TOMS Shoes. Patagonia. Warby Parker. Baron Fig. What do all of these businesses have in common? They’re each social enterprises.
Part of the challenge of becoming an entrepreneur is deciding what type of business you’ll start. It’s worth expanding that discussion to include social enterprise. After all, one of the keys to entrepreneurial success is gathering as much information as you can, then making a decision that best fits your vision and your short- and long-term goals.
Let’s take a quick look at social enterprises and how they typically work. Then, we’ll provide you some additional insight to help you decide if this business model is something you should pursue.
WHAT IS A SOCIAL ENTERPRISE?
Social enterprises are businesses that provide goods or services but also exist to solve specific social or humanitarian problems like hunger, lack of clean water, deforestation or disease. For example, Warby Parker donates a pair of eyeglasses for every pair sold, while Baron Fig plants a tree for every notebook purchase.
As Investopedia points out, “social enterprises exist at the intersection of the private and volunteer sectors.” And contrary to what you might think, not all social enterprises are nonprofits. In fact, social enterprises can exist in a variety of forms, including a B corporation, a LLC or even a 501(c)(3) nonprofit with a for-profit subsidiary.
The key is to ensure you have both a social purpose or mission and a sustainable business model. Starting a business is never easy, and social enterprises can introduce some specific challenges that you should try to account for in your planning. Use the following three-question checklist to help determine if your business will work better as a social enterprise.
SHOULD YOU START A SOCIAL ENTERPRISE?
WHAT IS YOUR MISSION?
It’s imperative to define the problem you’re solving through your business. This is a good time to reflect back on your personal entrepreneurial vision. What’s driving you? What goals do you want to accomplish? If you find a social mission inextricably linked to those answers, it’s more likely that your business could thrive as a social enterprise.Alexa Simeone is a prime example. She founded Lele Bombe in 2017, a fair trade jewelry distributor that connects people to handmade wearable art created by displaced indigenous communities in Colombia. By connecting indigenous artists with conscious shoppers, Lele Bombe is able to support native communities of Colombia and help shoppers find the ethically sourced jewelry they’re looking for.Rather than start a jewelry business that distributes domestically, Alexa was driven by a desire to support underrepresented Colombian artisans and help preserve their culture. Through Lele Bombe, she’s built a bridge between these talented artisans and customers who, without this link, would be much less likely to support these particular makers.
HOW WILL YOUR BUSINESS OPERATE?
Once you’ve identified your social mission, the next step is to think through your business model. This is where social enterprises can be particularly challenging, as business owners sometimes find themselves in a battle of profits vs. purpose.Let your purpose and your social problem be your guide. Then examine your business model and determine how you can satisfy your social mission while also being profitable. It’s important to remember that you don’t have to solve a global issue in a short period of time. In fact, it might be best to narrow your focus—a particular area of the world, for example—then broaden your impact in a way that supports, rather than hinders, your business growth and profitability.This is where it’s easy to get overwhelmed. And that’s where Kauffman FastTrac can help. The immersive online course is designed to help entrepreneurs work through each stage of the process when starting a business. And for those starting social enterprises, the self-paced curriculum can be an invaluable resource.”Without a solid foundation, I wouldn’t have been able to do this,” Alexa said. “FastTrac helped me to frame the market research in a way that really solidified the opportunity that existed for sustainable and fair trade programs. My ability to quantify that opportunity has led me to additional growth opportunities.”Another tip? Should you seek investors, do your due diligence to ensure that they’re in full support of your mission. That way, if a challenge does arise, it’s more likely that everyone will make decisions from a similar starting point instead of risking the enterprise’s integrity.
WHAT DETERMINES SUCCESS?
All social enterprises are united by a common need: to measure their impact. Refer back to your social mission, then decide how you’re going to determine success. If you opt for a one-to-one purchase model like TOMS or Warby Parker, a natural starting point is to keep track of how many goods are donated. If you’re working with a specific population like a community of artisans, you’ll want to track how many people you work with and what’s produced and sold as a result.Measuring impact and success not only helps keep your social enterprise accountable to stakeholders like investors, but it can also provide compelling statistics that support your story and message. Plus, over time, you’ll be able to identify success milestones and quantify cumulative impact, both of which validate the efficacy of your social enterprise.And remember: you have a partner in social enterprise and entrepreneurship with FastTrac. As you consider a business model that empowers others, we’ll do the same for you.