My first 90 days in Social Enterprise
My family and friends were a bit shocked when I gave up my respectable and well paid government job to pursue a mission in social enterprise. But despite the buzz this created in my social media circles, many people don’t seem to know much about what a social enterprise is, or understand why I decided to radically change the course of my career to pursue this new direction.
What is a Social Enterprise?
A social enterprise's main purpose is to encourage and deliver social change via commercial strategies. They can be structured as either for-profit or not for profit, and they will have both business-oriented and social goals. For example, one objective might be to maximise social impact while another goal, that of making profits for shareholders, operates alongside.
Social enterprises are distinct from other organisations in that social goals are ideally embedded in the business’ objectives. A social enterprise’s aim is to make a positive financial, social and environmental impact on the environment in which it operates.
What’s my "Why"?
My social business idea, The Re-Creators, was born from my dream to protect the environment, and provide jobs to those from a refugee background.
My initial idea involved operations and sales. I sought to set up training workshops where participants could upcycle products to on-sell for a profit. It was an ambitious idea, to say the least.
In the first 30 days, I spent my time meeting and interviewing people. People in my local community connected to local programmes, local council employees associated with minimising waste and community development, upcycling businesses, and zero waste groups. In doing so I quickly realised that my business idea involved challenges around funding, compliance (health & safety) and viability.
The best solution was to initially scale back. To focus on sales, create a platform for selling goods and rather than reinvent the wheel, upcycle it. Use the variety of programmes already in place in the Auckland community to deal with the operations side, such as Hub Zero, Shakti, Grey Lynn 2030, Ranui Community Centre, and Hackland, which offer a mixture of workspaces or training. In Auckland, we are lucky in that there are some shared working spaces, sewing classes, craft collectives and many community get-togethers already operating effectively.
I also researched upcycle businesses that were up and running, and looked at their websites and products, to research the market before making contact to discuss their business models.
I discovered that for various reasons there are a plethora of small upcycle artists who struggle to make a decent income. I realised that creating a collaborative platform would be a way to overcome this problem, and that the solution could combine the costs of platform hosting, advertising, and analysis, whilst ensuring that a sustainable income and other social benefits are fed back to the artists. It seemed the perfect solution had presented itself and it was all about connectivity.
What follows in the rest of this blog, are some insights that I gained from my first 90 days in social enterprise.
Social Enterprise and Profit
Every new business starts with a “Big Idea.” The difference between a mainstream business and a social enterprise is the awareness of where profits come from. Once there is a clear and reasonable idea for a profit margin, the social entrepreneur should sit down and calculate expenses and income to work out if the idea is a goer.
Like any business, the future will be paved with business planning, financial forecasting, and business models. It’s worth knowing how much capital will be required at the start. There must also be clear revenue targets and a business plan.
A social enterprise needs to cover part – or preferably all – of its costs AND produce a profit to support its mission.
Charities using the Social Enterprise model
Many charities are looking at the social enterprise model to see if they can grow and provide more support to their particular cause. For charities, funding is either provided by governments (who generate a reliable supply), or the public (who are vulnerable to economic cycles), or philanthropists (who can be difficult to find), all of whom control how the money is spent, but can remove support at their will.
The funding options available to charities require them to be very risk averse, which can limit growth. There’s a new trend of charities exploring social enterprise ideas, so that they can overcome their revenue constraints, and have more control over their destiny.
Social Entrepreneurs generally earn little money
Social entrepreneurs are more passionate about making an impact rather than generating a personal profit, or even earning a living wage. But a good social entrepreneur still needs to operate within the confines and benefits of a capitalist market. It’s still all about generating sales and effective marketing.
After researching various New Zealand-based social enterprises, I realised that my big idea will not be a great money earner for me personally. However, I am heartened by the upsurge of passion from a variety of people and their willingness to offer help. Most owners of social enterprises appear to earn very little, but they are more concerned about the impact they create. It’s about changing systems and mindsets.
It occurred to me that it’s not uncommon for mainstream business owners to start out by operating at a loss, then earning a small income while their business is in the initial stages of growth before they and their profits take off. Perhaps the difference is the desire to become rich and successful for one’s own benefit, instead of solely building a successful business for a good cause.
Social Lean Canvas Model and Funding
As social enterprises generally have a restricted budget and few assets to lean upon I had to think of a way to get going. Receiving government grants is one approach to funding, but given my organisation is new, and therefore has no track record, it’s difficult to get funding this way. I was faced with the chicken and egg scenario.
Enter the Social Lean Canvas Model, which helps a social enterprise deliver an impact on a budget, get off the ground, and test concepts. The Lean Social Model provides a small-scale business delivery model that allows you to take the risks and pursue your dreams. Testing ideas allow the validation of the business to see if it's sustainable and viable in the real world. It is the fastest, lowest risk way to develop a successful social enterprise.
Testing the Process – Engaging the Group you want to Help
Once a process is tested on a limited budget a decision can be made on whether the “Big Idea” is worth pursuing. The alternative option is to return to the drawing board for the next “Big Idea.” It’s important to be realistic, and this means choosing to invest precious time and money into a viable idea.
The other commercial concept regularly used in social enterprise is the ability to be agile. This concept means testing processes in small quantities, and adjusting where needed, to ensure the business processes are becoming more successful every day.
Another insight – ensure your social enterprise fulfils market demand and responds to competition. Effective operations, financing, and marketing campaigns, like any business, are critical for a successful non-profit.
Into the Next 90 days
I look forward to my next 90 days preparing for the impact I want to make in the social enterprise world. While the world of social enterprise continues to trend on social media, the idea of a company sharing profits or helping people and the planet is rare, but not new. There are organisations who have always been motivated to help people, animals or the planet and I am excited to add my voice and my expertise to these so that together we can re-create a better world.