Wednesday, 9 November 2011

A health check on our social enterprises' & charities' business models

In times likes this, it can be hard to stay afloat. I'm currently designing the business model for my new social enterprise - more about that another time - but conversations over the last few weeks about organisations staying afloat made me think; how can we ensure that our business models work? Here are 6 tests that I use:
  1. Making sure our cash cycle is ok: How are we day-to-day with finances? Do we have enough regular income to stay in the black - or not to go too far in the red?
  2. Keeping costs to acquire customers as low as possible: Are our costs to acquire customers affordable in comparison to the work we currently have and the work we are bidding for?
  3. Ensuring our sales cycle is not too long: How long are we waiting until we close a deal with an individual, organisation or government body? Are we waiting too long and investing too much time in the deal at the expense of our organisations? Business is all about selling and not pitching at the end of the day... 
  4. Making sure we get money quickly through our door after a sale: Can we ensure that we receive moneys owed from the sale quickly?
  5. Are our contribution margins are enough to cover the fixed cost structure: What do I mean by this? Our fixed costs (rent, rates, salaries etc) have got to be covered by the margin we make on everything we sell
  6. Make sure that our revenue can carry the business as a whole!
What tests do you use to look at your financial model?

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