Here at the SBA we have been hearing a lot of talk about social enterprise, but we didn't really know much about it. So we decided to ask the experts! David LePage and Michelle Eggli, of Enterprising Non-Profits, are our guest bloggers this month.Read their post to learn what exactly a social enterprise is, why to build a social enterprise, and some strategies for success.
What is Social Enterprise?
In very basic terms, a “social enterprise” is a business operated by a non-profit organization. Just like any other business, social enterprises produce products and services that are sold to customers. But unlike other businesses, the social enterprise is also creating a defined social, cultural, or environmental value at the same time. We refer to this as a blended return on investment. For social enterprises, the bottom line is never financial OR social; it is always both financial AND social. Social enterprise is emerging as a valuable tool for community development and non-profit sustainability. What ten years ago might have been advanced as merely an innovative twist is now recognized as a significant component of the non-profit sector.
Why Social Enterprise?
Social enterprise is a tool utilized by non-profits to meet a need in the community or the local market not met through traditional business models; to advance or
achieve a specific social mission; and/or to contribute to the financial sustainability of a non-profit organization. A good social enterprise contains all three of these components. The really successful ones have all three, but have a firm understanding of which is their priority.
Providing employment opportunities to persons with disabilities or barriers to employment is a common market need, which is met through social enterprise. While the private market does some targeted employment, their priority to achieve a financial return restricts the possibilities for creating employment opportunities. Social enterprise, however, focused on achieving a social purpose in their business, will commit to targeted employment objectives. The employment opportunities and the additional operating costs are acceptable in their blended value return on investment. An example, the Cleaning Solution in Vancouver is a commercial janitorial service employing over 50 people with mental health issues.
Many non-profits utilize social enterprise models to achieve and advance their social mission – they just might not call themselves a social enterprise! This sector of the social enterprise spectrum tends towards arts, culture, environment and education. Think of all the art galleries and theatres across the country that are operated solely to support the cultural health of our communities. By far most are operated by non-profit organizations, and by far most use a business model of entry fees, ticket sales and gift shops to create their main source of income. Another example is Farmers’ Markets who use fees collected for farmers stalls to create access to local and healthy foods for local community consumers.
In terms of financial sustainability, the sources of income for the non-profit sector continues to be a challenge as some traditional sources, especially direct government support, begin to diminish or disappear. In this economic climate, social enterprise has experienced an unprecedented evolution – the models vary widely, from the long used thrift store to the actual ownership of a for-profit business. Inner City Renovations in Winnipeg is an example of a "for-profit" business that is owned by a non-profit. The for-profit is allowed to donate up to 75% of its pre-tax profits to a charity, and then pay taxes on the balance; and then any dividend goes to the shareholders, the non-profit owner.
Planning for social enterprise
Planning for social enterprise requires at the least the same amount of thought, research, and consideration as a regular business… and then some as you consider the unique challenges and requirements of your social bottom line. Your commitment to a clear process for developing the enterprise idea is key to managing the business once it gets off the ground. You should know that, in reality, your process may not necessarily be so linear as finding an idea, writing a feasibility study, and writing a business plan. Opportunities and challenges will arise that require you to improvise, accomplish some tasks before others, and take measured risks. Ultimately, your ability to work through these unforeseen circumstances will depend on the strength of your vision, and how well your vision is communicated to your partners and allies.
For comprehensive information, resources, and templates specific to developing & planning a social enterprise including a free copy of the Canadian Social Enterprise Guide, visit: www.enterprisingnonprofits.ca/resources
Throughout September Enterprising Non-Profits is offering workshops on Building Your Social Enterprise all across BC. Take a look at their workshop listings to find one in your community!
PHOTO CREDIT: Making a Difference?? Created by Ind{yeah} May 26, 2009. Photo made available under Creative CommonsAttribution-NoDerivs 2.0 Generic licence. Last viewed on September 10, 2012.
Enp logo. Courtesy of Enterprising Non-Profits.