Consulting and support for social enterprise in Canada

Tag: social enterprise (Page 6 of 6)

Who are the social entrepreneurs?

I was asked today to outline the personality types of the typical social entrepreneur. Of course, anyone can be a social entrepreneur, and any entrepreneur (whether social or not) has to have vision, passion, risk tolerance, and an idea for a product or service for which there is—or can be—a market demand.

However, based upon my experience working with social entrepreneurs from the co-op sector, non-profit sector and from the private sector (primarily solo-preneurs), I can reflect on some categories of social entrepreneurs. Do any of these sound like you?

The social worker. Not necessarily a social worker by training, but more broadly a person working for a social cause. This person is characterized by a social mission that is paramount in their life and/or career. They typically work in the public or non-profit sector (and very possibly within a charity) and common passions include one of the following: environment/sustainability, recreation/health, victims of abuse or violence, youth development, homelessness/poverty, or individuals facing social stigma or barriers to employment (mental health, developmental delays, criminal records, etc). They may have years of experience and knowledge about the depth of the social problem that they’ve been tackling. They may not have business experience, but their knowledge of what needs to change, and how it needs to be changed, is significant; they typically are motivated to learn as much about business as they can to address the cause they believe in.

The Epiphanist.  This is not a real word, of course, but this describes the person who, for whatever reason, has a moment in their life when they realize that they need to help others. (ie an epiphany) Perhaps they’ve been diagnosed or survived a disease or accident, maybe they met someone whose story or experience touched them, maybe they read a news article or a non-fiction book, or perhaps they heard a TED Talk or social media plea, or maybe they saw something unjust that struck them into action. The Epiphanist can be any age, and is strongly motivated to use whatever they know or have to make a difference. They have a professional network, but their peers and contacts may not always be sympathetic to their “new” cause. They may also have to initially learn about organizations and networks that are already active in this new field of endeavor, but they are typically willing to partner and learn from those with the experience of the Social Worker (above).

The Seeker is the one who wants to change the world, but initially didn’t know where to start. They might have read about social enterprise or seen a social enterprise in action and immediately felt that this is the career for them. They then set about methodically to learn more about business operations, and to confirm the cause for which they plan to work and make connections. They typically are young and may have come to social enterprise from their disillusionment with community, the economy, or their own career or educational path so far.  Initially, The Seeker may lack business experience (and occasionally distrusts business generally), be impatient, and have a limited professional network. However, The Seeker feels they must do something important, tangible, and purposeful and is commonly quite driven to learn more, or even will take risks to test their business idea as soon as possible.  They grow into the role of social entrepreneur out of that need for purpose.

The Serial Social Entrepreneur has started and run a social business and now wants to apply their experience to a new cause. These folks are rare in Canada as the number of successful social enterprises is limited.  The Serial Social Entrepreneur is an expert in the process of building a social enterprise. They understand—through experience—the technical aspects of social business development such as market research, branding, pricing, retail operations, social metrics, partnership, and/or social finance options. They are able to transfer their business skills from one cause to another cause. They are passionate about social change, and they are aware that social change is complex and interrelated and they often have large and active professional networks.

The Maverick is the guy in high school who never spoke, but then created a mobility aid that made it possible to move a wheelchair up the front stairs. These are the inventors, the outliers, possibly the unsung geniuses of our time. They are sometimes reclusive, sometimes wildly gregarious, but often unpredictable and commonly irreverent. Mavericks make great (social) entrepreneurs, because they are “just crazy enough to try something new” without worrying about how it will affect their social status.  Some even cultivate a sort of unique personality (Richard Branson?) which becomes an element of their “brand.” Mavericks can be any age, and are typically able to think of new ways of solving old problems. They occasionally struggle with collaboration and partnership, but they are the idea generators who then work diligently to bring their social innovation to life.

There are, of course, no rules about who can be a successful social entrepreneur, but in my experience social entrepreneurs are people who care about building a better society, and who see the selling of goods and/or services as a tool to support that goal. Social entrepreneurs can come from any sector, any socio-economic background, any cultural heritage, aged teen to elder. They possess an unscripted mix of idealism, pragmatism, flexibility and diligence. However, they are each very unique, and they are not as easily categorized as I have suggested in this post.

Can Non Profits intentionally make profits?

Non profit organizations do not have the benefit of issuing tax receipts for donations, unless they are registered charities. This means that non profits running a social enterprise are at a significant disadvantage if they are trying to access funding from donors, philanthropists, foundations and many government programs. For many (non-charity) NPO’s, earned revenue is almost a necessity in order to fund their social, cultural, environmental or recreational programs.

The question is  whether a non profit organization can run their business so as to intentionally make a profit?

The answer up until now has been a resounding no. Many non profits believe that so long as they re-invest any profits (that is to say the excess of revenue over expenses) in the social mission, then they are OK. However, the CRA does not believe that this so-called “destination of profits test” is a sufficient argument. Indeed, the Canada Revenue Agency in their February 2014 Non-Profit Organization Risk Identification Project Report states: “It is the CRA’s position that a NPO can earn profits, but the profits should be incidental and arise from activities that are undertaken to meet the organization’s non-profit objectives. The earning of profit cannot be or become a purpose of the organization, even if the profit is earned to fund non-profit objectives.”

To paraphrase: if a non profit organization intentionally makes a profit year over year, even if that profit is reinvested in the organization’s mission,  they run the risk of losing their tax exemption.

Social Delta recommends the research work of the BC Centre for Social Enterprise, as they’ve written several position papers on this policy issue and others relevant to social enterprise operations run by non profits.

 

The Value of Ideation

“What business should we operate?”

Is your organization thinking about launching an enterprise?  Jonathan Wade explains the importance of ideation in pursuing that goal – and shares some of the challenges and benefits every enterprising non-profit can expect.

For non-profit organizations, there is a growing sense of urgency in seeking necessary resources to deliver on their social mission. Funding is diminishing, or is becoming increasingly focused on specific areas of funder interest. Donors seek lean organizations and relatively rapid results, yet social service provision is labour intensive, and change takes time.

It is not surprising that Ottawa’s Centre for Innovative Social Enterprise Development (www.cised.ca) receives regular calls from non-profit professionals asking for help starting a business to offset lost funding. The problem is that successful businesses rarely succeed because the entrepreneur needs money. In fact, as anyone who had started a business can tell you, launching a business typically requires more money (investment) than it initially makes…often generating one to three years of operational losses.

This reality is understandably disappointing for cash-strapped organizations.

Let the ideation begin

However, starting a social enterprise from within a non-profit is an excellent way to diversify revenue, provided that expectations are managed. In fact, the process of conceiving of a business idea—referred to asideation—is itself a very beneficial endeavor for most non-profits (and charities) as it allows them to look critically at what they do and how they do it while considering market demand for products and services they might create.

There are several ways to determine what sort of social enterprise your non-profit might consider:

1. What are you good at, and can it be commercialized?
2. What does the market need, and do you have (or can you assemble) the knowledge, skills, and inputs required to meet that demand?
3. Can you take over an existing business that is in keeping with your mission?
The second approach to ideation is pure entrepreneurship. If you understand the market, and you can fill a consumer need, that becomes your business. However, non-profits typically need to commission suitable market research and then divert limited resources to create the required product or service. This has a high opportunity cost, and many say that you can’t “learn” entrepreneurship.

Similarly, taking over an existing business requires a strong knowledge of business operations and business valuation, as well as access to financing to acquire an existing business.

Building a social enterprise on existing strengths within a non-profit corporation, in my experience, is the most effective ideation approach; it guarantees an alignment between the organization’s social mission and its business activities and it doesn’t require learning a whole new skill-set or investing in new resources.
For example, if your organization offers computer training to women in crisis, then you can offer fee-for-service computer training to a broader audience to generate revenues to underwrite your social mission. Similarly, if your social service programming generates artworks, then selling those artworks—indeed a by-product of the programming—is relatively easy and does not immediately raise concerns about mission drift.

The challenges of commercializing

Commercializing existing assets—intellectual, social, financial, or human capital—can be a challenge for non-profits. For one, the organization may lack the skill and resources to bring these assets to market. Second, there may be no buyer for the skill, product or services in which your non-profit excels. Third, an organization must ensure that selling of skills, networks, intellectual property, or programs doesn’t adversely affect the current programming goals. Fourth, the very concept that people, networks, programs and buildings are “assets” that can be “used” to generate revenue can rub non-profit professionals the wrong way.

Each of these challenges can be addressed, of course, and the process of addressing them is what brings new value to a non-profit board, staff, volunteer and beneficiary community. Acquiring new skill-sets is possible but one needs to be carefully budgeted and planned. A well-done feasibility study will identify not only if there is a buyer for your product/service, but also whether that business idea will enhance social outcomes.

A good business plan ensures that the launch of any revenue generating activity will support, not compete with, social value creation. Similarly, if the “assets” of the organization are understood as being investments in a better social outcome, then the language becomes less inflammatory.

Many believe that what makes an entrepreneur is the ability to see challenges as opportunities. Perhaps loss of funding offers the opportunity to rethink how best to maximize a social mission. The ideation process for non-profit staff and governors is a concrete way of categorizing challenges in the market and in the organization and building a sustainable, revenue generating, social value-creating solution to those challenges. Indeed, the process of ideation actually strengthens the capacity and resolve of an organization with a social mission.


This article originally appeared February 24, 2014 in See Change Magazine online.

Bring your social enterprise to life

ImageAfter 2 1/2  years at the Center for Innovative Social Enterprise Development, Jonathan Wade is now the Principal at Social Delta, offering consulting support to social entrepreneurs. He will help you build your social enterprise; from ideation to organizational readiness and from market research to business strategy, Jonathan brings decades of experience in the non profit sector, and many years as a consultant, job coach and trainer in the fields of social enterprise development and social finance.

Take a look at the services he provides to help your social enterprise create value in our community.

Send him an email for more information.

 

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