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6 Questions To Ask Before You Start A Social Enterprise
Eager to change the world? Here’s what you need to figure out before you can start.
Treating diseases, addressing climate change, expanding access to healthy food or creating new methods of learning. These are just a few of the major social challenges that companies–yes, companies–are working to solve. Of course, the public and nonprofit sectors continue to play a critical role in tackling these challenges, but we’ve also witnessed an increasing number of entrepreneurs building companies whose products and services offer scalable solutions to improve our communities, while at the same time generating financial returns.
Because of their unique goals, companies that have a mission to turn a profit and do good have a different set of questions to ask than traditional enterprises when they’re getting started. What are the critical questions you should ask if you want to be a for-profit social enterprise? Here are six things to think about:
- WHAT IS THE PROBLEM YOU’RE TRYING TO SOLVE?
Social enterprises are created to solve a social challenge using the power of the market. And it’s important to consider that mission when developing your business plan, planning to raise capital, and implementing your strategy. For example, global solar energy company D.light delivers affordable solar home and power solutions for a market of more than 2 billion people in the developing world who do not have access to reliable energy. D.light measures its impacts in four areas–financial freedom, productivity gains, human health and environmental health–thus bringing a more literal goal to its tag line, “Powering a brighter future for our customers.”
It’s important to know what is at the heart of what you are trying to achieve. D.light and many of the most successful impact companies find that being excellent in their core products and services builds the scale and sustainability for maximum social impact over time.
- WHAT IS YOUR BUSINESS MODEL?
Startups that are focused on social impact have some unique challenges as they build out a business model, and this is sometimes referred to as the “serving two masters” challenge. While there are plenty of companies who have found the right model and balance, new companies face common decisions that pit profit against purpose. Imagine a 1-for-1 company with a model similar to Toms. Now imagine that this new company is facing losses and some hard decisions need to be made. Would you compromise the social impact to make budget, or would you insist on finding others ways to make necessary cutbacks?
In general, investors are focused on growth, profits, and valuation. This means social enterprises need a business model that can demonstrate value in the markets they serve in relatively short order, while remaining true to a social mission. And it means carefully choosing partners and investors who are in lockstep with the social mission, so that when tensions arise, everyone has the same value set against which decisions are made.
- HOW WILL YOU MEASURE YOUR IMPACT?
Once a company has committed to a social mission and a sustainable business model, it’s then time to ask the question: “how will we measure our impact?” This is becoming increasingly important as impact investors ask companies not only for their financial projections, but also for how the business model contributes to solving a social problem.
There are a number of resources that can help a social enterprise to plan to measure its impact and to track how it’s doing. B Lab, for example, provides a free tool that enables companies to measure their social and environmental performance, benchmark against peers, and improve. Other models, particularly the 1-for-1 model, make this form of measurement straightforward, such as Warby Parker, which recently announced that it has given away over a million pair of glasses to those in need. Revolution Foods is fulfilling its mission “to build lifelong healthy eaters by making kid-inspired, chef-crafted food accessible to all” by counting the number of meals its serves in schools and through retail distribution each week.
The bottom line in measurement is knowing how you will define impact and being clear with internal and external stakeholders both as you set out and frequently along the way.
- WHAT IS YOUR PLAN FOR CAPITAL AND GROWTH?
Like any business, social enterprises need to develop a plan to assure there is sufficient capital to fund operations. Some social enterprises find a path to raise early “family and friends” support, but once you consider outside investors, it is a different ballgame. If your business model ensures that as the company grows, so too does the impact, you should feel compelled to be on a track to maximize growth. To do so, you’ll likely have to consider taking outside investment.
It’s important to understand that investors often expect a successful “exit” in the relatively short term (five or so years)–the ability to cash in on the equity stake at a premium. Some companies choose an IPO path, others entertain acquisition offers to meet this need, or sometimes there is a “recap” which brings new investors in to buy out the earlier investors. For a social enterprise, here again there needs to be careful consideration given to those with whom you align. Have they bought in fully to the business model and to the passion around impact?
Impact investing is a relatively new sector, but there have been some exits–one recent example is an affordable organic baby food company, Happy Family. The company found success with a growing share of the $1.7 billion baby food industry comprised of consumers who are increasingly interested in ensuring the food their children eat is high quality. Last year, Happy Family was acquired by Danone, a global company focused on bringing health through food to as many as possible. Happy Family’s CEO, Shazi Visram, put the acquisition in a perspective consistent with the company’s mission: “this will allow us to further our goal of providing organic nutrition to more children.”
- HOW WILL YOU TELL YOUR STORY?
It’s important for social enterprises to take time to craft their stories in a way that appeals to both investors and consumers. More than an “elevator pitch,” social enterprises need a “passion pitch” that incorporates clear intention, measurement standards, and transparency each step of the way. Greyston Bakery, whose mission is to give jobs to hard-to-employ people has a slogan that reads, “We don’t hire people to bake brownies. We bake brownies to hire people.” This short, elegant statement conveys the mission of the organization. Of course Greyston Bakery knows if it doesn’t provide wonderful, tasty offerings as a first order of business, there will be no social impact. A peek at the Greyston website shows consumers delectable brownies, cookies and other delights, and they compete well in a crowded category.
- WHAT CORPORATE FORM SHOULD YOU TAKE?
Choosing the right corporate form is important to being able to raise capital from the right investors and partners. Social enterprises could certainly register as a C corporation, much like any other company. But, there are other forms—such as a B corporation, low-profit limited liability Corporation, or 501(c)(3) nonprofit with a for-profit subsidiary—that might provide more flexibility. As you’re starting out, it’s worth taking the time to consider the options available to you in your state.
While we’re still in the early days of impact investing–which means there is still much to learn– we are incredibly encouraged by the momentum we’re seeing both in the growth and prevalence of social enterprises and the volume of investors who are interested in companies that generate both a financial and social return. These key questions–corporate form, approach to storytelling, planning for scale and capital, measuring impact and the problem you’re ultimately trying to solve–are just a few of many that aspiring social enterprises should ask as they get going, and continue to revisit as they grow.
BY JEAN CASE6 MINUTE READ
[ILLUSTRATIONS: MIK ULYANNIKOV VIA SHUTTERSTOCK]
20 Best Social Enterprise Blogs & Websites
The best Social Enterprise blog list curated from thousands of blogs on the web and ranked by traffic, social media followers, domain authority & freshness.
1. NextBillion
NextBillion.net is an open forum for discussion of social enterprise, poverty alleviation, and business development in emerging markets and beyond. Its goal is to stimulate discussion, raise awareness, and provide a platform for sharing ideas that improve the lives of the poor and reshape entire economies.
2. Causeartist | Social Impact Lifestyle Platform
Kansas City, Missouri, US
Causeartist is a global community and social enterprise platform, which covers brands, startups, and social entrepreneurs impacting the world through social enterprise. It features original interviews, lists, and spotlights with founders and CEOs from some of the most exciting Social Enterprises impacting the world. It is there to help you discover what’s new and trending in the world of Social Enterprise and Social Impact.
3. Devex | News
Devex is the media platform for the global development community. As a social enterprise, we connect and inform one million development, health, humanitarian, and sustainability professionals through news, business intelligence, and funding & career opportunities so you can do more good for more people.
4. Pioneers Post
UK
Through our stories, videos, podcasts, events, and partnerships and as a social enterprise ourselves we are committed to supporting, sharing, scrutinizing and celebrating the impact economy at every level, from entrepreneur to investor, to market builder and asset manager, across sectors and in every continent around the globe.
5. Social Change Central | Australia’s premier portal for social enterprise opportunities
Social Change Central (SCC) is Australia’s first dedicated online hub for social enterprises that connects, encourages, and supports social enterprises and aspiring entrepreneurs available in Australia and internationally. The vision is to enable social enterprises to thrive, resulting in widespread and transformative social change. Their mission is to support passion and ideas for social good into real social impact.
6. Social Enterprise Development in the Baltic Sea Region
The Network’s mission is to promote social entrepreneurship by developing integrated learning and sharing platform in the Nordic-Baltic area. Let’s make social innovation and collaboration happen, together.
7. Social Good Stuff
Social Good Stuff is full of Ideas, Resources, and Inspiration for Creating Positive Societal Impact. It aims to create the potential of individuals, technology, and collaboration to create a positive societal impact. The quality or state of being that is positive, optimistic, or constructive.
8. Acumen | Changing the Way the World Tackles Poverty
Acumen, a global nonprofit changing the way the world tackles poverty by investing in sustainable businesses, leaders, and ideas. Our vision is a world based on dignity, where every human being has the same opportunity. Rather than giving philanthropy away, we invest it in companies and change-makers.
9. Pro Bono Australia
Australia
Pro Bono News is a news outlet for Australia’s social economy. We cover all sectors under the umbrella of the purpose economy, from charities and not for profits, to impact investing, philanthropy, volunteering, corporate social responsibility, and social enterprise.
10. B The Change
B the Change is a collaboration of B Lab, the community of Certified B Corps, and to inform and inspire people who have a passion for using business as a force for good in the world. We believe our work towards an inclusive and equitable economic system has never been more important. In the community, we will find resilience.
Full list of the Best Social Enterprise Blogs to be followed on 2022 you can find HERE.
This publication has been prepared within INDIGISE project. The content of this publication is the sole responsibility of the project coordinator and may not always reflect the views of the European Commission or the National Agency.
Social innovation VS Social Entrepreneurship
Welcome to the Social Innovation | Social Entrepreneurship section. This section will help you understand the fundamentals of Social Innovation | Social Entrepreneurship. This section is not intended to be exhaustive list about everything “social”, but rather to give an overall view of what we see in the space.
“Social innovation is the process of developing and deploying effective solutions to challenging and often systemic social and environmental issues in support of social progress […] Solutions often require the active collaboration of constituents across government, business, and the nonprofit world”
(Clavier et. al., Stanford Centre for Social Innovation)
Inspired by natural ecosystems, the Canadian Social Innovation Generation group believes that a healthy system must be resilient and adaptable. As such, social innovation arises from acknowledging the world in all its complexity and can be understood as “an alignment of circumstances that make action possible” (SiG, 2017).
SiG defines social innovation as: “a process, product or program that profoundly changes the way a given system operates, changing it in such a way that reduces the vulnerability of the people and the environment in that system. As a consequence of a positive social innovation, a system grows more resilient” (SiG, 2014).
Please read the full article HERE.
This publication has been prepared within INDIGISE project. The content of this publication is the sole responsibility of the project coordinator and may not always reflect the views of the European Commission or the National Agency.
Mentorship program for Ukrainians in Vilnius
Let’s admit it – the best way to get to know a new city is with the help of a local. After all, if you’re staying for a longer period of time, you not only need to find a place to live – you also need to find a job, a kindergarten or school for your children, and a doctor as well. So the help of a local becomes invaluable. If you’re a Ukrainian who has come to the capital, you can meet your local friend in the BeFriend Vilnius mentoring programme – all you have to do is register and wait to be introduced to a volunteer. Your mentor will answer all your questions and help you with any problems that might come up.
For more information please visit the site directly HERE.
This publication has been prepared within INDIGISE project. The content of this publication is the sole responsibility of the project coordinator and may not always reflect the views of the European Commission or the National Agency.
The complete guide to growing and scaling your social enterprise
We’ve learned a few things in helping support over 900 social enterprises around the world scale their operations with the help of our Experteers, Capacity Building Programs, research, and educational programming. Our work has touched early stage, award-winning enterprises long before they reached international acclaim, including groups like Inyenyeri, Sistema B, M-KOPA, Ubongo and BEMPU. At all stages in the social enterprise “pioneer gap”, we’ve been in the trenches with small, growing, and even large social enterprises. Along the way, we’ve scaled up our own award-winning social enterprise, too.
We’ve seen first hand what research continues to prove: Most social impact startups fall wildly short of their projections and end up going out business. The main reason? Social entrepreneurship is hard. Really hard. But there is another reason, too: founders, biased by their own egos and intuition, don’t take the time to truly embrace proven frameworks that will increase the odds of success.
Despite what you might think, there are no such things as visionary entrepreneurs. In fact, the number one reason that startups fail is because founders think they have an idea that will work, when in reality there is no market for it. This is why startup guidance is full of quotes like “fall in love with problems, not your solution”, “don’t become a technology in search of a problem” and “get out of the building”.
So how do you stack the odds in your favor when growing a social enterprise? Our guide below shares the most impactful frameworks and tools that you need to grow and scale your social enterprise. It’s still going to be a long, hard journey, but we’ve found that it helps to know that you’re not alone (even when it feels like you’re riding a lion).
Full guide is available HERE.
This publication has been prepared within INDIGISE project. The content of this publication is the sole responsibility of the project coordinator and may not always reflect the views of the European Commission or the National Agency.
The relationship between social entrepreneurship and sustainable development from economic growth perspective: 15 ‘RCEP’ countries
Social entrepreneurship plays a role in sustainable development to value creation, delivering and capturing, in this article, researchers attempted to find the nature of the relationships between the sustainable development and its latent variables, and how can these variables effect on sustainable development. Two models were used to estimate the relationships mentioned before, structural equation model and bidirectional causality model, in the case of 15 the regional comprehensive economic partnership (RCEP) countries that are home to nearly a third of the world’s population, and account for 29% of GDP. The study found some interesting results which consistence with the results of previous studies in this field, like that there has a positive relationship between the social entrepreneurship and sustainable development, and positive relationship between the innovations and sustainable development and in the regard of the institutions variable, the study also found that there is an indirect effect on innovation.
Full scientific article is available HERE.
This publication has been prepared within INDIGISE project. The content of this publication is the sole responsibility of the project coordinator and may not always reflect the views of the European Commission or the National Agency.
Additionally, conclusion is made. SI happens within a system of SI (community, institutions and government) in which SE plays a fundamental role initiating the process, articulating the various actors involved, and balancing social value generation and financial sustainability.
Engaging youth as leaders of social change offers the exponential benefits of personal empowerment, community enhancement, and economic transformation. Grounded both in interdisciplinary theory and an expansive set of practical case examples, Making Change uses an asset focus and cultural relevance that centralizes youth and communities in social entrepreneurship, while introducing vocabulary and frameworks for youth social entrepreneurship advocates to gain resources and political traction for the approach. Readers will have the opportunity to consider the complex interplay of individual, economic, and community development versus oversimplifying causes or solutions of social disparities. Individuals engaged in youth work, program design, funding, and the study of youth and community development will appreciate the text’s exploration of existing research and theory that cross scholarly disciplines to promote a robust view of youth development.
