IMPACT HUB Ottawa is hosting a short workshop on theory of change and social impact measurement on October 17, 2018. It is only $10 to register, and the registration fee is donated to charity. Visit https://ottawa.impacthub.net/event/measuring-your-impact/ for more information.
social delta
Consulting and support for social enterprise in Canada
Deadline to apply: August 17th
Join Impact Academy: CityMaker Edition
HUB Ottawa offers a new cohort of its flagship program, Impact Academy. They are partnering with Synapcity for this special Impact Academy: CityMaker Edition. Here is what you need to know!
What it is: A free, three-month learning program running between September 5th and December 5th, 2018. (Yes, it is a free program for participants this year…so don’t delay)
Who it’s for: Creative and entrepreneurial changemakers working to make our communities more sustainable, inclusive, and equitable and who want to take their projects, ventures and initiatives to the next level.
Topic areas: Transportation & Mobility, Environment & Sustainability, and Healthy & Caring Communities.
Deadline to apply, August 17th, 2018.
Since 2012 Impact Hub’s Impact Academy has supported over 150 social changemakers in their entrepreneurial journey. Social Delta has been an active partner in both the design of the program from its inception, and Jonathan Wade of Social Delta continues to deliver elements of the program. This year, you can get Social Delta’s insights and recommendations on business modeling on October 31st, but each session will bring expert community resources to the classroom, and spectacular living examples to the program.
There is a new, heartening trend out there.
Optimism.
Each day, we read (or hear second-hand) news that brings us tales of human injustices like murder, poverty, gender violence, and child abuse. This sad knowledge forms a foundation for the tide of details about accidents like plane crashes, natural disasters and floods. We are saddled with grief if we are feeling people, and we are labelled as ignorant if we ignore the obvious.
The problem is the optimists. They are actually disproving the commonly held assertion that life is getting worse. The book Factfulness, by the late Hans Rosling and published by his family just this year, was my first introduction to rabidly optimistic views. And today I read “Are things getting better or worse,” an upsetting article written by Joshua Rothman in the New Yorker; it is upsetting in that it upsets the common beliefs of our collective pessimism. Rothman quotes content from scholars and experts around the world that further inform us that by virtually any standard, life is getting better for everyone on the planet. Life expectancy, murder, disease, abuse, addiction…you name it: the statistics in both the wealthy and the less wealthy parts of the world are staggeringly good.
We are easily swayed by bad news. And increasingly we don’t hear the good news. But good news is all around us.
Social enterprise is good news. It is not flawless, nor is it easy, but it is a positive tool about which we can all be optimistic. Imagine: businesses that exist only for the purpose of improving the lives, livelihoods and experiences of our people in our communities.
It is my experience that social enterprise flourishes when social problems feel overwhelming. There are spectacular examples of social enterprise addressing the needs of communities in the North End of Winnipeg, the Downtown East Side in Vancouver, the impoverished areas of Nova Scotia, and many of the aspiring First Nation communities scattered across the country.
I encourage you to visit the links page at the Social Enterprise Council of Canada, or visit Buy Social Canada, Social Enterprise Ontario, or the nascent Akcelos to see listings of social enterprises active in the market. Or read the many well researched reports that celebrate the impact of social enterprises at the Social Enterprise Sector Survey.
Celebrate the optimism.
Support social enterprises across the country as a customer. Learn about how social enterprises are changing the status quo for the better. Believe that even when there are challenges, there are innovative human solutions hard at work.
Monday June 18, 2018
6:30-8pm
6th floor, 123 Slater Street, Ottawa
Register for this free event here.
Author Elisa Birnbaum is the editor and chief wordsmith on the active, informative and longstanding blog on social enterprise and the tools of social change in Canada: See Change Magazine. At the launch, Elisa will offer perspectives on what she has researched, stories about successes and challenges in the sector, and will bring to life some of the many significant changes that have been made by social enterprises in Canada, the US and across the world. She brings a warmth, honesty and tremendous perspective on this changing sector.
Please register in advance.
Note that street parking downtown is also free in the evenings.
There are a growing number of individuals who approach us here at Social Delta with a business idea that is going to make a social change through the sale of goods and/or services. Many of these prospective clients ask if it is necessary to hire professionals to help them launch their business correctly. Of course, we first assure them that hiring Social Delta would be a good choice to invest in professional guidance (offered half in jest, wholly in earnest).
However, in full seriousness, Social Delta recommends that all starting entrepreneurs should hire the professional services of both a lawyer and an accountant.
It is always our belief that social entrepreneurs should remain operating in the informal sector for as long as possible. However, once the business matures to the point where it is appropriate to incorporate as a formal legal entity, it is worth contacting a lawyer to help with the incorporation. It is not difficult to incorporate a business in Canada, but a lawyer can help you shape the language you use to help enshrine your social value proposition as a non-profit corporation, a co-operative, or as a private sector business. Good legal advice is not always cheap, but a one-time consultation can be cheap in the long run as it will inform you of your rights, obligations and the benefits of the various legal incorporation forms to host your social enterprise.
Hiring an accountant early in your business operations will pay for itself many times over. As with the field of law, the field of accounting (and specifically tax codes) is perpetually changing, and getting good advice on how to set up your books, track your expenses, defer taxes, charge and claim GST or PST will make your first year of operations (and every year after) so much easier.
So what should every social entrepreneur ask their lawyer and accountant? Here is a short list of recommended questions, although of course every entrepreneur may also have specific questions related to their specific case:
“How and when should I incorporate my business?”
What are the benefits and limitations of a sole proprietorship, a limited liability company, a multi-stakeholder co-op, or a non-profit? Should I incorporate federally or provincially? Is there hybrid legislation in my province, and if so, what should I be sure to include in my bylaws or articles of incorporation to assure that I could register as a hybrid company in the future?
“Where do I get the money to run my business?”
A qualified accountant who understands your business model will help you choose whether you want to take on debt, sell equities, or self-finance your new venture. Note that not all forms of financing are available in every form of incorporation. Furthermore, financing creates annual operational expenses, and professional advice on how to structure the contracts, loans, equity agreements, membership shares, or other forms of financing can help mitigate cash flow challenges.
“How should I set up my books?”
It is always a good idea to separate your personal and business finances. Have a separate bank account and a separate credit card to help track business expenses. Any accountant will likely tell you that, but they can also tell you what expenses you need to track. What do you need to capture for tax or other government reporting? What are the rules around entertainment and marketing expenses? What are some of the key financial performance indicates that I should be tracking regularly to ensure that the business is healthy?
“How do I manage profit?”
Every entrepreneur thinks that they are going to make a profit, even many social entrepreneurs. However, by hiring a qualified accountant, you can help make realistic financial projections, employing their past experience with both revenue and costs with other clients. They can also help you structure your books to increase the expenses for (investments in?) activities that maximize social improvement (i.e. bursaries, salaries, community investments, philanthropy, sponsorship, and others)
“How much and when do I pay myself?”
An accountant can help structure a business to determine how best to pay yourself. They can help structure the business to minimize income taxes and they can help plan HR costs to not jeopardize cash flow.
“What about all this tax stuff?”
Accountants understand the tax rules better than anyone else. Trying to stay on top of the changes to income tax, or the payment schedules of GST, or the charging of GST in different jurisdictions is not for the under-informed. Ask your accountant about how your status as a sole proprietor, shareholder, salaried employee, or contractor affects personal income taxes. If you have staff, how do you manage payroll taxes (and source deductions, for that matter). Accountants can help you determine eligibility for tax deductions and/or credits, and can help you determine when to charge GST and how best to set up the regular reporting and payment of GST to the government.
“Is there a good time to prepare an exit strategy?”
When choosing how to incorporate your business, it is always good to consider what will happen when you aren’t there. You may want to sell the business, transfer the assets to a community organization, convert to a worker co-operative, or merge with another company. Social enterprises often seek to have an asset lock built into their initial design, in order that the business assets, intellectual property and staff remain in service to the community. Both accountants and lawyers will have advice on governance and processes to consider when you are downsizing, divesting, moving to another country, or merging with other legal entities.
It is often said that entrepreneurs should understand all aspects of their business. I couldn’t agree more…the entrepreneur is responsible for product development, market research, financial oversight, sales, social impact measurement and everything in between. You have to understand it all. Entrepreneurship is often about juggling all the plates.
But it doesn’t HAVE to be that way.
Seeking professional assistance in areas of your business which require special skills is a wise investment of money to save you time, and can prevent future problems. Professionals can help you understand your business better, and make better choices. Social Delta advises that a modest investment early in financial planning and governance will likely prevent a potentially crippling legal or financial problem down the road.
In the last decade, many more people working to create social change in Canada have been calling themselves social entrepreneurs. The phrase is no longer a mystery for most, as programs in social enterprise spring up at universities and colleges, social innovation incubation spaces proliferate across the country, and young leaders are increasingly looking to create meaningful work for themselves.
However, not all efforts to improve the human condition are social enterprises. Literally, an enterprise can be defined as any “project or undertaking, typically one that is difficult or requires effort” (as in the enterprise of training for a marathon). A social enterprise, under this definition, could be construed as involving any effort that has a social purpose. But, in fact, a social enterprise is not simply any social movement or activity.
There are a multitude of definitions of the term “social enterprise” in countries and markets across the world. All of them include the principle that an enterprise is a business that, at the very least, includes a transaction of value in which a customer pays cash for a good or service in a marketplace.
And then there’s the matter of social value. Here’s the thing: if you are creating social value but not selling anything, you are effectively operating a charity.
If you are creating limited social value (or social value as a happy by-product) through the sale of your product or service, you are a business – a regular, traditional business.
But, if you are in business primarily to create social value through the sale of a good or service, then—and only then—are you a social enterprise.
To be clear, there is nothing wrong with being a charity or a business. However, it is the direct, concerted effort to use a financial transaction to maximize social improvement that characterizes and differentiates a social enterprise.
Improving livelihoods, communities, culture and well-being is not only the responsibility of one type of actor. Governments, non-profits and charities, co-operatives, businesses and the informal sector (families, clubs, collectives, collaboratives, etc.) can all contribute to making our world a better place. One actor is not implicitly better or worse than another at making that contribution; how they operate dictates how much of a contribution they make.
However, social enterprise is a way of conducting business in which creating social value is a primary goal. It is a tool for social change that can pay for itself through earned revenues. This sustaining revenue offers an alternative to charity, voluntarism or tax-funded activities. It is a unique mechanism for which it is expected that the revenue-generating operations will always be seeking to improve the world around us.
To be clear, in Canada today there is very little benefit to calling yourself a social enterprise. There is no tax relief, no designated employment programs and limited start-up capital. Even grant opportunities are far more related to the form of incorporation and the prescribed outcomes than to the label “social enterprise.” In fact, there is no way to legally define an entity as a social enterprise in Canada.
Nonetheless – and perhaps as a result— many people are calling their project, program, or idea a social enterprise, which is actually making the term increasingly meaningless for policy makers, funders, employees, or even the purchasing public.
So, if you still want to call your work a social enterprise (in spite of lack of clear benefits currently) ask yourself the following four questions:
- Are you selling something?
- Is the sale of that good or service directly helping you to address a social problem or gap in our society?
- Do you have a systematic tool in place to quantify how your sales are directly reducing that social problem?
- Do you have a strategy to grow your business, and thus increase your (positive) social impact over time?
If you answered yes to all these questions, then you are a social enterprise. If you didn’t, then you may be doing fantastic work or providing a service that can prove both important and beneficial, but you are not a social enterprise.
This article was co-written by Jonathan Wade and Elisa Birnbaum.
Jonathan Wade is the principal at Social Delta and Elisa Birnbaum is writer and publisher who has recorded the advancement and achievements of social entrepreneurs in Canada both online (at SEE Change Magazine) and in print (her first book, In the Business of Change, will be published in May)
While many in the social enterprise space often qualify themselves as ‘non-profit,’ these organizations should instead treat themselves as ‘for-purpose.’ These organizations should focus on their mission to create social good, while still treating themselves with the same commitment to rigor and discipline as the best for-profits.
Adam Braun
If you are a sailor, you invest time, money, and passion in your boat. You may even build a community around this recreational hobby. You do not expect repayment. At the end of each day, however, you get paid with that which is immeasurable and intangible. You are paid in the beauty of the open water, the glory of nature, perhaps the company of friends, and the wind in the sails.
Similarly, social enterprise is not about making money, or making a name for yourself, or building an empire. It is about creating a better, more peaceful, more sustainable, more just world. The investment pays dividends that have no financial currency, but are of tremendous value.
I’ve heard that sailboats are frequently described by owners as “a hole in the water into which you throw money.” Sadly, a social entrepreneur will likely lose more money than they will make as they conceive, design, launch and build their business. Most effective social enterprises are never sold for a profit, nor are they franchised into a stream of future income. In fact, the majority of social enterprises do not make a profit year over year, and when they do, their very existence compels them to reinvest in maximizing their social mission.
However, social entrepreneurs—I argue—should not be motivated by money; they have to be motivated by the social change that they deem is necessary.
I was once approached by a social enterprise leader, asking if I’d like to invest in their fair trade business. He flat out told me, “This is a terrible financial investment.” However, he said that it is an investment in the right way to do business, where co-operative farmers (who I will never meet) will be able to live a sustainable, healthy life, a life where their children will get an education and opportunity. The investment has indeed been a financial loss, but an exceptionally lucrative social decision. The social enterprise has continued to operate (in part) because of my capital, and they continue to help individuals in a sustainable, meaningful way. I put money into justice, and my recompense is enormous.
I meet a lot of people who believe that social enterprise is cool. Some even call it innovative and new. However, social enterprise is actually an old concept with a new name. Early business was never about profit. It existed to allow entrepreneurs to make a living, providing goods and services that are needed for a community: food, haircuts, building materials, and the like. Business can be designed to cover costs, including salaries, and provide value without maximizing profit.
As we work to build purposeful and meaningful businesses, we ought to banish the thought that social enterprise is going to be a way to retire wealthy. As with the investment in a sailboat, we might enjoy retirement happy, satisfied, and full of calm knowing that our sacrifices are worth every penny we put into it.
The long-term payment for the social entrepreneur is a social wealth that is far beyond riches.
Here is an interesting article that suggests that social enterprise is a perfect tool for the idealistic Millennial. Social Delta couldn’t agree more (although we also believe that it is a robust tool for anyone from any generation seeking sustainable social change…)
However, as Social Delta’s president noted as a comment in the article, the wonderful and infectious idealism of Millennials must be tempered by knowledge of what has gone before. There are very few truly new ideas. We have new tools like computers and the internet, we have access to massive amounts of information, but humans have been innovating for our entire history.
It can be observed that perhaps each generation believes that they possess something that the previous generation lacked. This is the folly of humankind. Even if this were true, knowing what has gone before us in social housing, sustainable agriculture, support of seniors, empowering a disenfranchised group, or even recycling will help to convert idealism into practical, sustainable change in our communities.
One change that is worth noting: this new access to information actually makes it easier to learn about the history of a movement, and idea or a business. Moreover, we don’t only have access to the past, we also have access to other communities’ experience all over the world. We in Canada can learn a lot from citizens in Europe, Asia, Africa, South America or elsewhere. Miraculously, we can find out about these concurrent efforts easily; however, we must look before we leap.
It would be dangerous to think that even the very concept of social enterprise is new. The term may be new, but social enterprise–commercial transactions designed to benefit the community–is one of the oldest forms of social change. It is possible to think that many businesses 100 years ago were social enterprises: they generated employment, provided needed goods and services, and operated for the benefit of the community. (think of the general store…it wasn’t created for profit, but it certainly created community value).
We must all remember that new terminology shouldn’t disguise old ideas and that new ideas are best informed by past action by innovators and idealists all over the globe.
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An inspiring read
If you are interested in social enterprise, it is likely you’ve heard of Greyston Bakery in Yonkers, New York. They are a leading example of a successful employment and training social enterprise.
Forbes published an excellent article a few weeks ago that is worth reading. It is particularly of interest if you have ever harboured doubts about the effectiveness of social enterprise as a tool for improved community benefits.
Here is a taste:
In the last 35 years of operation, “Greyston has created job opportunities for more than 3,500 individuals and has supported over 19,000 families. At present, over 60% of Greyston’s bakers are formerly incarcerated.”