Analyse five (5) business risks that may arise from the case study?

Company background

Social Side Hustle Pty Ltd (SSH) is a not-for-profit service provider. The company matches

skilled professionals (such as consultants and accountants) to social enterprises seeking

professional services.

SSH was incorporated in Victoria, Australia in 2012 by sisters Erika and Chelsea. Erika is an

experienced Chartered Accountant who began her career in mid-tier accounting firms in the

advisory space. Chelsea is a creative marketing specialist who has worked in several advertising

agencies.

The idea that began SSH

When working in public practice, Erika had several smaller clients who were 'social enterprises'

in the start-up phase. Social enterprises use most or all of their profits to make a positive social

impact, such as by providing clean drinking water or sanitation in disadvantaged overseas

communities.

Over time, Erika realised that many social enterprises failed to progress their operations from

a start-up into the growth phase. She identified that these social enterprises struggled to

implement appropriate strategies, obtain funding and grow the market for their goods and

services.

In her marketing and advertising work, Chelsea noticed that many of her professional services

clients wanted to offer their services pro bono or at a discount to social enterprises starting out.

However, many start-up social enterprises were not aware that they could access these services

for free or at reduced rates so did not use them as they felt they could not afford them yet.

Erika and Chelsea believed that not having access to these services was hindering these social

enterprises from achieving their goals and benefitting society. The sisters discussed how

they could use their knowledge and contacts to create a database of professionals willing

to volunteer their time and enable them to widely promote this service to social enterprise

start?ups. This meant social enterprise start-ups could contact the sisters to 'match' them with

the professional services they needed. Together they decided to start a new company, SSH.

Structure

Erika and Chelsea started SSH in 2012 after receiving pledges of support from professionals

and obtaining government grants. Both sisters are directors and they each own 50% of the

company's shares. Erika and Chelsea work full-time within SSH and are paid a salary.

SSH is a registered not-for-profit and is tax-exempt, meaning that it does not pay income

tax or other taxes. SSH would lose this tax-exempt status if it ceases being a not-for-profit.

However, as SSH is not a charity any donations and gifts made to it are not tax deductible for

the donor.

In line with laws and regulations, a not-for-profit can make a profit but it must use that profit

for its purposes. It can also keep profits if there is a genuine reason for doing so that relates to

its purpose.

Case study - Social Side Hustle Pty Ltd (SSH) (cont.)

SSH's constitution includes the following clauses, which it must comply with in order

to maintain its not-for-profit status:

Not-for-profit

The assets and income of the organisation shall be applied solely to further its objects and no portion

shall be distributed directly or indirectly to the members of the organisation except as genuine

compensation for services rendered or expenses incurred on behalf of the organisation.

Dissolution

In the event of the organisation being dissolved, all assets that remain after such dissolution and the

satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes,

which is charitable at law and which has rules prohibiting the distribution of its assets and income to its

members.

Payments to directors

The company must not pay fees to a director for acting as a director. However, the company may:

(a) pay a director for work they do for the company, other than as a director, if the amount is no more

than a reasonable fee for the work done, or

(b) reimburse a director for expenses properly incurred by the director in connection with the affairs

of the company.

A director may not benefit from their position within the company unless it is allowed per the

two above conditions.

Mission and values

SSH's mission is to remove barriers to achieving impact for social enterprises. SSH achieves this

mission by building capabilities in its social enterprise client base through matching them with

professional services mentors who volunteer their time.

Before placing a social enterprise client with a professional services mentor, SSH asks the client

to complete a profile document that evaluates its:

(a) vision, mission, values and impact

(b) marketing strategy (if any)

(c) financials (including past performance and position as well as identified future needs).

Case study - Social Side Hustle Pty Ltd (SSH) (cont.)

Operations

SSH maintains a database of qualified professionals across different fields (for example, legal,

accounting, finance, marketing and information technology) who agree to volunteer time

to social enterprise start-ups. The database summarises each professional's key skill areas,

available time and specific social enterprise interests.

SSH charges its social enterprise clients a small fee each time it matches them with a suitable

professional services mentor. The volunteering professionals provide up to 8 hours free of

charge. Social enterprise clients can purchase extra hours with the mentor at a much cheaper

rate than their standard consulting fees, with SSH receiving 20% of these fees.

SSH invoices its social enterprise clients directly from its database. The clients receive invoices

via email with 30-day payment terms. Where clients have purchased extra hours with mentors,

SSH invoices the client for these and then pays the mentor their portion when payment is

received.

SSH markets to social enterprise clients via online social enterprise directories, social media,

networking events and referrals.

SSH operates from leased premises on the fringe of Melbourne's central business district. It also

leases servers, laptops, photocopiers, and cars for Erika and Chelsea as they are required to

travel frequently in their roles within SSH.

Up until 2018 SSH employed around 16 staff on a full-time or part-time basis.

SSH uses a large mid-tier chartered accounting firm as advisors and auditors. SSH pays market

rates for these services.

Volunteering professionals

Most professional services volunteers become involved with SSH through personal

recommendations and word of mouth. SSH has an application process for new professionals

that involves interviews, reference checks and verification of qualifications.

The volunteers see mentoring as a way to network, build their brand, enhance their skills and

be seen to be 'giving back'.

Business growth: 2018 and 2019

In 2018, Erika and Chelsea found that SSH was growing and their database had moved beyond

just their personal contacts to include a significant network of professionals within Victoria.

SSH decided to partner with a professional networking website to offer its volunteer mentors

a unique Social Impact badge to recognise their efforts. This respected credential became a

valuable point of difference for professionals when applying for employment opportunities.

Several professional firms then approached SSH and asked to be awarded the Social Impact

badge. Erika and Chelsea developed an approval process and allowed successful firms to use

the badge for an agreed donation. These firms also provided a roster of experienced staff for

several days each month. Adding these firms to the database contributed to SSH's rapid growth

by enabling increased matching capacity.

Erika and Chelsea had done an excellent job of matching mentors to social enterprises to date.

They felt they really had their finger on the pulse of social enterprises in Victoria and could

quickly unpack their needs and match them to a mentor with the right skills. However, as SSH

grew, they could not continue to do this matching personally.

To take the pressure off their day-to-day roles, they recruited more administration staff and

leased additional office space and equipment for these staff.

Case study - Social Side Hustle Pty Ltd (SSH) (cont.)

Business challenges: 2020

With the impact of COVID-19 in 2020, many of the professional services mentors in SSH's

database withdrew or reduced their services due to increased demand in their primary roles

and some challenges in their own lives. Overall, SSH's volunteers had around 30% less hours

available for mentoring.

On the other hand, mentoring requests from social enterprises increased by 20% based on the

previous year's hours. This increase arose from both crisis and opportunity.

Some social enterprises were faced with financial challenges that threatened their very survival.

Those with business-to-consumer models were hit particularly hard, as lockdowns prevented

consumers from accessing their products. Many social enterprises relied on face-to-face models

to sell their products and did not have the infrastructure to move quickly to offer their goods or

services online.

Conversely, these unique circumstances created opportunities for some social enterprises to

either start up or progress, as society needed new and different types of assistance.

There was increasing demand for mentoring but a large shortfall in the hours available from

existing volunteering professionals. To combat this:

? Erika and Chelsea worked hard to prioritise clients and determine which would receive

support, with some desperate social enterprises offering incentives personally to the sisters

for priority.

? SSH accepted many new professional volunteers with limited reference and qualification

checks. This occurred due to the large number of volunteer applicants, the number of social

enterprises needing urgent assistance and difficulties with travelling or meeting in person.

SSH receives financial support from governments, including grants, for various not-for-profit

measures and this is expected to continue. During 2020 SSH received additional government

grants relating to COVID-19 and social enterprise support schemes. It is unclear how much of

this additional funding will be available in 2021.

Balance Sheet

Case study - Social Side Hustle Pty Ltd (SSH) (cont.) Statement of Comprehensive Income 2020 2019 For the year ended 30 June 2020 note Revenue 1 3,473,200 3,490,600 Less: operating expenses Personnel expenses 2 (2,609,400) (2,596,600) Professional fees (254,600) (323,400) ince costs (12,000) (10,000) Administration (140,800) (289,200) Travel (81,400) (156,600) Depreciation and amortisation (201,400) (67,400) Communications (106,000) (96,000) Events and activities (31,000) (58,800) Marketing (66,000) (104,800) Total operating expenditure (3,502,600) (3,702,800) Operating Loss (29,400] (212,200) Total comprehensive income for the year (29,400) (212,200) The following notes relate to these financial statements sentence: Note 1 2020 2019 Revenue Revenue from contracts with customers 1,789,600 1,804,800 Donations 799,600 1,241,400 Government funding including grants for not-for-profits 400,000 350,000 Government funding (COVID-19 grants, social enterprise 378,400 0 support subsidies) Interest revenue 105,600 94,400 Total revenue 3,473,200 3,490,600 Note 2 2020 2019 S Personnel expenses Wages and salaries 2,549,200 2,505,200 Contractors 31,200 22 200 Other associated personnel expenses 29,000 69,200 Total personnel expenses 2,609,400 2,596,600Case study - Social Side Hustle Pty Ltd (SSH) (cont.) Statement of Financial Position 2020 2019 As at 30 June 2020 note Assets Cash 1,417 ,400 1,045,200 Trade and other receivables 908,600 636,600 Prepayments 34,400 192,800 Other financial assets 286,400 708,200 Total current assets 2,646,800 2,582,800 Other financial assets 31,400 39,400 Other receivables 741,050 647,600 Property, Plant, and Equipment 113,000 182,800 Right-of-use assets 373,600 76,050 Intangible assets 22,000 29,400 Total non-current assets 1,281,050 975,250 Total assets 3,927,850 3,558,050 Liabilities Trade and other payables 3 585,000 420,200 Provisions 129,000 122,200 Lease liabilities 109 400 100,000 Total current liabilities 823,400 642,400 Provisions 53,400 54,600 Lease liabilities 299 400 80.000 Total non-current liabilities 352,800 134,600 Total liabilities 1,176,200 777,000 Net assets 2,751,650 2,781,050 Equity Issued capital 50 50 Retained Earnings 2 751,600 2 781,000 Total equity 2,751,650 2,781,050 Note 3 2020 2019 $ Trade and other payables Amounts owed to professionals 451,600 241 800 sajqexed Jauto 133,400 178 400 Total trade and other payables 585,000 420,200