Analyzing a Businass Plan - RUMA

On our lecture on business planning we had an assignment of analyzing a business plan, and for this post I'm going to analyze the Indonesian based Social Business RUMA.

Having won the first prize of the Harvard Social Enterprise “Pitch for Change” competition, the acronym that gives name to this social business literally to Your Micro Business Partner. Through their business model they pretend to empower poor women by supplying them with a kit that enables them to start their own micro franchises hence becoming micro-entrepreneurs.

Using the strucutre seen during the lecture I'll try to make the analysis:

What?

Most of the time when poor people ask for a loan, they fall into a vicious cycle of debt. This is often caused by the way the money is spent after the loan is granted. No money is generated back so, in order to repay another loan has to be made. The RUMA business addresses this problem through the lending of Microfranchises, in their own words, they lend businesses to generate money.

Literally called a Business in a Box this micro-franchises provide all the tools and training required for selling electronic airtime minutes through mobile phones.

Who?

Knowing that the mobile phone industry has a high penentration on Indonesia, RUMA partnered with the Grameen Foundation as well as with Qualcomm to put this business into work. The Grameen Foundation provided the initial investment funds through its Pioneer Fund, as well as technical assistance that helped RUMA to build its initial operational framework (which includes technology systems and human capital). Qualcomm supplied the technological expertise on mobile phones through its Wireless Reach initiative.

How?

In order for RUMA to be a successful business they stipulated that the revenues will come from selling franchise kits that will be leased to the borrower by the financial institution, as well as for a margin obtained for each airtime sale. In that sense, the borrower of the microfranchise will use the revenue obtained to repay their loans. The estimated profit for the borrower is approximately $1/day. This business defines the poor as people as those living with less $2,5 a day (World Bank poverty line), so a steady $1/day supposes a 50% overall increase.

For measuring their results, RUMA chose the Grameen Foundation's Progress out of Poverty Index (PPI) since t's country specific and it's based on a ten-question survey of readily identifiable indicators.

As for their fanantial sustainability, RUMA plans to break even within its first 2.5 years. In order to reach that goal they need to empower 5,000 of the poor and poorest by August 2011, having as a target to reach a 70% of people below the poverty line.

RUMA in numbers (current situation).

At this point, Ruma has:

• Created more than 600 new micro-business.
• 100% profitability for the micro-business owners.
• 97% of owners are women.
• 68% of business owners are below the poverty line ($2,5/day)

They also pretend to develop and deploy new business kits that deal with medical products and services, education and training, trade and distribution, and agriculture and fisheries.

For more information I leave a link were you can download a through presentation

Ruma Business Model Presentation

hacking social business: reverse engineering Bienestar's businee plan.

D4 sb bienestar analysis

View more presentations from chiara_renton.

"Reverse engineering is the process of discovering the technological principles of a human made device, object or system through analysis of its structure, function and operation."


During the last week, as a group, we worked together to prepare a structured analysis and critique to the document that had been sent to us by the Grameen Creative Lab inherent to the "Bienestar" project, which is taking place in the region of Caldas, Colombia.
The analytical model that we applied to the document is, actually, the "reverse engineering" one; in this sense we have isolated, deconstructed and analyzed every single point of it with the prospective to grasp all the possible pros and cons.
The tangible benefit that can be drawn from this type of investigation, as well as the exercise itself, is the possibility of improving an existing template or, from its fbases, to try creating an entirely new and more efficient one.

Stanford University Social Entrepreneurship Start-up

I found the example from the lecture and thought it would make sense to read it and share it with you guys (the business plan for LED technology implementation in developing countries) – Standfort University Social Entrepreneurship Start-up Report.

http://ses-1.stanford.edu/reports/global.pdf

The business plan is, in my opinion, only the structure of a real business plan that can support all this social impact of bringing more efficient lighting solutions to the developing world with numbers, measurable goals and timing. Standfort University is actually saying in this report that 3 individual, stand alone business plans for China, India and Mexico were developed (found China which is much more complete and detailed). The main concern in this report is the social impact of such a product but it lacks all the economic part, some detailed paths in order to achieve the goals and the time issue is totally ignored. Everything is explained in general, some parts built just on common sense and with too little probability of success (3 employees with too daring objectives worldwide). I didn’t get their enthusiasm for franchising, a step in my opinion too early to be taken into consideration, as well as the whole fundraising issue which seems too positive and without a concrete sustainable part. In the part where partners should be taken into consideration, there is no criterion of selection (to be in line with the values or to have proven success??).

For a more detailed business plan, take a look at China pilot case:
http://ses-1.stanford.edu/reports/china.pdf

Business planning for social entrepreneurs - Episode 1

Admittedly, this is a pretty grim part of the course: the place where our dreams of changing the world by innovation and goodwill have to come to terms with the "business" in social business – and some of them will come down in flames. It was all about rigour, data, and hard economic logic. Students took it in stride: well done!

Let me remind us of the rules of engagement for this part of the course.

1. we are going to be completely honest and trasparent about our business case. Remember, business planning is a troubleshooting exercise: if you try to camouflage your errors they may not show up – until it's too late, and you are committed to running a crippled business. 
2. we are going to be very upfront with our feedback about each other's business planning. Be generous when praising, merciless when criticizing. No ego massaging or bleeding hearts allowed :-)
3. we are not going to take offense when somebody else exposes our mistakes. This is not personal: criticism is, actually, a very precious gift.

All clear?

Business planning for social entrepreneurs: the prequel

Yesterday's session brought about a surprise: students have proposed to participate in several competition for new social startups across the globe, as a way of exercise. Excellent: this is going to be a great exercise, and probably a lot of fun. It does, however, mean that we are going to move to next week one of the final lectures, the one about business planning (submissions in these competitions are business plans, what else could they be?), that was originally scheduled for much later. And that means I have to scramble to prepare the lecture.

I'll do my best, though my schedule is very full. I know the topic reasonably well, so the main problem will be preparing a batch of my famously sleek slides :-). To do a better job of it, there is something I need to know from each of you. Do you know what the following expressions mean:

• fixed costs vs. variable costs
• investments and depreciation of investments
• costs/revenues vs. liabilities/assets

Please each of you answer by commenting this post. Thanks!