Vous êtes sur la page 1sur 23

European Federation of City Farms (EFCF)

www.cityfarms.org

Developing a viable and sustainable social enterprise on your city farm


1. 2. 3. 4. 5. 6. 7. 8. Where are we today? - A SWOT analysis of your City Farm Your Social Enterprise Scoping Study Your Social Enterprise Feasibility Study Social Enterprise Business Plan your key document Information, advice and guidance for your feasibility study and business plan Specific Guidance on Budgets and Cash flows Your City Farm your reputation and your story Consistent appraisal for social enterprise, services, projects, programmes and policies

Introduction It is suggested, that there are four key stages in preparation of your social enterprise. They are marked by four documents that are sequential and build into your final Social Enterprise Business Plan. These are: 1. 2. 3. 4. Where are we today? - A SWOT analysis of your City Farm A Social Enterprise Scoping Study A Social Enterprise Feasibility Study A Social Enterprise Business Plan

Participation The expectation is that all relevant stakeholders, (particularly management committee, members, staff, volunteers and users) are invited to participate in the process. Process Scoping study to include SWOT for CF & proposed SE, vision, outcomes Brief appraisal if answer no try again or abandon; if yes Feasibility study see Feasibility Study guidance paper Full appraisal if answer no try again or abandon; if yes Social enterprise business plan see Business Plan guidance paper Begin to engaged funders and investors Perhaps pilot some aspects of your social enterprise as appropriate

Timetable You must decide following initial consultation. Five Key Messages Social enterprises can and do deliver much needed service outcomes in all areas; The good social enterprises are models of sustainable development in action; Social Enterprises can deliver where other sectors will not or can not deliver; When support, training and finance is in place, social enterprises can and do succeed; Visible local political, media, public and private sector support can greatly enhance social enterprise viability.

The five 'S's' SD SI SE SC SA Sustainable Development integrating the environmental, social and economic; Social Inclusion, an essential ethical and social justice component of SD; Social Enterprise, creating quality needed services and financial viability; Social Capital creating outcomes of well being and quality of life; Social Auditing, monitoring and evaluating SD, SI, SE & SC - and improving!
Introduction 1.2

Developing a viable and sustainable social enterprise on your city farm | November 2008

European Federation of City Farms (EFCF)

www.cityfarms.org

The five Cs of social enterprise development Challenge: to assess whether a particular service should be provided at all and, if so, to determine whether it is being provided effectively or if it could be provided better in another way or by another body. Consult: finding out what members/users/customers want and what they are prepared to pay for. Compare: assessing the level, quality and cost of service against that achieved in previous years by other bodies providing similar services. Compete: to determine who can best deliver a particular service at the right quality and optimum cost. Creativity: imaginative problem solving is the cutting edge of innovation. When solutions depend on connections yet to be made, logic is not enough! Ethics, values and social justice Good social enterprises are governed by their ethics; which leads to: Addressing environmental, social and economic outcomes through ethical behaviour; Challenging the status quo to achieve environmental, social and economic outcomes; Where possible, proactively trading and collaborating with other social economy bodies.

This can facilitate: Your 'Social Enterprise advantage' Delivering excellent products and services, with distinct competitive benefits, derived from your ethics and your commitment to the communities you serve'. Failing to plan.is planning to fail

Developing a viable and sustainable social enterprise on your city farm | November 2008

Introduction 2.2

European Federation of City Farms (EFCF)

www.cityfarms.org

1. Where are we today? - A SWOT analysis of your City Farm


Strengths Weaknesses Opportunities Threats - internal - internal - external - external

The SWOT analysis of your City Farm helps create baseline information that will inform your viability and sustainability; (including EESE - the ethical, environmental, social and economic) The SWOT analysis is appraised and you decide whether to move to a social enterprise scoping study or address key issues raised in the City Farm SWOT. Document format and size This is an internal document shared with relevant stakeholders. Format: Brief introduction, context and methods used; an organised SWOT; an analysis commentary and as appropriate an action plan to address any key weaknesses. Size: circa 4 -6 pages. The SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) provides a simple and useful framework for helping you to carry out a review of your organisation or a marketing audit. Strengths and Weaknesses are internal; Opportunities, and Threats are external. Use it as a tool to check what position your organisation is in at the moment, but more importantly to plan its future direction. Budgets should be based on a SWOT analysis, not prepared in advance of a SWOT analysis. A SWOT analysis can be used to help to: differentiate yourself from your potential competitors. identify the issues which should be addressed in the future as a matter of priority.

Having listened to someone presenting a SWOT summary, you should end up with a clear understanding of the main thrust of your City Farm. If a SWOT is well done, someone else should be able to draft the objectives and outcomes which logically flow from it. The SWOT is by definition a summary of key issues. The SWOT is generated from internal debate; it is not just one person's opinion. The SWOT should provide answers to such questions as: What do users/clients/customers need? How do they buy? What are our competitors doing?

In our SWOT summary we should continually follow with the implied question: Which means that ? In this way we are forced to think about the implications of the issue itself. Finally agreed budgets must reflect internal consistency with the issues raised in the original SWOT analysis. Remember - it is a great self-discipline to complete a good, tight, but comprehensive, SWOT. See paper 7
Paper 1 1.1

Developing a viable and sustainable social enterprise on your city farm | November 2008

European Federation of City Farms (EFCF)

www.cityfarms.org

2. A Social Enterprise Scoping Study


Introduction A Social Enterprise Scoping Study gives you an opportunity to explore a number of social enterprise ideas and access their viability, sustainability etc. without carrying out a full feasibility study. Importantly it involves basic research, stakeholder consultation, addressing the key elements (marketing, finance etc.) and importantly your appraisal. Relevant information, research etc. will feed in to your Feasibility study. Where do we want to be in three to five years from today? What are your social enterprise ideas? What is your vision, dreams, crazy ideas, expectations and outcomes?

How are we going to get there? What needs to be done? eg involve members, staff/volunteers, users/ other stakeholders What resources are needed? eg working capital? As appropriate - what facilities are needed? What research and consultation is needed? Who is going to do what? How will we monitor and evaluate our progress? The aim is to encourage Honest and open debate about the potential and limits of your social enterprise; The chance to avoid making the many mistakes others have made; Action learning as people learn best about social enterprise by taking social entrepreneurial action themselves; Social enterprise Seeing is believing visits.

WHAT you aim to do? The aims and objectives of your social enterprise; How it addresses identified need; What service(s) or products you will provide.

WHO will be involved? What skills and personnel are needed

WHERE will it take place? HOW you will achieve it Initial sub-studies Governance and management plan Delivery plan Marketing Plan Finance Plan Options and Risk analysis

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 2 1.2

European Federation of City Farms (EFCF)

www.cityfarms.org

HOW you will monitor and sustain it Monitor and Evaluate against targets/outcomes set Identify any added value

HOW will you resource the development of a social enterprise Investment, personnel, donations in kind, advisers

WHEN do you hope to be operational? Initial market research and marketing It is vital that you have a market for anything you will sell or service you will offer. Do some market research to see if there is a demand for what you are providing. Check the number of people in your area who are doing similar things it may be that your idea is completely new and will have a large market, or there might be lots of people doing similar things, who have been doing them for a long time, which may mean you have more difficulty establishing your place in the market. Inform yourself on legal issues A social enterprise evolves under a legal framework. These rules and regulations importantly help protect your social enterprise, such as; legal structure requirements, insurances, VAT, equalities, employment etc. Finance Estimated Budgets and if possible estimated Cash Flow forecasts. Estimated capital and working capital required. Options and Risk Analysis For example: Scenario 1 - Do nothing (baseline data) Scenario 2 - Social enterprise A Scenario 3 - Social enterprise B Scenario 4 a Combination of parts of Social enterprise A & B The Appraisal You will need to estimate the costs, benefits and risks of each alternative considered. Each alternative should provide the necessary information about costs, benefits and risks necessary to select the best option. The option to do nothing is likely to provide costs and benefits too. The costs of doing nothing are the costs of operations and maintenance over time, as currently performed or as anticipated. Document format and size This is primarily an internal document shared with relevant stakeholders. Format: In general, include a cover sheet, contacts page, table of contents, executive summary, description of your service(s) and/or products, your social enterprise model, your social enterprise context, marketing strategies, critical risk factors, financial projections, options appraisal and a conclusion. The additional, evidence, research, legal, marketing, finance details, etc. to be placed in the appendices. Size: Circa 8 to12 pages depending on number of social enterprise options explored (excluding appendices). Your executive summary reflects the scoping study. Keep this to one page. It is written last but it will need to be positioned at the beginning of the study as an introduction to your report. See paper 8, (and if possible read 5)

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 2 2.2

European Federation of City Farms (EFCF)

www.cityfarms.org

3. A Social Enterprise Feasibility Study


Introduction A Social Enterprise Feasibility Study is the working up of your chosen social enterprise option, but will include variations to be appraised to come to the best option. Your feasibility study is undertaken to determine and document a social enterprises' viability and sustainability. Your Feasibility Study attempts to answer: is your social enterprise feasible? Can it be done? Does it make sense? can it really be achieved? - is the social enterprise doable? Your Feasibility Study can be considered as a group of sub-studies Your Feasibility Study comprises of a group of interrelated and often interdependent sub-studies as appropriate to your proposed social enterprise. Your Feasibility Study links and integrates the sub-studies into one coherent whole. Consequently, individual sub-studies may need to be updated and revised as information from other studies becomes available. It is not uncommon, over the course of a Feasibility Study that many assumptions are revised, new risks identified and the proposed social enterprises financial projections changed. The Feasibility Study needs to provide sufficient information to justify acceptance or modification or rejection of the proposed social enterprise for further financing and development. The Appraisal phase, verifies whether the proposed social enterprise is well-founded and is likely to meet the needs of its intended outcomes and beneficiaries. Your feasibility study is an important part of creating your viable and sustainable social enterprise business plan. If a social enterprise is seen to be feasible from the outcomes of the study appraisal, the next logical step is to proceed with it. The research and information uncovered in the feasibility study will support the detailed planning and greatly reduce the research time for the social enterprise business plan. Key to the Feasibility Study is Options Analysis and Risk Assessment For example: Scenario 1 - Expected Scenario 2 - Optimistic Scenario 3 - Pessimistic

Document format and size This is your key research and planning document shared with relevant stakeholders and possibly with potential funders, partners, contract providers etc. with whom you have a good relationship. Format: Include a cover sheet, contacts page, table of contents, executive summary, and followed by key sections of the business plan. The additional, evidence, research, legal, marketing, finance details, risk assessment etc. to be placed in the appendices. Size: Circa 10 to 15 pages (excluding appendices). Your executive summary reflects your feasibility study appraisal. Try to keep this to one page. It is written last but it will need to be positioned at the beginning of the study as an introduction to your report.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 3 1.2

European Federation of City Farms (EFCF)

www.cityfarms.org

Sub-studies may include: Purpose and Objectives People Partnership Working (if applicable) Product(s) Service(s) Market Research Marketing plan Suppliers Procurement (as applicable) Premises Plant, machinery, equipment and transport (as applicable) Governance Legal aspects Insurances Finances - Budgets and Cash Flow forecasts Capital and working capital and investment required Risk assessments See papers 5, 6 and 8

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 3 2.2

European Federation of City Farms (EFCF)

www.cityfarms.org

4. A Social Enterprise Business Plan your key document


Introduction If you are ready to carry out a social enterprise business plan, you have taken your chosen option forward and have most of your research, evidence and largely completed all your consultation, information, advice and guidance. A business plan is a document that provides a picture in words and figures of your social enterprise, what you hope to achieve and how it will operate over a given period. It will help you to develop your idea before any major financial commitments are made. If you need to obtain finance, your business plan is an absolute necessity for helping to convince funders etc. that you are worth supporting. Above all, once up and running, your Social Enterprise Business Plan will be a valuable tool for monitoring performance, and enable you to meet challenges as you go along. Refer to it and update it regularly, so you can see how you are doing compared to your original plan. Preparing the Social Enterprise Business Plan The document needs to be a factual reflection of the proposed social enterprise, without waffle, but containing enough information to enable sensible decisions to be made. Document format and size This is your key document shared with relevant stakeholders, funders, potential partners, potential contract providers etc. Format: Include a cover sheet, contacts page, table of contents, executive summary, and followed by key sections of the business plan. The additional, evidence, research, legal, marketing, finance details, risk assessment job descriptions etc. to be placed in the appendices. Size: Circa 12 to 20 pages (excluding appendices). Your executive summary reflects the business plan. Try to keep this to two pages. It is written last but it will need to be positioned at the beginning of business plan. You will need to make sure you include the following: To make it easy to read, it is best broken down into sections, for example: Executive Summary Introduction to your proposed social enterprise and city farm context; (Inc. Purpose and Objectives) People Partnership Working (if applicable) Product(s) and/or Service(s) Market Research and Marketing plan Suppliers and/or procurement (as applicable) Premises, plant, machinery, equipment and transport (as applicable) Governance and legal aspects Finance Risk assessment Appendices

These headings, can be amended, added to, and/or re-ordered as appropriate - depending on its size, complexity, and the type of social enterprise you are proposing. Your titles and order to form the contents page of the business plan. A professional business plan presentation will reflect your professionalism in being able to deal with users, customers, funders, suppliers, institutions, public sector procurement etc.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 4 1.2

European Federation of City Farms (EFCF)

www.cityfarms.org

Purpose and Objectives The Purpose and Objectives section needs to cover a lot of ground by describing your city farm and what it does. This section should include: An overview of your city farm. Your city farmss legal status (whether it is a charity or a company limited by guarantee, the registered numbers of your charity/company etc). Relevant historical information relating to your city farm information on when how and why it was formed etc. Information relating to the geographical area you work in and the type of members and/or users and/or clients you work with. The nature of the work that you undertake and how you deliver it. Your vision for the future of your city farm.

What your objectives are; what you are seeking to achieve over the life of your social enterprise business plan See papers 5, 6 and 8

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 4 2.2

European Federation of City Farms (EFCF)

www.cityfarms.org

5. Information, advice and guidance for your feasibility study and business plan
Introduction The more sub-studies (research, evidence, calculations etc.) that are carried out in the feasibility study phase, reduces the work and time spent during the business plan phase. More importantly your feasibility study appraisal is more robust and the business plan is much easier to assemble. Social enterprise name If you are going to trade under a name, you need to check with in case anyone else is using it. Your social enterprise name should reflect your enterprise and be easily remembered. EESE: The ethical, environmental, social and economic situation The ethical, environmental, social and economic situation description provides the introduction to and reasons for the Feasibility Study. It sets the framework in which it takes place. WWW research As most environmental, social and economic statistics are widely publish and on the Internet, it is not necessary to fill these pages with statistics! Rather, the most important and relevant numbers should be drawn out that relate to your social enterprise. Importance should be placed on the analysis and situation. An analysis should provide what relevance the research and figures have to the social enterprise. This is the most important area to emphasis. Ethics Ethics is the social justice component of sustainable development. Ethics is a major branch of philosophy, encompassing right conduct and well being. It is broader than the common conception of analysing right and wrong. A key aspect of ethics is "well being", the life worth living or life that is satisfying, which is held by many philosophers to be more important than moral conduct. Inputs, outputs and outcomes Inputs: where your money went; Outputs: what activities etc. you did; Outcomes: what difference did you make?

You need to record your inputs and outputs; but your city farm and your social enterprise needs to concentrate on the outcomes. Note: Public Sector commissioning and procurement is interested in positive outcomes and added value, besides price.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 5 1.7

10

European Federation of City Farms (EFCF)

www.cityfarms.org

Examples of outcomes People, local area and wider society outcomes some are quantitative, but most require qualitative measures as well. The simplest qualitative method is for the beneficiary to write (or dictate) their outcomes and sign and date. Number of jobs created; Temporary jobs created (such as building work); Staff and volunteer development - such as gaining qualifications, enhancing skills, experience, confidence, making friends etc.; Value added services; Service users outcomes such as gaining confidence, qualifications, enhanced quality of life, well being, new skills, making friends etc.; Donations in Kind - such as reducing costs; Local economy spend (multiplier effects); Bringing in external investment and creating outcomes for the city farm and often for the local economy; Additional taxes paid to government, such as Social taxes, VAT, Business rates, (These are easily calculated).

A good Business Plan is one that: shows that your plans are feasible and realistic helps you plan for the future and assess your strengths and weaknesses helps spot future opportunities and threats helps to identify risks and how you will deal with them shows how you will monitor success and manage any setbacks

The Work You Do In this section you need to provide an overview of all your city farms current activities and how they fit together as well as detail on each individual product or service. A section which relates specifically to your social enterprise for which you are seeking investment. This should include a description of what you propose to do, why you want to do it, how you will do it and how you will know whether or not you have been successful. This section should also include detail about how the funded social enterprise would be managed, staffed, promoted and evaluated. You should include a description of how much your proposal will cost and how you will fund it, including details on how much of your funding package is already secured and when you expect any outstanding funding to be secured. You should explain why an investment is required, and the other options you have explored to fund your proposal. Potential funders need to understand how your proposal differs from what you do now and why you think it is needed. Your Plan should aim to provide evidence of that need and to explain why it is the best option to meet your aims. This evidence could include an analysis of the need for the proposal, a survey of similar or related services provided (or planned) by other organisations, and/or an options appraisal to show that you have considered different ways of achieving your objectives. Analysis The importance of SWOT, PEST, Risk analysis and other analysis tools are useful; but what you need to do here is analyse what is happening in the world inside and outside your organisation. Certainly the techniques described can be useful but all you really need to do is consider the world in which your organisation operates.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 5 2.7

11

European Federation of City Farms (EFCF)

www.cityfarms.org

SWOT analysis means looking at the Strengths and Weaknesses of your social enterprise and the Opportunities and Threats that face it in the future. Strengths and Weaknesses are essentially internal issues and usually Opportunities & Threats are external. PEST analysis means considering the wider environment in which your organisation operates using Political, Environmental, Social and Technological. These, like the SWOT analysis, set the background for the rest of your Plan. More than anything else, both are designed to make organisations think about their future and help to ensure that all necessary elements have been included in the Plan. Risk analysis is the comparison of the risk of a situation to its related benefits. There are many definitions of risk that vary by specific application and situational context. One is that risk is an issue, which can be avoided or mitigated (eg a potential problem that has to be fixed) Risk is described both qualitatively and quantitatively. In some texts risk is described as a situation which would lead to negative consequences. Qualitatively, risk is proportional to both the expected losses which may be caused by an event and to the probability of this event. Greater loss and greater event likelihood result in a greater overall risk. The definition risk often simply is: Risk = (probability of risk occurring) x (impact of risk occurring) People This is a description of you and any other key people (except any partners, which you should outline in a separate section). For example, directors involved in the management of the social enterprise, trainees, volunteers and paid staff. If CVs are available, they could be included in the Appendices, along with the job descriptions of any staff, trainees or volunteers you will have to recruit. The crucial points, in addition to the names of the people are: work experience and past training experience of the sector into which you are going or already operating any relevant qualifications held what staff you will require now or in the period covered by the business plan

You should show what the organisational structure will look like, and provide details of the roles and responsibilities of all of the people involved. Partnership Working You should identify any partnerships you have, or intend to have, in order to achieve your aims, and give their contact details. It is important to explain how the partnership will work, for example roles and responsibilities, management, and what the monitoring arrangements will be. Letters of intent or some form of written evidence of the partnership should be attached in the Appendices. Products and/or services The level of detail required in this section will depend on what service (s) you are providing. The less well known it is, the more detail required, including, where possible, drawings or photographs. In the case of a service, this should be explained in as much detail as possible. Are there any "extras" you will sell in addition to the main product or service? You should define the full range of the product or service you intend to offer, outlining the benefits to your customers/users. If relevant, explain your pricing policy and how it relates to your competitors. Market Research and Marketing This is one of the most important sections of your social enterprise business plan.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 5 3.7

12

European Federation of City Farms (EFCF)

www.cityfarms.org

Remember the marketing concepts. Place: (some say location, location, location) Price: How much you charge based on expected income and expenditure Product: How attractive are your service(s) and/or products People: People are your most important resource Publicity: Attractive, well laid out, key information provided, web site, media

You should be able to show that there is a clear demand for what you are providing. Describe any methods you used for market research, for example, surveys or questionnaires, community meetings. Also include reference to any documents which identify the local needs you will be addressing. Any figures and details obtained should be included in the Appendices. Your research should be able to show: what area you will be covering and how large the potential need is whether the need is growing, static or declining if there is a seasonal cycle who your customers/users are for example general public; businesses; schools; voluntary groups; faith communities what, if any, the competition is. List their names and locations as appropriate what advantages, if any, these competitors have over you and what advantages you have over them

Other questions about marketing that you should answer are: how will you be promoting the business? What forms of advertising will you use? do you need brochures, price lists and so on? what are your terms of trading? how are you going to sell? will you be expected to issue written quotations? how will you get the goods to the customer (where applicable)? what will your opening hours be? how will people reach you? Answer phone, telephone, email? what image do you project? reflect your image and one element can ruin or enhance your image. what is your sales forecast for the next 12 months? Do you have any actual orders yet or letters of intent?

Suppliers/procurement You will need to state who will be supplying any materials to you. For example, supplies could come from local producers. Explain what would happen if you relied on one supplier through a contractual agreement which was not renewed. One supplier can start dictating terms from a position of strength, so if at all possible, avoid relying on one supplier - and if you cannot avoid it, try not to let them know! Public Sector contracts are similar! Markets It is vital that you have a market for anything you will sell or service you will offer. Do some market research to see if there is a demand for what you are providing. Check the number of people in your area who are doing similar things it may be that your idea is completely new and will have a large market, or there might be lots of people doing similar things, who have been doing them for a long time, which may mean you have more difficulty establishing your place in the market.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 5 4.7

13

European Federation of City Farms (EFCF)

www.cityfarms.org

Note: It should be remembered that without a good marketing and action plan, you are unlikely to raise funding, loans, donations in kind, etc. Good first steps could be: seeing is believing tours of established and relevant social enterprises Premises Give details of the type of premises you are going into or already occupy and why they are suitable. State the size, as applicable rental or lease terms, and what services are provided. Before committing yourself to a binding contract, consider: how long will these premises be suitable for any costs involved of converting the property for your use, including security. what were the premises used for before? whether planning permission and/or building regulations are required whether any other permission is required, such as Environmental Health.

Building Work If your proposal involves building work, most funders expectations of your building plans are to be as well developed as possible. Ideally, property proposals will be developed by your architect, (ideally with planning permission granted) For significant building work, you should also provide details your options appraisal; the professionals you have engaged and your plans for project management; the brief given to your architects; the source of your costings; (or similar building professional); and an indication of the progress of your planning application. You should include a statement on access to demonstrate that you have considered the needs of all potential users. You should also clearly state the tenure on the property. Detailed financial information to be included under Finance. Plant, machinery and Equipment You should list, with prices, all the items of major equipment which you need before you can start trading. It is a good idea to get at least two or three written quotations for each item, considering second hand, refurbished or hiring whenever possible. Remember too that some items will need replacing as they wear out. Any quotations obtained for plant and equipment should be included in the Appendices, especially if you are looking to raise finance. Transport If you need a vehicle, state the type and costs incurred. In some cases, it may be better to hire or lease. Whenever possible, it is a good idea to look at electric or other alternative options (such as pedestrian controlled vehicles). Legal Aspects A social enterprise evolves under a legal framework. These rules and regulations must be respected, but more importantly they help protect your social enterprise, such as; legal structure requirements, insurances, VAT, equalities, employment . A further consideration is the inclusion or not of partnership working and/or procurement, which involves legal agreements and contracts Licences and/or permits Do you need any licences or permits for handling, storing or transporting? There may be costs associated with obtaining licences, but you may be exempt from payment, so check.
Paper 5 5.7

Developing a viable and sustainable social enterprise on your city farm | November 2008

14

European Federation of City Farms (EFCF)

www.cityfarms.org

Legislation Are you familiar with the various legal requirements which could affect your social enterprise? Insurance What insurance will you taken out? There may be compulsory ones you need, so check. Finance This is an important part of your feasibility study and a critical section of your business plan. Potential funders and investors pay a lot of attention to it when considering whether or not to support your social enterprise. You will include figures which show how your social enterprise will operate and what monies are expected to flow into and out of it. Budgets and Cashflows It is essential that your organisation understands that Budgets and Cashflows are very different things; Budgets seek to give an overall picture of the levels of income and expenditure that are expected over the year. They do not seek to reflect the actual timing of money that flows into and out of your social enterprise. Cash flows aim to ensure that your social enterprise will have enough money in the bank to allow it to pay for all the goods and services it may need throughout the year. As well as reflecting the actual timing of money moving in and out of the organisation, Cash flows also take into account the money available at the start of the year and give a figure for the money that will be available to your social enterprise at the end of the year. Many organisations go bankrupt each year because, although they had a full order book, they did not have enough cash available to pay their bills. Budgets need to list the sources from which you anticipate receiving income during the year and the expenditure you will need to make. The figures should show annual estimates for the current financial year and the 3 following years in the business plan. They should be submitted as a spreadsheet, and should cover your organisations finances as a whole. A separate, more detailed, budget should cover, in detail, the income and expenditure for the social enterprise for which you are bidding for support. You will need to include detail of any assumptions you have used in the creation of these spreadsheets (rates of inflation etc) See paper 6. Specific Guidance on Budgets and Cash flow. Cashflows need to show the actual cash position of your organisation & should, again, be submitted in spreadsheet format. This needs to show month-by-month figures for the remainder of your current financial year and the subsequent 12 months & then should be projected on an annual basis for 2 more years after that. Your figures need to be your best estimate of what will actually happen over the year. When you have prepared these figures, please comment in your main Plan on which income streams you are certain of, & which you are not. Also indicate what the effect of reduced income sources would be. Ideally funders like to see you commenting on 3 financial scenarios: A realistic projection of your organisations development A worst case (the effect of any uncertain sources of income failing to be secured) A best case (where income might exceed your realistic projection)

They would expect that this work will also help you in assessing the risks for your organisation and what you will do if they need to be addressed.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 5 6.7

15

European Federation of City Farms (EFCF)

www.cityfarms.org

Including Investment Figures Remember to follow your estimated timing for the project so that you include injections of funding from funders grants and/or loans during the months when you wish to draw down the money. For loans include repayments. Income You need to show how much you expect to get and why: How much have you already got to put in, both in cash and "in kind"? Do you expect any grants, and if so, how much, when and from where? How much income in sales/charges/contracts do you expect the social enterprise to get when it is fully established and running? Realistic and evidenced. How long do you think it will take to get the social enterprise fully established?

How much the total social enterprise costs are to set up. How much you can put in from secured sources (in cash and kind) how much funding you are looking to secure. how exactly the money will be used. what security, if any, you can offer. what contingency plans are in place eg illness, breakdown of equipment, theft.

Cost-benefit analysis (CBA) is a term that refers both to: a formal discipline used to help appraise, or assess, the case for a project or proposal or social enterprise and an informal approach to making decisions of any kind. Under both definitions the process involves, whether explicitly or implicitly, weighing the total expected costs against the total expected benefits of one or more actions in order to choose the best or most profitable option. Social Return on Investment (SROI) analysis builds upon the logic of cost-benefit analysis, but differs in that it is explicitly designed to inform the practical decision-making of social enterprises focused on optimising their ethical, social and environmental outcomes as well as financial viability. Putting your Plan into Practice Include a timeline of key tasks and activities and/or a work plan for the first year of your social enterprise proposal. You should explain how you will monitor and review your plan and who will be responsible for doing this. Business plan appendices This may be a volume two, enabling readers to easily consult the appendices Budgets and Cash Flow Forecasts Option analysis Risk assessment Summary of options appraisal in scoping study and feasibility study.

Include copies (where relevant) of: Research evidence Publicity brochures etc. Price lists Photographs/drawings/plans Contracts and agreements Job descriptions CVs of key personnel Key letters of support..
Paper 5 7.7 16

Developing a viable and sustainable social enterprise on your city farm | November 2008

European Federation of City Farms (EFCF)

www.cityfarms.org

6. Specific Guidance on Budgets and Cash flows


Introduction If you have not produced a social enterprise business plan and the associated financial information before there are a number of things that you should bear in mind when creating budgets and cashflows: Budgets Make them as accurate as possible; check what the actual figures are. Do not guess what will you spend on salaries, utilities etc look at what you have paid previously or what other people are paying for similar posts. Dont forget to include other staff costs such as National Insurance, pensions, expenses etc if they are relevant. Include an allowance for inflation each year this will affect the costs of employing staff as well as many other items of expenditure. It is unrealistic to expect to pay the same year-on-year and your staff may be unlikely to continue to work without an increase in their salaries! Make certain you include everything! A budget should contain all the costs of running your organisation from rent to rates and from the cost of supplies to utility bills. If you are producing a budget on a spreadsheet and feel the sheet is getting too detailed, think about creating a series of sheets all linking to an overall summary spreadsheet. For example, you might have one for the costs of running your premises (containing items such as heat, light, business rates etc) and then have the total of this sheet going forward to your overall summary spreadsheet. When you think your budget is complete, sit back and review it carefully. Does the overall picture seem to reflect your experience of the way the organisation has run over the last few years? Does it feel right to you? It is common at this stage to find that some areas have been omitted or even over budgeted and this reality check is a good way of finding such errors. If there are significant variations between the figures you submit to funders and your organisations historic performance you will need to explain any major differences. Cash flow The essential difference between budgets and cashflows is best demonstrated by an example. Suppose your city farm has a post funded by a grant from the local authority. The person filling the post works full time, 12 months of the year, but the Local Authority pays the grant in quarterly instalments and 3 months in arrears. A month by month budget would usually show the expenditure on the persons salary as spread evenly over 12 months and would normally show the income spread over 12 months as well. This reflects the way the organisation thinks about employing staff - they are paid every month so it is normal to match up the income and expenditure in a similar fashion. That is far from what would actually happen in cash terms - the cashflow would show the actual situation so the payment for April, May and June would come in a single lump sum payment in September - even though the salary payment has to go out each month! This could give you a real problem of paying the salary costs for up to 6 months before receiving any grant towards the costs. If this pattern were repeated across a number of budget areas, such cashflow variations could make a significant difference to the amount of cash (often called working capital) you would need to keep your organisations finances in a healthy condition. You therefore need to bear this in mind when creating your cashflow make sure it reflects when the money will actually arrive and when it will leave your account to pay your bills.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 6 1.2

17

European Federation of City Farms (EFCF)

www.cityfarms.org

It is easier to construct your budget first and then build your cashflow from that; once you know how much you need to raise or spend then you can think about when it is likely to arrive or leave. Include both opening and closing cash balances in your cashflow since a cashflow seeks to reflect the amount of cash in your social enterprise - how much you started, and will finish, the year with. The opening balance (the amount of cash your organisation had prior to the start of the cashflow) must link either to the figure in your last set of audited accounts or to the last set of management accounts produced in your organisation. In this way funders can be sure that the amount of cash shown in your organisation is accurate. Conclusion: Make sure that the same data is provided in a clear and understandable form.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 6 2.2

18

European Federation of City Farms (EFCF)

www.cityfarms.org

7. Your City Farm your reputation and your story


Introduction The people involved in your City Farm are youre most precious resource; but second is your City Farms reputation and your story. A good story and reputation can attract investment, resources, support and help. Has your city farm established a reputation and record of being? . Open-source co-operation Where, all stakeholders, (particularly members, staff, volunteers and users) are invited to offer solutions, guided by an agreed set of targets. Starting with shared goals, backed up by regular and rigorous feedback, your city farm can engender ideas, actions and commitments from all parts of the community. Your story - If you cant provide it how can others be expected to understand you! Your story is critical to your whole existence Potential members, users and funders are looking for sense and meaning A story permits meaning and memory Lists are hard to remember, stories and concepts act like mnemonics Uniting emotion and intellect Stories can recount a complex narrative Your story must be: - Authentic- Comes first- Is out there Remember - You cannot control it Innovative, imaginative and creative Democratic, open, transparent and trusted Public service ethos that is responsive and flexible Representative of and good reputation with your members and users Focussed on providing benefits and understanding and meeting identified needs Providing high quality products and services and added value Committed to equalities & sensitive to cultural differences Committed to sustainable development, inclusion, well being and a quality of life Maintaining a range of specialist knowledge, expertise and experience And skilled and experienced in networking, working collaboratively and in partnership

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 7 1.1

19

European Federation of City Farms (EFCF)

www.cityfarms.org

8. Consistent appraisal of the social enterprises, services, projects, programmes and policies
Introduction Your Management Committee, key staff, volunteers, members, users, partners, collaborators and other stakeholders to: Improve the position, role and range of services offered and delivered by your organisation. Ensure sound governance of your city farm. Demonstrate evidence of systems to ensure transparency and accountability for your actions.

An inherent tension There is an inherent tension between the desire to respond and make the most of the opportunities that exist to develop your city farm; at the same time minimising risk, protecting reputation and not overstretching your capacity to deliver effectively. Addressing this conundrum There is a need for a simple and consistent method to ensure all proposals are evaluated before significant funds and resources are committed. To set the standard for a clear social enterprise case that has evidence and is focussed on identifying and realising the benefits of a proposal. Consistent appraisal and evaluation of services, etc., including how past and present activities should be evaluated, is an important tool in ensuring that your limited resources are used in the most efficient way. It helps your city farm to manage risk and be a learning organisation. Effective appraisals should not be overly complicated; but need to be carried out carefully as decisions taken at the appraisal stage affect the whole lifecycle of new services, projects, etc. Remember! Evaluation of your previous initiatives is essential in avoiding any past mistakes and enabling you to constantly learn from experience. The purpose of the assessment The purpose of the assessment is to ensure that no service, programme or project is adopted without first having the answer to these questions: Are there better ways to achieve this objective? Are there better uses for these resources?

Appraisal and Evaluation Cycle Appraisal and evaluation often form stages of a cycle formalised in the acronym ROAMEF (Rationale, Objectives, Appraisal, Monitoring, Evaluation and Feedback).

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 8 1.4

20

European Federation of City Farms (EFCF)

www.cityfarms.org

ROAMEF CYCLE

Identifying Objectives and Targets The following questions help to set suitable objectives and outcomes What are we trying to achieve? What are our objectives? What would be a successful outcome or set of outcomes? Are our objectives consistent with our strategic aims and objectives? How might our objectives and outcomes be measured? Are our objectives defined in a way that they can be monitored? What factors are critical to success?

Targets help in producing outputs, delivering outcomes and meeting objectives. Targets should be SMART: Specific Measurable Achievable Realistic -Time-bound. Ask yourself: What SMART targets can we then set? What targets do we need to meet? Appraising the options This is to help develop a value for money solution that meets your objectives. Creating and reviewing options helps you understand the range of action that you may take. A shortlist of options to keep the appraisal process manageable. Note: shortlists should still try to cover a wide range of potential action including the do minimum/nothing option. Reasons for the rejection of excluded options to be recorded. The costs and benefits of options to be valued, and the net benefits/costs calculated. This enables you to compare the results between options to help select the best. Income & expenditure budget & cashflows are for the affordability of a proposal; but, they do not provide the opportunity cost and cannot be used to understand the wider costs and benefits.
Paper 8 2.4

Developing a viable and sustainable social enterprise on your city farm | November 2008

21

European Federation of City Farms (EFCF)

www.cityfarms.org

Adjusting for Bias and Risks Optimism bias There is a tendency for appraisers to be optimistic. A phenomenon of the private, public and social economy sectors; tending to overstate benefits, and understate timings and costs. Addressing optimism bias Appraisers to make explicit adjustments for this bias; by increasing estimates of the costs and decreasing, and delaying the receipt of, estimated benefits. Adjusting for optimism bias To provide a better estimate of a service etc. Adjustments for optimism bias is designed to complement and encourage existing good practice, in terms of calculating project specific risk adjustments and to encourage more accurate costing. Assessing Uncertainty An expected value is a useful starting point for understanding the impact of risk between different options. But however well risks are identified and analysed, the future is inherently uncertain. So it is also essential to consider how future uncertainties can affect the choice between options. Scenarios Scenarios are useful in considering how options may be affected by future uncertainty. Scenarios to be chosen to draw attention to the major technical, economic and political uncertainties on which the success of a proposal depends. Scenarios by asking simple what if questions. It may also be helpful to undertake some sensitivity analysis within a scenario. Preventing and Mitigating Risks and Uncertainty Following the identification and analysis of risks, the generation of an expected value, and an assessment of options exposure to uncertainty, appraisers need next to look at strategies to prevent and mitigate the risks and uncertainties. The following may be adopted: Consulting early Avoiding irreversible decisions Carrying out pilot and/or scoping studies Building in flexibility from the start Taking precautionary action Transferring risk through contractual arrangements (eg insurance) Developing less risky options Developing different options; or Abandoning the project because it is too risky

Performance management and measurement Performance Management involves tracking the success of a service, programme or project in achieving its expected outcomes. For appraisal and evaluation purposes, it involves the collection of data relating to the financial management and outcomes of a service etc.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 8 3.4

22

European Federation of City Farms (EFCF)

www.cityfarms.org

This provides an essential source of information for: The extent to which objectives/outcomes are being achieved, Giving an early warning of potential problems, The possible need to adapt the service, programme or project to ensure success.

Monitoring provides information for evaluation. To be fully effective, plans for monitoring must form part of the initial planning of a service etc. Evaluation Evaluation examines a service etc., against what was expected, and to ensure that lessons learned are fed into decision-making and to ensure your city farm refines what best achieves the objectives. Appraisal and evaluation are similar each identifies and measures, where possible, the direct and indirect outcomes of the service etc. The main difference is that evaluation tends to be based on actual data, and appraisal on forecasts and projections. The evaluation should include the following: An assessment, quantified where possible, of what happens A comparison with the target outputs and outcomes Why the outputs and outcomes differed from that foreseen in the appraisal How effective the activity was in achieving its objectives, and why The cost effectiveness of the activity and What the results imply for future management

The results should lead to recommendations for the future, for example, changes in procurement practice, delivery, or the continuation, modification, or replacement of a service or programme. Conclusions An appraisal process that is: Consistent - Repeatable - Predictable - Managed - Measurable Controllable. But to keep it as simple as possible Benefits include: Creation of a common language to improve understanding and communication; Consistent execution of project processes; Reduction of non-value added time in and around projects; Projects can concentrate on the service/enterprise issues rather than reinventing project processes (or missing them out!); Focus on delivering and realising benefits; Focus on identifying and evaluating risks; An important building block in improving your governance and accountability; Better use of time in getting it right first time!

Source: This guidance paper has been adapted from; Consistent Appraisal Good Practice paper by John Crowther and Mike Primarolo, FCFCG Board Members; who adapted the widely adopted systems set out in the Office of Government Commerces publications Managing Successful Programmes, and Business Benefits Through Project Managementand HM Treasurys The Green Book.

Developing a viable and sustainable social enterprise on your city farm | November 2008

Paper 8 4.4

23