Module 5. Green Business and Developing Business Models

INTRODUCTION

THE GREEN BUSINESS PLAN GUIDE

“Do not wait to strike till the iron is hot, but make it hot by striking.” (William B. Sprague).

Innovative business ideas have the power not just to generate proﬁt, but to solve critical environmental problems and transform underserved communities as well. The best solutions will come from within these communities.

This guide is intended for ﬁrst-time entrepreneurs with limited business experience.

WHAT IS A GREEN BUSINESS?

The green economy is new and evolving rapidly. “Green business,” like many terms in this emerging market, can take on different meanings based on context and speaker.

WHAT IS A “GREEN” BUSINESS PLAN?

A conventional business plan aims to demonstrate the ﬁnancial viability of the proposed venture. A green business plan must also account for the environmental and social impacts of the proposal. This is called a triple-bottom-line approach: measuring success according to the impacts on people, the impacts on the planet, and the generation of proﬁt.

BUSINESS DEVELOPMENT SUPPORT

No two green entrepreneurs are exactly alike. They come from an array of communities,

backgrounds and industries. Even so, green entrepreneurs do have a number of things in common:

They are inspired by an idea or business opportunity that seeks to protect natural resources or help achieve social equity.
They are hard working and persevere in the face of challenges.
They need support to succeed.

GETTING STARTED

Set personal goals for completing your business plan

Draft a basic timeline with targeted goals you would like to reach and the dates by which you would like to reach them. Concrete, time-speciﬁc objectives are a good way to hold yourself accountable and stay on track.

Think through how your business will contribute to the green economy

Before you begin writing, spend some time brainstorming all of the ways that your business will contribute to the green economy. Consider your product, service, internal operations, and the local economy.

Product

Can you use locally sourced materials to produce it?
Can you use sustainable or recycled goods to produce it?
How can you minimize the waste and harm to the environment during the manu- facturing process?
Is it possible to employ disadvantaged workers (e.g., at-risk youth or the formerly incarcerated) during the manufacturing or distribution processes?

Service

Will your service reduce greenhouse gas emissions?
Will it provide opportunities for green-job training?
Will it educate consumers about environmental or social justice issues?
Will it provide consumers with the opportunity to reduce their environmental impact?

Internal Operations

How will you minimize waste generated by your business?
How will you reduce greenhouse gas emissions associated with your business activities?
How will you conserve natural resources as part of your operations?
How will you conserve energy?
How will you create a green supply chain?
Will you focus on creating green job opportunities?
Will you hire from underserved populations?
How will you educate employees about your green initiatives?
How will you monitor and report progress on your green initiatives?
How will you ensure a safe working environment for your employees?

Local Community and Economy

How will your business affect other local businesses and non-proﬁt organizations?
Will you offer job-training services, which could enhance job skills for the unemployed?
Will you give back to the community through services, donate a percentage of proﬁts or donate products or services?
Will your business or facilities contribute to redevelopment in distressed communities or urban areas?
Will your business stimulate economic growth for your community as a whole?

Stakeholder Analysis

Another preliminary exercise is the stakeholder analysis. A stakeholder is anyone who will be impacted by your business, or anyone who has a strong interest in what you do or produce. Take 15 minutes to compile a list of your key stakeholders.

Some potential stakeholders to consider:

Customers.
Employees.
Community members.
Non-proﬁt organizations.
Community groups.
Other business owners.
Politicians.
Suppliers.
Investors.
Lending institutions.

THE CONTENTS OF A GREEN BUSINESS PLAN

I. Cover Page

Your cover page should include a title for your plan, such as Recycling Gurus: Draft Business Plan and Financial Overview.

II. Executive Summary

(Although the Executive Summary appears ﬁrst in your document, it should be the last section you. Write after you have completed the entire plan.)
The executive summary is a succinct, 1-2 page “snapshot” of your green business plan. It is arguably the most important section of your plan because it will give the reader— and potential investor, advisor or partner— her ﬁrst impressions of your business.

III. Mission Statement and Objectives

Mission Statement

A mission statement encapsulates your business’s philosophy, commitment to green initiatives, and reason for being. As a green business, sustainability and social justice initiatives should be at the core of your philosophy and guiding mission.

Here are a few examples of mission statements from green enterprises and non-proﬁts:

Green For All’s mission.
Solar Richmond’s mission.
Green Home’s mission.

Objectives

Directly below your mission statement in your business plan, you should list at least three clear,

achievable objectives you plan to accomplish with your business.

IV. Company Description

In this section of the plan, you will provide a general description of your business and highlight your reasons for starting it. What is the environmental or social need?

You will also need to include the following sections.

Company Overview.
Background information.
Ownership.
Location and Facilities.
Third-Party Validation (optional).

V. Products and Services

The next section must provide a detailed description of your products and services. As you are writing this section, be sure to address the key green features and beneﬁts of each product and service you will be offering.

VI. Market Information

Market research is a critical aspect of writing a business plan. Before you prepare a marketing strategy to draw customers, you must make sure you understand the marketplace.

VII. Marketing Plan

Depending on your product or service, your location, and your market, your status as a green, sustainable and socially conscious business can be a powerful tool to differentiate you from the competition.

The 4 P’s of Marketing

Product: this refers to services as well as physical products. You will need to make a variety of decisions about your product, ranging from the name of the company to the type of packaging you offer. Each of these decisions will convey a marketing message to your consumer. Make sure that your green focus is consistent throughout your business model.

Price: remember that the price you charge serves as a marketing signal to consumers. If your green product costs less than traditional alternatives, you will need to use other areas of your marketing mix to explain why that is the case—particularly since green products often come with a price premium.

Place: you’ll need to ﬁnd a way to distribute your products, perhaps through a retailer, or maybe through your own store or website. Whatever sales or distribution channel you use, you should make every effort to ensure that your commitment to the environment and social justice is clear. For instance, manufacturing organic candy bars but selling them only at gas stations (rather than health food retailers or grocery stores) would not be properly incorporating “place” into your marketing mix.

Promotion: this includes all information, advertising, and public relations for your product and business.

Be sure to properly educate your consumers about all of the green aspects of your product/service, as well as your company’s overall commitment to triple-bottom-line principles. You should also be sure to use collateral and brochures made from recycled, non-bleached paper and non-toxic inks, further underscoring your green focus.

Your operational plan should also consider the following topics.

Personnel

You should calculate the number of full-time equivalents (FTE) job positions that your business will create. (This information may help you receive grants and loans because many government agencies aim to support businesses that create jobs for the local economy.) In addition to the expected number of FTE jobs, include brief descriptions of the positions and the skills that they will require. You should also note if you plan to offer job-training services to employees, community members, or interns.

Suppliers

Creating a green and socially just supply chain is a critical element of ensuring that you adhere to triple-bottom-line principles in your business operations. One way to build a green supply chain is to develop criteria that your company can use to select suppliers that are aligned with your mission.

Some examples of green, socially just supplier criteria:

Choose local suppliers when possible.
Choose suppliers who have clear and transparent sustainability initiatives to re- duce waste, conserve natural resources and minimize greenhouse gas emissions.
Choose suppliers who offer organic and fair-trade certiﬁed products wherever possible.
Choose suppliers who offer environmentally sound products (e.g., a printer who uses 100% post-consumer paper products to print your marketing materials).
Prioritize suppliers who hire from underserved communities.
Legal Environment.

If applicable, be sure to address whether your business must comply with any state or federal regulating agencies, as well as whether you’ll need special permits or licenses to operate.

IX. Management

It is often stated that investors invest in “people, not ideas,” which means that your business plan must communicate why you are the right person to launch and manage this green business. Detail any personal or professional experience in the green industry or related ﬁelds. Describe any life experiences that give you special, ﬁrst-hand insight into the impacts of—and solutions to—environmental degradation and social inequality.

Management Team. Identify each member of the management team, and high- light his or her key responsibilities and relevant experience.
Advisors. Describe any additional support you will receive from an advisory board, consultants, or your board of directors. Be sure to list their names, titles and afﬁliations.

X. Financial Plan

The failure of many startup companies can be traced to undercapitalization. The ﬁnancial portion of your business plan should demonstrate that you have thought through every aspect of your start-up requirements, and have estimated the funds needed to carry you through your ﬁrst three years of operation. Potential funders, such as investors and bank lenders, will want to see your ﬁnancial projections and forecasts before deciding whether or not they will fund your plan. We recommend that you seek advice and support in crafting this section of your plan to ensure that your projections are as reliable as possible.

The Financial Plan is one of the most critical pieces of a business plan (particularly from a funder perspective), and this guide does not provide an exhaustive examination of how to craft it. Other existing resources already do an excellent job of this. That said, the follow- ing items should be contained in any green business plan:

Startup expenses and sources of capital (e.g., owner investments, third-party in- vestments, loans, grants and donations).
Income Statement.
Cash Flow.
Balance Sheet.
Assumptions (you’ll need to provide detailed information on how you came to the numbers in your forecasts. This should include references to source materials, as well as any numbers you may have used to calculate your projects).

CONCLUSION

Writing a business plan is not easy. It requires a great deal of time, though, and effort. But nothing good ever came easy. Developing a strong business plan is a mandatory ﬁrst step for any entrepreneur with any aspirations of owning a business. It is a valuable learning experience, and the plan you produce will be indispensable as you look to raise money from lending institutions and capital providers. Though it may be daunting, crafting a business plan will yield many rewards. In this way, it is much like running a business: hard work but, well, worth it.