Rookie Mistakes Social Ventures Make in Business Plans

You have a great idea for a world-changing social venture. You can’t wait to get started, to get it off the ground, and to create positive change for the people who will benefit from your venture. But first, you need funding.*

Whether your social venture is for profit or not-for-profit, you’ll need a business plan.** Business plans can vary greatly in terms of content and format, but they serve two purposes: 1) articulating the details of how your venture is going to work and be successful, and 2) if you’re looking for outside investment, they communicate your vision, plan, and a level of confidence in your ability to execute to potential backers.

While foundations and other sources of funding for not-for-profit ventures may not want to see or read a full business plan, the principles are the same: you need to have a clear understanding of — and be able to clearly articulate — why and how your venture will be successful.

I’ve been on both sides of this equation: as the founder of a for-profit social venture, I wrote a business plan, and iterated on it many times over many years as the company grew and as market dynamics changed. I pitched it to social venture competitions, angel groups, and venture capitalists. It was successful in raising both seed funding and an angel round.

I’ve also read and evaluated many business plans, as both a judge and mentor in several business plan competitions, and teaching an entrepreneurship course for the past 5 years at Georgetown University.

Here are three rookie mistakes social ventures make in business plans:

• A solution without a problem/a product or service without a market. Ideas are great. They can be really exciting. Many entrepreneurs get excited about describing the idea — and why it’s great and innovative — without describing what problem or pain point it is addressing for a market that has a demonstrated willingness to pay for a solution (or, in the case of some social ventures, a market that has a desire to use the product or solution, and a third party with a demonstrated willingness to pay for it). An idea without a demonstrated market is just that — an idea. An idea with quantified market demand can become a business.
• Thinking that your venture has no competition because no one has done exactly what you’re proposing. It may well be the case that there isn’t another company or not-for-profit that does exactly what you’re proposing. But it’s a mistake to think that that means you don’t have any competition. Think about the person (or organization) who will make a conscious decision to use your product or service. What are they doing now? Even if they’re not using a related product or service, they are spending time and/or money on other things that will have to be displaced by your service. You need to know what those things are, as well as other solutions that may be somewhat like yours that will compete for your audience’s attention — and money.
• Not clearly explaining what your venture’s social impact will be. It may be obvious to you, the entrepreneur, but you need to make it explicit to your reader, particularly as more and more ventures (even the traditional variety) incorporate social elements. What is particularly impactful about your venture?

While these aren’t the only issues that can hurt a social venture’s chances of success, they are critical issues for a young social venture to address.

So start with the problem you’re solving, explain how you’re solving it better than anyone else — and why people will consistently choose you to solve it, describe your impact in concrete terms, then go build your social venture.

* Note: not every venture needs — or should pursue — outside funding. In fact, revenue is the best source of funding. But if your venture won’t generate revenue immediately (or, possibly ever, which is only ok if your venture is a not-for-profit that generates income through public support), you may need to turn to other sources.

** Not every venture will write a full business plan (though I would suggest that there is value in going through that process). The same principles addressed here apply to creating a business model canvas or a pitch deck for your venture.

A version of this piece was first published in Forbes.

image from https://pixabay.com/static/uploads/photo/2015/08/16/17/29/business-891339_960_720.png