing
a description of how you arrived at that judgment. For
example, if RAB was going to determine the
improvement in customer service, it might develop a
survey or interview customers whose answers can then be
quantified through a rating system.
•
Create multiple measures. For outcomes that are more
difficult to measure, such as developing interpersonal
skills, you may need to identify several different
measures to cover each element of the outcome.
•
Measurements need to be adaptable. Don't get stuck
measuring the same things - be open to new, more
important concepts that may emerge and need to be
measured instead of, or in addition to, what you are
already measuring.
Complete the Developing Indicators and Quick Test
worksheet in Part IV of the Toolkit. Indicators should be
created before moving to Step Four.
Step Four: Develop Performance Based Targets
Once you have the indicators developed, the next step in the process is to
set targets. Begin by establishing a baseline performance for each
indicator. The baseline may be based on past experience, the success of a
similar program or simply your best guess. Then project targets for the
indicators over the next five years. Make assumptions on how outcomes
will grow based on a combination of what you want to achieve and what
you believe is realistic. For example, will you be satisfied if 50% of the
client population served in your business move on to college or additional
training? Would you be more satisfied with 75%? Is 75% realistic? Could
you reach 90% by year five? You will have to establish these targets before
developing the collection strategy.
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Helpful Hints
Setting Targets
•
Base social purpose business targets on current
program and evaluation strategies.
•
If there is no current program that matches the work
and mission of the social purpose business, look to
other programs within the parent organization or to
similar social purpose businesses.
•
Remember to be realistic and ambitious. It is better
to risk not reaching your targets than to leave clients or
your mission underserved.
Mitigating Risks
The social purpose business may not be able to meet the targets you have
set. As we have discussed, you will need to be realistic in establishing
targets, but also embrace risk taking. But what if you can't meet the
targets? What if the population does not succeed in the first employment
experience, or they cannot find jobs? Much like you develop mitigation
strategies in case the business is not able to meet its financial projections,
you will need to establish mitigation strategies for the social purpose
business. This may include adapting the training program, cutting back
on the number of employees or phasing in social purpose goals over time.
Step Five: Collect Data
In this step, you will develop a data collection strategy. This strategy will
become part of your on-going outcomes assessment. In addition, data
collection sets the stage for developing management reports that can be
used to demonstrate your progress to Board Members, supervisors,
employees and other stakeholders.
Data Collection Strategy
• Where will the data come from and what methods will you use to
collect this data? What are the sources? Sources include:
libraries, internet, government, census information and customer
feedback. And what are the methods? Methods include surveys,
interviews, focus groups and performance evaluations.
• Who will collect the data? Who will be responsible? Will it be the
business manager or someone from the parent organization? It is
important to clearly establish the party responsible for the
collection.
• When will the data be collected? How frequently will you collect
data? Will it be monthly, quarterly or twice a year? The frequency
depends on the program element that is attached to the business.
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•
How will the data be stored? Will you use spreadsheets or software
to track outcomes? If you come from a larger parent organization,
it is likely that you already have evaluation strategies in place. Is it
possible to adopt those systems for use in tracking the social
outcomes of the business?
Create a Data Collection Strategy for your social purpose
business using the Data Collection Worksheet in Part IV of
the Toolkit.
Outcome-Driven Management
So now what? You have concluded the steps for Gathering Evidence and
Data Collection. Developing the system of tracking indicators is only half
the battle. Using the information to inform the operations of the social
purpose business is the real challenge. Like many other management
strategies, assigning responsibility and communicating the process and
rationale will help speed the adoption of the data collection and
management system. The data on indicators helps managers to:
• Assess performance targets
• Make informed decisions
• Track and review progress for performance improvement
• Accelerate the learning process, promote accountability, and
identify and solve problems
A key part of integrating data collection into the social purpose business is to
develop a reporting mechanism that allows you to document and highlight
progress. As part of this process, you will need to determine how often to
report on your outcomes, what information to provide and who will receive
these reports. Management reports can be used for several purposes:
• Monitor Progress
• Guide Planning
• Improve Performance
• Manage Programs
• Evaluate Investment (funders/investors)
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Review the PM&M Management Worksheets in Part IV of
the Toolkit. These worksheets are tools to help you and your
organization remain committed to tracking outcomes. A
sample management reporting document is included as an
example of a tracking form that you can incorporate into
the ongoing management of the social purpose business
and the parent organization to inform management
decisions going forward.
Helpful Hints
Outcome-Driven Management
•
Hold annual staff retreats and regular staff meetings
devoted to the Social Purpose Business - devote as
much time to thinking through the social outcomes as
you do in thinking through the financial goals.
•
Set targets. Institutionalize an annual memo requiring
staff to look back and look forward - this requires staff
to plan for outcomes and review outcomes achieved.
•
Evaluate performance reviews based on outcomes
achieved.
•
Determine the frequency of distributing management
reports-monthly, quarterly, semi-annually.
Technology
PM&M is based on systematic thinking and is built around basic concepts
that express complex ideas. The worksheets will assist you to create your
action plans, logic models, indicators and tracking tools. While you will
want to fill out the worksheets to master the concepts, you will eventually
want to manage the system in a more sophisticated manner. Using
spreadsheet software is a good place to start. Or you may choose to adapt
current outcomes measurement tools, such as a databases, to the new
needs of the social purpose business. PM&M does not require fancy
technology in order to make the process work, but investing in technology
will help facilitate the use and adoption of PM&M.
ii.73
p a r t i i : Financials
Financials
Show Me the Money!
The Financial Section tells the story of the sustainability and viability of the business based on all of
the revenues and expenses that you will incur to accomplish the goals of your plan. It also
demonstrates that you have thought through the major risk factors and that you understand how
they will affect the bottom line. As you prepare this Section, ask yourself: "Would I invest my own
money in this venture? Why or why not? What do I need to know to make an informed decision?"
OV E RV I E W
In developing your financials and implementing your plan, you will
analyze the financial potential of the business. Evaluation tools, which
form the basis of this Section, include pro-formas or projections, breakeven analysis and sources and uses statements. These tools use assumptions
to forecast the financial outlook of the business.
When you are actually running your business, you will also utilize a
number of management tools to help you understand what is happening
with the business and compare your success to previous years, competitors
and your projections. Management tools include the balance sheet,
income statement and cash flow statement. A description of these
statements and information on using them is included in Part III:
Resource Guide.
The Financial Section of your plan should include the following information:
1.
Introduction
2.
Cost and revenue assumptions
3.
Financial projections (3 to 5 years) and sensibility analysis
4.
Sources and uses statement (current funding sources and commitments)
5.
Capital needs by stage of development
6.
Risks and strategies for mitigation
7.
Summary/conclusion
If this is your first time working with or creating financial statements, it
would be wise to seek assistance from a business consultant with skills in
both modeling and analyzing projections. You may be able to access these
resources inexpensively through a local business school or through
business counselors.
ii.75
INTRODUCTION
Begin the Financial Section by providing context and highlighting the
major points of this section. Recap the major factors affecting your
financial situation from the market opportunity, business model,
management or operations section of the plan. State your financial goals
for the business in the short and long term including when you expect to
break even and the projected net income over the next 3 to 5 years. Your
financial goals might also address your plans for reinvesting profits in the
business or passing them to the nonprofit parent organization.
In the example below, Recycle-A-Bicycle provided background on two
major events that affected their financial performance in the recent past.
R E C YC L E - A - B I C YC L E F I NA NC I A L S E C T I O N I N T R O D UC T I O N
Recycle-A-Bicycle has successfully grown and expanded through a self-financing approach. This
approach was required due to the fact that Recycle-A-Bicycle did not obtain 501©3 status until
July 2002. Without formal nonprofit credentials, the organization had limited access to grants or
donations that would have provided the capital needed to grow more rapidly. Therefore, Recycle-ABicycle functioned much like a start-up small business, utilizing dedicated staff and growing only
when net profits or donated funds were available to reinvest in the business.
After five years of operations in the East Village, Recycle-A-Bicycle recognized the strong
opportunity to grow its operations and training program through the creation of the DUMBO store.
The diversification, additional space, and new market opportunity will assist in the growth of
Recycle-A-Bicycle. But the addition of the new DUMBO store has put demands on Recycle-ABicycle's cash flow, as the store has not yet built up a sustainable level of sales. This has created a
need for additional financing for working capital. As consumers become more aware of the store,
the sales volume from retailing is expected to sustain operations.
Recycle-A-Bicycle has reached a critical juncture in its lifecycle in which further expansion is
required in order to meet demand and scale its youth development efforts. Affordable financing is
required to support the Five-Year Strategic Plan. Financing will be pursued through philanthropic
grants, debt financing and other socially supportive funders. This section reviews the near-term
capital needs of the organization.
Recycle-A-Bicycle has developed a five-year financial outlook to accompany this business plan.
Please refer to Appendix E and Appendix F for details. Projections are based on historical
performance and are realistic but conservative estimates. Recycle-A-Bicycle believes it has the
capacity to outperform the projections, given stability in staffing and few negative external factors.
Significant assumptions to the plan are in shown in Appendix G.
ii.76
COST AND REVENUE ASSUMPTIONS AND
FINANCIAL PROJECTIONS
All of the projections that you create for the business require that you
begin with assumptions about the revenues you will generate and the costs
you will incur in operating the business. These assumptions are your best
guess on what will happen in your business. You have detailed these
assumptions in two earlier sections of the plan:
• Business Model: Sales revenues and cost of goods (based on market
opportunity section). These are reflected on the Sales Assumptions
Worksheet within the Financial Projections Workbook.
• Operations: Staffing costs, fixed costs, marketing plan and start-up
budget. The Financial Projections Workbook includes worksheets
for staffing, fixed costs (including marketing) and your start-up
budget.
Revenue assumptions will be based on two main factors: Price and Sales
Volume. In addition, you will make assumptions on the Cost of Goods
Sold for the product or service that you hope to sell. You must also make
assumptions about the rates of growth in each of these factors.
Expense assumptions are based on your best guess as to the cost of
running the business. These costs will include staffing, utilities,
insurance, marketing, etc. Growth in expenses should be projected using
information on historical growth rates, discussions and contracts with
vendors and suppliers as well as the current rate of inflation.
If you have been using the Financial Projections Workbook provided in
the Toolkit, your five-year projections should now be complete.
ii.77
SAMPLE 5 YEAR PROJECTION CREATED FROM FINANCIAL TEMPLATE WORKBOOK
5 YEAR PLAN
START UP
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Product A
$60,795
$75,994
$88,267
$99,035
$106,067
Product B
$177,870
$204,551
$227,256
$250,345
$256,566
Product C
$3,080
$3,422
$3,733
$3,996
$4,138
$241,745
$283,966
$319,255
$353,376
$375,830
Product A
$34,740
$48,859
$51,447
$57,158
$61,216
Product B
$29,400
$34,486
$38,694
$42,645
$45,216
Product C
$1,540
$1,711
$3,733
$1,998
$2,099
$176,065
$203,910
$227,248
$251,596
$267,299
73%
72%
71%
71%
71%
$158,663
$184,188
$194,361
$207,624
$221,275
$58,200
$28,700
$28,700
$30,448
$31,361
$32,302
Profit from Business Operations $(58,200)
$(11,298)
$(9,840)
$2,440
$12,610
$13,722
no
no
no
yes
yes
yes
$50,000
0
0
0
0
0
Net Profit (not including taxes,
$(8,200)
depreciation)
$(11,298)
$(9,840)
$2,440
$12,610
$13,722
$(8,200)
$(19,498)
$(29,338)
$(26,898)
$(14,288)
$(566)
no
no
no
no
no
no
Annual Revenues
Total Revenues
Cost of Goods
Gross Profit
Gross Margin
Staffing Costs
Fixed Costs
Breakeven?
Grant Subsidies
Cumulative Cast Flow
Cash Flow Positive?
ii.78
In the write-up for the plan, outline your assumptions. The rationale
behind these assumptions should have been given in other places in the
plan, so this section will just provide highlights and then detail the
numbers. Use graphs and charts to visually represent your analysis where
possible and use volume-adjusted measurements such as income as a
percent of sales or inventory days on hand to add perspective.
In your analysis of the projections, you may want to discuss the following:
• Break-even: The break-even point shows the level of sales needed
to cover all of your expenses, and in how much time you think this
level will be achieved. When you determine the break-even point,
ask yourself if this is reasonable given your market opportunity,
staff, marketing plan and operational capacity. (A break-even
calculation is provided in the Financial Projections Workbook.)
• Seasonality: Is your business seasonal? How does this affect your
projections?
• Economies of scale: In what areas are you able to take advantage of
economies of scale as you grow the business?
In the following example, Recycle-A-Bicycle is able to make assumptions
based on past performance because it is an established business. The
business plan explains the projected sales volume increases over the next
five years. The average price is assumed to remain constant.
R E C YC L E - A - B I C YC L E A S S U M P T I O N S
REVENUE ASSUMPTIONS
The bicycle industry is seasonal in nature. The most lucrative season runs from April through
August. The less lucrative season runs from December through March due to cold weather. Unlike
other retailers, Recycle-A-Bicycle does not benefit from holiday consumption patterns as most
customers prefer to give new rather than used items as gifts.
The East Village store will outperform the newer DUMBO shop over the next few years because it
has enjoyed a six-year presence in the neighborhood. Over the next five years as Brooklynites
become more aware of the DUMBO shop, sales will increase to 80 - 90% of the East Village store
sales.
Recycle-A-Bicycle expects to grow revenue 100% in 2003 due to several factors:
•
Full-year results of new DUMBO store (opened October, 2002);
•
Subway fare hike will prompt people to evaluate their commutes with some spillover effect on
•
Recycle-A-Bicycle sales; and
ii.79
•
Addition of new development officer mid-year (although greatest benefit will likely be realized
in 2004).
Recycle-A-Bicycle's sales revenue increases, although large in percentage terms, represents a
conservative expectation. Despite doubling the retail capacity through the DUMBO store, bike sales
are expected to increase by only 84% (from 339 in 2002 to 626 in 2003).
East Village shop
DUMBO shop
TOTAL
2002A
294
45
339
2003E
348
278
626
Beyond 2003, Recycle-A-Bicycle expects revenue growth to accrue from its investment in
marketing, as well as the full impact of the development officer. Recycle-A-Bicycle expects 71%
top-line growth in 2004 through 40% increase in bike sales and 148% increase in grant funding
including down-payment capital grant for new facility. In 2005 - 2007, revenue growth will slow to
12%, 10% and 5% respectively. After 2007, revenue growth is expected to level out at 3 - 5%
annually.
EXPENSE ASSUMPTIONS
The major expense for Recycle-A-Bicycle is labor. Recycle-A-Bicycle will create a succession plan
that increases the professional staffing in order to strengthen the organization. Recycle-A-Bicycle
will also invest in training, so that staff may be prepared to fill in any gaps that might occur.
Mechanics will undergo sales and advanced mechanics training as this is a proven method for
creating higher productivity.
The organization will take advantage of its strategic partnership with Henry Street Settlement to
secure an Administrative Assistant through Henry Street's job-training program, at no cost to
Recycle-A-Bicycle. The following chart examines the effect of the new strategies on net income over
the five-year projections. Though net income will be negative in 2003, the organization will return
to positive net income in 2004 and beyond.
ii.80
RECYCLE-A-BICYCLE PROFIT
AND LOSS STATEMENT
2003
2004
2005
2006
2007
Classes
Swift Folder
Grants
Capital Grant
Bikes
Accessories
Parts
Service
Credit Card Fees
3,900
$
720
$
$ 71,091
$
$ 78,300
$ 23,490
$ 41,108
$ 21,421
$ (1,282)
3,900
1,080
138,396
38,000
109,620
32,886
57,551
29,989
(2,093)
3,900
1,440
172,049
137,025
41,108
71,938
37,487
(2,617)
3,900
1,440
188,875
150,728
45,218
79,132
41,235
(2,878)
3,900
1,440
198,129
158,264
47,479
83,089
43,297
(3,022)
Total Net Sales
Growth
$ 238,748
51.5%
409,328
71.4%
462,329
12.9%
507,649
9.8%
532,576
4.9%
SALES
COST OF SALES
Repair Supplies
Accessories
PT Retail Mechanics
FT Storage Facility Mechanic
PS 218 Mechanic
Retail Mgr / Asst Mgr
PT Van Driver
$
$
$
$
$
$
$
11,275
9,396
12,186
5,184
87,360
-
15,785
13,154
17,572
15,821
5,340
89,981
3,955
19,732
16,443
22,623
16,295
5,500
92,680
4,074
21,705
18,087
25,632
16,784
5,665
95,461
4,196
22,790
18,992
27,721
17,288
5,835
98,324
4,322
Total Cost of Sales
Gross Profit
Gross Margin
$ 125,401
$ 113,347
25.2%
161,608
247,721
40.4%
177,347
284,982
38.9%
187,530
320,119
41.2%
195,272
337,304
41.6%
TOTAL EXPENSES
$ 131,944
213,785
220,289
226,662
231,380
OPERATING INCOME
Interest Expense
Interest Income
Other Income
$ (18,597)
$ (1,691)
774
$
493
$
33,936
(20,339)
1,311
690
64,693
(19,585)
716
863
93,457
(17,105)
968
949
105,923
(14,623)
1,555
996
NET OPERATING INCOME
$ (19,021)
15,598
46,687
78,269
93,851
ii.81
Sensitivity of Assumptions
Once you are done with your projections, you should estimate the
sensitivity of your results to the assumptions you have made. Ask yourself
the following questions: How would my breakeven analysis be impacted if
revenues are 5% lower than I though? What if I have to hire an additional
worker to meet my projected demand? How would I change my plans if I
was only able to get funding for half the amount that I need?
No projections are ever exactly correct - they simply represent your best
guess of the amounts of expenses and revenues that will be realized in the
future. Therefore, it is prudent to leave yourself some flexibility when
making your financial forecasts. The answers to the above questions will
help you build in some margin for error in your financial projections.
S OU R C E S A N D U S E S S TAT E M E N T
This section shows what the business needs in terms of capital and
investments. Your capital need is the amount of cash required to meet the
business expenses. The Sources and Uses statement demonstrates how
much it will cost to implement your plan and where the money is going to
come from. The Statement lays out the expenses and costs of operating
the business ("uses") and then shows the revenues and cash investments
that are expected to flow in ("sources"). The difference is your financing
need.
ii.82
Recycle-A-Bicycle Sources and Uses Statement 2004
SOURCES
Cash deficit from 2003
Classes
Swift Folder Sales
Bike Sales
Accessories Sales
Parts Sales
Service Revenues
Credit Card Fees
Capital Grant
Total Sources
Excess (Deficit)
USES
$(19,021)
$3,900
$1,080
$109,620
$32,886
$57,551
$29,989
$(2,093)
$38,000
$251,911
$(105,143)
Repair Supplies
Accessories
PT Retail Mechanics
FT Storage Facility Mechanic
PS 218 Mechanic
Retail Mgr/Asst Mgr Labor
PT Van Driver
Salaried Wages
Payroll Taxes
Workers Comp & Disability
Healthcare Benefits
Accounting
Advertising
Automobile
Bad Debt
Repair & Maintenance
Communications
Store Expenses
Postage & Delivery
Printing & Repro
Educational Materials
Travel & Entertainment
Ride Leader
Bank Fees
Rent
Storage Mortgage
Insurance
Utilities
Expensed Investments
Interest Expense
Interest Income
Other Income
$15,785
$13,154
$17,572
$15,821
$5,340
$89,981
$3,955
$87,550
$19,264
$3,379
$6,650
$3,090
$2,060
$5,000
$125
$515
$4,597
$206
$515
$1,751
$206
$1,030
$3,600
$206
$29,664
$39,568
$2,100
$709
$2,000
$(20,339)
$1,311
$690
Total Uses
$357,055
In addition, in this section it is useful to demonstrate funding
commitments to the parent or related programs to show a history of
support for the work of the parent organization and to show where you
might receive grants or other philanthropic investments.
ii.83
R E C YC L E - A - B I C YC L E F UN D I NG C O M M I T M E N T S
SOURCE
Sales Revenue
Fundraising
2002 PERCENTAGE
2003 PERCENTAGE
69%
31%
65%
35%
Recycle-A-Bicycle raised $50,000 in grant funding in 2002. Major support was provided by Bike
New York. Grant funding in 2003 has been secured or is expected from Bike New York, The Citizens
Committee for NYC, Travelers Foundation, Monterey Foundation and Silverman Foundation.
C A P I TA L N E E D S BY S TA G E O F D E V E L O P M E N T
In this final part of the Financial Section, you will use your financial
projections and Sources and Uses Statement to explain the total amount
of funding needed for start-up, new investment, growth or expansion of
the business. Discuss the amount of capital needed and the timing in
order for the business to meet its projections.
R E C YC L E - A - B I C YC L E C A P I TA L N E E D S
CAPITAL NEEDS
The projections indicate that grant funding of approximately $520,000 is needed over the next 3
years to cover costs associated with expansion of the business and training program. This funding
amount includes a capital grant of $38,000 that will be used as a down-payment on the production
and training facility. In three years (2005), Recycle-A-Bicycle will generate approximately $60,000
in net operating profit.
Capital needs are greatest in 2003 and 2004 when new staff is hired and infrastructure related to
the new production facility is added since these additional expenses are not be matched
immediately with increased revenues. However, these investments will quickly produce positive
returns for the organization as net income grows steadily from 2004 to 2007.
In 2004, financing of approximately $300,000 is needed to purchase the training and production
facility. This financing has been modeled as a 10-year mortgage at 6% annual interest. In addition,
the following debt service chart includes a $100,000 loan beginning in 2003 to finance the
beginning of the Five-Year Strategic Plan (assuming grant funds are not available).
ii.84
R I S K S A N D M I T I G AT I NG S T R AT E G I E S
In this Section, describe the major risks associated with implementing
your plan and fulfilling your projections. The purpose of this section is to
show that you understand the weaknesses in your assumptions and that you
have thought through what you will do if your assumptions are wrong or
something unpredicted happens to the business. Risks may involve factors
that are outside your control. The risks that you include should be
realistic. To develop your risks, ask "What if" questions about your
assumptions (see the RAB example that follows for some examples). For
each risk, discuss its potential affect on your business and suggest strategies
to either thwart or deal with the issue should it arise.
Helpful Hints
Developing Mitigation Strategies
The following are mitigation strategies to consider as you
develop this section of your plan.
•
Have a strong management team in place, especially
an industry expert who can anticipate problems
before they occur and who has experience trouble
shooting.
•
Establish contingency plans before problems arise so
that both management and staff know what to do "in
case."
•
Develop a system to monitor cash flows into and out
of the business in order to assess your liquidity.
•
Diversify your business revenues by building several
product or service lines that appeal to different target
customer segments.
•
Use Management Reporting tools to assess what is
happening in the business and compare results to
projections.
•
Create an exit strategy for your nonprofit. How will
the nonprofit know if the business is not successful?
When will the nonprofit review the results of the
operations and what are the decision factors for
closing the business. On the other hand, what will the
nonprofit do if the business is highly successful or
begins to cause mission drift?
ii.85
RECYCLE-A-BICYCLE RISKS AND STRATEGIES FOR MITIGATION
RISKS AND STRATEGIES FOR MITIGATION
Recycle-A-Bicycle has identified several risks associated with implementing its strategic initiatives
as well as strategies to mitigate these risks. These are briefly described below.
1. Store revenues lag behind plan: demand is low
Strategy for mitigation: We would reduce operating costs by reducing labor and curtailing store
hours during exceptionally slow periods (e.g. during a heavy snowstorm). We will simultaneously
continue aggressive marketing efforts to pull in demand. Recycle-A-Bicycle operations are flexible
and have been subject to past revenue variations, management is comfortable managing to these
issues.
2. Insufficient Raw materials to meet sales demand
Strategy for mitigation: Recycle-A-Bicycle seldom has to actively solicit raw materials donations,
and supply does not look to be constrained in the near future. If for some reason there is a
shortage of bicycles we would initiate outreach efforts to increase supply. Used bicycles could be
purchased at police auctions as a reasonably inexpensive substitute to donated bicycles. Though
margin would suffer, Recycle-A-Bicycle would still be able to meet demand for bicycles and offer its
higher margin accessory and repair lines.
3. Insufficient labor to meet production demand
Strategy for mitigation: Given current labor market conditions in New York City, we do not
anticipate any issues. Our wage rate is very competitive with the market and we always have a
surplus of labor. However, if a labor supply shortage exists, we would tap into our volunteer network
which has worked well in the past to meet seasonal demands for production.
4. Funding is not obtained on schedule
Strategy for mitigation: The Executive Director has solid fundraising experience and is confident in
the goals listed. The addition of the new Development Director will enhance these strengths.
Operations will be managed to the funding commitments that are available, and when possible,
reserves will be created to help smooth cash availability.
5. Loss of senior management before training and succession plan is implemented
Strategy for mitigation: The Board of Directors and others have committed their energy should an
unplanned change in Senior Management occur. Recycle-A-Bicycle has several professional services
partners such as their accountant and business management consultant who can help provide
transitional support services.
6. Loss of a major partner
Strategy for mitigation: The Executive Director has many relationships with potential partners and
is nurturing these as prospects for when the production/training facility is operating.
ii.86
S U M M A RY / C O NC L U S I O N
Conclude your business plan with information on your financing need
and next steps. Convince the reader that your business is a worthwhile
investment through a quick summary of your business situation.
RECYCLE-A-BICYCLE CONCLUSION
Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year
Strategic Plan. These grants will be pursued through institutional funders with an interest in
environmental stewardship and/or youth development.
2003 Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000 in grant
funding will serve as working capital to support current operations as well as implement
new marketing efforts. The additional $100,000 will support hiring additional staff, support
costs associated with sourcing and obtaining the new production and training center and
provide for other infrastructure improvements.
2004 Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These funds will
be used in part for working capital and in part to support more of the Five-Year Strategic
Plan. This includes hiring a Production Assistant to staff the production and training center,
hiring a van driver to facilitate the pick-up of supply and transfer of bikes between facilities
and funding to pursue e-business strategies. In addition, part of these funds ($38,000) will
be used for a down payment on the production and training center. Recycle-A-Bicycle will
raise the additional $106,000 through fundraising efforts spearheaded by the new
2005 Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset additional
costs related to expansion including research into new retail opportunities. In 2005,
Recycle-A-Bicycle will also launch the Tours by Teens program.
Recycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track record
of growth and is now looking for capital in order to expand the social and environmental outcomes
and develop more sustainable systems within the business.
Recycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer and
small business in New York City. The organization serves a triple bottom line, benefiting the at-risk
youth and the New York City environment through a business model that is moving toward
sustainability. Recycle-A-Bicycle is seeking to increase its effectiveness in all three areas - social,
environmental and financial. As one of the leading organizations combining youth education,
recycling and bicycling, Recycle-A-Bicycle has the capability to expand locally as well as develop a
national reach.
ii.87
p a r t i i : Exhibits
Exhibits
Supporting your business plan.
In your business plan, exhibits are the supporting materials that back up the story you have told
throughout the documents. Include relevant information that helps make your case.
Examples of items that could be in the Exhibits Section include:
1.
Detailed financial projections, monthly cash flows and other supporting
financial information
2.
Financial statements of the parent nonprofit
3.
Resumes and biographies of key managers, staff or Board members
4.
Descriptions of the parent nonprofit activities
5.
Press clippings or other news items about the business or relevant
programs
6.
PM&M Logic Model
7.
Marketing materials for the business
8.
Letters of support
9.
Client/customer lists
ii.89
part iii: resource guide
Part III of the
Toolkit will
provide you
with a few extra
resources to assist
with the planning
process.
Part III
Resource Guide
iii.1
And a Couple Other Things...
Pa r t I I I
Resource Guide
Every person and organization comes to the planning process with
different skill sets and expertise. The Resource Guide provides
information on a few specific topics that may be new to you, at least in the
context of business ventures. The section includes:
• Pitching your Business
• Working with Consultants
• Understanding Financial Statements
• Glossary of Business Terms
iii.1
p a r t i i i : Pitching your Business
Pitching Your Business Plan
Completing your business plan is a major task. But you are not done yet.
Next, you will need to condense this immense amount of information and
planning into a pitch that is comprehensible and compelling. The
following is a guide for developing a 10-minute presentation. You may
also want to create a 3-minute "elevator pitch," a short, concise version of
the 10-minute presentation.
The 10-minute Presentation
Welcome (30 seconds, title slide)
• Introduce yourself and explain your role in the business.
• Mention the purpose of the presentation and your “ask”.
Overview of Parent Organization (1-2 minutes, 1 slide)
• Explain the mission of the organization and how you accomplish
this mission (key programs and services).
• Describe the population that your business will serve and your
experiences with this population. Include a brief success story or
anecdote.
The Social Purpose Business (3-4 minutes, 2-3 slides)
• Describe the business. What is your business and what products or
services do you sell? Who are your customers and what is your
market opportunity?
• Explain your competitive advantage.
• Clarify how the social purpose business furthers the mission of the
organization.
Management Team (30 seconds, 1 slide)
• List key team members and describe their experience.
• Convince the audience that you have the right people to make this
business work!
Social Outcomes (1-2 minutes, 1 slide)
• State the short term, interim and long-term outcomes (you might
include your logic model).
• Briefly describe how you will track and measure your outcomes.
Financial Outcomes (2-3 minutes, 2 slides)
• Summarize your assumptions and 5-year profit/loss projections.
• Discuss the financial outlook for the business.
• Explain your financial need and how you plan to fill this gap.
iii.3
Conclusion: Next Steps and the “Ask” (1 minute, 1 slide)
• Outline the next steps for the business? Include the timing of
these steps.
• Include the "ask" - what do you want from the audience in terms of
financing, inkind resources, etc.
• End on high note - summarize why this is a worthwhile business.
Tips for Presenting a Social Purpose Business to Potential Funders
Concentrate on your message and the ideas you want to convey.
• Practice your introduction and your conclusion until you are
entirely comfortable with the first and last few minutes of your
presentation.
• Focus on the "big picture" and the overall message you want to
communicate to your audience.
Create a PowerPoint presentation that is professional and easy-to-read.
• Avoid overcrowding.
- Use 3 to 5 high-level bullet points - then, expand on them
when you speak.
- Use short sentence fragments to "telegraph" your points.
• Avoid distractions.
- Use pictures and animations on your slides only when they add
to your presentation.
- Keep the background simple and professional.
• Include a Conclusions and/or 'Any Questions?' slide.
Talk confidently to individuals, not a faceless crowd.
• Make eye contact.
• Use the gestures, phrases and movements that come naturally to
you. Let your personality come through.
• Remember, you know your subject better than anyone in the room
• Use your breath for control.
- Before you get up to speak, take several slow, deep breaths.
Inhale as you count to five, hold for 2 counts, and then slowly
exhale as you count to five. Repeat several times.
- Before you start speaking, pause and take a deep breath.
• When you speak, look at your audience, not at your presentation.
Be prepared for tough questions.
• Work with your colleagues on a list of tough questions about your
business and funding plans.
• Practice the answers to these questions.
Practice - it's the key to confidence.
iii.4
p a r t i i i : Working with Consultants
Working with Consultants
Through your organizational assessment or Action Plan, you may find that
you do not have the expertise or time to complete a part of the planning.
Or you may believe that an outside perspective would be helpful in moving
the planning forward. In these cases, a consultant is a valuable tool. When
working with a consultant, it is important to think through what you need
done and the amount of staff time required to manage the project.
Before You Hire a Consultant
1.
Develop a Draft Scope of Work Document.
This document outlines the project to be completed and the associated
timeline and deliverables (or work document) required. It will be used to
solicit proposals from consultants. Think about the following questions:
• What is your goal for the project? Define your project outcomes.
• What type of expertise does the project require?
• What are the qualifications you seek in a consultant?
• What is the deliverable that is needed and how will it be used?
• What is the time frame in which the work should be completed?
• Who at the organization will manage the consulting project?
• What is the budget range for the consulting project?
2.
Identify Potential Consultants.
Send your Scope of Work document to potential consultants before
meeting with them. Ideas for finding potential consultants include:
• Reach out to organizations that are similar to yours for ideas,
contacts and references of potential consultants.
• Contact professional associations such as networks of organizational
development practitioners, facilitators, trainers and fundraisers.
• Contact local universities for student or faculty resources.
3.
Choose a Consultant.
Interview potential consultants in order to assess their skills as well as the
fit with your organization. Key questions to ask during the interview:
• Have you worked on similar projects or consulted with groups
similar to ours? What did you learn from the experience?
• What skills do you possess that will be helpful with our project?
• How would you work with our staff, Board and constituents?
• Will other members of the consulting team be working on the
project? Who are they? How will the tasks be divided up?
• What challenges do you anticipate? How will they be addressed?
• What do you see as our responsibility during the consulting
engagement?
• Can the work be completed in the time frame and budget specified?
iii.5
After the interview, request a short written proposal including a
description of how they will complete the project, a timeline and a budget.
Request that references and samples of the consultant's work be included
with the proposal. The criteria you use to select a consultant will be some
combination of skills, experience, budget, timeline and personality.
Managing the Consulting Relationship
iii.6
1.
Write up a final Scope of Work and/or contract to formalize the
relationship with the following information:
• Project description
• Need for services
• Deliverables (interim and final)
• Timeframe for completing the work
• Check-in times
• Evaluation process
• Budget and payment process
2.
Prior to beginning the consulting arrangement, it is important to have a
candid conversation about expectations and how you will handle the
situation in the event that expectations are not met.
• Provide a detailed briefing on your organization,
what you are trying to accomplish and any research to date.
• Communicate that the Scope of Work may change once the work
begins. Establish how such changes will be handled.
3.
Don't become overly dependent on the consultant. The consulting
relationship is collaborative and you play an important role in shaping the
process so that you can achieve your goals.
4.
Establish set check-in times for the project to ensure that you have open
communication. Determine when you will see drafts of the work.
• Develop agendas to guide the check-in meetings.
• Review interim drafts of the work to ensure that the project goals
are being met.
5.
Set aside adequate time to work with the consultant.
p a r t i i i : Understanding Financial Statements
Understanding Financial Statements
There are three main reports that are prepared to deliver financial
information about the health of businesses. These are: the Balance Sheet,
the Income Statement and the Cash Flow Statement. The statements are
used both internally to manage the financial performance and externally
to communicate the financial position to stakeholders or funders. Each of
these provide separate types of information and can provide valuable
insights into the performance of the business during the previous
accounting period. They can also give early warning signals of problems
that may arise in the future. As you read through this section refer to the
examples provided in Part IV of the Toolkit.
Balance Sheet
The balance sheet is a snapshot of a company's assets and liabilities on a
particular day. It is divided into two columns, with all the assets listed on
the left and liabilities listed on the right. The reason it is called a balance
sheet is because both sides must "balance"; that is, they must have the same
totals at the bottom. There is a basic accounting equation which makes the
balance sheet "balance": Assets = Total Liabilities + Equity.
Some of the items listed on the assets or left side of the balance sheet
would be: Property, Equipment, Cash, Accounts Receivable and
Inventory, etc.
On the right side of the balance sheet, you would typically see the
following items: Bank loans (short term and long term), Accounts Payable
and Owner's Equity.
This last item, Owner's Equity, is what is left over after subtracting the
total liabilities from the total assets. This represents the net value of the
company, which can be claimed by the owners of the company.
Analysis of Balance Sheet
There are some key items on your balance sheet to analyze closely. They
may be an early warning signal of impending problems with your financial
standing.
• Current ratio: This is mathematically calculated as the ratio of
total current assets to total current liabilities. Since 'current' means
items that will be received or payable within the next accounting
year, it would be ideal for this ratio to be close to one. In other
words, the total current assets and current liabilities would be
equal. If that was the case, we could reasonably conclude that the
company will be able to meet its obligations and remain solvent for
the next year.
iii.7
• Debt to Total Assets: This ratio is mathematically calculated as the
ratio of total liabilities to total assets. Since the 'ideal' debt to total
assets varies by industry (for example capital intensive businesses
will have a higher ratio than service businesses), it is useful to
compare this ratio with similar companies to see if a business
may have too much debt.
Income Statement
The income statement summarizes the activities of a company during the
previous accounting period, and answers the following question: "Did we
make a profit last year?" It lists items such as revenues, cost of goods sold,
salary expenses, marketing expenses, administrative expenses, and finally,
net income.
Remember that the net income item does not equal the amount of cash
that the company generated. Due to accounting conventions and business
practices (such as purchasing goods on credit), there can be significant
differences in what the company declares as net income, and the amount
of cash it generated over the course of the year. For this reason, we have a
third report, call the Cash Flow Statement.
Analysis of Income Statement
Most analysis of the income statement is done by evaluating each item on
the statement as a percentage of revenues. This method allows you to
compare these ratios across firms with vastly different levels of revenue.
The following ratios are useful tools in assessing how much money the
company earns as a percentage of total revenues:
• Gross margin: This is the gross profit (revenues minus cost of
goods sold) as a percentage of total revenues - it tells you on average
how much a company earns on the sales of its goods.
• Operating margin: This is the operating profit (before interest
costs) as a percentage of total sales. The ratio tells you how much
money a company spends to earn one dollar of revenues. The
interest expense is left out since interest depends on the amount of
debt taken on by a company, which is not strictly an 'operating'
decision (rather, it is a financing decision).
• Net margin: This is net income as a percentage of revenues. This
tells how much of the total revenues the company's owners can keep
for themselves, after paying all the expenses incurred during the
year.
Notice that these move down the income statement: first analyzing the
gross profit, then operating and finally net profit. In this way, we can
separate problems and see at what stage the highest costs are incurred.
iii.8
p a r t i i i : Understanding Financial Statements
Cash Flow Statement (CFS)
The CFS details the amount of cash that came into the company, and
which was paid out of the company over the course of the previous accounting period.
It documents the change in cash balance during the accounting period. It
has three main sections:
• Cash Flow from Operating Activities (such as payments of salaries,
rent on office space, purchases of goods and receipts from cash
sales)
• Cash Flow from Investing Activities (such as purchases of a delivery
truck, machinery or office building)
• Cash Flow from Financing Activities (such as loans received from a
bank or investments by the owner of the company)
The total of these three sections is the Net Cash Flow. It can be a positive
or negative number, and, when added to the beginning balance in your
bank account, should give you the balance in the bank account at the end
of the year.
Analysis of Cash Flow Statement
While it is helpful to know whether the Net Cash Flow is positive or
negative, a negative net cash flow may not necessarily be a bad thing. For
example, a company may have a positive cash flow from operating
activities, but due to high investments in the business or repayments of
debt the net cash could be negative. A high level of investment back into
the business (and resulting negative net cash flow) may actually be good
news!
The key to analyzing the CFS is to identify where cash is being spent;
arguably the most troublesome discovery would be a negative cash flow
from operating activities. This would mean that you are spending more
than you earn in revenues - certainly not a sustainable position.
Summary
This section has briefly introduced the main accounting documents used
to report the activities of a business. When doing analysis across all the
statements, it is worthwhile not just to look at ratios for a single year, but
compare the trend of each ratio for several years.
Although we have highlighted a few of the key items to look at in each
accounting statement, it must be noted that this is not meant to be a
comprehensive discussion of financial analysis. Each industry has its own
unique accounting conventions, and any analysis must take into account
the nuances of the specific company and the industry's accounting
standards and practices. If you are evaluating the performance of a
company, it is best to consult a professional accountant or experienced
financial consultant who would be able to help in this task.
iii.9
p a r t i i i : Glossary of Business Terms
Glossary of Business Terms
Accounts Payable
Payments owed to suppliers for goods and services.
Accounts Receivable
Payments owed by customers for delivered goods and services.
Amortization
The process of liquidating (paying off) a debt through installment
payments; amortization also refers to the process of prorating
expenditures over time in order to write them off.
Assets
The resources that the company possesses for the future benefit of the
business (includes cash, inventory, accounts receivable, equipment
buildings).
Balance Sheet
Snapshot of a company's holdings at a given point in time. Shows the
assets owned by a company, the liabilities owed to others and the
accumulated investment of its owners.
Balloon Payment
Principal is paid back in a lump sum at the end of the loan term. This
keeps payments lower during the life of loan as the company pays only
accrued interest.
Benchmarking
Comparing your business with other similar businesses or competitors.
Brand Equity
The good will, positive associations and recognition earned by a brand.
Break Even Point
The amount of sales (in dollars or units) that will cover all the costs of
running the business.
Call Option
The company's ability to pay back the debt before maturity. Calls are
usually applied to bonds. Often a call option will require that the
company pay more than the face value of the debt. Calls are also attached
to preferred equity.
Cash Flow
The money coming in to the business and the money going out is the flow
of cash that determines whether a business will survive.
iii.11
Cash Flow Statement (CFS)
Document summarizing the business's cash flow position for a given
period. Often shows the sources and uses of cash.
Competitive Analysis
Examination of your company's position in the marketplace relative to the
competition.
Core Competencies
Advantages and strengths your company has relative to the competition.
Cost of Goods Sold (COGS)
The cost to your company of acquiring or producing the goods and
services sold in a given period of time.
Coupon Rate
Interest rate on a bond (sometimes used to refer to the interest rate on
any debt instrument).
Covenants
A way for the debt holder to ensure some control over the company.
Covenants include limits on different financial ratios (like assets to
liabilities or debt to equity) and may bar the company from selling any
major assets without approval from the debt holder.
Debt Service
The regular debt payment that a company makes (monthly or annually),
which includes interest accrued and a portion of the principal.
Dequity
Hybrid financing instruments that combine certain characteristics of both
debt and equity. Preferred stock is the most common example.
Differentiation
Any way a company markets its products and services to distinguish them
from the others in the market. Ways of differentiating include features,
fit, styling, reliability, packaging, sizes, service and brand names.
Fixed Costs
Costs that do not vary with volume of goods or services produced or sold.
Often includes rent and insurance.
Fixed Income
A security in which the holder receives a specific annual interest income
and a specific amount at maturity.
Gross Margin
Revenue from sales to customers, minus the cost of goods sold (COGS).
Tells you whether the business is making a profit, before considering
corporate expenses.
iii.12
p a r t i i i : Glossary of Business Terms
Interest-Only Payments
Debt service in which company pays only the interest that accrues.
Principal is usually paid back in a lump sum (balloon payment).
Income Statement (Profit and Loss Statement)
Shows the flow of activity and transactions over a specific period of time.
In general, revenue minus expenses equals income (profit).
Liabilities
Obligations to repay borrowing, debts and other obligations to provide
goods or services to others (includes bank debt, accounts payable, advance
payments from customers to deliver goods or services, taxes owed and
wages owed).
Marginal Revenue and Cost
The revenue and cost of producing and selling one more item.
Market Segment
The portion of all consumers that is the ideal buyer for a product or
service. For example, a snack food manufacturer might target a young
consumer who makes purchases on impulse, while a gourmet food
manufacturer targets an older consumer who does research on quality.
Market Share
The ratio of company sales in a market to total sales in a market. Can be
expressed in dollars or sales units.
Maturity
The length of the term of debt.
Moratorium
Debt service is not paid for a specific amount of time (helps start-ups by
not requiring them to immediately begin debt repayment).
Nonrecourse Debt
Debt for which the borrower cannot be held personally liable for
payment.
Operating Income/Operating Profit/EBIT
Earnings before interest and taxes, or the profit made from the operations
of the company, usually the production and sale of goods and services.
Equals gross margin minus selling, general and administrative expenses.
Opportunity Cost
The sacrifice made to use an asset for one purpose instead of another. For
example, by deciding to produce more pizza, a café might have to produce
fewer sandwiches. The opportunity cost is the revenue lost from
sandwiches not sold.
iii.13
Owners' Equity
The accumulated dollar measure of the owners' investment in the
company. Assets minus liabilities equals owners' equity.
Positioning
Projection of a product as having a certain desired image which makes it
appealing to a certain segment of the market.
Principal
The original amount borrowed or financed; interest is paid on the
principal.
Return or Return on Investment (ROI)
A measurement of the amount of money that has been realized as a result
of a certain investment of resources; the amount earned in proportion to
the capital invested, usually stated as a percentage.
Secured
Debt is guaranteed by an asset. If company defaults, that asset is sold and
proceeds are used to pay the secured creditor. Typical assets include
land/buildings and accounts receivable.
Seniority
The order in which debt holders are paid back. Each debt holder will have
a different seniority. Senior, general and subordinate debt are the most
common terms for levels of seniority. All debt is senior to equity.
Variable Contribution
Amount remaining from sales revenue after covering variable costs,
expressed per unit of sales. This is the amount that will go toward covering
fixed costs.
Variable Costs
Costs that vary with production or sale of goods and services. Often
includes materials, sometimes labor.
Working Capital
The amount of funds available to pay short-term expenses. Seen as a
cushion to meet unexpected or out-of-the-ordinary expenses. It is
determined by subtracting current liabilities from current assets.
iii.14
Part IV contains
materials
referenced in
Parts I, II and III.
Pull out these
sheets as you work
through the
Toolkit in order
to guide your
planning process
and better
understand the
concepts.
Part IV
Worksheets, Templates
and Examples
I.1
Part IV: Strategic Questions
Social Purpose Business Planning Strategic Questions
Distribute this Strategic Questions Worksheet to a group of staff, managers and board members
to help you evaluate your social purpose business idea from multiple perspectives within the
organization.
1. State the overall mission of the organization.
2. Describe your social purpose business idea. What product or service do you plan to offer
and who are your target customers?
3. Describe the clients that you expect to benefit from this idea in terms of demographics
and needs.
4. How will the venture benefit your clients? What needs, interests and skills sets do they
bring to the venture?
What programs do you have that Have your clients expressed a
currently serve the needs of
special interest for new services?
your clients?
What kind of new services/
programs are they interested in?
What are your client’s key skill
sets in terms of what is needed
for the business venture?
DEVELOPING A SOCIAL PURPOSE BUSINESS PLAN
IV.1
Part IV: Strategic Questions
5. What are the anticipated benefits or outcomes for your clients and the organization that
will result from starting a social purpose business?
Client Outcomes
Organizational Outcomes
6. What assets will you use to create the business venture (e.g. building, property,
equipment, intellectual property, proprietary processes)?
7. What other ways might you use these assets (e.g. sell the building or equipment, use the
equipment for a new program)?
8. What are the financial goals of the business (break-even, generate profits to be used for
additional training or spin off revenues for other programs of the organization)?
IV.2
Part IV: Organizational Assessment Survey
Organizational Assessment Survey
This survey will help you to gauge your organization’s ability to develop a social purpose business.
We suggest that you give this survey to a cross-section of your staff members to get their input into
the organization’s capacity to start a new venture.
Assessing the Organization
1. The core values of the organization are:
2. The strengths of our organization are:
3. The areas of the organization that need improvement are:
4a. The financial, staff, and physical
(equipment, property, etc.) resources that
are needed for the business planning process
are:
4b. The financial, staff and physical (equipment,
property, etc.) resources that are needed for the
launch and operation of the business are:
IV.3
5a. The organization has the following
financial, human, and physical resources
available for the planning process:
5b. The organization has the following financial,
human, and physical resources available for launch
and operations:
6a. How might the organization acquire the
missing financial, human and physical
resources that are still needed for business
planning?
6b. How might the organization acquire the
missing financial, human and physical resources
that are still needed for launch and operations?
7. The advocates for the social purpose business among the Board of Directors are:
8. What kind of assistance and/or expertise can your Board of Directors provide?
9. How would an advisory board or business development task force aid in your planning process?
Who/what skills would you look for in recruiting members for this group?
IV.4
10. The organization has the following strategic partnerships and relationships that will aid in
developing the business:
11. What strategic partnerships or relationships are necessary in order to plan and launch the
business? How can the organization develop these partners?
12. In developing the business, the organization expects to experience tension and/or resistance to
change in the following areas:
13. How might a consultant help you in the planning or launch of the business? What work would
they do for you?
14. The timeframe for the business planning process is:
IV.5
Assessing your “People”
The entrepreneurship team, including key staff, Board members and other stakeholders will be
comprised of:
Name
Title/
Position
Role on
Entrepreneurship Team
Skills/Expertise
Project Champion
IV.6
Part IV: External Environment Assessment
External Environment Assessment
This assessment is an initial “quick test” to assist you in thinking about the feasibility of your
business idea in the context of your potential customers and marketplace. An in-depth market
analysis will be completed later during the business planning process.
Questions to Consider
Associated Challenges
1. Who are your potential customers? Describe them
demographically. What similar products do these
customers currently buy? What do they look for when
buying similar products/services?
2. Who are your competitors? What are their strengths and
weaknesses??
3. How will you compete? How will your business be
different?
4. What is happening with the economy, your industry and
your market? Are there major changes in what
customers need and want, how they access the product
or the price? How might this affect your business?
IV.7
IV.8
Part IV: Logic Model Template
Performance Measurement and ManagementSM Logic Model Template
The following is a basic template for a Logic Model. In addition, two examples are provided to help you think through your own business
idea: The Recycle-A-Bicycle Logic Model, demonstrating a business that is currently in operation; and the City Café, a business that is
operating a pilot and is in development. Note that the template provides space for business, program and organizational outcomes.
INPUTS
ACTIVITIES
OUTPUTS
Business Activities
Business Outputs
INITIAL
OUTCOMES
Business Outcomes
Organizational
Outcomes
Program Activities
Program Outputs
Program Outcomes
INTERIM
OUTCOMES
Business Outcomes
LONG TERM
OUTCOMES
Business Outcomes
Organizational
Outcomes
Organizational
Outcomes
Program Outcomes
Program
Outcomes
IV.9
IV.10
Part IV: Logic Model Examples
Recycle-A-Bicycle Logic Model
Outputs
Inputs
Board
Staff
Youth
Funding
Materials
Donation
Facilities
Consultant
Inventory
and
bookkeeping
systems
Activities
Conduct youth
training
programs
Youth trained
in bicycle
repair and
business
concepts
Refurbish
bicycles
Ongoing sales
activity
Conduct
business
activities at
retail stores
Analyze
operations &
set production
goals
Create
resource
development
strategy
Revised
operating plan
Initial Outcomes
Students
graduate from
training
Youth
employed at
RAB or other
bike shops
Facilities and
staffing plan
Long-term
Outcomes
Healthy lifestyle
practiced by
program
graduates
Healthy lifestyle
promoted to others by
program graduates
Youth graduate
high school
Youth develop
strong job skills
Improved
inventory &
bookkeeping
Strategy for
resource
development
Interim
Outcomes
Financing for
new facility and
programs
secured
Graduates become
environmental stewards
Youth enter living wage
careers or obtain postsecondary education
Retail sales
volume increase
Long-term staff
positions
supported by
sales
RAB offers consistent
programming
Organizational
Sustainability achieved
Van & Storage
Facility
acquired
IV.11
Part IV: Logic Model Examples
City Café
A Social Purpose Youth Business
INPUTS
Business Plan
Ideas
Staff
Business
Advisory
Committee
Funding
Facilities
ACTIVITIES
OUTPUTS
INITIAL
OUTCOMES
Business begins
to generate
income from
sales
Develop/revise
business plan
Develop business
strategy
Implement
training
LONG-TERM
OUTCOMES
Business breaks
even
Completed
business plan
Conduct market
analysis
Provide
employment
and leadership
opportunities
for youth
Develop
training
curriculum
INTERIM
OUTCOMES
Business
Launched
Youth
participate in
activities
Youth receive
employment
and training
opportunities
Organization
becomes more
entrepreneurial
Youth develop
skills and gain
experience to
pursue
meaningful job
opportunities
Parent
organization
explores
additional
revenue
generating
activities
Youth advance
in a meaningful
career
IV.12
Part IV: Action Plan Template
Action Plan Template
Use the activities on your Logic Model to determine what needs to be done with respect to the
business. The Action Plan can be used to manage both the business planning process and the
operations of your business.
Task
(WHAT)
Due Date
(WHEN)
Responsibility
(WHO)
Status/Notes
Category:
Category:
Category:
IV.13
IV.14
Part IV: Conjoint Analysis
Conjoint Analysis
As you learned in the Part II: Business Model Section, Conjoint Analysis is a process that helps you
predict the price customers might be willing to pay, based on the weight that customers place on
different decision factors associated with the product. Conjoint Analysis uses the following
process:
1. Choose a range (3 – 8) of competitive products that you think are most like your product.
2. List attributes that you think are important to the customer when purchasing or using this
type of product.
3. Ask a sample of potential customers to rank the attributes in terms of importance in the
decision to purchase and then ask them to rank the competitors on these attributes.
4. Use a weighted average calculation to determine the price customers are willing to pay.
Example of Conjoint Analysis for Social Purpose Bakery Chocolate Cake
The following shows a sample pricing analysis for a Social Purpose Bakery that is testing its
signature chocolate cake to determine a basis for pricing its baked goods.
Step 1: Choose a range of competitive products that you think are most like your product.
Our Social Purpose Bakery was able to identify three bakeries that it believed were its prime
competitors: The Cake Place, a gourmet grocer and Baked for Good.
Step 2: List attributes that you think are important to the customer when purchasing or using this
type of product. Our Social Purpose Bakery decided on the following attributes: Taste,
Presentation, Ease of ordering, Convenience, Customer service and Social mission.
Step 3: Ask the sample of potential customers to rank the list of attributes using a 100 point scale
based on importance of the attribute in your decision to purchase.
Attributes
Taste
Presentation
Ease of ordering
Convenience
Customer service
Social mission
Total
Ranking
100
Then ask the sample of potential customers to rate the competitive products on a scale of 1 to 10
(10 being the best) based on the attributes identified in Step 2. Also have them rate your product.
IV.15
An example of the worksheet provided to the sample of potential customers for the Social Purpose
Bakery is below:
Attributes
Bakery 1:
The Cake
Place
Bakery 2:
Gourmet
Grocer
Bakery 3:
Baked for
Good
Taste
Presentation
Ease of ordering
Convenience
Customer service
Social Mission
Price of the Product
Test Case:
Social
Purpose
Bakery
TBD
Step 4: Use a weighted average calculation to determine the price customers are willing to pay.
For example, the following are the rankings of one customer.
Attributes
Taste
Presentation
Ease of ordering
Convenience
Customer service
Social mission
Total
Attributes
Taste
Presentation
Ease of ordering
Convenience
Customer service
Social Mission
Price of the
Product (actual
price of
competitors)
Ranking
65
25
1
5
3
1
100
Bakery 1:
The Cake
Place
10
5
10
6
8
0
$35
Bakery 2:
Gourmet
Grocer
8
5
8
9
8
0
$22
Bakery 3:
Baked for
Good
7
9
10
6
8
6
$30
Test Case:
Social
Purpose
Bakery
9
7
8
7
7
8
TBD
IV.16
Price Calculation:
Attributes
Taste
Presentation
Ease of ordering
Convenience
Customer service
Social Mission
Total Score
Actual Price
Bakery 1:
The Cake
Place
10*65=650
5*25=125
10*1=10
6*5=30
8*3=24
0*1=0
839
$35
Bakery 2:
Gourmet
Grocer
Bakery 3:
Baked for
Good
8*65=520
5*25=125
8*1=8
9*5=45
8*3=24
0*1=0
722
$22
7*65=455
9*25=225
10*1=10
6*5=30
8*3=24
6*1=6
750
$30
Test Case:
Social
Purpose
Bakery
9*65=585
7*25=175
8*1=8
7*5=35
7*3=21
8*1=8
832
?
Determining your price:
The Social Purpose Bakery evaluated how it ranked compared to the other three products and with
respect to the importance of the different attributes. Based on this, the bakery was able to evaluate
where it fit along the price continuum of the three other products. The price that our Social
Purpose Bakery should be able to charge is between $30 and $35 because its weighted ranking is
between that of Baked for Good and The Cake Place.
Score
Price
Gourmet
Grocer
Baked
for Good
722
$22
750
$30
Social
Purpose
Bakery
832
$30 - 35
The Cake
Place
839
$35
IV.17
IV.18
Part IV: Using the Revenue Model Template
Revenue Model Template
The disk provided in the Toolkit contains templates that are meant to assist you in developing a
five year outlook for your business. You can use or modify these templates, or create your own.
In the Revenue Assumptions template, you are provided with space for three basic product
lines. If you have more product lines, you will need to add sections to the template. This
template is extremely basic and is meant to serve as a starting point for new businesses. Yellow
coded cells are where you will enter your assumptions. Enter only numerical values. Blue
coded cells are for text entries. Cells without color are coded with formulas and will be
calculated based on the assumptions that you enter in the Yellow-colored cells.
Instructions:
1. Begin with your primary product line. Enter the name of the product line in the bluecolored cell currently labeled “Product/Service A”. Then enter the name of the first
month that you will be projecting (enter the date in the format: Month Year, e.g.
February 2003).
2. Enter the price you will charge for this product/service in year one. Indicate in the blue
box what units this price refers to. For example, one cake, one bicycle, a package of
services, an “average” customer purchase, etc.
3. Estimate the sales volume per month for year one. That is, how many units will you
sell each month. The template will calculate the monthly revenue from that
product/service line and will show the seasonality by showing what percent of annual
sales are generated each month.
4. Estimate the cost per unit in direct materials and direct labor costs. The template will
total the cost and calculate the gross margin on each unit sale.
5. Now you will estimate future revenues. You will need to estimate increases in the three
major assumptions: price, sales volume and cost of goods. You will enter the percent
increase (or decrease) expected. The template will fill in the new price, sales volume
and costs associated with your projected increase.
The template allows you to enter three product lines and at the bottom of the worksheet,
calculates the total revenues, costs, gross profit and gross margins. If you have additional
product lines, you will need to modify the template.
A printed version of one completed Product Line and the total calculations is provided on the
next pages.
IV.19
Product/Service A
Pricing
Price per unit = what you will charge
Units
$
21.00
per service
(For example: per hour, per piece, per pound)
Insert date in format: March 2003
Sales Volume (Units sold)
Month 1
Month 2
Number of units to be sold each month
Percent of total units sold
Sales Revenues (price x volume)
Feb-03
165
6%
$3,465
Mar-03
250
9%
$5,250
Cost per unit
Direct Material cost per unit
Direct Labor cost per unit
Total cost per unit
Gross Margin (%)
Gross Margin ($)
Increases for Years 2 - 5
$
$
$
$
12.00
12.00
43%
9.00
Apr-03
250
9%
$5,250
Month 4
Month 5
May-03
250
9%
$5,250
Jun-03
320
11%
$6,720
Month 6
Jul-03
320
11%
$6,720
Month 7
Month 8
Aug-03
320
11%
$6,720
Sep-03
230
8%
$4,830
Month 9
Oct-03
230
8%
$4,830
Month 10
Nov-03
230
8%
$4,830
Month 11
Dec-03
165
6%
$3,465
Month 12
Jan-04
165
6%
$3,465
Total
2895
$60,795
(Direct Labor is a tricky issue. Ask yourself if the cost truly varies with the number of units sold)
(Cost per unit should be less than the price per unit or else you will lose money on every item you sell!)
(Price minus cost, then divided by price)
(Price minus cost)
One method of estimating increases in revenues is to think through changes in the price, sales volume and cost of
goods that you will experience over the next few years. These cells allow you to look at how changes in these
factors wlll affect your revenues, margin and profits.
Price
growth rate
Year 2
Year 3
Year 4
Year 5
Month 3
0%
1%
2%
2%
New price
$
$
$
$
21.00
21.21
21.63
22.07
Unit sales
growth rate New Volume
25%
15%
10%
5%
3,619
4,162
4,578
4,807
Sales
Revenues
$
$
$
$
75,994
88,267
99,035
106,067
Cost per
unit growth
rate
1%
2%
1%
2%
New cost
per unit
$
$
$
$
12.12
12.36
12.49
12.74
Gross
Margin
42%
42%
42%
42%
IV.20
Revenue Model Summary
Year 1 Forecast (month-by-month)
Revenues
Product/Service A
Product/Service B
Product/Service C
Total Revenues
Cost of Goods
Product/Service A
Product/Service B
Product/Service C
Total Cost of Goods
Operating/Gross Profit
Gross Margin (%)
$
$
$
$
Feb-03
3,465
8,470
280
12,215
$
$
$
$
Mar-03
5,250
13,310
280
18,840
$
$
$
$
1,980
1,400
140
3,520
$
$
$
$
3,000
2,200
140
5,340
$
8,695 $
71%
$
$
$
$
Apr-03
5,250
13,310
240
18,800
$
$
$
$
3,000
2,200
120
5,320
13,500 $
72%
$
$
$
$
May-03
5,250
13,310
240
18,800
$
$
$
$
Jun-03
6,720
22,385
240
29,345
$
$
$
$
Jul-03
6,720
22,385
240
29,345
$
$
$
$
Aug-03
6,720
22,385
240
29,345
$
$
$
$
Sep-03
4,830
15,125
240
20,195
$
$
$
$
Oct-03
4,830
15,125
240
20,195
$
$
$
$
Nov-03
4,830
15,125
280
20,235
$
$
$
$
Dec-03
3,465
8,470
280
12,215
$
$
$
$
Jan-04
3,465
8,470
280
12,215
$
$
$
$
60,795
177,870
3,080
241,745
$
$
$
$
3,000
2,200
120
5,320
$
$
$
$
3,840
3,700
120
7,660
$
$
$
$
3,840
3,700
120
7,660
$
$
$
$
3,840
3,700
120
7,660
$
$
$
$
2,760
2,500
120
5,380
$
$
$
$
2,760
2,500
120
5,380
$
$
$
$
2,760
2,500
140
5,400
$
$
$
$
1,980
1,400
140
3,520
$
$
$
$
1,980
1,400
140
3,520
$
$
$
$
34,740
29,400
1,540
65,680
13,480 $
72%
13,480 $
72%
21,685 $
74%
21,685 $
74%
21,685 $
74%
14,815 $
73%
14,815 $
73%
14,835 $
73%
8,695 $
71%
Total
8,695 $
71%
176,065
73%
5-Year Projection
Annual Revenues
Product/Service A
Product/Service B
Product/Service C
Total Revenues
Cost of Goods
Product/Service A
Product/Service B
Product/Service C
Total Cost of Goods
Operating/Gross Profit
Gross Margin (%)
Projected Revenues based on changes in price, volume and cost of goods
Year 1
Year 2
Year 3
Year 4
$
60,795 $
75,994 $
88,267 $
99,035
$ 177,870 $ 204,551 $ 227,256 $ 250,345
$
3,080 $
3,422 $
3,733 $
3,996
$ 241,745 $ 283,966 $ 319,255 $ 353,376
$
$
$
$
$
34,740
29,400
1,540
65,680
$
$
$
$
176,065 $
73%
43,859
34,486
1,711
80,056
$
$
$
$
203,910 $
72%
51,447
38,694
1,866
92,007
$
$
$
$
227,248 $
71%
57,158
42,625
1,998
101,780
$
$
$
$
Year 5
106,067
265,566
4,198
375,830
$
$
$
$
61,216
45,216
2,099
108,531
251,596 $
71%
267,299
71%
IV.21
IV.22
Part IV: Using the Fixed Cost Template
Fixed Cost Template
In the Financial Projections Workbook, the Fixed Costs Template contains a list of possible
expenses associated with a typical small business. Add and eliminate items from this list as needed.
The Fixed Costs projections are formulated to allow a standard rate of increase over the course of
the five years. However, when creating your projections, it is best to determine the rate of growth
for each item separately. In some cases, you will know exactly how the expense will grow and in
others, you will have to estimate.
Year 1
Year 2
Year 3
Year 4
Year 5
Annual Amount Annual Amount Annual Amount Annual Amount Annual Amount
Facilities Expenses
Rent
Mortgage
Utilities
Signage
Office equipment (computers, copiers, fax machine)
Equipment Repair and Maintenance Services
Administrative Expenses
Insurance
Payroll fees
Legal fees/retainer
Accounting fees
Office supplies
Association Memberships
Phone/Cell Phone/Pager
Computer Software
Parent nonprofit admin fee or overhead charge
Travel and Conference Expenses
Conferences
Transportation
Marketing and Sales Expenses
Credit Card Fees
Advertising Campaign
Fliers/coupons/other printing
Logo design/branding
Training or other Program-related Expenses
Training curriculum
Program supplies
Program overhead
12000
0
2400
0
2400
1200
12360
0
2472
0
2472
1236
12731
0
2546
0
2546
1273
13113
0
2623
0
2623
1311
13506
0
2701
0
2701
1351
2400
300
0
0
2400
0
0
500
2472
309
0
0
2472
0
0
515
0
2546
318
0
0
2546
0
0
530
0
2623
328
0
0
2623
0
0
546
0
2701
338
0
0
2701
0
0
563
0
0
0
0
0
0
0
0
0
0
0
1200
2400
0
1236
2472
0
0
1273
2546
0
0
1311
2623
0
0
1351
2701
0
1545
0
0
1591
0
0
1639
0
0
1688
0
0
0
0
0
0
1500
Other/miscellaneous
Total Fixed Expenses
Fixed Expense Growth Rate
$
28,700
$
29,561
$
30,448
$
31,361
$
32,302
3%
IV.23
IV.24
Part IV: Using the Staffing Plan Template
Staffing Plan Template
The Staffing Plan Template is a worksheet within the Financial Workbook. The template is divided
into two sections: one for salaried employees and the other for those employees paid hourly. As in
the Revenue Model, this is a basic template to guide your planning process and you may need to
expand its scope or even redesign the model to fit your busines. In particular, you may need to
develop a more detailed plan for adding part-time employees over the course of the first year as you
ramp up your operations. Before you use this plan, you will need to determine the number of
employees needed to fulfill the level of sales projected and provide support services as needed.
To use this template, enter text in the blue colored cells and enter numerical values in the yellowcolored cells. The template will total the staffing costs in a table at the bottom of the page. A
printed version of this worksheet is included here.
Follow the steps below to use the staffing template.
1. Input the titles of the positions for salaried employees and the corresponding annual salary.
2. Estimate the percent of time for which each salaried employee will be paid each year. Your
business may employ some staff part time and then move them to full time as you grow.
These cells allow you to demonstrate that increase.
3. Estimate the cost of living increase to be paid to salaried employees from year to year.
4. Enter the titles of the positions for hourly employees, the corresponding hourly wages and
cost of living increase.
5. Estimate the number of hours per week that each position will work each year for five
years.
6. Determine the number of employees in each position each year. This is a place where you
can increase the number of hourly employees over the years.
7. Enter the payroll tax, workers compensation rate, and fringe benefit rate for the business.
The template will total the staffing costs in the table at the bottom of the page.
IV.25
Staffing Assumptions
Salaried Employees
Salaried Staff Positions
Business Manager
Lead Mechanic
Chief Financial Officer
Assistant Manager
Marketing Director
Human Resources/Payroll Manager
Development Officer
Year 1 Salary
$
50,000
$
40,000
$
50,000
$
$
45,000
$
40,000
$
40,000
Annual cost of living increase for salary
Salaried Staff Time (as % of FTE)
Business Manager
Lead Mechanic
Assistant Manager
Marketing Director
Development Officer
Year 2 Salary
$
51,500
$
41,200
$
51,500
$
30,000
$
46,350
$
41,200
$
41,200
Year 3 Salary
$
53,045
$
42,436
$
53,045
$
30,900
$
47,741
$
42,436
$
42,436
Year 4 Salary
$
54,636
$
43,709
$
54,636
$
31,827
$
49,173
$
43,709
$
43,709
Year 5 Salary
$
56,275
$
45,020
$
56,275
$
32,782
$
50,648
$
45,020
$
45,020
Year 2
Year 3
Year 4
Year 5
3%
Year 1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
5%
0%
0%
0%
0%
0%
50%
50%
50%
50%
5%
0%
0%
0%
0%
0%
0%
0%
0%
0%
5%
5%
0%
0%
0%
Hourly Employees
Hourly Staff Positions and wages
Youth mechanics
none
none
none
Annual cost of living wage increase for hourly
Hourly Staff Time (Hrs/week/employee)
Youth mechanics
none
none
none
Hourly Staff Time (Number of employees)
Youth mechanics
none
none
none
Year 1 Hourly
Wage
$
10.00
$
$
$
-
Year 2 Hourly
Wage
$
10.15
$
$
$
-
Year 3 Hourly
Wage
$
10.30
$
$
$
-
Year 4 Hourly
Wage
$
10.46
$
$
$
-
Year 5 Hourly
Wage
$
10.61
$
$
$
-
1.50%
Year 1
Hours/Week
15
Year 1
Year 2
Hours/Week
15
Year 2
Year 3
Hours/Week
15
Year 3
4
5
Year 4
Hours/Week
15
Year 4
6
Year 5
Hours/Week
15
Year 5
7
8
Staffing Expenses:
Payroll taxes
Workers comp - other
Fringe benefits
Weeks per year
9.425%
2.32%
20.00%
52.00
% of total wages
% of total wages
% of total wages
weeks used to calculate annual wages
IV.26
Total Staffing Costs:
Business Manager
Lead Mechanic
Assistant Manager
Marketing Director
Development Officer
Subtotal Salaried Employees
$
$
$
$
$
$
$
$
Year 1
65,873
52,698
3,294
2,964
2,635
127,463
$
$
$
$
$
$
$
$
Year 2
67,849
54,279
19,762
2,714
144,603
$
$
$
$
$
$
$
$
Year 3
69,884
55,907
20,355
146,146
$
$
$
$
$
$
$
$
Year 4
71,981
57,585
20,965
150,530
$
$
$
$
$
$
$
$
Year 5
74,140
59,312
21,594
155,046
Youth mechanics
none
none
none
Subtotal Hourly Employees
$
$
$
$
$
31,200
31,200
$
$
$
$
$
39,585
39,585
$
$
$
$
$
48,215
48,215
$
$
$
$
$
57,094
57,094
$
$
$
$
$
66,229
66,229
Total Staffing Costs
$
158,663
$
184,188
$
194,361
$
207,624
$
221,275
IV.27
IV.28
Part IV: P-Flow Analysis
P-Flow Worksheet
Think about your 4 Ps (Product, Price, Place and Promotion). As you fill in the chart, consider the
extent to which one element makes sense in terms of the others. For example, Recycle-A-Bicycle
targets the messenger and student market segments because Recycle-A-Bicycle bikes are more
affordable than a new bike (average price of $125). In addition, promotions are primarily generated
through grassroots efforts and word of mouth, both of which are strong ways to reach the
messenger and student market segments. It would not make sense for Recycle-A-Bicycle to create
glossy advertisements in Bicycling Magazine because those readers are more likely looking to buy
new, high-end bikes.
FOUR P’S
Product
DESCRIPTION
Describe the attributes of your product?
What are the benefits?
Price
Who are your competitors?
What are your costs?
What is the value perception?
IV.29
Part IV: P-Flow Analysis
Promotion
Segmentation (list important customer groups in your market):
Target (identify which of the segments will be your primary and secondary
targets):
Tools (list the tactics, as of now, that you think you will use to promote your
business):
Place
Describe your current channels of distribution:
List any other distribution opportunities:
IV.30
Part IV: Positioning
Developing Your Positioning Statement
Primary Positioning:
[PRODUCT or SERVICE]
is the brand of
[CATEGORY]
which to
[TARGET]
delivers
[Unique BENEFIT]
Now, create a secondary positioning statement. Change the target, and/or the benefit. This
statement should represent the business opportunity that you feel is almost as important as your
primary focus.
Secondary Positioning:
[PRODUCT or SERVICE]
is the brand of
[CATEGORY]
which to
[TARGET]
delivers
[Unique BENEFIT]
IV.31
IV.32
Part IV: Developing Indicators
Developing Indicators and Quick Test Worksheet
Instructions:
1. Identify the initial, interim, or long-term outcomes that you want to measure. Write the outcome below.
2. Describe this outcome in words.
3. Based on these descriptions, identify indicators or measures.
4. For each indicator, assess whether it is useful and practical.
Outcome: _____________________________________________________________________
Outcome Description in
Words
Indicator
Useful?
Practical?
IV.33
IV.34
Part IV: Data Collection
Data Collection and Management Worksheet
Instructions:
1. Identify the outcome you want to capture and write it in below.
2. From the Indicators Worksheet, select the “best” indicators for the outcome.
3. Determine the data collection strategy. Identify how the data will be collected, what data
collection instrument will be used, who will be responsible, and how often the data will be
collected?
Outcome to Measure: ______________________________________________________
Indicator
Data Source and
Methods
Data Collection
Instruments
Who Will
Collect the
Data?
When will
the Data be
collected?
IV.35
IV.36
Part IV: Outcomes Management
PM&MSM Outcomes Tracking Template
OUTCOMES
Indicators
Example:
Example:
Reduction in waste Tonnage of donated bikes
entering NYC waste collected
stream
Example:
Youth acquire job
skills and move into
better paying longterm employment
Status as of Year 1 Target Year 2 Target
3/31/03
(4/1/02 (4/1/03 3/31/03)
3/31/04)
8 tons
15 tons
25 tons
Example:
Number of students leaving the
Recycle-A-Bicycle training
program for full-time
employment
10
Example:
Average wage earned by youth
Minimum
wage
20
30
10% above
10% above
minimum wage minimum wage
IV.37
Part IV: Outcomes Management
Uses of the Management Report
Who uses
information?
Board
What information do
they need to know?
Senior Staff
Outputs & Outcomes
Information
All (Inputs, Activities,
Outputs, & Outcomes
Information)
Line Staff/
Supervisors
Inputs, Activities &
Outputs Information
Funders
Inputs & Outcomes
Information
Why do they need to
know information?
- Monitor Progress &
Guide Planning
- Monitor & Manage
Progress
- Improving
Performance
- Program
Management
- Day to Day
Oversight
Evaluate Investment
When do they
need to know
information?
Quarterly Board
Meeting
Monthly
Weekly/Daily
Six month/Annual
Template for Management Report
Who uses
information?
What information do
they need to know?
Why do they need to
know information?
When do they
need to know
information?
IV.38
Part IV: Sample Financial Statements
Sample Balance Sheet
SAMPLE COMPANY
CONSOLIDATED BALANCE SHEET
Period End: June 30, 1998
June 30, 1998
June 30, 1997
Assets
Current Assets:
Cash and Cash Equivalents
Short-Term Investments
Accounts Receivable - Net
Merchandise Inventory
Deferred Income Taxes
Other Current Assets
Total Current Assets
$
Property, Less Accumulated Depreciation
Long-Term Investments
Other Assets
Total Assets
222,709
20,343
143,928
2,104,845
56,124
37,734
2,585,683
$
3,636,917
28,716
93,335
195,146
16,155
118,408
1,714,592
34,116
31,185
2,109,602
3,005,199
35,161
69,315
$
6,344,651
$
5,219,277
$
92,475
99,019
1,133,177
80,104
112,749
247,820
1,765,344
$
98,104
12,478
969,777
64,669
83,377
220,915
1,449,320
Liabilities and Shareholders' Equity
Current Liabilities
Short-Term Borrowings
Current Maturities of Long-Term Debt
Accounts Payable
Employee Retirement Plans
Accrued Salaries and Wages
Other Current Liabilities
Total Current Liabilities
Long-Term Debt, Excluding Current Maturities
Deferred Income Taxes
1,283,092
160,263
1,045,570
123,778
Total Liabilities
3,208,699
2,618,668
Total Shareholders' Equity
$
3,135,952
$
2,600,609
Total Liabilities and Shareholders' Equity
$
6,344,651
$
5,219,277
See accompanying notes to consolidated financial statements.
IV.39
Sample Income Statement
SAMPLE COMPANY
INCOME STATEMENT
Period Ending: June 30, 1998
Years Ended on
Net Sales
Cost of Sales
Gross Margin
Expenses:
Selling, General and Administrative
Store Opening Costs
Depreciation
Interest (Note 13)
Total Expenses
June 30, 1998
$
12,244,882
8,950,156
3,294,726
June 30, 1997
$
10,136,890
7,447,117
2,689,773
2,118,149
71,651
271,769
74,735
2,536,304
1,754,780
69,999
240,880
65,567
2,131,226
Pre-Tax Earnings
758,422
558,547
Income Tax Provision
276,000
201,063
Net Earnings
$
482,422
$
357,484
IV.40
Cash Flow Statement
SAMPLE COMPANY
CASH FLOW STATEMENT
Period Ending : June 30, 1998
Years Ended on
June 30, 1998
June 30, 1997
Cash Flows From Operating Activities:
Net Earnings
$
482,422 $
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation
271,769
Amortization of Original Issue Discount
445
Increase in Deferred Income Taxes
14,337
Loss on Disposition/Writedown of
Fixed and Other Assets
23,540
Changes in Operating Assets and Liabilities:
Accounts Receivable - Net
(25,520)
Merchandise Inventory
(390,253)
Other Operating Assets
(6,313)
Accounts Payable
163,400
Employee Retirement Plans
75,508
Other Operating Liabilities
87,513
Net Cash Provided by Operating Activities
696,848
(846)
(108,712)
6,732
55,610
60,527
31,103
664,870
Cash Flows from Investing Activities:
(Increase) Decrease in Investment Assets:
Short-Term Investments
Purchases of Long-Term Investments
Proceeds from Sale/Maturity of Long-Term Investments
(Increase) Decrease in Other Long-Term Assets
Fixed Assets Acquired
Proceeds from the Sale of Fixed/Other Long-Term Assets
Net Cash Used in Investing Activities
19,848
(19,866)
2,644
(18,528)
(928,040)
38,202
(905,740)
25,773
(15,384)
4,811
(5,472)
(772,792)
31,183
(731,881)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term Borrowings
Long-Term Debt Borrowings
Repayment of Long-Term Debt
Proceeds from Stock Options Exercised
Cash Dividend Payments
Net Cash Provided by Financing Activities
(5,629)
296,159
(15,458)
12,140
(50,757)
236,455
17,199
265,795
(32,781)
210
(28,653)
221,770
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
27,563
195,146
222,709
154,759
40,387
195,146
$
$
357,484
240,880
192
7,637
14,263
IV.41
Part V contains
the full text of the
Recycle-A-Bicycle
Business Plan.
Part V
Sample Business Plan
I.1
RECYCLE- A- BICYCLE, INC.
NEW YORK
BUSINESS PLAN
APRIL, 2003
CONFIDENTIAL
FOR MORE INFORMATION, CONTACT KAREN OVERTON, EXECUTIVE DIRECTOR
55 WASHINGTON STREET, BROOKLYN, NY 11201
[email protected]
© 2003 RECYCLE-A-BICYCLE NEW YORK
V.1
V.2
TABLE OF CONTENTS
I.
II.
EXECUTIVE SUMMARY
5
MARKET OPPORTUNITY
11
ERROR! BOOKMARK NOT DEFINED.
12
13
RECYCLE-A-BICYCLE HAS A STRONG PRESENCE IN ITS RETAIL TRADE AREAS
14
14
RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE
16
MARKET OPPORTUNITY SUMMARY
16
III.
BUSINESS MODEL
17
DESCRIPTION OF PRODUCTS AND SERVICES
“RE-MANUFACTURING” THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE
STRATEGIC PARTNERSHIPS AND RELATIONSHIPS
REVENUE MODEL OVERVIEW
18
25
20
21
22
IV.
37
SOCIAL OUTCOMES TRACKING
SOCIAL INDICATORS OF SUCCESS
ENVIRONMENTAL INDICATORS OF SUCCESS
37
38
V.
25
OPERATIONS: FIVE YEAR STRATEGIC PLAN HIGHLIGHTS
SUMMARY OF STRATEGIC INITIATIVES
30
VI.
33
MANAGEMENT TEAM
MANAGEMENT TRACK RECORD
PERSONNEL NEEDS BY STAGE OF DEVELOPMENT
33
29
VII.
37
FINANCIALS
FINANCIAL ESTIMATES AND ASSUMPTIONS
CAPITAL NEEDS, TIMELINE AND BENCHMARKS
41
45
47
APPENDICES
V.3
V.4
I.
EXECUTIVE SUMMARY
OVERVIEW
Recycle-A-Bicycle, a thriving 501©3 nonprofit, has a dual mission: to provide youth
development opportunities to at-risk populations in New York City and to promote
environmental stewardship. The nonprofit operates two successful full-service used bicycle
shops that employ young people trained in bike repair and mechanics. Through these bicycle
shops, Recycle-A-Bicycle offers affordable and environmentally sustainable transportation
options for commuters, recreational bikers and messenger/delivery persons. As a social
enterprise, Recycle-A-Bicycle has a triple bottom line in which the social and environmental
missions are balanced with financial returns.
Since 1997, Recycle-A-Bicycle has salvaged bikes from the waste stream and refurbished them
to sell to the public. Recycle-A-Bicycle also trains young people to fix bikes and assists them in
acquiring the soft skills required in today’s competitive job market.
Working closely with the Henry Street Settlement and Children’s Aid Society, Recycle-ABicycle integrates financial, social and environmental concerns into a successful business model.
Recycle-A-Bicycle currently operates two retail stores, one in the East Village of Manhattan, the
other in DUMBO, Brooklyn, New York. Toward these goals, Recycle-A-Bicycle:
1. Collects donated bicycles destined for dumping.
2. Trains at-risk youth for positions as bike mechanics and sales people, builds skills in
basic business concepts and computer training, and provides a safe alternative that is
a positive influence on their development.
3. Refurbishes used bicycles through a training program.
4. Sells the bicycles to the community as an affordable, quality transportation option.
5. Employs graduates of the training program.
6. Operates retail stores that also sell accessories and repair services that diversify the
revenue stream and create additional profit.
7. Offers classes to adults on bicycle repair.
Recycle-a-Bicycle is at a critical juncture in its growth. While the business is currently
profitable, the potential for further growth is significant. To better serve its mission and to
address the demand for used bikes, Recycle-A-Bicycle plans to create a new production
facility, fill key staff positions and enhance its infrastructure. By pursuing these strategies,
Recycle-A-Bicycle can increase its youth outreach by more than 100%1 in the next two years as
well as create an organization that is sustained on its operating cash flow, thus reducing
dependency on corporate grant funds.
MARKET OPPORTUNITY
1
Outreach refers to the number of youth involved in any RAB activity, including both youth training and organized
youth bike rides.
V.5
The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in
the United States. Recent studies show that in the Northeast, 28% of adults participated in biking
activities during a one-year period. New York City boasts a healthy cycling community
consisting of commuters (over 100,000 people commute by bike each day), bike
messengers/delivery persons and professional and recreational riders.
Used bicycles are in demand in New York City. The high rate of bike theft in New York City
results in many cyclists wanting to purchase an affordable bike as well as one that is less likely to
be stolen. The prohibitive cost of a new bike also generates business at used bike stores.
Demand has outpaced Recycle-A-Bicycle’s capacity for the past three years.
Despite the demand, used bike stores are not prevalent in New York City. Within Recycle-ABicycle’s trade areas, there are few other used bike sellers due to the high costs associated with
used bikes including labor to repair, inventory system requirements and insurance.
The supply of used bikes is also strong. National trends in cycling report that the number of
bicycles purchased each year remains relatively constant while the number of people riding is
declining. This indicates that more bicycles are being consumed per rider.
YEAR
1995
1998
2001
BICYCLES CONSUMED
(MILLIONS)
16.2
15.8
16.7
U.S. RIDERSHIP
(MILLIONS)
56.3
43.5
39.0
BICYCLES CONSUMED
PER RIDER
0.28
0.36
0.42
COMPETITIVE ADVANTAGE OF RECYCLE-A-BICYCLE
Recycle-A-Bicycle offers a unique product and service. Its social and environmental
missions make it the only socially responsible bicycle retailer in New York City.
Recycle-A-Bicycle has built a trusted brand name and its products are well known as quality
alternatives to traditional new bicycles. Customers often say these bicycles are better than new,
referring to both the quality and the social mission. Many customers are attracted by the low
prices but feel much more compelled to purchase when they learn of the social and
environmental stewardship that the organization embodies.
Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York
City. Because of low labor and materials costs, Recycle-A-Bicycle is able to offer bicycles at
very affordable prices, most at 50% less than a comparable new bicycle.
The youth programs inspire young people to make better life decisions and touch many aspects
of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-
V.6
being, provides a goal-oriented social structure (earning their own bike by helping fix others),
and helps improve self-esteem. An “I can do it” attitude pervades Recycle-A-Bicycle.
MANAGEMENT TEAM
The management team consists of three highly skilled and dedicated staff with over 10 years of
experience in bicycling retailing, 13 years in transportation advocacy, and over 7 years
experience in youth education. The team has proven its ability over the years and is continuing
to develop new strengths. The three key staff members are:
•
Karen Overton - Executive Director
Ms. Overton is the founder and leader of Recycle-A-Bicycle. Ms. Overton worked as
the Bikes for Africa Project Director at the Institute for Transportation and Development
Policy; a consultant for the World Bank, in the International Development Bank, African
American Institute; and Pedals for Progress.
•
Jared Bunde - Manager, DUMBO Shop
Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began
in 1997 as a messenger. Before joining Recycle-A-Bicycle in 2002, he was employed
for over three years as a bike mechanic at Bike Works, a high traffic shop in Lower
Manhattan that sells used bicycles. He has also excelled in his racing career, winning a
silver medal for the NY State Track Cycling Championship in 2000 and 2002.
•
Yoandy Ramirez - Manager, East Village Store
Mr. Ramirez started his career with Recycle-A-Bicycle as a Summer Youth Employment
student in 1999. Based on his hard work, Mr. Ramirez was promoted to Assistant
Manager in June 2002 and most recently became the East Village Store Manager. He
will graduate high school this summer and aspires to pursue a degree in computer
science.
Members of the Board of Directors complement the skills presented by the management team.
The Board consists of dedicated individuals from the following professions: education, finance,
social work and transportation advocacy. Each Board member brings enthusiasm, a unique skill
perspective and a broad network of contacts to the organization.
SOCIAL AND ENVIRONMENTAL IMPACT
To date, Recycle-A-Bicycle has worked with over 4,500 youth and staffed an average of 15
positions per year.
Recycle-A-Bicycle improves the lives of at-risk youth in the New York City metro area through
a hands-on, formal training program in bike repair, small business and environmental education.
After completing the training program, many youth fill the part- and full-time positions available
at the Recycle-A-Bicycle retail stores. In addition, some secure positions in other bike shops
V.7
across New York City. The organization’s strategic partners provide qualified youth counselors
that recruit and work with young people who need assistance with basic job readiness skills and
who can intervene in the case of serious issues regarding the social or mental well-being of
participants.
In 2002, Recycle-A-Bicycle worked with 772 youth through its training program. Over the next
five years, the organization will increase its youth impact by 54%.
In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New
York City. In 2002, Recycle-A-Bicycle recycled over 14 tons of material destined for New York
City’s landfills. Recycle-A-Bicycle expects to increase the amount of materials recycled to over
27 tons in 2007.
5-Year Projected Outcomes
Number of positions to be filled
Tonnage of material to be
removed from the waste stream
2
2003
2004
2005
2006
2007
780
850
950
1050
1200
22
28
31
34
37
17
22
24
26
27
FINANCIAL OVERVIEW
Recycle-A-Bicycle plans to make three key investments over the next three to five years to
expand its programs and create opportunity for revenue growth:
• Acquire a production and training facility that will provide an expanded and dedicated
space for training youth as well as refurbishing bikes, therefore meeting more of the
demand for used bikes in New York City;
• Acquire a van and hire transportation staff to allow for more strategic and coordinated
pick-up of donated bikes as well as transfer of inventory between production facility and
retail stores; and
• Hire additional staff to enable the organization to raise capital from institutional grantors
for business expansion as well as for increased training and youth program services.
Recycle-A-Bicycle projects net operating losses in 2003 while development and fundraising
efforts are invigorated, and the marketing, internet sales capacity, retail signage/merchandising,
and other critical corporate infrastructure projects are further developed. The results of this
investment will be greater sales revenue and significant improvement in net margin.
2
Includes both full and part time positions
V.8
Summary of revenue projections and net income
Sales Revenues
Grant Revenues
Net Income
Net Retail Margin
$
$
$
2003
2004
167,657 $ 232,932
71,091 $ 176,396
(11,472) $ 47,868
n/a
21%
$
$
$
2005
290,281
172,049
80,105
28%
$
$
$
2006
318,775
188,875
111,275
35%
2007
$ 334,446
$ 198,129
$ 126,475
38%
Recycle-A-Bicycle
-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year
2003
Recycle-A-Bicycle seeks $171,000 in funding in 2003. Approximately $71,000
in grant funding will serve as working capital to support current operations as
well as implement new marketing efforts. The additional $100,000 will support
hiring new staff, support costs associated with sourcing and obtaining the new
production and training center and provide for other infrastructure improvements.
2004
Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004.
These funds will be used in part for working capital and in part to support more of
the Five-Year Strategic Plan. This includes hiring a Production Assistant to staff
the production and training center, hiring a van driver to facilitate the pick-up of
supply and transfer of bikes between facilities and funding to pursue e-business
strategies. In addition, part of these funds ($38,000) will be used for a down
payment on the production and training center. Recycle-A-Bicycle will raise the
additional $106,000 through fundraising efforts spearheaded by the new
2005
Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset
additional costs related to expansion including research into new retail
opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours by Teens
program.
Recycle-A-Bicycle is facing growing supply and demand for its products. It has a solid track
record of growth and is now looking for capital in order to expand the social and environmental
outcomes and develop more sustainable systems within the business.
Recycle-A-Bicycle is a thriving enterprise that has proven itself as a successful bicycle retailer
and small business in New York City. The organization serves a triple bottom line, benefiting
the at-risk youth and the New York City environment through a business model that is moving
toward sustainability. Recycle-A-Bicycle is seeking to increase its effectiveness in all three
areas – social, environmental and financial. As one of the leading organizations combining
youth education, recycling and bicycling, Recycle-A-Bicycle has the capability to expand locally
as well as develop a national reach.
For more information on Recycle-A-Bicycle, please contact Karen Overton, Executive Director
at [email protected].
V.9
V.10
II.
MARKET OPPORTUNITY
Bicycling has long been a pastime of children and adults alike and are used most often for social
and recreational purposes. In fact, bicycle riding is now the seventh most popular sport in the
country (out of 62). In July 2001, the Bureau of Transportation Statistics estimated that
approximately one in four adults (25%) in the United States had used a bicycle in the last 30
days. An Outdoor Industry Association Report found that within the Northeast, over 28% of
adults participated in biking activities during 1994-1995. However, cycling is highly seasonal
and usage declines to as low as one in ten in the winter months.
Statistics show that the number of bicycles purchased each year remains relatively consistent
while the number of people riding is declining. This indicates that more bicycles are being
consumed per rider.
YEAR
1992
1995
1998
2001
BICYCLES CONSUMED
(MILLIONS)
15.4
16.2
15.8
16.7
US RIDERSHIP
(MILLIONS)
54.6
56.3
43.5
39.0
BICYCLES CONSUMED
PER RIDER
0.28
0.28
0.36
0.42
10 Yr. Avg.
16.7
48.3
0.34
With fewer people cycling and a constant number of bicycles being consumed, either consumers
are accumulating more bicycles or disposing of more bicycles. Recycle-A-Bicycle’s experience
points to the latter.
Further evidence of this “disposable” bike culture was indicated in the keynote presentation at
the 2002 Taipei International Cycle Show, when Yoshizo Shimano, Chairman of Shimano Inc.
said:
“American consumers buying mass-merchant bikes ride them fewer than 60 miles before
hanging them up in their garages. In Japan the bicycle is so devalued that consumers
dumped them in the streets creating a public nuisance. They [bicycles] have become a
throw-away commodity.”
Source: Bicycle Retailer and Industry News, May 1, 2002
Recycle-A-Bicycle provides a unique solution to the commodification of bicycles while offering
affordable, environmentally sound transportation and recreation options to residents of New
York City.
V.11
Using a conservative average (20% less than the national standard), nearly 200,000 new
bicycles are consumed annually in Brooklyn and Manhattan alone:
Population
Bicycle Consumption
per 1000 people
Annual Bicycle
Consumption
UNITED STATES
BROOKLYN
MANHATTAN
277,800,000
2,465,326
1,459,596
60.2
50
50
16,700,000
123,266
72,979
Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001. New York Data estimated
New York City boasts a healthy cycling community consisting of commuters, bike
messengers/delivery persons, and professional and recreational cyclists. The New York City
Department of Transportation estimates that 100,000 people commute by bike daily. In
addition, there are several active bike-oriented organizations and clubs with memberships
totaling over 10,000. The Five Borough Bike Tour, the largest cycling event in the U.S., takes
place in New York City with a ridership of 30,000. Cyclists flock to New York City parks on
the weekends during good weather. There are also New York City industries dependent on
cyclists: messenger services, food delivery and pedicabs.
New York City has over 100 miles of bike lanes and an additional 75 miles of Greenways for use
by cyclists. For the most part, New York City's terrain is flat, and the high density and mix of
land use lend themselves to cycling. Traffic and parking are constant problems facing drivers
and cycling is generally a faster mode of transport for trips within a five-mile range. According
to one bike shop manager, cyclists will be active in temperatures of 50 degrees Fahrenheit and
above, leaving only the winter season unpopular for biking.
The events of September 11th converted some commuters into cyclists. At this time, many
people’s access to public transportation was disrupted or they became anxious about the possibility
of biological warfare in the subways. The East Village shop did a record volume of sales and repairs
from September to December. With a bus and subway fare hike scheduled for May 2003, the
number of commuters cycling to work is expected to increase as commuters will choose to cycle
rather than pay $4 daily for a round trip.
On a more positive note, the government’s recent investment in New York City’s bicycle
infrastructure, perceived to make conditions safer, helps to encourage cycling. These investments
include $1.5 million, received in 1994, to plan and implement a comprehensive bicycle network
for New York City. Through this effort, 500 miles of bicycle routes have been identified and New
York City has produced the New York City Bicycle Master Plan as well as the first-ever New York
Cycling Map. In 1996, an additional $2.4 million was invested in the implementation of the Plan.
V.12
Both of Recycle-A-Bicycle’s shops directly benefit from these improvements. A new bike lane is
being painted along Avenue C in the East Village, directing cyclists from the Williamsburg Bridge
to pass by the shop. More impressively, a dedicated bike/pedestrian path is under construction
that will run along the East River on the Brooklyn side. One of the main entrances is located at
Washington Street just one block from one of RAB’s shops.
Overview
The retail bike industry in New York, like most cities in the country is comprised mainly of
small, independent bicycle retailers that primarily serve neighborhood clientele. Mass
merchants like K-Mart and Toys-R-Us and sporting goods stores like Sports Authority also sell
bicycles.
Among sellers of new bikes, mass merchants and department stores are the greatest competition
for Recycle-A-Bicycle because they offer products at affordable prices. However, these
competitors are not equipped to handle adjustments or repairs and do not employ professional
bike mechanics trained to offer appropriate customer service. In addition, the selection is often
limited and the bikes may not be assembled properly.
Recycle-A-Bicycle is not in direct competition with most independent bicycle shops in New
York City because the majority of these shops cater to the high-end market. The price of a new
bicycle in these shops typically begins at $200. Recycle-A-Bicycle maintains favorable
relationships with many of these stores and often will receive donations of materials from them.
However, bike shops make their highest profit margin from the sale of parts and accessories and
Recycle-A-Bicycle competes with these stores for accessory sales.
Few barriers exist to opening a bicycle retail store, though a capital outlay of approximately to
$100,000 is required ($80,000 investment in inventory, $10,000 in tools, and $10,000 in other
various costs, plus a good credit history). In general, dealer margins have been declining on
bicycles and accessories, and more retailers are closing. Recycle-A-Bicycle does not anticipate
any new retailers opening in the East Village or DUMBO trade areas in the immediate future.
New York City Market for the Sale of Refurbished/Used Bikes
Most bike shops do not offer used bikes because the cost of labor to repair them is high, and
because selling used bikes requires an additional inventory system and liability policy (new bikes
are insured by the manufacturer). Furthermore, due to the high rate of theft in New York City,
many consumers want assurance that the bikes are sourced from legitimate places, requiring bike
shops to develop additional inventory and sourcing systems. Used bicycle dealers are the
primary competition for RAB and will be discussed in detail with regard to the trade area of each
of the retail stores.
Thrift stores are another source for used bicycles. These stores offer inexpensive bicycles,
however the supply is not steady and a bike is sold "as is", meaning that it has not been repaired
and may not be safe to ride.
V.13
RAB has identified a market niche, used bicycles. Given the additional requirements such as a
liability policy and inventory system, the majority of bike shops only sell new bicycles. While RAB
directly competes with these shops for the sale of accessories, its core product of affordable,
refurbished bicycles distinguish it from other bike retailers.
RECYCLE-A-BICYCLE HAS A STRONG PRESENCE IN ITS RETAIL TRADE AREAS
Recycle-A-Bicycle offers a unique product and service bundle that experiences limited
competition in its two distinct retail trade locations.
East Village, Manhattan, Retail Competition
Bicycle retailers in the Lower East Side include:
• Frank's Bike Shop on Grand St
th
st
• Bikes by George on 12 St/1 Ave;
• Bike Works on Ridge St;
th
st
• Two local thrift shops on Ave. B and 6 St/1 Ave;
th
th
• Mobile bike mechanics on 7 St/Ave C and 10 St/Ave. A.; and,
• Local department stores including Toys-R-Us at Union Square and K-Mart at Astor
Place.
A healthy underground market of stolen bicycles sold in the neighborhood (i.e. Thompkins
Square Park) also exists, but for the past few years the police have been controlling these venues.
The trade area of the East Village Store is shown in Appendix B. The East Village is an
established retail center with many affordable varieties of retail.
DUMBO,
Brooklyn, Retail Competition
There are no other bike dealers in DUMBO. All are outside the radius shown on the trade area
map in Appendix C.
Internet Sales Competition
There are no direct internet competitors for our product and service mix. Used bicycles are
available on ebay, but there are few websites offering quality used bikes or parts. Recycle-ABicycle is planning to extend its internet sales capabilities to take advantage of this void as our
prices are competitive even outside of New York.
A strong market exists for used bikes because many consumers are unwilling or unable to
purchase new bikes that typically start at $200 – 250. A typical RAB customer for a bicycle
purchaser is 20 – 45 years old, will use a bicycle as a primary means of transportation, and has a
median income of at least $20,000. Secondary customers are in similar age demographics, but
will use the bicycle primarily for recreational purposes. Repair services and parts are sold to a
wider variety of cyclists, and Recycle-A-Bicycle is a strong supplier to the messenger and
delivery bicycling communities.
One in three customers shop at Recycle-A-Bicycle because they recently had a bicycle stolen.
This was determined during a survey of shoppers conducted over a month in summer 2002.
V.14
These customers reported that they were interested in purchasing a cheap, beat-up looking
bicycle to reduce the likelihood of theft. Customers in this situation are also happy to learn that
Recycle-A-Bicycle tracks every bike - from its source of donation to its final destination.
Business is built on its reputation to avoid dealing in stolen bikes. The majority of customers
purchase a bicycle to meet their primary transportation needs.
Parts and repair sales tend to sell to the messenger and commuter communities. The fix-a-flat
stations are busy in the summer serving these two communities and the enhanced accessory lines
also appeal to these groups.
East Village Customers
Residents of the East Village are aware of Recycle-A-Bicycle as the organization has operated in
the neighborhood for five years. The organization is well known and has attracted many local
supporters. Key target customer groups include:
• New York University and Baruch College students;
• Cyclists using the Williamsburg Bridge as a throughway to Manhattan; and,
• Neighborhood residents shopping at other Avenue C retail storefronts.
Customers
is seeing a revitalization of retail spaces attracting more residents to shop within the
neighborhood. A new community bank opening directly across the street will dramatically
increase foot traffic in front of the store.
DUMBO
DUMBO
The new store is beginning to cultivate a repeat clientele. Marketing efforts are focused on
Brooklyn, and the local artists and students have been the biggest market. The neighborhood is
becoming more ‘upscale’ with several warehouse to condo conversions occurring. Key target
customer groups include:
• New York Technical College and Long Island College which are in the trade area;
• Cyclists using the paths off of the Manhattan Bridge and Brooklyn Bridge; and,
• Cyclists using the East River Greenway.
ATTRIBUTE
Resident
Population
Over age 18
Ages 20 – 45
% Renters
Median
Earnings
% bike to work
EAST VILLAGE
10009 ZIP CODE
ALL OF
MANHATTAN
DUMBO
11201 ZIP CODE
ALL OF
BROOKLYN
58,595
1,459,596
47,746
2,465,326
46,290
35,687
92.6%
$43,767
1,213,652
709,052
80%
$48,281
40,687
23,692
64.8%
$56,293
1,802,827
941,531
72.9%
$31,896
2.9%
0.9%
0.7%
0.5%
Source: 2000 Census, Census 2000 Summary Files (SF-1, SF-3) by Zip code; Manhattan = 100 3-Digit ZCTA;
Brooklyn = 112 3-Digit ZCTA
V.15
RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY
BICYCLE
As evidenced from the above chart, Recycle-A-Bicycle is located in prime home markets for
bicycle commuters. East Village residents ride their bike to work nearly three times that of
other Manhattan residents. The DUMBO trade area rate of cycling is also higher than the
Brooklyn average, and should continue to grow.
MARKET OPPORTUNITY SUMMARY
Recycle-A-Bicycle faces a welcome challenge: to recycle the supply and meet the demand for
used bicycles in New York City.
The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in
the United States and studies show that adults frequently participate in biking activities. New
York City boasts a healthy cycling community consisting of commuters (over 100,000 people
commute by bike each day), bike messengers/delivery persons, and professional and recreational
riders.
Used bicycles are in demand in New York City. The high rate of bike theft in New York City
results in many cyclists wanting to purchase both an affordable bike as well as one that will be
less likely to be stolen in the future. The prohibitive cost of a new bike also generates business at
used bike stores. Demand has outpaced Recycle-A-Bicycle’s capacity for the past three years.
Despite this demand, used bike stores are not prevalent in New York City. Within Recycle-ABicycle’s trade areas, there are few other used bike dealers. In addition, most retail bike shops
do not carry used bikes due to the high cost of labor that is required to refurbish the bikes.
The supply of used bikes is also strong. National trends in cycling indicate that bicycle
consumers are purchasing more bikes, though ridership remains constant. This creates a
situation in which there are many bikes either sitting idly in storage or being thrown out or
abandoned. In New York City, as space is at a premium, the latter situation is more likely.
Recycle-A-Bicycle estimates that the supply of used bicycles is ten times greater than what the
business can currently collect; these unused bicycles currently end up in landfills.
V.16
III. BUSINESS MODEL
Recycle-A-Bicycle provides environmental education
and job training for New York City youth.
Source: Recycle-A-Bicycle Mission Statement
Recycle-A-Bicycle, a growing social purpose business, is a manufacturing and retail venture that
provides youth with training and employment opportunities by refurbishing and selling used
bicycles as well as offering accessories and parts and repair services. Recycle-A-Bicycle is built
around the concepts of youth development and environmental stewardship.
First, Recycle-A-Bicycle collects bicycles destined for the dump. These bikes are then
processed by young people involved in the youth training program and sold to the community as
an affordable alternative transportation option. Retail activities follow the principals of reuse,
reduction and recycling. The two elements go hand in hand to create a viable business.
Recycle-A-Bicycle’s operations generate considerable community benefits: waste reduction, an
affordable source of non-polluting transportation, youth education, work force preparation, job
creation and constructive social programming for youth.
•
•
Recycle-A-Bicycle provides affordable and environmentally sustainable transport.
Recycle-A-Bicycle trains youth for positions as bike mechanics and sales people, build
skills in basic business concepts and computer training, and provide a safe alternative that
is a positive influence on their development.
The youth training program provides Recycle-A-Bicycle with a relatively low cost labor input
for the remanufacturing process. Youth are trained in the basic mechanics of bicycles and
further benefit by developing job skills and understanding basic business concepts. In addition,
they earn a stipend or school credits for their participation and they have the opportunity to earn
their own bicycle as an incentive, which they are encouraged to use as their mode of transport to
and from work or school. Students are trained at our DUMBO, Brooklyn facility or Children’s
Aid Society partner site, and then have the opportunity to work in one of two retail shops, once
they have demonstrated a certain level of competence. In 2002, Recycle-A-Bicycle worked
with over 770 youth.
Recycle-A-Bicycle takes advantage of very low cost raw materials supply. With a fairly limited
amount of outreach, Recycle-A-Bicycle is able to capture over 1,000 bicycles per year from the
waste stream. In accordance with the environmental mission, Recycle-A-Bicycle accepts bikes
in any condition. This provides a critical advantage in parts sourcing and materials reuse. On
average, the business has removed 13 tons of waste per year from the waste stream, for the
past 7 years.
Recycle-A-Bicycle is facing growing supply and demand for our product. Recycle-A-Bicycle
has a proven track record and is now seeking capital to expand the social and environmental
reach and develop more sustainable systems within the business.
V.17
DESCRIPTION OF PRODUCTS AND SERVICES
Recycle-A-Bicycle operates two stores offering used bicycles, full repair services, and parts and
accessories for bicyclists.
East Village,
Manhattan Store
75 Avenue C,
New York, NY 10009
• Located in the East Village of
Manhattan.
• RAB has operated in this
neighborhood since 1997.
• The current location on Avenue
C opened in October 2000.
• Sales have consistently grown.
• Open Monday to Friday from 1
to 7pm and Saturday from
10am to 4pm.
• There are two work stands for
repairs and on average three
employees.
• Average sales are $234 per day.
The East Village store at its opening.
DUMBO,
Brooklyn Store
55 Washington Street,
Brooklyn, NY 11201
• Located in newly revitalized
Brooklyn neighborhood,
DUMBO (“Down Under the
Manhattan Bridge Overpass”).
• The store opened in October
2002.
• Open Monday to Saturday from
12 to 7pm.
• Training classes are held in the
evenings and weekend morning
hours.
• The store has four workstations
for repairs and training and on
average 2 employees.
• Recycle-A-Bicycle
administrative offices are
located here.
• Average sales are $123 per day.
DUMBO
Store during a local artists exhibition co-promotion
V.18
Recycle-A-Bicycle’s growing success can be attributed to the fact that it has moved to more
accessible locations and has built a solid reputation in the community. Repeat customers are
common, as well as visitors who were referred by word of mouth. A majority of customers
choose to patronize the Recycle-A-Bicycle shops because of the social and environmental
missions.
A narrative of our history and major milestones is available in Appendix A.
Product Line --Bicycles:
Recycle-A-Bicycle offers a wide variety of refurbished bicycles. Over 50% of sales are in the
road bike category. This is due to the fact that it is the most common type of donation, and
therefore most available in stock. Recycle-A-Bicycle experiences high demand for mountain
bikes, hybrids, three speeds, and cruisers. These types of bikes offer the cyclist an upright
position that is considered more comfortable for commuting. Recycle-A-Bicycle also sells
children's bikes, but has found that few parents want to purchase second hand items for their
children. Children’s bike sales account for less than 5% of the bikes sold. All bicycle sales
come with a 30-day warrantee.
Product Line -- Repairs:
Recycle-A-Bicycle offers full bicycle repair services for all models of bicycle. Customers come
to Recycle-A-Bicycle because many bicycle shops will not repair older bicycles. The
percentage of repairs to total income has ranged from 5% to 15%, gradually increasing over the
years as staff with professional experience have been added. .
Offering repairs helps to further Recycle-A-Bicycle’s environmental impact by reducing the
number of bicycles that become unusable. Furthermore, parts recycled from demanufactured
bicycles are not entering the waste stream and are put to productive use again. The shops are
well positioned to specialize in the repair of bicycles manufactured during the 1970’s and
1980’s. Repair pricing is competitive with other bicycle retailers.
Product Line – Parts and Accessories:
Both stores sell new and used accessories that make cycling safe and comfortable. The number
and variety of accessories are currently being expanded, but the merchandise mix will remain
focused on the safety, commuting and security categories. The most popular safety and security
items that are sold include locks, helmets, lights, and bells. Commuting items include pumps,
patch kits, racks, baskets, and fenders. The mark up on new items ranges from 50-150%,
averaging 100%. Recycle-A-Bicycle offers discounted prices on used accessories acquired from
donated bicycles. These are priced at wholesale rates because they require no capital outlay.
The ability to stock and sell new accessories currently accounts for a little over 17% of total
income and growth is expected as product offerings increase.
Retail revenues have grown steadily throughout the past five years of operation. The trend in
revenues has been towards increased sales of parts and accessories, driven primarily by customer
awareness and loyalty. Recycle-A-Bicycle is also able to more efficiently special order items
that will further increase sales in this category.
V.19
Recycle-A-Bicycle’s ability to quickly remanufacture bicycles, therefore meeting more of the
demand for used bicycles, has been impaired by the lack of a focused production facility.
Recycle-A-Bicycle expects the proportion of bicycle sales to increase once new inventory is
created, as selling bicycles is the most effective way to serve both the social and environmental
missions.
Youth Job Training
The youth involved with Recycle-A-Bicycle are recruited through the organization’s strategic
partnerships with Henry Street Settlement and Children’s Aid Society. These youth come from
low-income families and receive a wealth of services through the partner organizations.
Recycle-A-Bicycle provides meaningful training and employment opportunities for these young
people who in turn provide a low cost labor input for the business.
Recycle-A-Bicycle works with over 750 students annually through a classroom training program
focused on the following areas:
• Bike repair / mechanical overview;
• Small business / setting goals;
• Environmental education / recycling / stewardship; and
• Safe cycling / road awareness.
Recycle-A-Bicycle also delivers innovative on-the job training programs in the following areas:
• Basic mechanics training / advanced mechanics training;
• Customer service and communications;
• Introduction to business management /entrepreneurship;
• Accounting, marketing and business operations;
• How cycling can create a healthy lifestyle and a social structure; and,
• Recycling and environmental stewardship.
Recycle-A-Bicycle offers a unique product and service. Our social and environmental
missions differentiate us from any other bicycle retailer in New York City.
On a product basis, Recycle-A-Bicycle bicycles are one of the most affordable modes of
transportation in New York City. Because of low labor and materials costs, a Recycle-A-Bicycle
bike is priced at least 50% lower than a comparable new bicycle from an independent bicycle
retailer. Recycle-A-Bicycle prices are also competitive against other used bicycle dealers.
Additionally, the 30-day guarantee is unique in the used bicycle marketplace and because
Recycle-A-Bicycle tracks all inventory from its source, consumers are assured that they are not
buying a product that was stolen or illegally obtained.
The youth programs inspire young people to make better life decisions. Recycle-A-Bicycle
touches many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers
improved health and well-being, provides a goal-oriented social structure (earning their own bike
by helping fix others), and helps improve self-esteem. An “I can do it” attitude pervades
Recycle-A-Bicycle.
V.20
Consumers feel good about making their purchases with Recycle-A-Bicycle. Many customers
report that they are drawn to Recycle-A-Bicycle because of the low prices, but feel much more
compelled to purchase when they learn of the social and environmental stewardship.
Recycle-A-Bicycle enjoys the following advantages in relationship to second hand dealers, chain
stores, and bike stores:
• A legal operation that does not deal in stolen bikes;
• An indoor, year round, predictable space;
• Competitive prices;
• Higher quality bikes than the competition;
• A 30-day warranty;
• A selection of accessories and the ability to custom order special accessories and parts
• A full line repair services; and,
• A social mission in which all proceeds are applied to the social and environmental
programs.
STRATEGIC PARTNERSHIPS AND RELATIONSHIPS
The key to Recycle-A-Bicycle’s success has been its ability to develop strong partnerships. This
strategy encourages resource sharing and allows each organization to specialize in what it does
best. Recycle-A-Bicycle contributes its curriculum, mobilization of donated materials, technical
expertise, retail capabilities, and networks in the environmental and cycling circles. Partner
organizations contribute space, cost of instruction, transportation for bike collections, youth
recruitment, support services, and neighborhood connections. Recycle-A-Bicycle’s two
strongest partners are described below.
Henry Street Settlement, founded in 1893 by social worker/nurse Lillian D. Wald, is a not-forprofit arts and social service institution serving the people of New York City, especially
Manhattan’s Lower East Side. Its innovative programs have been models for similar efforts in
countless municipalities across the nation. Many Henry Street Settlement initiatives have led to
major state and federal legislative changes.
Recycle-A-Bicycle works in partnership with Henry Street Settlement to offer a job training
program that puts youth to work. We collaborate with the Youth Employment and Counseling
Services as well as the Workforce Development Center. Henry Street Settlement has qualified
counselors to recruit and work with young people who need assistance with basic job readiness
skills. These counselors are also available to intervene in the case of serious issues regarding the
social or mental well being of our participants. Henry Street Settlement also offers youth
leadership development opportunities, tutoring, SAT preparatory courses, and career counseling
services to our young people. These services are funded primarily by contracts with the New
York City Department of Labor and some foundation grants. Recycle-A-Bicycle offers
environmental education, bike repair, earn-a-bike, basic business instruction, and cycling trips to
an average of 60 students each year.
V.21
Children’s Aid Society, founded in 1853 by Charles Loring Brace, is dedicated to promoting the
welfare of children in New York City. It was one of the first agencies of its kind in the US and
became well known for opening youth lodging houses in the poorest and most populous districts
of New York City. The Children’s Aid Society continues to be at the forefront of child welfare
reform as well as in providing services that respond to society’s needs. Currently it maintains 22
sites that provide child care, academic assistance, counseling, after-school programming, job
training and leadership development services.
In 1990, the Children’s Aid Society partnered with the New York City Board of Education to
open three community schools in Washington Heights, a low-income neighborhood in upper
Manhattan. The unique partnership offers services to students, parents and members of the
community such as health care, leadership and skills development (i.e. English as a second
language and the parents’ association), and after-school and summer programming for young
people. In May 1994, Recycle-A-Bicycle partnered with Children’s Aid Society and
Intermediate School 218 to offer an after-school bike repair program. Based on its success,
Recycle-A-Bicycle also became integrated into the summer program and then into the school
day. The program offers environmental education, bike repair, earn-a-bike, and ride club
activities to over 500 young people each year.
Community Networks
Because of the Shop’s social mission, we have developed relationships with organizations that
are willing to promote the business. Examples of this include:
• Transportation Alternatives features Recycle-A-Bicycle events during Bike Week;
• The Five Borough Bike Club creates a fundraising opportunity by inviting Recycle-ABicycle staff to break down bikes for their Montauk Century; and
• the American Gardening Association featured our shop by offering garden cycling tours on
bikes rented from Recycle-A-Bicycle.
Recycle-A-Bicycle also belongs to other networks relevant to its social and environmental
missions:
• New York City Waste Prevention Coalition;
• The Youth Bicycle Education Network; and,
• Seedco’s Nonprofit Venture Network.
REVENUE MODEL OVERVIEW
The organization has built a strong revenue base through its retail stores and also increased its
ability to generate grant revenue by completing 501©3 status in July 2002. Grants will become
a more important source of revenue for Recycle-A-Bicycle in the next five years as the
organization seeks capital to expand its business operations and increase its youth outreach. The
new DUMBO store, opened in summer 2002, will further increase Recycle-A-Bicycle’s ability to
grow the bottom line.
V.22
Historical Revenue By Source
$180,000
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$1998
1999
2000
Sales
Donations
2001
2002
Grants
V.23
V.24
IV. OPERATIONS: FIVE YEAR STRATEGIC PLAN HIGHLIGHTS
Recycle-A-Bicycle has a strategic plan to expand the organization in order to increase the social
impact of the business. The business is focused on processing more bicycles in order to remove a
greater amount of material from the waste stream as well as to better meet the demand for used
bikes. As a result, the business will be able to train and hire more youth. As capacity is currently
constrained, the business has hit a plateau that cannot be overcome without additional staff, space
and infrastructure. As a result, a Five-Year Strategic Plan was developed in 2002 through an
intensive planning process that included input from Recycle-A-Bicycle staff, management, Board
of Directors, and other stakeholders and partners. The plan identifies areas that are critical to the
success of Recycle-A-Bicycle and will require an organizational focus. Strategies have been
created in each category to address deficiencies, bolster strengths and create changes with the goal
of making Recycle-A-Bicycle a more sustainable organization. A summary version of these
results is shown at the end of this section.
Operations and Production
“RE-MANUFACTURING” THE LIFECYCLE OF A RECYCLE-A-BICYCLE BIKE
Materials Donation:
Recycle-A-Bicycle promotes reuse and recycling of bicycles. Over 1,000 used bicycles are
collected annually. Eighty percent (80%) of donations come from bike shops and apartment
building superintendents, with the remainder collected from individuals and corporate donors.
Bike shops and apartment buildings are the most prevalent source because bikes are often
abandoned at these locations. Donation saves the cost of disposal and provides a tax deduction.
Additionally, individuals who want to support Recycle-A-Bicycle’s mission bring in bikes, parts,
and accessories. There are also several reputable volunteers who collect bikes in their
neighborhood on garbage night and deliver them to our facilities. Finally, corporations organize
employee collections and one bike manufacturer, Fuji, donates surplus inventory to the project.
The organization will collect twice the number of bicycles when greater storage, production and
transportation capacities are available.
De-manufacturing process / remanufacturing process:
The Youth Classroom Training Program curriculum was developed to teach bicycle mechanics
skills through the disassembly and reassembly of key mechanical components. The first stage of
the youth training program involves de-manufacturing damaged bicycles. Upon arrival, bicycles
are assigned a number in chronological order of receipt and then logged into the inventory. All
frame damaged bikes and very rusty bikes are slated for immediate de-manufacturing. The
component parts are cleaned and inventoried for use in repairing other bicycles or for sale to
consumers. Approximately 20% of the bicycles are de-manufactured.
The remaining bikes are assessed for type, quality, and amount of repair time necessary to
refurbish. Bikes that have the highest market value, that are in high demand (3 speeds and
mountain bikes), and that are quickest to repair are worked on first. In addition, some customers
put a down payment on a recent arrival and return to buy it fully repaired. These “pre-ordered”
V.25
bikes also receive priority in terms of the order in which bikes are refurbished. On average, a
refurbished bike requires six hours of labor.
Remanufacturing a bicycle
In order for Recycle-A-Bicycle to expand its de-manufacturing and remanufacturing processes, it
needs to have a focused production and training facility because the current manufacturing
operations are fragmented. Though the educational mission is well served, there is lost
opportunity as not enough bicycles are being manufactured to meet demand in the retail stores.
This opportunity cost can make the difference in sustaining the organization through retail
operations alone. Over 2,000 bicycles were not collected in FY2002 due to lack of resources to
pick up and store these bikes.
The new facility will allow Recycle-A-Bicycle to increase the amount of trash it removes from
the waste stream and ensure a consistent amount of used bicycles for sale. Storage space will
allow for more efficient raw materials sorting and reuse. And more space will allow Recycle-ABicycle to consider creating other product lines which support its mission, such as selling used
parts on the internet. In addition, the retail stores will be able to display and sell more bikes as
valuable square footage is currently being used for storage of raw materials and waste.
Securing a new production facility will also enable Recycle-A-Bicycle to double the number of
youth participants in the job training program. This will provide the learning environment they
V.26
need to apply their newly acquired knowledge. Young people that excel in this program will be
hired by Recycle-A-Bicycle or placed in shops around New York City.
With the new production center, Recycle-A-Bicycle will be operating from three locations. In
order to facilitate movement of materials between the three locations, Recycle-A-Bicycle will
also need to acquire a van.
Recycle-A-Bicycle plans to purchase rather than rent the space for the new facility. One benefit
of choosing ownership rather than rental space is the availability of capital budget grants. These
grants can drive down the cost of ownership. Specifically, the Environmental Services Unit of
the NYS Department of Economic Development offers matching grants for capital investments
in remanufacturing businesses. In addition, there are capital grants offered by other
organizations, such as the Charles Hayden Foundation, that have a particular interest in
supporting youth initiatives.
Strategy: Recycle-A-Bicycle will create and own a production and training facility for
processing raw materials. In 2004, a facility will be identified, purchased and outfitted.
Ownership of space will help mitigate risks presented by ownership changes, and also allow the
organization to build equity on its balance sheet and have a more permanent outlook. The
space will provide a more efficient learning environment for youth. More management attention
will be placed on the process of manufacturing: from raw materials identification and sorting, to
moving materials, to eliminating waste in the process quickly. This facility, acting as a central
storehouse, will significantly improve the operations and profitability of the organization.
Acquiring a van will also allow the group to nearly double the amount of donated bicycles that it
could collect.
To date, infrastructure has primarily been bootstrapped. Improved measurement systems for
inventory and raw materials are necessary to ensure that increased production processes can be
adequately managed. In addition, store productivity and production throughput need to be more
closely tracked and analyzed to identify new areas of improvement.
Strategy: Recycle-A-Bicycle will invest in new technology for its operations including a
customer database and a centralized parts inventory database, continue to build its management
team, and improve its communications processes.
Staffing
Recycle-A-Bicycle current supports eight staff positions. Five of these positions are filled by
bicycle mechanics who hold positions of store managers and head mechanics at its two retail
stores. The business manager is the Executive Director, Karen Overton, who manages the triple
bottom line. Adding staff to the team to diversify the skill sets and reduce the burden on the
business manager is a strategic goal for the organization.
The store managers possess a good understanding and ability to deliver on the retail aspects of
Recycle-A-Bicycle operations. Though the managers have been working as a team for only a
short time, they have demonstrated strong potential. Because of their trade and industry
V.27
expertise, the team understands the social mission and how to integrate youth and learning into
their operations. Retail and program management are adequately served by the team.
Recycle-A-Bicycle relies heavily on volunteer labor to achieve several aspects of its corporate
activities such as tutoring youth, website development and maintenance, and fundraising.
Though there are a handful of motivated, talented individuals who donate their time to RecycleA-Bicycle, this labor pool is unpredictable and does not provide a stable source of labor.
Several gaps exist in key areas of organizational leadership. One particular area is resource
development and fundraising. The need for fundraising and development has increased over the
past several years as Recycle-A-Bicycle has experienced government cut-backs that limit their
ability to fulfill the youth training and employment mission. For example, the New York City
summer youth employment initiative has been a source of funding for employment opportunities
for youth during the summer. However, this initiative has been cut back over the past two years,
resulting in less funding available for Recycle-A-Bicycle to pay summer interns. In addition,
adding staff at the leadership level will increase the organization’s ability to plan and implement
additional programs to promote environmental stewardship and youth development.
In addition, the Executive Director is often performing tasks of a relatively low skill level instead
of doing higher-level work. The retail managers do not possess the skills to fill in areas where
the Executive Director is not able to deliver, though they are highly capable retail operators.
Administrative assistance is needed to reduce this burden on the Executive Director. A staffing
and succession plan is being developed for organizational leadership, which will mitigate these
issues.
Strategy: Carefully managed staff growth in several key skill areas will allow for better
assignment of responsibilities, diversification of risk, for more tasks to be completed, and for
better accountability and organizational performance. The Board supports hiring new staff to
focus on fundraising, allowing the existing Executive Director to move back into the position of
program and operations oversight Recycle-A-Bicycle will also hire an Administrative Assistant
as well as a Production Assistant to oversee operations at the Production and Training Facility
(see below).
V.28
PERSONNEL NEEDS BY STAGE OF DEVELOPMENT
These positions are reflected in the financial model. Additional positions not listed here may be
required depending on the strategies pursued.
Targeted
Hire Date
6/2003
9/2003
1/2004
Position Title
Responsibilities
Development Officer
Administrative Assistant
Production Assistant
Fundraising/Development
Administration
Coordinate production and raw materials
collection
Sales and Marketing
When the production and training facility is in operation, additional marketing will be needed to
increase the supply of donated bikes and create demand among customers. New staff and
volunteers will be recruited with this task in mind, so that a concerted effort can be placed in
marketing the organization and merchandising and sales within the stores. While the production
center is in development, a formal sales and marketing plan will also be developed. Within this
plan, new product offerings will be considered that will increase the stores’ revenues and
profitability.
Recycle-A-Bicycle can market its social and environmental missions much more aggressively
within the stores and their trade areas. A campaign will be developed that highlights these two
areas. This will include print media, an enhanced website, and a video that can be played in
each store to assist consumers in immediately understanding why Recycle-A-Bicycle is the best
place to purchase a used bicycle. In addition, Recycle-A-Bicycle will create and install much
needed signage at the DUMBO store.
Recycle-A-Bicycle will also investigate selling used parts on the internet. Two strategies will be
explored: using E-Bay as a mechanism for sales or tapping into the Bicycle Trader website that
specializes in the sale of second-hand bicycles, parts and accessories.
Strategy: Recycle-A-Bicycle will create an aggressive marketing campaign, make improvements
to point-of-sale merchandising in the stores, develop and implement a customer service training
program, add new accessory lines to both operations and improve the website to better facilitate
e-business.
Additional Strategic Opportunities
Recycle-A-Bicycle will continue to expand its social mission to groups that have unmet needs
and can make use of the services offered by the organization. In 2003, Recycle-A-Bicycle
published and distributed 3,000 manuals that detail the process of starting ride clubs. Youthoriented organizations were invited to a workshop in April 2003 to learn how they can start these
programs with the goal of starting up ten ride clubs in 2003. These organizations can invest in a
ride club “fleet” by purchasing bikes from Recycle-A-Bicycle. This will allow Recycle-ADEVELOPING A SOCIAL PURPOSE BUSINESS PLAN
V.29
Bicycle to further its social mission and put more kids on bicycles. Recycle-A-Bicycle will
serve in a technical assistance capacity to these groups to ensure their success.
As the number of graduates from the youth training program increases with the creation of the
manufacturing facility, Recycle-A-Bicycle will increase its efforts to place youth in local
employment.
Lastly, the Tours By Teens program is an example of new programming that Recycle-A-Bicycle
will be starting in 2004. This program will train teens to give tours of selected neighborhoods
by bicycle. Teens will study the history of a neighborhood, research and compile a tour
program. Tour leaders will be graduates of the Recycle-A-Bicycle bike repair curriculum so
handling the groups’ mechanical needs will be covered. The Tours By Teens program will
employ program graduates and will help Recycle-A-Bicycle improve its visibility throughout
New York City.
Strategy: Recycle-A-Bicycle will increase the impact of its efforts by adding several new
programs to its portfolio, including enhanced ride clubs, adult education, and a tourist
operation.
SUMMARY OF STRATEGIC INITIATIVES
Progress has already been made in several of these areas: a customer has offered to donate a
vehicle to the project this spring; a New York University professor has adopted Recycle-ABicycle as a class project and will upgrade the website and develop an inventory system that
facilitates e-business, and; free bicycle storage space has been identified in the East Village that
will increase storage capacity by 100%.
The Five-Year Strategic Plan includes the following major actions:
1. Hire for skills that are needed; Add staff to the RAB team;
2. Create a focused production and training facility and improve materials movement within
the organization;
3. Own the production and training facility; Build the RAB brand and balance sheet;
4. Institute stronger marketing and sales efforts to increase retail revenues;
5. Strengthen operations; and,
6. Pursue new social mission specific strategies.
V.30
2003 OR IMMEDIATE
Obtain temporary
production and training
facility
Obtain financing for
strategic objectives
Hire/acquire Administrative
Assistant
Hire Development Officer
Investigate improvements to
employee benefits program
Develop and implement
marketing campaign
including signage
Purchase new computers
and software to support
inventory and accounting
systems
Set up inventory
management system and
review merchandising
Renew East Village lease
Update customer service
training program
2004
2005 / LATER
Purchase independent production Investigate establishing new
and training facility
sites for student training to
reach more students
Hire Production Assistant
Renew DUMBO lease or
consider purchasing space
Acquire a van for materials
Investigate starting uptown
collection and distribution
retail shop
Revitalize volunteer
Evaluate expansion into the
management program
Bronx
Create used part / sales interface Evaluate franchising
to the inventory database
Recycle-A-Bicycle
regionally or nationally
Fundraise for Tours By Teens
Implement Tours By Teens
Program
Program
Enhance E-business capabilities
for bicycles
Market used parts on the
internet through separate site
Test selling used parts on the
internet (through web auctions or
set up independent site)
Source: Recycle-A-Bicycle 5-Year Plan
V.31
V.32
V.
MANAGEMENT TEAM
MANAGEMENT TRACK RECORD
Recycle-A-Bicycle’s management has over 10 years of experience in bicycling retailing, 13
years in transportation advocacy, and over 7 years experience in youth education. The team has
proven its ability over the years and is continuing to develop new strengths.
Board of Directors membership complements the skills presented by the management team.
Nearly all directors volunteer in capacities beyond their Board role. The Board consists of
dedicated individuals with experience in: education, financial management and analysis, social
work, and transportation advocacy. Each member brings enthusiasm, their unique skill
perspectives, as well as a broad network of contacts to the Board and the entire organization.
Board member biographies are listed in Appendix D.
Karen Overton
Executive Director, Recycle-A-Bicycle, Inc.
Ms. Overton was the founder of Recycle-A-Bicycle when it began as the environmental
education initiative for Transportation Alternatives in 1994. Prior to that, Ms. Overton worked
as Bikes for Africa Director for the Institute for Transportation and Development Policy and as a
consultant for the World Bank, in the International Development Bank, African American
Institute, and Pedals for Progress. In 1998, Ms. Overton incorporated Recycle-A-Bicycle.
Through her various positions, Ms. Overton has developed skills in the areas of project
management (design, implementation and evaluation); research (data collection, analysis and
publication); writing (Ms. Overton has authored several cycling manuals, magazine articles, and
publicity pieces); training (design and implement training programs for youth and transport
planners/economists); and public speaking at several alternative transportation symposia. Ms.
Overton cycles year round.
Ms. Overton has a Masters Degree in Urban and Regional Planning from the State University of
New York-Albany, and is recognized as an expert in the field of alternative transportation
planning.
Jared Bunde
Manager, DUMBO Shop
Mr. Bunde is an expert mechanic and amateur bicycle racer. His cycling career began in 1997
as a messenger. Before joining Recycle-A-Bicycle in 2002, he was employed for over three
years as a bike mechanic at Bike Works, a high traffic shop in Lower Manhattan that sells used
bicycles. His racing career has excelled, winning a silver medal for the NY State Track Cycling
Championship in 2000 and 2002.
Mr. Bunde brings with him an interest in the arts and the environment. He has taken
photography courses, permaculture and ecological design courses, and completed the Foundation
Program at the Parsons School of Design.
V.33
During his tenure with Recycle-A-Bicycle, Mr. Bunde has increased the shop’s productivity and
profitability. Through his efforts, the shop experienced an overall increase of $20,000 in revenue
in 2002.
Rich Conroy,
Program Coordinator, Children’s Aid Society
Mr. Conroy founded the Major Taylor Bike Recycling in 1998. He served as its director for a
year before moving to New York City. During this time he developed the organization’s goals,
raised funds and managed the budget, recruited volunteers, instructed students in bicycle
maintenance and repair, and created the website. This experience makes him well qualified to
coordinate the Recycle-A-Bicycle/Children’s Aid Society youth education program at
Intermediate School 218.
Mr. Conroy holds a PhD from Notre Dame from the Department of Government and
International Studies, and taught political science classes at the college level for four years.
Upon moving to New York City, he managed Metro Bicycles, a successful bicycle chain store in
New York City, for three years. Mr. Conroy’s skills uniquely blend his experience in teaching
and management with his love for bicycles.
Rommell Bishop
Head Mechanic, Children’s Aid Society
Mr. Bishop enrolled in the Brooklyn Recycle-A-Bicycle training program at age 14. After two
years, he volunteered to participate in the fundraising event, Bike Aid. This required that he ride
his bicycle cross country for the entire summer. Upon his return, Mr. Bishop was employed as
student assistant mechanic and served in this position until he graduated from high school. In
2000, he was hired as the Head Mechanic for Recycle-A-Bicycle at Children’s Aid Society.
Mr. Bishop is an excellent role model for students, having come through the training program
himself. Through his familiarity with the program, Mr. Bishop is able to create new
opportunities for young people. In addition, he occasionally volunteers to chaperone bike trips,
and spends extra time and effort on students eager to learn and build a bike.
In 2002, Mr. Bishop enrolled in an airplane mechanic’s program offered at LaGuardia
Community College. He currently works part-time at Children’s Aid Society and dedicates his
afternoons to study.
Yoandy Ramirez,
Manager, East Village Store
Mr. Ramirez holds the position of East Village Assistant Manager. He started as a Summer
Youth Employment student in 1999 and was hired to work as a student mechanic on Saturdays.
Based on his hard work, dedication and advanced mechanical skills, Mr. Ramirez was promoted
to Assistant Manager in June 2002. He will graduate with a high school diploma this summer
and aspires to pursue a degree in computer science.
V.34
Denny de los Angeles
Head Mechanic, DUMBO
Mr. de los Angeles started as an on the job trainee with Recycle-A-Bicycle in the spring of
2000. After two months time, Recycle-A-Bicycle offered him a full time job as mechanic due to
his aptitude. He was promoted to East Village Assistant Manager the following year.
Unfortunately, Mr. de los Angeles suffered from a broken leg, and when he returned to the
organization in October 2002, he was given a mechanic’s job at DUMBO. Once business picks
up in the spring of 2003, he will be promoted to DUMBO Assistant Manager. Mr. de los Angeles
is completing his high school degree via a correspondence program.
Kerri Martin
Outreach Coordinator, Recycle-A-Bicycle Inc.
Ms. Kerri Martin graduated from the College of New Jersey in 1994 with a B.A. in Sociology
and a minor in French. She is fluent in French and German. Upon graduating, Ms. Martin was
employed by Commerzbank in the Technology department where she d did database designing
and data warehouse reporting. She also worked on Web Development Team.
Ms. Martin joined Recycle-A-Bicycle’s volunteer Ladies’ Night in 1999 and has been actively
involved with the organization until hired in 2003. She has dedicated her spare time to bicycle
advocacy. She has been an active volunteer with Transportation Alternatives for several years,
and served as a volunteer coordinator for one of their monthly bicycle count projects. She also
produces a public access TV show called Bike TV, a weekly show on a wide range of bike
related topics.
V.35
V.36
VI.
SOCIAL OUTCOMES TRACKING
SOCIAL INDICATORS OF SUCCESS
Youth Training -- Recycle-A-Bicycle has worked with over 4,500 youth and staffed an
average of 15 positions per year.
Recycle-A-Bicycle improves the lives of many at-risk youth in the region by offering an
effective training program in the areas of bike repair, small business, and environmental
education. Strategic partners provide qualified youth counselors to recruit and work with young
people who need assistance with basic job readiness skills and who can intervene in the case of
serious issues regarding the social or mental well being of participants. Partner programs also
offer youth leadership development opportunities, tutoring, SAT preparatory courses, and career
counseling services to our young people.
In addition to the skills training and self-esteem building that the youth training provides, many
participants earn their own bicycles. The organization promotes bike riding as a form of
recreation and transportation among the youth. The benefits of promoting an active lifestyle
among youth are not calculated by the organization, but the benefits are assumed to be
significant. In the future, Recycle-A-Bicycle may be able to track this increase in activity among
youth participants.
Youth Participants
1995 1996 1997
1998
1999
2000
2001
2002 Total
10-13 years
325
384
276
370
7003
430
609
737
3,831
14-21 years
20
88
139
169
91
94
99
35
735
Total
345
472
415
539
791
524
708
772
4,566
Recycle-A-Bicycle Jobs Filled (includes part time and full time)
1995 1996 1997
1998
1999
2000
2001
2002 Total
Jr. Staff
0
0
0
0
0
14
10
8
32
Sr. Staff
6
10
10
10
13
10
12
8
79
Total
6
10
10
10
13
24
22
16
111
3
In 1999, RAB served 300 additional youth during a one-time summer mountain biking camp.
V.37
A “fix a flat” class in action
ENVIRONMENTAL INDICATORS OF SUCCESS
Since its inception, Recycle-A-Bicycle has removed 109 tons of material from the waste
stream and eliminated 104,244 trips by other polluting transportation sources.
In addition, Recycle-A-Bicycle has a strong impact on the environmental conditions of New
York City. The organization removes tons of material from the waste stream each year. As the
business increases its capacity to pick up, store and refurbish discarded bicycles, its positive
impact on the waste stream will also increase. In 2002, Recycle-A-Bicycle recycled over 14 tons
of material destined for New York City’s landfills. Over the next five years, the amount of
tonnage removed will steadily increase. Additional environmental benefits are accrued as
bicycles are used as alternatives to driving. To calculate these benefits, Recycle-A-Bicycle
assumes that each bicycle sold replaces 28 car trips each year.
Waste Prevention
1995
1996
1997
1998
1999
2000
2001 2002 Total
Bicycles
556
617
787
926
1205
976 1061
953
7081
Tons of
8.56
9.49
12.10
14.25
18.54
15.02 16.32 14.66 108.93
Material
Represents tonnage of material removed from waste stream, and that 65 bicycles = 1 ton of waste
V.38
Air Pollution Prevention
1995
1996
Bicycles
311
208
Trips
8,708 5,824
1997
435
12,180
1998
468
13,104
1999
665
18,620
2000
510
14,280
2001
2002
483
643
13,524 18,004
Total
3,723
104,244
Recycle-A-Bicycle will generate increased outcomes through its expansion and growth. The
following chart outlines the expected outcomes over the next five years.
4
Outcomes
2003
780
2004
850
2005
950
2006
1050
2007
1200
Number of positions to be filled4
22
28
31
34
37
Tonnage of material to be
removed from the waste stream
17
22
24
26
27
Number of non-polluting vehicle
trips generated
20,000
23,000
25,000
27,000
29,000
Includes both full and part time positions
V.39
V.40
VII. FINANCIALS
Recycle-A-Bicycle has successfully grown and expanded through a self-financing approach.
This approach was required due to the fact that Recycle-A-Bicycle did not obtain 501©3 status
until July 2002. Without formal nonprofit credentials, the organization had limited access to
grants or donations that would have provided the capital needed to grow more rapidly.
Therefore, Recycle-A-Bicycle functioned much like a start-up small business, utilizing dedicated
staff and growing only when net profits or donated funds were available to reinvest in the
business.
After five years of operations in the East Village, Recycle-A-Bicycle recognized the strong
opportunity to grow its operations and training program through the creation of the DUMBO store.
The diversification, additional space, and new market opportunity it provides will assist in the
growth of Recycle-A-Bicycle. But the addition of the new DUMBO store has put demands on
Recycle-A-Bicycle’s cash flow, as the store has not yet built up a sustainable level of sales. This
has created a need for additional financing for working capital. As consumers become more
aware of the store, the sales volume from retailing is expected to sustain operations.
Recycle-A-Bicycle has reached a critical juncture in its lifecycle in which further expansion is
required in order to meet demand and scale its youth development efforts. Affordable financing
is required to support the Five-Year Strategic Plan. Financing will be pursued through
philanthropic grants, debt financing and other socially supportive funders. This section reviews
the near-term capital needs of the organization.
Recycle-A-Bicycle has developed a five-year financial outlook to accompany this business plan.
Please refer to Appendix E and Appendix F for details. Projections are based on historical
performance and are realistic, but conservative estimates. Recycle-A-Bicycle believes it has the
capacity to outperform the projections, given stability in staffing and few negative external
factors. Significant assumptions to the plan are in shown in Appendix G.
FINANCIAL ESTIMATES AND ASSUMPTIONS
Recycle-A-Bicycle is at a critical juncture in its organizational development. Investment in
building the organization’s equity and developing professional staff are expected to produce
positive returns within the five-year period.
INVESTMENTS
Recycle-A-Bicycle plans to make three key investments over the next five years to expand its
programs and create the opportunity for the level of revenue growth projected in the above
graphs.
•
Acquire a Production and Training Facility
In January 2004, Recycle-A-Bicycle plans to acquire a production and training facility that
will benefit the organization by relocating the environmental and youth training element from
the retail shops to their own facility. This will enable the stores to focus on retailing through
V.41
increased space in which to showcase finished bicycles and accessories. In addition, it will
free up workstations, increasing capacity for repair services. The facility will also improve
the shops’ appearances as there will be less donated bicycles and “work-in-progress” creating
clutter.
Expected cost: Facility purchase cost of $330,000 for a 3,000 square foot facility assuming
10% down payment via a capital grant and 10-year mortgage payments of approximately
$3,300 per month. In addition, $5,000 is budgeted for leasehold improvements. The
addition of the facility will also require investment in a Production Assistant to staff the new
facility. Expenses related to the Production Assistant include approximately $20,000 in
salary and benefits.
•
Acquire a van
The acquisition of a van will improve the efficiency by which materials are collected and
transferred to appropriate project sites. A higher number of bicycles will be collected and
consequently, productivity will increase as there will be a greater number of “easy” tune-ups
and greater selection for customers.
Expected cost: Annual operating expenses of $6,000. No cost for acquisition because, as
noted earlier, a customer has offered to donate a van to Recycle-A-Bicycle in Spring 2003.
•
Hire a development officer
Recycle-A-Bicycle will hire an individual that is networked in the youth training and social
services sectors. This person will be able to contribute immediately and their efforts will
cover the cost of the position within 9 months.
Expected cost: $50,000 annual salary plus approximately $5,000 benefits
REVENUE
The bicycle industry is seasonal in nature. The most lucrative season runs from April through
August. The less lucrative season runs from December through March due to cold weather.
Unlike other retailers, Recycle-A-Bicycle does not benefit from holiday consumption patterns as
most customers prefer to give new rather than used items as gifts.
The East Village store will outperform the newer DUMBO shop over the next few years because it
has enjoyed a six-year presence in the neighborhood. Over the next five years as Brooklynites
become more aware of the DUMBO shop, sales will increase to 80 – 90% of the East Village store
sales.
Recycle-A-Bicycle expects to grow revenue 100% in 2003 due to several factors:
• Full-year results of new DUMBO store (opened October, 2002);
• Subway fare hike will prompt people to evaluate their commutes with some spillover
effect on Recycle-A-Bicycle sales; and
V.42
•
Addition of new development officer mid-year (although greatest benefit will likely be
realized in 2004).
Recycle-A-Bicycle’s sales revenue increases, although large in percentage terms, represents a
conservative expectation. Despite doubling the retail capacity through the DUMBO store, bike
sales are expected to increase by only 84% (from 339 in 2002 to 626 in 2003).
East Village shop
DUMBO shop
2002A
294
45
339
2003E
348
278
626
Beyond 2003, Recycle-A-Bicycle expects revenue growth to accrue from its investment in
marketing, as well as the full impact of the development officer. Recycle-A-Bicycle expects
71% top-line growth in 2004 through 40% increase in bike sales and 148% increase in grant
funding including down-payment capital grant for new facility. In 2005 – 2007, revenue growth
will slow to 12%, 10% and 5% respectively. After 2007, revenue growth is expected to level out
at 3 – 5% annually.
CURRENT FUNDING SOURCES AND COMMITMENTS
SOURCE
Sales Revenue
Fundraising
2002 Percentage
69%
31%
2003 Percentage
65%
35%
Recycle-A-Bicycle raised $50,000 in grant funding in 2002. Major support was provided by
Bike New York. Grant funding in 2003 has been secured or is expected from Bike New York,
The Citizens Committee for NYC, Travelers Foundation, Monterey Foundation and Silverman
Foundation.
V.43
Revenue by category
$600,000
1,206
$500,000
1,266
1,096
$400,000
877
$300,000
626
$200,000
339
$100,000
$2002
2003
Grants
Bikes
2004
Accessories
2005
Parts
2006
Service
2007
No. of bikes sold
EXPENSES
The major expense for Recycle-A-Bicycle is labor. Recycle-A-Bicycle will create a succession
plan that increases the professional staffing in order to strengthen the organization. Recycle-ABicycle will also invest in training, so that staff may be prepared to fill in any gaps that might
occur. Mechanics will undergo sales and advanced mechanics training as this is a proven
method for creating higher productivity.
The organization will take advantage of its strategic partnership with Henry Street Settlement to
secure an Administrative Assistant through Henry Street’s job-training program, at no cost to
Recycle-A-Bicycle.
The following chart examines the effect of the new strategies on net income over the five-year
projections. Though net income will be negative in 2003, the organization will return to positive
net income in 2004 and beyond.
V.44
Revenue and Net Income
600,000
532,576
507,649
500,000
462,329
409,328
400,000
300,000
238,748
200,000
126,475
100,000
111,275
80,105
0
-11,472
2003
47,868
2004
2005
2006
2007
(100,000)
Revenues
Net Income
V.45
Recycle-A-Bicycle has identified several risks associated with implementing its strategic
initiatives as well as strategies to mitigate these risks. These are briefly described below.
1. Funding is not obtained on schedule
Strategy for mitigation: The Executive Director has solid fundraising experience and is
confident in the goals listed. The addition of the new Development Director will enhance these
strengths. Operations will be managed to the funding commitments that are available, and when
possible, reserves will be created to help smooth cash availability.
2. Store revenues lag behind plan: demand is low
Strategy for mitigation: We would reduce operating costs by reducing labor by curtailing store
hours during exceptionally slow periods (e.g. during a heavy snowstorm). We will
simultaneously continue aggressive marketing efforts to pull in demand. Recycle-A-Bicycle
operations are flexible and have been subject to past revenue variations, management is
comfortable managing to these issues.
3. Insufficient Raw materials to meet sales demand
Strategy for mitigation: Recycle-A-Bicycle seldom has to actively solicit raw materials
donations, and supply does not look to be constrained in the near future. If for some reason
there is a shortage of bicycles we would initiate outreach efforts to increase supply. Used
bicycles could be purchased at police auctions as a reasonably inexpensive substitute to donated
bicycles. Though margin would suffer, Recycle-A-Bicycle would still be able to meet demand
for bicycles and offer its higher margin accessory and repair lines.
4. Insufficient labor to meet production demand
Strategy for mitigation: Given current labor market conditions in New York City, we do not
anticipate any issues. Our wage rate is very competitive with the market and we always have a
surplus of labor. However, if a labor supply shortage exists, we would tap into our volunteer
network which has worked well in the past to meet seasonal demands for production.
5. Loss of a major partner
Strategy for mitigation: The Executive Director has many relationships with potential partners
and is nurturing these as prospects for when the production/training facility is operating.
6. Loss of senior management before training and succession plan is implemented
Strategy for mitigation: The Board of Directors and others have committed their energy should
an unplanned change in Senior Management occur. Recycle-A-Bicycle has several professional
services partners such as their accountant and business management consultant who can help
provide transitional support services.
V.46
CAPITAL NEEDS, TIMELINE AND BENCHMARKS
The projections indicate that grant funding of approximately $520,000 is needed over the next 3
years to cover costs associated with expansion of the business and training program. This
funding amount includes a capital grant of $38,000 that will be used as a down-payment on the
production and training facility. In three years (2005), Recycle-A-Bicycle will generate
approximately $50,000 in net operating profit.
Capital needs are greatest in 2003 and 2004 when new staff is hired and infrastructure related to
the new production facility is added since these additional expenses are not be matched
immediately with increased revenues. However, these investments will quickly produce
positive returns for the organization as net income grows steadily from 2004 to 2007.
In 2004, financing of approximately $300,000 is needed to purchase the training and production
facility. This financing has been modeled as a 10-year mortgage at 6% annual interest. In
addition, the following debt service chart includes a $100,000 loan beginning in 2003 to finance
the beginning of the Five-Year Strategic Plan (assuming grant funds are not available).
Debt service
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$2002
2003
2004
2005
2006
2007
$(50,000)
Interest payment
Principal payment
Cash balance
Debt balance
Operating cash flow
V.47
Summary of Revenues, net income and net margins:
Sales Revenues
Grant Revenues
Net Income
Net Retail Margin
$
$
$
2003
2004
167,657 $ 232,932
71,091 $ 176,396
(11,472) $ 47,868
n/a
21%
$
$
$
2005
290,281
172,049
80,105
28%
$
$
$
2006
318,775
188,875
111,275
35%
2007
$ 334,446
$ 198,129
$ 126,475
38%
Recycle-A-Bicycle seeks grant funding to finance the growth objectives laid out in its Five-Year
2003
Recycle-A-Bicycle seeks $171,000 in funding in 2003. Thus far, the organization
has raised $38,000 of this funding need. Proposals for additional funding of up to
$50,000 have been submitted and other funding requests will be made during the
year. Approximately $71,000 in grant funding will serve as working capital to
support current operations as well as implement new marketing efforts.
The additional $100,000 will support hiring the Development Officer, support
costs associated with sourcing and obtaining the new production and training
center and provide for other infrastructure improvements. As this funding is vital
for the growth of the organization and its ability to meet the objectives of the
Five-Year Strategic Plan. Recycle-A-Bicycle has projected the $100,000 as debt
financing and is able to support the debt service required through its steady cash
flows and strong financial management. Funding from a grant source will allow
the organization to avoid over $8,500 in interest expense over the next five years.
2004
Recycle-A-Bicycle expects to raise $176,000 in grant funding during 2004. These
funds will be used in part for working capital and in part to support more of the
Five-Year Strategic Plan. This includes hiring a Production Assistant to staff the
production and training center, hiring a van driver to facilitate the pick-up of
supply and transfer of bikes between facilities and funding to pursue e-business
strategies. In addition, part of these funds ($38,000) will be used for a down
payment on the production and training center. Recycle-A-Bicycle will raise the
additional $106,000 through fundraising efforts spearheaded by the new
2005
Recycle-A-Bicycle expects to raise $172,000 in grant funding in order to offset
additional costs related to expansion including research into new retail
opportunities. In 2005, Recycle-A-Bicycle will also launch the Tours by Teens
program.
V.48
RECYCLE- A- BICYCLE, INC.
NEW YORK
BUSINESS PLAN
APPENDIX
V.49
TABLE OF CONTENTS
EXHIBIT
APPENDIX PAGE
A.
HISTORY AND MILESTONES
51
B.
TRADE AREA OF EAST VILLAGE STORE
53
C.
TRADE AREA OF DUMBO STORE
54
D.
BOARD MEMBER BIOGRAPHIES
55
E.
2003 MONTHLY PROFIT AND LOSS STATEMENT
57
F.
5 YEAR PROFIT AND LOSS STATEMENT
58
G.
ASSUMPTIONS TO FINANCIAL MODEL
59
H.
EXECUTIVE DIRECTOR C.V.
61
I.
COMMUNITY NETWORK REFERENCE
62
J.
MEDIA COVERAGE
63
K.
SUMMER YOUTH EMPLOYMENT CURRICULUM
64
L.
SEEDCO LOGIC MODEL
67
M.
PICTURES OF RECYCLE-A-BICYCLE
68
V.50
APPENDIX A -- History and Milestones of Recycle-A-Bicycle
1994
Transportation Alternatives receives NYC funding to initiate the Recycle-A-Bicycle project. A
partnership is formed with Children’s Aid Society. The Manhattan Borough President
inaugurates the project and our first class, teaching bike repair and environmental stewardship, is
offered in May 1994.
1995
RAB partners with Eastern District High School.
1996
RAB publishes Tools for Life: A Start-up Guide to Youth Recycling and Bicycling Programs.
Two thousand copies are printed and distributed.
RAB partners with Henry Street Settlement and offers its first job training program.
1997
A dedicated work space is established in the Charas, El Bohio Community Center. A grant from
the Urban Resources Project to Henry Street Settlement provided funds to create a youth job
training program and to capitalize a bicycle retail business. This business model has been based
on the donation of bicycles and their sale after the restoration work done by teens enrolled in the
job training program.
1998
RAB becomes incorporated.
A business plan is written in partnership with Henry Street Settlement.
The first two RAB students travel cross-country with Bike Aid.
1999
Tours By Teens is developed by Henry Street Settlement students as part of NYC Summer
Youth Employment Program. Students researched the history and culture of the East Village,
mapped out a tour, designed a brochure, and led 3 pilot tours. The goal is to start-up a program
that trains and employs teens as tour guides.
2000
RAB opens its first retail storefront in the East Village.
2001
A new storefront lease was negotiated on Avenue C, in the Lower East Side - an area that is still
currently enjoying a great amount of investment. The relocation of retail activity from a third
floor (walk-up) room based in a community center to a storefront doubled the amount of repair
business, as well as facilitated bike sales and rentals. This space also provided separation of job
training and retail activity, which has enhanced our ability to offer higher quality services to both
customers and students.
V.51
APPENDIX A -- History and Milestones of Recycle-A-Bicycle (CONTINUED)
RAB produces bike safety public messages for radio and television that’s paid for by the NYS
Governor’s Committee on Traffic Safety.
2002
In May, a lease was signed to create a second retail location and training center in Dumbo,
Brooklyn. Extensive renovation was required and the shop opened in October.
In July, RAB received its official IRS 501-c-3 status, after successfully completing a 5 year
review period. This status provides greater access to funders.
In July, RAB received a Seedco grant to upgrade its business plan.
In November, a major strategic planning effort was undertaken by all staff, management, and the
Board of Directors. Input from key partners was included and a 5-Year strategic plan was
created.
V.52
APPENDIX B -- East Village Trade Area Map
V.53
APPENDIX C --DUMBO Trade area map
V.54
APPENDIX D-- Board Member Biographies
Jonathan Orcutt, Board President
Mr. Orcutt is Associate Director, Tri-State Transportation Campaign. Since 1994, Mr. Orcutt
has planned advocacy campaigns, supervised staff and raised funds for the Campaign, a highly
effective mass transit and sustainable transportation advocacy organization in the New
York/New Jersey/Connecticut metropolitan region. He is editor of the Campaign's awardwinning weekly bulletin, Mobilizing the Region, and develops Campaign strategies on a wide
range of transportation policy issues.
He sits on the executive committee of the board of the League of American Bicyclists, a national
advocacy organization, and is vice-president of the Kissena Cycling Club, a NYC race- and
fitness-oriented bicycle riding group. Mr. Orcutt was executive director of Transportation
Alternatives between 1989 and 1994 where he developed programs to promote bicycle
transportation and traffic calming policies.
Mr. Orcutt holds a B.A. with honors from Colby College.
Sara Elinson
Ms. Elinson is a Senior Manager at Standard & Poor’s in their Corporate Value Consulting
group. This group, formerly PriceWaterhouseCoopers, provides clients with Mergers &
Acquisitions advisory services, as well as broader corporate finance advice. She has advised
clients on, debt refinancing, debt restructuring, and finance raisings. Additionally, she has
provided capital structure valuations and advice. Ms Elinson holds an MBA degree from Cornell
University.
Ms. Elinson also volunteers her time for RAB as the Dumbo store manager on Saturdays.
Christine Koenig,
Ms. Koenig is Workforce Development Center / Chief Administrator at the Henry Street
Settlement. She has worked at Henry Street Settlement since 1986 in direct services and
administration.
Ms. Koenig is the founder of the Greening Challenge-Youth for Ecology initiative that was the
foundation for environmental programming in Youth Services. She has forged many
collaborations within the environmental field and local movement. She also founded Beyond
City Limits in 1990, an international exchange program for urban youth.
Ms. Koenig holds a MSW degree and is certified as a field administrator.
V.55
APPENDIX D-- Board Member Biographies (CONTINUED)
Ira Perelson
Mr. Perelson has worked as a NYC high school social studies teacher (bilingual-Spanish) since
1975. His board interests center around youth development.
Mr. Perelson served as the faculty advisor to the Student Unity Club at Eastern District High
School for over ten years and as an Outward Bound instructor for two years. In 1995, Mr.
Perelson founded the North Brooklyn Recycle-A-Bicycle project. He directed its activities for
six years. During this tenure, he developed curriculum, forged a partnership with Green Maps
System and created a map-making project, helped send six teens on cross-country bike trips,
taught over 150 students bike repair, and managed an advisory board. Mr. Perelson continues to
be an active RAB board member.
He holds a B.A. degree from Brooklyn College and an M.A. in Chinese History from Columbia
University. He is fluent in Chinese, Russian, and Spanish.
V.56
APPENDIX E – MONTHLY P&L
2003 Monthly Profit & Loss Statement
Profit & Loss
April 3, 2003
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Sales
Classes
325
325
325
325
325
325
325
325
325
325
325
60
60
60
60
60
60
60
60
60
60
60
60
5,924
5,924
5,924
5,924
5,924
5,924
5,924
5,924
5,924
5,924
5,924
5,924
4,500
1,350
2,363
1,231
(74)
15,679
3,600
1,080
1,890
985
(59)
13,805
4,500
1,350
2,363
1,231
(74)
15,679
9,000
2,700
4,725
2,462
(147)
25,049
7,200
2,160
3,780
1,970
(118)
21,301
7,200
2,160
3,780
1,970
(118)
21,301
9,000
2,700
4,725
2,462
(147)
25,049
9,000
2,700
4,725
2,462
(147)
25,049
7,200
2,160
3,780
1,970
(118)
21,301
6,300
1,890
3,308
1,724
(103)
19,427
6,300
1,890
3,308
1,724
(103)
19,427
4,500
1,350
2,363
1,231
(74)
15,679
Cost of Sales
Repair supplies
Accessories
PT Retail mechanics
FT storage facility mechanic
PS 218 mechanic
Retail mgr /asst mgr labor
PT van driver
Total cost of sales
648
540
870
432
6,240
8,730
518
432
870
432
6,240
8,493
648
540
1,088
432
7,800
10,508
1,296
1,080
1,088
432
7,800
11,696
1,037
864
1,088
432
7,800
11,221
1,037
864
1,088
432
7,800
11,221
1,296
1,080
1,088
432
7,800
11,696
1,296
1,080
1,088
432
7,800
11,696
1,037
864
1,088
432
7,800
11,221
907
756
1,088
432
7,800
10,983
907
756
870
432
6,240
9,206
648
540
870
432
6,240
8,730
Gross profit
6,949
5,312
5,171
13,353
10,080
10,080
13,353
13,353
10,080
8,444
10,222
6,949
Swift folder
Grants
Capital grant
Bikes
Accessories
Parts
Service
Credit card fees
Total net sales
325
Growth
Gross margin
Expenses
Salaried wages
PT Admin wages
Payroll taxes
Workers comp & disability
Healthcare benefits
Accounting
Advertising
Automobile
Bad debt
Communications
Store expenses
Postage & delivery
Printing & repro
Educational materials
Ride leader
Bank fees
Rent
Storage mortgage
Insurance
Utilities
Expensed investments
Total expenses
Operating income
Interest expense
Interest income
Other income
Net operating income
44.3%
2,917
986
206
277
83
167
100
10
42
372
17
42
142
17
83
17
1,600
167
46
7,289
(340)
28
(312)
38.5%
33.0%
53.3%
47.3%
47.3%
53.3%
53.3%
47.3%
43.5%
52.6%
44.3%
2,917
986
206
277
83
167
100
10
42
372
17
42
142
17
83
17
1,600
167
46
7,289
2,917
1,153
252
277
83
167
100
10
42
372
17
42
142
17
83
17
1,600
167
27
7,483
2,917
1,153
252
277
83
167
100
10
42
372
17
42
142
17
83
17
1,600
167
46
7,502
2,917
1,153
252
277
83
167
100
10
42
372
17
42
142
17
83
17
1,850
167
46
7,752
2,917
1,153
252
277
83
167
100
10
42
372
17
42
142
17
83
1,200
17
1,850
167
86
8,992
2,917
1,153
252
277
83
167
100
10
42
372
17
42
142
17
83
1,200
17
1,850
167
106
9,012
7,083
1,546
270
546
83
167
100
10
42
372
17
42
142
17
83
1,200
17
1,850
167
101
12,800
26,654
7,083
1,546
270
546
83
167
100
10
42
372
17
42
142
17
83
17
1,850
167
46
12,599
7,083
1,546
270
546
83
167
100
10
42
372
17
42
142
17
83
17
1,850
167
46
12,599
7,083
1,378
224
546
83
167
100
10
42
372
17
42
142
17
83
17
1,850
167
46
12,386
7,083
1,378
224
546
83
167
100
10
42
372
17
42
142
17
83
17
1,850
167
46
12,386
(1,977)
23
(1,954)
(2,312)
(177)
28
(2,460)
5,851
57
5,907
2,328
45
2,373
1,088
(177)
45
957
4,341
57
4,397
(13,301)
46
57
(13,198)
(2,518)
(177)
189
45
(2,460)
(4,155)
185
40
(3,930)
(2,164)
(985)
179
40
(2,931)
(5,437)
(177)
174
28
(5,411)
V.57
APPENDIX F -- 5-YEAR P&L
2003 – 2007 Annual Profit & Loss Statements
Profit & Loss
April 3, 2003
2003
2004
2005
2006
2007
Sales
Classes
Swift folder
Grants
Capital grant
Bikes
Accessories
Parts
Service
Credit card fees
Total net sales
Growth
3,900
3,900
3,900
3,900
720
1,080
1,440
1,440
1,440
71,091
138,396
172,049
188,875
198,129
78,300
23,490
41,108
21,421
(1,282)
238,748
38,000
109,620
32,886
57,551
29,989
(2,093)
409,328
137,025
41,108
71,938
37,487
(2,617)
462,329
150,728
45,218
79,132
41,235
(2,878)
507,649
158,264
47,479
83,089
43,297
(3,022)
532,576
51.5%
167,657
71.4%
232,932
148%
12.9%
#
9.8%
3,900
4.9%
290,281
318,775
334,446
24%
10%
5%
Cost of Sales
Repair supplies
Accessories
PT Retail mechanics
FT storage facility mechanic
PS 218 mechanic
Retail mgr /asst mgr labor
PT van driver
Total cost of sales
11,275
9,396
12,186
5,184
87,360
125,401
15,785
13,154
17,572
15,821
5,340
89,981
3,955
161,608
19,732
16,443
22,623
16,295
5,500
92,680
4,074
177,347
21,705
18,087
25,632
16,784
5,665
95,461
4,196
187,530
22,790
18,992
27,721
17,288
5,835
98,324
4,322
195,272
Gross profit
113,347
247,721
284,982
320,119
337,304
Gross margin
25.2% #
40.4%
38.9%
41.2%
41.6%
Expenses
Salaried wages
PT Admin wages
Payroll taxes
Workers comp & disability
Healthcare benefits
Accounting
Advertising
Automobile
Bad debt
Communications
Store expenses
Postage & delivery
Printing & repro
Ride leader
Bank fees
Rent
Storage mortgage
Insurance
Utilities
Expensed investments
Total expenses
55,833
15,133
2,932
4,670
1,000
2,000
1,200
125
500
4,463
200
500
1,700
200
1,000
3,600
200
21,200
2,000
688
12,800
131,944
87,550
19,264
3,379
6,650
3,090
2,060
5,000
125
515
4,597
206
515
1,751
206
1,030
3,600
206
29,664
39,568
2,100
709
2,000
213,785
90,177
20,269
3,597
6,749
3,183
2,122
5,000
125
530
4,735
212
530
1,804
212
1,061
3,600
212
33,668
39,568
2,205
730
220,289
92,882
21,097
3,765
6,852
3,278
2,185
5,000
125
546
4,877
219
546
1,858
219
1,093
3,600
219
35,668
39,568
2,315
752
226,662
95,668
21,854
3,912
6,958
3,377
2,251
5,000
125
563
5,023
225
563
1,913
225
1,126
3,600
225
36,000
39,568
2,431
774
231,380
Operating income
Interest expense
Interest income
Other income
Net operating income
(18,597)
(1,691)
774
493
(19,021)
33,936
(20,339)
1,311
690
15,598
64,693
(19,585)
716
863
46,687
93,457
(17,105)
968
949
78,269
105,923
(14,623)
1,555
996
93,851
V.58
APPENDIX G -- ASSUMPTIONS TO FINANCIAL MODEL
Assumptions – Initiatives
Initiatives
On-going
Hire Development Officer
Development Officer healthcare
Hire PT van driver
Hire PT administrative support (in-kind)
Purchase Prod/Training Facility
Purchase van (donated)
Hire Production Assistant for Prod. Facility
Date
Aug-03
Aug-03
Jan-04
Mar-03
Jan-04
Jan-04
Jan-04
One-time
Implement inventory system
Leasehold improvements at storage facility
Tools and equipment at storage facility
Business consultant (remaining fees)
Real Estate Consultant
Aug-03
Jan-04
Jan-04
Aug-03
Aug-03
$
$
$
$
$
$
$
$
$
$
$
Cost
50,000
3,228
8.00
110.00
8.00
Quantity
annual
annual
hour
40
hour
40
sq ft
3,000
at purchase, plus:
hour
160
4,167
269
320
$3,297
417
1,280
Incr
3%
3%
3%
3%
month
month
month
month
month
month
month
3%
800 (2 computers)
5,000
2,000
4,500
$7,500
Assumptions – Expenses
Expenses
April 3, 2003
Repair supplies
Bike accessories
14% of bicycle sale price
40% of accessories sale price
Payroll taxes
Workers comp - exec
Workers comp - other
9.425% of total wages
Annual
$ 35,000
$ 3,228
$ 1,000
$ 2,000
$ 2,000
$ 1,200
$
125
$
500
$ 4,463
$
200
$
500
$ 1,700
$
200
$ 1,000
$
200
$ 2,000
Salary - ED
Benefits
Accounting
Audit
Advertising
Van rental
Bad debt
Repair & Maint
Communications
Expenses store
Postage & Delivery
Printing & repro
Travel & Ent
Bank fees
Insurance
Utilities
Waste removal
Utilities
Total
Ride leader
DUMBO Rent - 2003
DUMBO Rent - 2004
DUMBO Rent - 2005
DUMBO Rent - 2006
DUMBO Rent - 2007
($15-$20 of supplies per bicycle sold at an average price of $125)
(100% margin for all products excluding locks; locks marked up approx. 50%)
Annl incr
3%
Month
$ 2,917
$
269
$
83
$
167
$
167
$
100
$
10
$
42
$
372
$
17
$
42
$
142
$
17
$
83
$
17
$
167
annual
annual
annual
annual
annual
annual
annual
annual
annual
annual
annual
annual
annual
annual
annual
Annual
incr
3%
3%
3%
3%
3%
3%
0%
3%
3%
3%
3%
3%
3%
3%
3%
5%
month
month
month
month
month
month
month
month
month
month
month
month
month
month
month
month
Rent
EV - Annual
EV - Monthly
Credit card fees
% of all sales
transaction fee
PT Labor
2003
13,200
1,100
2004
18,000
1,500
2005
18,000
1,500
2006
18,000
1,500
2007
18,000
1,500
30%
2.6%
35%
2.6%
35%
2.6%
35%
2.6%
35%
2.6%
3% Annual increases
Manager
Asst. Manager
Mechanic
PS 218 Mechanic
$15.00
$10.00
$8.00
$8.00
per hour
per hour
per hour
per hour
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Total
16
30
16
30
16
11
16
30
16
30
16
70
16
90
16
85
16
30
16
30
16
30
16
30
192
496
46
46
27
46
46
86
106
101
46
46
46
46
688
-
-
-
-
-
1,200
1,200
1,200
-
-
-
-
3,600
500
750
1,083
1,417
1,500
500
750
1,083
1,417
1,500
500
750
1,083
1,417
1,500
500
750
1,083
1,417
1,500
750
1,083
1,417
1,500
1,500
750
1,083
1,417
1,500
1,500
750
1,083
1,417
1,500
1,500
750
1,083
1,417
1,500
1,500
750
1,083
1,417
1,500
1,500
750
1,083
1,417
1,500
1,500
750
1,083
1,417
1,500
1,500
750
1,083
1,417
1,500
1,500
8,000
11,664
15,668
17,668
18,000
V.59
APPENDIX G -- ASSUMPTIONS TO FINANCIAL MODEL (CONTINUED)
Assumptions – Income
Income
April 3, 2003
Weekly bike sales
Average bike price
$
125
M
1
1
2
Bike sales - EV
Bike sales - DUMBO
Bike sales - Total
Daily bike sales revenue
$
250
T
1
1
2
$
250
W
1
1
2
$
250
R
2
1
3
$
375
F
2
2
4
$
500
Sa
3
2
5
$
625
Su
$
Total
10
8
18
- $
2,250
Bike sales
Seasonality factor
Expected sales - EV
Expected sales - DUMBO
Expected sales - Total
JAN
0.5
20
16
36
FEB
0.4
16
13
29
MAR
0.5
20
16
36
APR
1.0
40
32
72
MAY
0.8
32
26
58
JUN
0.8
32
26
58
JUL
1.0
40
32
72
AUG
1.0
40
32
72
SEP
0.8
32
26
58
OCT
0.7
28
22
50
NOV
0.7
28
22
50
DEC
0.5
20
16
36
Total
0.7
348
278
626
Bike Inventory
Existing Finished inventory
Existing WIP inventory
Restorable donations
No. restored
Available for sale
JAN
74
355
67
65
139
FEB
103
357
67
65
168
MAR
139
358
67
65
204
APR
168
360
67
30
198
MAY
126
397
67
45
171
JUN
114
418
67
45
159
JUL
101
440
67
30
131
AUG
59
477
67
30
89
SEP
17
513
67
45
62
OCT
4
535
67
50
54
NOV
4
552
67
50
54
DEC
4
568
67
60
64
Total
4
36
29
36
72
58
58
72
72
58
50
50
36
626
103
139
168
126
114
101
59
17
4
4
4
28
28
Total bikes sold
Ending finished inventory
Monthly bike revenue
$
Lost monthly bike revenue
4,500
$
$0
$
$0
JAN
Accessories
Rel. to bikes
2002 sales
Parts
Rel. to accessories
2002 sales
Service
Relationship to parts
2002 sales
3,600
4,500
$
$0
FEB
9,000
$
$0
MAR
7,200
$
$0
APR
7,200
$
$0
MAY
9,000
$
$0
JUN
9,000
$
$0
JUL
7,200
$
$0
AUG
6,300
$
$0
SEP
6,300
$
$0
OCT
4,500
800
580
64
$
$0
NOV
78,300
$0
DEC
Total
0.30
$ 14,894
$
1,350
$
1,080
$
1,350
$
2,700
$
2,160
$
2,160
$
2,700
$
2,700
$
2,160
$
1,890
$
1,890
$
1,350
$
23,490
1.75
$ 28,820
$
2,363
$
1,890
$
2,363
$
4,725
$
3,780
$
3,780
$
4,725
$
4,725
$
3,780
$
3,308
$
3,308
$
2,363
$
41,108
0.52
$ 15,018
$
1,231
$
985
$
1,231
$
2,462
$
1,970
$
1,970
$
2,462
$
2,462
$
1,970
$
1,724
$
1,724
$
1,231
$
21,421
Other revenue sources
2002
2003
2004
2005
2006
2007
23,815
21,055
3,786
48,656
35,723
31,583
3,786
71,091
71,445
63,165
3,786
138,396
89,306
78,956
3,786
172,049
98,237
86,852
3,786
188,875
103,149
91,194
3,786
198,129
Total Grants per Month
4,055
5,924
11,533
14,337
15,740
16,511
Classes - Annual
Classes - Monthly
3,900
325
3,900
325
3,900
325
3,900
325
3,900
325
3,900
325
Grants
Donations
Contributions
Benefit
Swift folder
Commission per bike
Bikes sold
Revenue - annual
Revenue - monthly
Other income
Sales tax credit
$60
$
$
8
480
40
$
$
12
720
60
$
$
18
1,080
90
$
$
24
1,440
120
$
$
24
1,440
120
$
$
24
1,440
120
0.30% of taxable sales for prompt payment
V.60
APPENDIX H -- Executive Director C.V.
Karen Overton
55 Washington Street
Brooklyn, NY 11201
[email protected]
Work Experience:
Executive Director, Recycle-A-Bicycle, Inc. (1998-present)
Founded innovative organization dedicated to youth environmental education and job training that has worked with
over 4,500 youth and removed 109 tons of waste from the waste stream.
• Established the organization’s legal and structural framework; handle all finances
• Hire and train permanent staff of six and organize volunteers
• Successfully increased fundraising/development 200% over the life of the organization
• Oversaw creation of a second successful retail establishment, including site selection, tenant buildout,
merchandising, and community development
• Led 5-year strategic planning effort; writing business plan and sourcing financing to grow the business
• Co-authoring training manual “One Revolution at a Time: How to Start and Run a Youth Cycle Club” and
providing technical assistance to youth groups
• Serve as technical consultant to other youth and transportation programs nationwide
Recycle-A-Bicycle Project Director, Transportation Alternatives (1994-1998)
Founded a youth environmental education project in which duties included:
• Developing partnerships with youth organizations
• Fundraising & coordinating material donations
• Developing curriculum & instructing
• Publishing “Tools for Life: A Start-Up Guide for Youth Recycling and Bicycling Programs”
Bikes for Africa Project Director, Institute for Transportation and Development Policy (1992-1994)
Established a bicycle project in Beira, Mozambique in which duties included:
• Hiring and training staff
• Running revolving credit fund for women peasants
• Fund raising
• Research and publication of project’s socio-economic impact
Education:
1993 - Masters in Urban & Regional Planning. State University of New York at Albany.
1985 - Bachelor of Arts in Latin American and Caribbean Studies. State University of New York at Albany.
Special Skills:
Fluent in Portuguese, working knowledge of Spanish. Proficient in Quickbooks and other common applications
Affiliations:
1997 to present
Director and Treasurer, Institute for Transportation and Development Policy,
Appointed to Board of Directors of global transportation policy and program development organization.
Elected Treasurer of the Board
2001 to present
Advisory Board Member, Ryan-Nena Health Clinic,
Appointed by clinic director to advise staff of largely government-funded institution that provides services to low
income HIV-positive residents of Manhattan’s Lower East Side.
V.61
APPENDIX I -- COMMUNITY NETWORK REFERENCE
MAJOR PARTNERS
Henry Street Settlement
Children’s Aid Society
www.henrystreet.org
www.childrensaidsociety.org
AFFILIATES
Transportation Alternatives
Five Borough Bike Club’s Montauk Century
New York City Waste Prevention Coalition
Project Renewal
The Youth Bicycle Education Network
Nonprofit Venture Network
www.transalt.org
www.5bbc.org
www.nycwpc.org
www.projectrenewal.org
www.yben.org
www.seedco.org
V.62
APPENDIX J -- MEDIA COVERAGE
Copies of articles are available upon request.
Spinning on 2 Wheels of Fortune, David Gonzalez, The New York Times, Saturday, May 31,
1997, p. 21.
Recycle-A-Bicycle, YES. A Journal of Positive Futures, Winter 1997/1998.
Summer Fun for Recycle-A-Bicycle, Greenline: The North Brooklyn Community News,
September 1999, p. 1.
Honor Roll: Kristina Rodriguez, Todd Edelman, Latingirl Passages, August-September 2000.
Program gets ‘em in fresh gear, Matthew Creamer, New York Daily News, Sunday, October 8,
2000.
Wanna’ get inspired yourself?, College Bound Magazine, November/December 2000..
Reality Pokes Its Nose Into the Tents, Guy Trebay, The New York Times, Tuesday, February
11, 2003, p. B10.
Urban Legend: Karen Overton. Tracie McMillan, CityLimits, June 2003, p. 7.
V.63
APPENDIX K -- YOUTH EMPLOYMENT CURRICULUM SAMPLES
Derallieurs and Gears
Goals: To understand the function of gears and how to use them to increase distance and speed.
Students will disconnect, inspect, lubricate and reinstall a gear cable.
Set-up:
-
5 bikes with functioning rear and/or front derailleurs
8/9/10 y-wrenches
cable cutters
Discussion Questions:
- What are gears? What do they do?
- When would we want to make it easier to pedal the bike? When would we want to
make it harder?
- Who has a bike with gears? Do you use them often?
- Do gears help cyclists ride farther?
The Lesson:
1. Ask for two volunteers to come up to the bike. Walk them through how to shift gears
(one pedals, the other shifts). Stress that one should never shift gears unless the pedals
are moving (not just the wheel). Tell the students to watch how the chain moves.
2. Ask the pedaler if it is easier to pedal in the low or high gears.
3. Have the pedaler turn the pedals as fast as he/she can when the bike is in low gear. Stop
the wheel and try it again in high gear. Ask the students if the wheel turned faster the
second time.
4. Name the parts and explain how the cable system works.
5. Demonstrate a derailleur cable “overhaul”
- Loosen the eyebolt and disconnect the cable
- Take the cable out of the housing
- Inspect cable for rust and damage
- Replace or straighten cable if necessary
- Oil cable housing
- Reinstall cable
- Check and adjust cable tension
6. Assign groups to bikes to perform lesson.
7. Clean up.
Classroom Lesson Plan © 2003 Recycle-A-Bicycle NYC
V.64
APPENDIX K -- YOUTH EMPLOYMENT CURRICULUM SAMPLES (CONTINUED)
Environmental Education &
Cannibalizing Bikes
Goal: To understand the environmental impact of garbage and recycling. To understand the
positive environmental contributions of RAB and its students. To recycle bicycle parts.
Set-up:
-
Get out bikes and bike parts to be disassembled (ex. steel drop handlebars, rusty
wheels)
Write the three rules of cannibalizing on the board: Keep similar pieces together!!!,
finish taking off one part before moving on to the next one, put pieces away.
Get one example of a complete brake and a disassembled brake
Opening discussion questions:
- What happens to your garbage when you throw it away? Where does it go and how
does it get there?
- How much garbage do you throw away at your house per week? How many
apartments are in your building? How many buildings are on your block? How
many blocks are there in NYC? How much garbage do we throw out every week?!
- Do garbage trucks cause air pollution? How does it effect the environment if we have
to ship our garbage far away?
- What can we do about the garbage problem?
The Lesson
1. Have the students look around at all of the bikes and pieces in the shop. Explain that
most of these pieces would be in the garbage if it weren’t for RAB.
2. Explain the three fates of a bicycle that enters the shop (earned, sold, disassembled)
3. Describe how we use the parts off of cannibalized bikes to build new ones.
4. Demonstrate how to keep like pieces together by showing an example of a complete
brake (all in one piece) and a disassembled brake (in 15 pieces). Show how difficult it
would be to reassemble a brake if one piece is missing.
5. Assign students to bikes or cannibalizing projects. Students can use the tools from the
boards.
6. Ten minutes before class ends, students stop working on bikes.
7. Instruct students on where to put parts. Get one container for miscellaneous small parts.
8. Clean up and put away tools.
V.65
APPENDIX K --YOUTH EMPLOYMENT CURRICULUM SAMPLES (CONTINUED)
Bike Safety Check-up
Goals: To apply the cumulative information from the previous lessons to perform a complete
bike safety check. To learn the most important things to check on a bike before every
ride.
Set-up:
-
five booby trapped bikes with 6-10 problems each
A written list describing the make, model, color, and type of each bike and a
description of every problem
Photocopies of a checklist of how to evaluate a bike
Pencils and blank paper
Opening discussion questions:
- Name all of the lessons we have had in this class.
- Why should we check our bikes before we ride?
- What can happen to you if the bike has problems? What can happen to the bike?
The Lesson:
1. Go over the check list using student volunteers to help demonstrate each step.
2. Break students into groups and pass out a checklist and pencils to each one.
3. Have the students write the make, model, color and type of bike on the top of a blank
paper.
4. Have students evaluate each bicycle. Make them take their time and go over the check
list from top to bottom. They should write a complete description of every problem on
their paper.
5. Once they have performed a thorough safety check, compare their answers with the prewritten list of problems. If they are missing any, ask them to go back and look for more
problems.
6. Clean up.
V.66
APPENDIX L --SEEDCO LOGIC MODEL‘((This Logic Mode was modified for use in this toolkit)
Inputs
Board
Activities
Conduct Youth
Training
Programs
Staff
Youth
Funding
Materials
Donation
Facilities
Consultant
Inventory
and
bookkeeping
systems
Refurbish
bicycles
Conduct
business
activities at
retail stores
Analyze
operations &
set production
goals
Create
resource
development
strategy
Outputs
Youth trained
in bicycle
repair and
business
concepts
Ongoing sales
activity
Revised
operating plan
Initial Outcomes
Students
graduate from
training
Youth
employed at
RAB or other
bike shops
Youth develop
strong job
skills
Improved
inventory &
bookkeeping
Strategy for
Resource
Development
Facilities and
staffing plan
Financing for
new facility and
programs
secured
Interim
Outcomes
Healthy lifestyle
practiced by
program
graduates
Youth graduate
high school
Long-term
Outcomes
Healthy lifestyle
promoted to others by
program graduates
Graduates become
environmental stewards
Youth enter living wage
careers or obtain postsecondary education
Retail sales
volume increase
Long-term staff
positions
supported by
sales
RAB offers consistent
programming
Organizational
Sustainability achieved
Van & Storage
Facility
acquired
V.67
APPENDIX M
PICTURES OF RECYCLE-A-BICYCLE
Yoandy Ramirez in the East Village Store
V.68
Working on a bicycle
Local bike tour
Youth field bike trip to Montauk beach
V.69
Local bike tour
NYC Council Member Margarita Lopez visits Recycle-A-Bicycle
V.70

A Toolkit for Developing a Social Purpose Business Plan

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