The Re-Creators Turns Two. What I’ve Discovered in my Two Years of Social Enterprise
In November 2020, we celebrate our second birthday. Without a doubt, it’s been a rollercoaster two years with the highs and lows of setting up a new business model and trying to figure out the path towards financial sustainability.
I’m very proud to have reached my second year in social enterprise. Even so, I’m not sure if I should start this blog with a sense of cynicism or optimism.
Why cynicism? Do people understand what Social Enterprise is?
The last two years have shown me that running a social enterprise is not for the faint-hearted. It’s definitely harder than a pure for-profit or a charity which are both widely understood.
One of the biggest hurdles we’ve faced is that, because it’s not a mainstream model yet, many people struggle to get their heads around it.
Many think that social enterprises are charities, thinking you provide a business for free. But how can that work and be sustainable? How would people get paid?
All of this is made more complex by the fact that there isn’t a separate legal structure for social enterprises, making it just as confusing to run in practical terms.
Social enterprises tend to take an ethical supply chain approach and pay decent wages, all of which cost more, yet still have to compete with cheap for profits, all the while paying the same tax rate (if you are lucky enough to earn a profit).
The harsh reality of Covid-19 means that many charities are looking hard at the social enterprise business model..
Why optimism? Kinder leadership.
We re-elected a government who are leading with kindness, which in turn means they should make better economic decisions for our society that benefit all of us, not just the elite few.
If our government take this one step further and mandate triple bottom line reporting (profit, people & planet), then perhaps we would see kinder business models being the norm and not the niche.
Still, there’s a part of me that is sceptical on whether hardnose businesspeople are eyeing up being kinder to people and/or our planet or are happy sticking with the status quo.
Reimagining our World Through a Social Enterprise Model
The Re-Creators was set up to reinvent the way we do business. Reinvention doesn’t come easily, but I know that in the long run, it is worth it.
Here are some of the main ideas and challenges we’ve come up against in the first two years, and some insights I’d like to share with you.
- Delivering Joy through Sustainable Creativity: As an environmentalist without a scientific background, I wanted to use my working hours for something that would help our planet. I also knew that fast and wasteful consumerism doesn’t actually bring joy.
Creative upcycling was something I was drawn to because of the positivity
that comes from creativity.
Our workshops – which we were
able to deliver online during the lockdowns – certainly earn us an income way
above and beyond product showcasing and demonstrate the lasting enjoyment people feel from making something themselves by hand, rather than buying something new.
- Accessible Pricing: I’ve found pricing is the greatest catch 22 of them all. How can you price yourself to be accessible to a wide consumer base whilst also being sustainable?
In any business, for marketing purposes, you need to understand and hone in on your ideal audience. Many choose to price themselves at the higher end. Others are at the lower end and sell offers like Buy One Get One (BOGO). Many are flexible and offer different price points for different markets.
The Re-Creators do deliver workshops for free in the community, but that’s because we are either supported by Auckland Council or another community organisation to deliver a community empowering service. This is social procurement in action.
When it comes to pricing, our main priority is to reach as many people as we can with our message of choosing upcycling over new. People who attend our courses learn skills that they can use again and again and share with their whānau and friends.
That’s why the classes we offer are affordable, subsided or free (funded). Our most expensive classes are priced at $70.
- Living Wage:How does one price to include the Living Wage as a minimum, accounting for all the preparation and innovation, while being affordable to the average person? The answer: with difficulty.
But a fair wage is integral to us. We are Living Wage Accredited and ensure that everyone is paid at least the Living Wage.
- Working towards Carbon Positivity:Our mission is to convert anyone and everyone to creatively reuse rather than buy new; raising their awareness on the impact of environmental degradation caused by the extraction of virgin materials, and ultimately prevent as many materials as we can from reaching landfill.
- Investment & Funding:Our property and investment markets are currently the biggest drivers of inequality. Why else would you see a US share market soar when Trump cut taxes, knowing that it damages investment into health and education?
We live in an investment world that’s ruled by monetary Return on Investment (ROI) rather than creating positive social, environmental AND financial outcomes.
Those who are privileged enough to invest understand the types of businesses that are likely to succeed, clipping the ticket indefinitely without any work. In a recession, they only get richer; they rule our world.
I’ve been sneered at by venture capitalists who deem social entrepreneurs as financially incompetent. While there are many presentations in impact investment, in the day-to-day reality, I see very little.
As the current investor funding system is geared to help the rich get richer, I prefer crowdfunding. But even this has its downfalls. Because of the existing inequality, it seems oversubscribed.
Then there is governmental or philanthropic funding, which is also a competitive environment. Applying for funding is time-consuming and often a huge waste of time. It takes a lot of networking. However, once received, the way to get more funding is to overdeliver on services through creativity, reliability, and understanding audiences, eventually growing because of a stellar reputation.
What’s been the answer for us? Inclusive shareholding. The Re-Creators has performed above and beyond after two years of memberships and being an inclusive shareholding.
- Diversity & Inclusion.We embrace the concept of being inclusive to all who believe in the mission of creative sustainability.
- Using Profit to Innovate, Pay Decent Wages but not for external Shareholders. We’ve made small profits from time to time when we are busy with events. These are invested back into the business for product development, assets purchasing, or increasing wages.
- Pivoting during a pandemic. Last year I mapped out a detailed business plan; Covid quickly scuppered that.
Two years in and with a pandemic, I have a better understanding of what our business model is because of pivoting, testing and learning. It’s now easier to map out future years’ growth and think about a business model that targets sustainable growth.
Don’t be afraid to fail – suck it up and try again.
Test, Fail, Learn (Adjust & REPEAT)
Test, Succeed, Learn (REPEAT)
- Learning from other social entrepreneurs.It’s difficult to map out multiple years’ income and expenditure when the pathway to income is unknown. That’s why you’ve got to do your research and keep your eyes and ears open to trailblazers in your country and further afield.
One of the kindest social entrepreneurs that I know, Saia Latu the Founder and CEO of Trow Group, always says that he is a pure for-profit business. He charges for-profit rates for the work and then chooses how he uses his profits. Trow’s profits go towards materials sent to Tonga, Pasifika people in Auckland (check out the Maketi in Avondale) and community groups close to him.
One sticky point about this approach though – he has to use for-profit, cut-throat pricing in commercial negotiations because people don't tend to take pricing from Social Entrepreneurs seriously.
At the beginning of my social entrepreneurial journey, I listened to the podcast How I Built This with Guy Raz featuring Yvon Chouinard from Patagonia, and it stuck with me.
Yvon spoke about leading a business that was environmentally sustainable in everything they sold, including products that are designed to last but are also repaired. He also spoke about the respectful social environment of the organisation being inclusive and family-friendly. Finally, he spoke about not seeking a speedy scale up, but rather growth over the long-term. In other words, create a company that would be around a century later, independent of investors looking for a quick return.
Perhaps the solution to the money challenge is slow but steady growth that will last the long term.
- The Re-Creators Charitable Trust.On 24 September 2020, we took the plunge and also set up a charitable trust. By 3rd November we were approved.
This allows us to seek funding to deliver upcycling skills-based programmes for low decile schools, or in areas where people can’t afford our ticket prices.
It’ll also allow us to develop products that can be gifted to the needy re-using materials that already exist.
Looking Ahead to Year Three
Working with vulnerable people is a cause close to my heart and an area where I’ve got a lot of experience. The Re-Creators strategy is heavily geared towards social equity, which means I don’t have the time to market to people in the top 10% income bracket. Perhaps this is a weakness in my business model. At the very least, it’s something to consider as I move into the next phase.
To be true to our collective, we are adjusting the constitution for The Re-Creators Limited, so that we can give shares to members who contribute above and beyond for over two years. This forms part of my biggest dream: to make a collaborative shareholding business inclusive to those who believe in our mission.
Social Enterprise & Charitable Trust
Watch this space for year three and how we adjust and learn from our mixed legal entity.
With a healthy dose of questions and hope, we are looking forward to year three and delivering more workshops, making more connections in our communities, and standing strong in our mission and vision, regardless of the challenges.
As always, we are so grateful for your support. It is the power of the collective that makes us strong and sustains us.