My ten years of experience helping people start and grow businesses, nonprofits, and social enterprises in Alberta allows me to witness one of the most common mistakes made by would-be social entrepreneurs. Most of them tend to confuse social enterprise with nonprofit or corporate social responsibility and therefore focus more on their social mission than a sustainable, profitable business model during the planning process.
Here are my top 5 tips for starting a successful social enterprise.
1. A Sustainable Business Model
Don’t be fooled by the word “social;” a social enterprise is a profitable business. Solving pressing world issues requires money. A product or service, as innovative as it is, isn’t enough—the product or service must have a viable market. The “build it and clients will come” approach has proven to be a failed business model. According to St. John’s Bakery, “if there is a direct conflict between the business versus the social goal, the business has to take precedence or the enterprise will eventually fail.” Being able to balance the nonprofit mentality and business sense is key to building a successful social enterprise.
2. A Strong, Clear, and Inspiring Social Mission
A strong , clear, and inspiring social mission related to the business has a big impact on convincing customers to buy your product or service to support your social enterprise. Without clearly stating your mission—and making it one that will appeal to consumers—it will be difficult to be successful at that mission.
3. A Suitable Legal Structure
There is no legal structure specific to social enterprise in Alberta. A social enterprise can be a for-profit, nonprofit, registered charity, or a cooperative. There is no right or wrong structure. The most important thing is to make an informed decision based on your goals, knowing that the structure you choose will have a significant impact on governance, ownership (profit sharing), investment options, taxation, regulations, etc. It’s a fact: businesses need flexibility regarding decision-making and risk-taking to be successful. Your structure should be flexible enough to allow you to achieve your goals.
A social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being—this may include maximizing social impact alongside profits for external shareholders. Social enterprises have both business goals and social goals. —Wikipedia
A non-profit organization (NPO), also known as a non-business entity or non-profit institution, is dedicated to furthering a particular social cause or advocating for a shared point of view. In economic terms, it is an organization that uses its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the organization’s shareholders, leaders, or members. Non-profits are tax-exempt or charitable, meaning they do not pay income tax on the money that they receive for their organization. —Wikipedia
4. A Plan
You need a roadmap! Making a real social impact takes not only money but also a lot of time. Having a thorough market analysis and financial forecasts is very important. Think and plan for the long-term.
5. A Great Team
Find people who care about the problem the way you do and who believe in the potential of the social enterprise. They will very likely be prepared to go the extra mile to help the social enterprise succeed.
Of course, there are many other things to consider. I’ve shared what I think is most important in planning for a successful social enterprise.
Don’t feel lonely on your journey to making a positive social impact on our earth. Seek professional advice—like the kind you get at Business Link!