There are many obvious benefits for a non-profit organization seeking to launch a social enterprise: Unrestricted revenue. Sustainable mission-based programming. Less reliance on grant cycles, reporting and application processes. Building new partners or constituencies.
However, often unseen and frequently unsung, there is also a truly transformative benefit that is realized by organizations considering social enterprise: Social enterprise planning and operations allows an organization to “operate more like a business.” Indeed, the very discipline of considering a social enterprise helps an organization focus its efforts on maximizing social value creation.
But what does it mean to “operate more like a business?”
First, it is important to note that conceiving, designing, launching or running a social enterprise does not subsume the organization’s social purpose, nor does it convert all decision making to be predicated on money or financial profitability. By definition, social enterprises exist with the primary purpose of improving the social fabric of our community; therefore a non-profit organization starting a (properly conceived) social enterprise should not jeopardize—but will actually strengthen—the organization’s social mission and create a culture of seeking to maximize social value creation.
I acknowledge that operating more “like a business” might sound wonderful to some, yet heretical to others. To address the perceived heresy, I offer the following list of the beneficial changes that might be expected within an organization considering social enterprise:
- Place a value on time. Business thinking quantifies return on investment, and time is an investment. The discipline of business planning helps to quantify and value the time of staff, board and volunteers.
- View organizational assets as capital. In a non-profit, the organization’s assets—social networks, human resources, intellectual property, cash reserves, experience, networks—are frequently undervalued and it is worthwhile to consider how these various forms of capital can generate revenue and social impact.
- Ensure peak performance. If social impact is seen as “profit” from various forms of capital, then the goal of maximizing social impact creates a rationale to reallocate various forms of capital from one initiative to another.
- Create and assess new ideas efficiently. Using a business planning process in the non-business activities of an organization creates a sound framework to filter brainstorming results through research, internal capacity, financial feasibility, strategic planning, funding vs. financing, and measurement lenses.
- Understand the cost structure. By allocating costs (and revenue sources) to the “business and non-business” operations requires a solid review of the budget, often illuminating activities that may need review or which are unsustainable.
- Make solid investment decisions. Strategic planning can follow a more business-like approach, from an analysis of internal and external strengths and weaknesses to how best to maximize the social return on investments of money, time and resources.
- Build dignity into the social mission. A business perspective challenges organizations to price products and services based upon cost, and market ability to pay, not based upon a presupposition that everything ought to be free.
- Stop the bleeding. When measurements are in place to document social effectiveness, it is far easier to know when to cancel programs, projects, or products if they are not maximizing capital to create social impact.
- Release unwanted inventory. If there are assets that are not being used efficiently to support the social mission, then a business discipline offers a clear rationale to reduce staff, sell a building, cancel a contract, sell an “in-kind” donation, etc.
Through these examples and others, I hope it is clear that “operating like a business” is not a dirty phrase, and does not turn a non-profit or a charity into an unfeeling, profit-driven organization. Social enterprise is a discipline, and that discipline includes tools and concepts that can (and in my experience will) directly benefit the operational and strategic choices made by the whole organization.