Last time we mentioned social enterprises, and this generated some curiosity from people wanting to know what they are and what they do.
A very simple definition of a social enterprises is that it is an organisation that carries on a business that trades with an overarching aim to create social impact.
Social enterprises typically use their profits to address social challenges, such as homelessness, poverty, disability, unemployment, and other challenges facing society.
They may also structure their operations in such a way as to also make an impact in this way too.
Like running any business, running a social enterprise can be challenging, but many people in this space find their involvement incredibly rewarding.
If you are thinking of starting a social enterprise, there are some key steps to work through.
In many cases the steps will be similar to the steps involved in creating a traditional for-profit business, however there will often be some unique differences too.
These steps are likely to include:
– Defining your social purpose:
The first step in running a social enterprise is to define your social purpose.
What social problem are you trying to solve? What impact do you want to have?
Once you have a clear understanding of your social purpose, you can start to develop a business model that is built around this purpose.
– Developing a plan:
We’ve said previously that a lengthy business plan is generally a bad idea, but you do need to have some sort of roadmap for your social enterprise.
It should start with your social purpose, suggest a business model, identify your target market, perhaps include some basic details around your marketing strategy, and if possible simple financial projections.
It’s also helpful to list any resources you think you might need.
– Choosing a legal structure:
There are a number of different legal structures that you can choose for your social enterprise.
The best structure for you will depend on your specific circumstances, but these structures mirror those used by other for-profit and not-for-profit organisations.
This is an area where you really need to understand the options thoroughly before you make a decision.
Some common legal structures for social enterprises in Australia include:
● Company
● Partnership
● Incorporated association
● Trust
Accessing funding:
Like any new business, you may need to access external debt or equity funding to cover some of the startup costs.
This can be a particular challenge for social enterprises because funding sources may be concerned with providing money to an organisation that’s primary focus is not generating a
profit.
However, there are a number of different ways to access funding for your social enterprise.
Some of these options include:
● Grants: Occasionally grants are available to social enterprises, but it is not a good idea to rely on these.
● Loans: Banks and other financial institutions may offer loans to social enterprises under the right circumstances.
● Equity investment: There are some investors who will consider investing equity in social enterprises.
● Social impact investments: Social impact investors invest in businesses that have a social or environmental impact.
● Crowdfunding: You can raise funding from the public through crowdfunding platforms if your idea engages enough people, but there
is still some legal uncertainty around this option.
Building your team:
As in any business, the people you hire will be essential to the success of your social enterprise.
When hiring staff, you need people who have the skills and experience you want, and ideally who share your values.
However, unlike a traditional business, you also need people who are committed to the social impact you are trying to achieve.
In some cases the specific focus of your social enterprise may also involve employing specific people, for example people with special needs, long term unemployed, refugees, etc.
Obviously, this brings with it some unique challenges you need to overcome.
Advertising your social enterprise:
Once you have launched your social enterprise, you need to communicate your existence to your target market.
This will involve raising awareness of your products or services, as in any business.
However, you will also want to strongly communicate your social mission to as many people as you can too!
Like any business, you can use a variety of traditional channels to reach your target market, such as social media, online advertising, public relations, and events.
Measuring your impact:
It is important to measure the impact of your social enterprise.
This will help you to demonstrate the value of your work and to attract funding and partnerships once you are well established.
There are a number of different ways to measure impact, depending on the nature of your social enterprise and how long you have been established for.
Some common methods include:
● Social impact indicators: These are quantitative measures of your social impact.
● Social impact surveys: These are surveys that you can use to gather feedback from your clients, beneficiaries, and any other stakeholders.
● Case studies: These are in-depth stories that illustrate the impact of your work on individuals or communities.
Running a social enterprise is challenging but rewarding.
While the steps above are a guide, the most important thing when setting up and running a social enterprise is to be passionate about your social mission and to be committed to making a difference.
If you have a question about starting a business or running your existing business, we’d love to hear from you because we’ll select a new question to answer here every two weeks.
You can submit your question to james@qsb-consulting.com using the subject ‘CQToday’.
