What is a Social Enterprise Business Model?


What is a Social Enterprise Business Model?

No one argues with the fact that society has problems. The question is what to do about them. While those on the left side of politics focused on government-funded programs, and those on the right focus on the free market economy, I want to present a solution that draws on the best of both: social enterprise. What is a social enterprise business model? The constraints within which social enterprises operate to bring about interesting innovation and keep companies accountable. It’s as if there are two bottom lines – social impact and profitability. You can’t have one without the other. While most social enterprises are small, they’re growing in number, and have the potential to tackle great issues we face with the environment, poverty, drugs, incarceration, trafficking, homelessness, equality, and mental health.

Two approaches to social issues that don’t work

No one argues with the fact that society has problems.  The question is what to do about them.  Those on the right side of politics often argue in favor of the trickle-down economy – let the market do its thing, they say; let businesses focus on profit; let the rich get richer, and let the benefits of an economy with higher turnover trickle down until at last it benefits even the poorest in society.  Those on the left, of course, counter that the trickle-down economy is a myth.  They argue that one of the functions of government is redistributing wealth so that everyone gets a share of society’s goods.  On this view, businesses should, through paying more tax (which can then be spent on social programs) and being obliged to operate more equitably, be forced to contribute to the common good.

In my opinion, neither of these plans is going to meet the social and environmental needs plaguing our planet, at least not in isolation.  Public companies, legally obliged to act in the best interests of their shareholders, will continue to focus on profits, even at the expense of the good of society.  As for the government, the political winds change so often that it is unable to act as a steady source of funding for social programs.  Moreover, those charged with setting social policies are often too removed from the issues on the ground to be able to implement truly useful programs.

We need another way.

Looking for ideas that transform how we approach social change

So, What is a Social Enterprise Business Model?

This is where social entrepreneurship and conscious capitalism enter.  So, what is a social enterprise business model? Basically, using business as a tool to solve social issues.  It’s tricky, because entrepreneurship is already hard, and entrepreneurship exercised with the precept of placing a social cause above your profits is even harder.

But sometimes this constraint forces innovative solutions.  It certainly brings out a lot of goodwill from the community and breeds beautiful and inspiring visions.  I believe we’re seeing the start of something beautiful.  While most social enterprises are small, they’re growing in number, and have the potential to tackle great issues we face with the environment, poverty, drugs, incarceration, trafficking, homelessness, equality, and mental health.

What’s the Secret Sauce in Social Entrepreneurship?

There are two things I really love about social enterprise.

The first is that they tend to be really close to the social problem that they’re solving.  Most non-profits are too, but social enterprises operate within a different set of constraints.  They don’t have certain deliverables imposed upon them as a condition of obtaining grants or have to work according to the grant requirements.  They’re free to deliver their impact in the way they see best.

On the flip side, they still have their business constraints – you can’t just allocate money and resources that don’t exist.  But that’s not necessarily a bad thing.  It both brings about some interesting innovation and keeps companies accountable.  It’s as if there are two bottom lines – social impact and profitability.  You can’t have one without the other.

The second thing I love is that social enterprises tend to be self-funded, and that means that, in a sense, they’re in control of their own destiny.  Yes, plenty of businesses fail.  You need to have a solid business model.  And yes, earning profits can get in the way of your social impact.  But you’re not spending your time writing grant applications, and you’re not a charity.  (This is not to say one is better than the other – charities certainly have their place in social change.)

Authentic Business

Somehow it feels like the impact and vision are more genuine when you don’t have extra strings attached.  Being a company that’s willing to sacrifice profits for their mission gives extra truth to their vision of change.  And there is something really powerful in that.  You want to get behind it because they’re standing for something bigger than themselves.

It’s like they inspire trust in their stakeholders that they’re doing the right thing.

Although this all seems clear to me, I spoke to an economics professor at a retail conference recently – and he thought social entrepreneurship was pointless.  To him, business should be business, and you should leave the social stuff to the government.  In his eyes, capitalism doesn’t work if you’re not letting companies deliver value as effectively as possible, and in his eyes, profit was the pure measure of that value.  I personally don’t understand this logic.

Grant funding is tight – and it’s not evergreen.  Everyone is competing for the same grant dollars.  If you miss out one year, as a non-profit, you’re in trouble.  When you’re a social enterprise, your success isn’t tied to a grant – it’s tied to your ability to do business.  And you can find people (and pay people well) to carry out your business objectives.  That’s something I like with social enterprises.  They can pay wages that compete with industry, and attract the top talent that they need.

Build an ecosystem to make your social impact shine

Building an Ecosystem for Social Entrepreneurship

So, we just looked at two of the great forces that social enterprise brings to the table.  Next up, I’m curious how to build an ecosystem to support social entrepreneurship and give entrepreneurs the tools they need to succeed.  How do you get more people playing the impact business game?

In Columbus, Ohio, we have a great ecosystem pulling new people in, teaching them how they can form teams around projects to create a social impact with a business idea, and then providing support systems to grow their social enterprise and get it off the ground.  The nature of Columbus is very collaborative – people are accessible and are willing to reach out and help each other out, which I believe is one of the true superpowers of this city.

How do I start a Social Enterprise?

Let’s look at this more in-depth.

Launching an Idea with GiveBackHack

GiveBackHack is the gold standard for using a hack-a-thon to start a social enterprise.  It’s also a remarkable and fertile ground for testing out ideas.  It’s like taking the grit from crowdfunding, and people from all walks of life with all sorts of crazy business ideas that make a social impact… throwing them in a blender and making a magic brew that kick-starts new social enterprises. A weekend at GiveBackHack is diving straight into the deep end to understand what is a social enterprise business model.

There are three bits of magic to these weekend events that create some truly innovative ideas.

The first is the generation of ideas.  One-minute pitches to propose ideas… maybe 50 or more… nothing is polished, and they’re often more sound bites than fleshed-out concepts.  But through the sheer quantity, and the subsequent voting — you get three stickers to vote on your favorite ideas — it’s like some internal validation of ideas that people want to work on.

The second bit of magic is external validation.  Teams are pushed to validate their ideas outside of Give Back Hack by hitting the streets, taking surveys, talking to people, and refining their ideas based on these conversations.  Constant customer and stakeholder feedback are some of those business elements that contribute a lot to success.  The more you understand your customer, the better you can provide them with a solution that solves their problem at a price they’re willing to pay.

The third bit of magic is what happens when you bring people together from different backgrounds to work on an idea.  People from different careers, different walks of life… this mix foments new ideas quicker than anything I’ve seen and is where a lot of the magic of Give Back Hack comes into being.

Going deeper with SEA Change

Then there’s SEA Change, which is a social enterprise accelerator. What does that mean? It means that people with fresh ideas to change the world, just starting out, can join a cohort of others trying to make a difference in the world. They learn business basics – interviewing & talking to potential customers, determining their mission & values, focusing on their MVP, and evaluating the tools they use to measure their impact.

SEA Change is a twelve-week program that takes a budding social enterprise idea (anything that’s started within the last couple years) and gives it the support it needs to go forward. They’re a program which will your deepen your understanding of what is a social enterprise business model. But their first objective isn’t to make sustainable social enterprises —it’s to help you evaluate your idea more quickly and to decide whether it’s something to take forward or not. Their success isn’t in making enterprises successful, but rather in helping social entrepreneurs understand their viability and find their path forward quick more quickly. If you haven’t got a good idea, they don’t want to prop it up. If you’ve got a good idea, yes, they want to support you in any way they can – but they really stress the self-reliance, and help you to build the connections you need to proceed.

With speakers from different backgrounds and conversations with those established in the area, SEA Change does a great job of furnishing young entrepreneurs with resources and insight. These connections direct the attention to things that will most help to get your business off the ground.

A piece of advice for social entrpreneurs:  stay close to the ground

Apart from plugging into programs that can help you focus and build your budding enterprise, I have one piece of advice for social entrepreneurs:  stay close to the ground.  Stay close to the people you’re trying to help, and the problems you’re trying to solve.

A Case Study in Starting a Social Enterprise

One of my favorite ideas from Give Back Hack Columbus was Rentor Mentor – a platform intended to become the Uber of low-income housing… something to solve problems that both tenants and landlords face, in a new and distinguished way.  They started in May, and they’re still going.

What was it about their project that stood out?  Jerry Valentine has a career working with affordable housing.  He knows the issues inside and out.  He understands what problems people are facing, from their perspective.  It’s this deep understanding of a social issue that leads to the best ideas.  Not just a textbook reading of a social issue, but an “I’ve talked with the people being impacted” understanding.  Having a base feel for what people want and their inclination to adopt a new idea is a powerful place to start.

Another social enterprise, and one that I’ve been closely involved with, is Wild Tiger Tees.  You can read about our origin story.  When we started it, I had only a slight understanding of what youth experiencing homelessness really wanted and needed.  To be honest, it’s still not clear – but there are dozens and dozens of youth I’ve worked with who help me better understand their unique situation, giving rise to better answers to the question, “how can we best help you lead a successful life”.

If you’re developing a social enterprise, make sure you’re on the ground, talking to the people you want to impact.  Make sure to incorporate their stories, hopes and dreams into whatever concept you’re developing.

Connect to create social impact


In conclusion, neither traditional business models and nor government funding are always the best routes to make a social impact.  Traditional business models are too focused on profit, and government funding can be scarce and restrictive.  Hopefully, now you have a better understanding of what is a social enterprise business model. Social enterprises occupy a unique position in being able to deliver social change sustainably.  And the best way to start is to plug into a supportive ecosystem, through organizations like GiveBackHack and SEA Change, to help launch new ventures and create new inspiring missions that have an impact.

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