Social Enterprises 101

Social Enterprises 101

Social Enterprises (#socents) are a new way to do business that is becoming a popular topic. We believe this movement is an important one in the world of entrepreneurship. The trend is resonating with all generations, and it seems that millennials are driving the movement. Since’socents are relatively recent, little research has been done on their successes and failures, as well as what makes them tick.

People are following social enterprise to find out if they’re a viable and innovative way to do business, or just a trend.

What are social enterprises?

Harvard Business Review says that social entrepreneurship “has emerged over several decades as an approach to identifying and bringing about potentially transformative and positive societal changes.”

Social Enterprise Council of Canada defines social enterprises as “businesses that are owned by non-profit organisations and directly involved in the production or sale of goods and/or services with the combined purpose of generating income and achieving socio, cultural and/or environment aims.”

Social enterprises are businesses that have a higher purpose and aim to do good while making money.

Social Enterprises: key challenges

Social enterprises face the greatest challenge: it is difficult to raise funds. It takes many years for social enterprises to break even or start generating money. Subsidising and long-term commitment are crucial and difficult to find. Crowdfunding campaigns like PinUp or IndieGogo are a popular way to raise funds.

However, even then, there is no guarantee and it is very difficult to balance the financial and social priorities of a social enterprise.

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We have also observed the difficulty in selling new ideas. The idea is not proven successful and therefore poses a risk. It is difficult to “pitch” an idea that has not yet been proven successful. Without the funds to support it, it can be almost impossible to implement the idea. This is a problem that can make it difficult to start a social enterprise.

Demand Media’s Sarita Douglas explains that a social enterprise is subject to the same challenges as any other business in terms of its growth and operation. Social entrepreneurs face unique challenges when delivering social value, social returns, or social impact to the enterprise.

The benefits: Success is possible

Social enterprises need to meet both significant financial and social constraints in order to be successful. Financial sustainability is essential for the initiative. Otherwise, it will need to continue receiving subsidies, donations, and charity that traditional non-profits heavily rely on. These are unsustainable and hard to secure.

Social enterprises are known for their ability to maximize their impact by collaborating, co-operation, and social innovation. They approach traditional business problems differently. However, scale doesn’t always equal impact.

Social entrepreneurs often share their ideas with each other. Building relationships and networks has been essential for us to maximize our impact. Instead of worrying about our competitors, we have adopted the strategy to share information with other peers and connect with them in an effort to gain insight, industry best practices, and future contacts.

To solve common industry problems, we recommend that you brainstorm with experts and other contributors. Simply put, the more people who are inspired to join your “movement”, then the greater chance that others will notice it and make resources available.

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There is still much to learn about the economic and social benefits of operating economically sustainable, socially responsible organizations. A social enterprise is just that: a business. It must be managed by commercially-experienced professionals who are familiar with financial planning, scaling up and growth as well social issues.

Editor’s Note

About PATHFINDER

Singh and VanThiel, cofounders at PATHFINDER can be described as highly skilled consultants. They connect local social entrepreneurs with compelling ideas to finance financing by engaging financial institutions and impact investors.

After identifying their clients and partners they offer lasting strategy and management consultation through relationship governance and business education, among other aspects of leadership and guidance.

They work to ensure that their field experts are fully equipped to deliver tangible results. Each project is documented and presented to the local government. Local experts can help to influence local policy. Their work is transparent and documented, and can be accessed for study, auditing and analysis.