Keeping on top of income streams, expenditures and projections will keep everything in your social enterprise running smoothly. Growth can only get going in a financially sustainable organisation, so this lesson is about gaining and maintaining financial stability — or even prosperity!
Social Entrepreneurs Discuss
You need to ensure that the products or services you create bring money to the organisation. Whilst planning your prices, be sure that you are considering the total costs and time spent on producing the product or service. You want to ensure that you are making a profit on the individual units you sell so that money returns to the organisation. You often hear the terms ‘net’ and ‘gross’ profit within profit margins. Gross profit is the profit you make after taking away the direct costs of pro...
You need to ensure that the products or services you create bring money to the organisation. Whilst planning your prices, be sure that you are considering the total costs and time spent on producing the product or service. You want to ensure that you are making a profit on the individual units you sell so that money returns to the organisation. You often hear the terms ‘net’ and ‘gross’ profit within profit margins. Gross profit is the profit you make after taking away the direct costs of producing a product or service. For example, if it costs you 10 euros to produce a product and you sell them for 15 euros, the gross profit would be 5 euros. Net profit is the profit or surplus a social enterprise has left after all overheads and expenses are made – all income minus all expenditure.
Cash flow is the movement of money in and out of your business regarding income and expenditure. You might be in a situation where you are waiting for invoices to be paid to afford to pay for equipment or wages. Ideally, you want a positive cash flow where more money is coming into the organisation than is going out. Try and get creditors to pay you as early as possible so you are not waiting for money to come in, allowing you to continue to pay business costs and expenses.
Often within business plans or grant applications, you may be asked to project future income. This can prove quite tricky as we don’t know the future; however, we recommend that you consider your business's size and customer base and then make modest but incremental projections. Whilst projecting income, some people can be very ambitious and project very high amounts of income. While this may seem like a good idea, if there’s no backing for such high projections, then investors/funders will think you don’t possess a good financial understanding of your enterprise.
Journalists Jonathan Bone and Peter Baeck speak to nine crowdfunding platforms supporting good causes in the UK about what motivates them, how they can help you reach your crowdfunding targets and what advice they’d give anyone launching a crowdfunding campaign.
Accountancy software can make running your business quicker, simpler, and easier, and there are some great free solutions out there. Check out these options and find the right fit for your business.
Blue sky thinking refers to brainstorming with no limits. With this approach to idea generation, ideas don't need to be grounded in reality. Rather, blue sky thinking sessions are open to all creative ideas regardless of practical constraints. The allure of blue sky thinking is based on the premise that ideas beget more ideas. This resource will explain a little more about this approach to idea generation.
Having a way to track your income and expenditure is really invaluable, so this lesson's activities include a log you can use for your first six months. Don't forget that you can reuse these templates if you want to track further ahead!
Unlike many other entrepreneurs, money might not be something you care about or feel comfortable dealing with as a social entrepreneur. Unfortunately, you can't build a social enterprise without getting well-versed in the 'enterprise' half of your social enterprise. The social and financial halves will always work interdependently. Hopefully, this lesson will help you to break down your financial management and get you thinking about making money!