Social Enterprises 101

There’s a lot of chatter these days about Social Enterprises (#socents), a relatively new way of doing business, that we believe is a ‘movement’ in the entrepreneurial world. It seems millennials (in general) are the driving force behind the trend that’s resonating with all generations and revolutionizing the way people do business. Because ‘socents’ are fairly recent, there is little research about their successes, failures, and what makes them tick.

As with all new things, people are following social enterprises to see if it is indeed a successful and revolutionary new way of doing business or if it’s just the trend of the moment.

Social Enterprises: what are they?

Social entrepreneurship, according to Harvard Business Review, “has emerged over the past several decades as a way to identify and bring about potentially transformative and societal change.”

Social Enterprise Council of Canada describes social enterprises as – “businesses owned by non-profit organizations that are directly involved in the production and/or selling of goods and services for the blended purpose of generating income and achieving social, cultural, and/or environmental aims.”

The main identifying characteristic of social enterprises is that they are businesses which have a greater purpose and in general aim to ‘do good’ while making a profit.

Social Enterprises: key challenges

The first and most significant challenge of a social enterprise is that it is not an easy way to raise revenue. Most socents take years before they break even, let alone start generating funds. Long term commitment and subsidising are essential and are hard to find. That’s why a common way of seeking funds is through crowdfunding campaigns such as IndieGogo or PinUp.

But even then, nothing is certain, and balancing a social enterprise’s social and financial priorities is extremely challenging.

The second challenge we’ve observed is the difficulty of selling a new idea. In most cases the idea has not been proven to be successful yet, and is therefore not free of risk even though it may hold great potential. It’s difficult to ‘pitch’ an idea that hasn’t yet proven results; and it’s next to impossible to deploy on the idea without the money to do so. It’s a bit of a ‘chicken before the egg’ dilemma and it can be one of the most frustrating aspects of starting a social enterprise.

As explained by Sarita Douglas of Demand Media, “A social enterprise faces the same issues that any traditional business faces in its growth and operations. But social entrepreneurs also face unique challenges in delivering the social value, social returns or social impact of the enterprise in addition to commercial value”.

Benefits: success is possible

In order to succeed, social enterprises must comply with both social goals and significant financial constraints. The initiative must be financial sustainable, otherwise the project will require a constant flow of subsidies, charity and donations that traditional non-profit organizations heavily rely on; that are, in nature, unsustainable and difficult to secure.

Many social enterprises maximize their impact through collaboration, co-operation and social innovation. They tackle traditional business problems in a different way; and scale of business doesn’t necessarily equal scale of impact.

One common practice among social entrepreneurs is to share ideas with peers. For us, building relationships and networks to maximize impact has been essential. Rather than worrying about competitors, we’ve taken on the strategy of sharing information and connecting with our peers in the effort to gain insight, industry ‘best practices’, and future contacts.

We recommend brainstorming with experts and contributors to help find solutions to common industry problems. Simply put, the more people are inspired and join your “movement”, the more likely others will take notice and in turn, make resources available.

Much work is yet to be done to discover all of the benefits of running socially responsible and economically sustainable organizations. The bottom line is this: a social enterprise is a business. It needs to be run by professionals with commercial experience who understands financial planning, scaling and growth as well as social issues.