social delta

Consulting and support for social enterprise in Canada

Tag: planning

Key Ingredients of Flourishing Social Enterprises

Poverty & Purpose

It is no accident that some of the hotbeds of new and successful Canadian social enterprises are in specific, economically depressed regions: North end Winnipeg, Downtown Eastside Vancouver, Regent Park in Toronto,  and rural Nova Scotia and Newfoundland. It is said that necessity is the mother of invention, and indeed, the needs of the population in these regions are acute and entrenched: discrimination, drug use, alcoholism, obesity, crime, unemployment, marginalization… Where there is poverty, inequality, and significant loss of livelihood there is a need to try anything; poverty creates an irrefutable purpose to develop a mechanism to arrest human suffering. Social enterprise is one such mechanism, where a business model is employed specifically to address a human need.

Innovation & Investment

Desperation may be a driver for change, but someone has to create an idea for the business. In my experience, social enterprise business ideas are rarely conceived by committee.  More commonly, a single person is responsible for a creative social enterprise idea, and they need to then invest their time, energy and often finances to bring that idea to the market. That individual can work independently as a solo-preneur, or as an intrepreneur within government, the private sector, co-operatives or non profits. Growth and development of the idea will of course require support from many actors within these organizational structures, and even from a broader community, but innovation and investment typically starts with one person who has a dream to make life better for others.

Risk & Reslience

However, business is not easy; ask any entrepreneur. Social entrepreneurs face an increased challenge because they live in a world where success is measured in social wealth, not in financial returns. Creating a business where maximizing social benefit drives all business decisions can—and in most cases does—suppress financial returns. Risk is therefore large and the expectation of future financial wealth is optimistic at best, and frequently a myth.  In the private sector, individuals and organizations assume risk on the presumption that future financial rewards will compensate them for risking their time, energy, money and social capital. Social enterprise flourishes when the innovators have a resilient constitution, and a way to accept, manage and even embrace personal losses for the sake of a common good.

Patience & Prudence

The worst part is that starting a business creates risks that last for a long time. For many individuals and organizations launching a social enterprise, the initial energy can be whittled down by a thousand tiny cuts, often over years. In my experience, social enterprises that are spearheaded by an innovator in the non-profit sector may take up to three years to launch, and perhaps five  years to break even (if ever). Accepting, managing and embracing losses and risk over that length of time—all motivated by a sense of optimism and altruism—requires exemplary patience and a strong, informed, and flexible plan to succeed. A full-fledged business plan may seem excessive, but there has to be at least an understanding of the market, the risks, the operational requirements, proposed budget including both projected income and expenditures.

Social Enterprise: How to make your organization stronger

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.

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