How much profit should go towards your goal?

Reinvest, spend or share the wealth

A key element which puts the social into social enterprise is the way you spend your profits. Out with the idea that only shareholders or investors should benefit from the hard work of your company. Instead, it’s now time to invest in the wider community.

However as you navigate the literal world of social enterprise you will see a range of regulations or recommendations. Here we look at what exists in terms of asset locks, commitments and suggestions.

Legal structures, definition or certification

Community Interest Company (CiC), United Kingdom

Over in the UK, you can legally register as a social enterprise, locally known as a CiC. Once registered, the asset lock and dividend cap come into place. These ensure that the profit is either retained within the company or used to meet its social or environmental goals. This currently stands at 65%, meaning the rest can be paid out as dividends to the traditional shareholders or investors.

Social Traders definition, Australia

With no legal structure in Australia, things aren’t as clear cut as in the UK. Therefore many turn to the definition used by Social Traders in their FASES report, where it states that the majority of profit/surplus must be reinvested. Given that a majority can be 50.01%, any company that does this, either through reporting or constitutional locks can be classes as a social enterprise

Benefit Corporation, United States

Not to be confused with Certified BCorp, the Benefit Corporation is a legal structure with different rules on reporting per state. The main difference is that it gives the board the opportunity to make decisions based on both financial AND social reasons. This signifies a shift from the previous focus on a financial duty to shareholders. However there is nothing related to paying out dividends nor reinvesting profits.

What’s best for social business?

Three countries, three different set of rules. They do all protect the need for the triple bottom line, to ensure the organisation is able to make the social or environmental goal as important as the financial one. Which one goes far enough? There are arguments that dividend caps can share of investors, but this is why there is now a movement in the ‘impact investment world’.

Ultimately I would say, for trust purposes with both customers and stakeholders, having a legal requirement that a set percentage has to be committed, is better. You can build your business model around this, you can plan short, medium and long-term investment on it, and you can boast about it to the world.

What do you think is a reasonable percentage for reinvestment?

Originally published at https://medium.com/@michaelfreersplit/how-much-profit-should-go-towards-your-goal-167fe95a465a

Why we should always strive for an embedded model for our social enterprise

A look at which models exist and which are deemed ‘best’

The flexibility of social enterprise is something that makes it a lot more appealing than having to go the traditional non-profit route. However with a number of models out there, it can sometimes be hard to define which is and which isn’t a social enterprise.

You may have even heard in the news that Apple was moving towards being a social enterprise. Whilst many were quick to dismiss this based on the way Apple has worked, does work, and the cash reserves it holds, others had heard the term social enterprise for the first time and suddenly thought Apple was one such model. This is not the case.

At the other end of the scale, there is the myth that the organisation has to focus on employing people from a vulnerable group in order to be classed as a social enterprise. This is, in fact, a type of social enterprise known as WISE (work integrated social enterprise).


For those new to this sector, here are the the three most commonly talked about models in social enterprise, which each have a name that relates to the social/environmental cause.

Embedded model

Where the product or service directly provides the solution to the cause and is fully linked to the social or environmental goal(s).

For example, providing latrine solutions in a sustainable and entrepreneurial way when the organisational goal is to improve health and wellbeing whilst reducing attacks.

Integrated model

Where the product or service provides some crossover with the social or environmental goal(s). In some countries they are forced to use two legal entities — one for doing good and the other for making money.

For example, running a coffee shop which donates its profits back to the non-profit whilst also offering work for some of their users or clients.

External model

Where the product or service has very little to no connection with the social or environmental goal, and may even donate outside of the organisation.

For example, producing and selling wooden boxes whilst funding computer lessons for primary school students.


So now when you look at the models, you could potentially see how people thought Apple could even dare to think about becoming a social enterprise. Then we can think about a number of private corporations and how they, more and more, are donating to certain causes or sponsoring specific events.

Taking a step back from that, and looking at the integrated model. This is sometimes where social enterprises have found themselves struggling to make ends meet. Perhaps their product or service didn’t have the demand they had hoped. Perhaps what is a great cause just isn’t a sustainable business. These social enterprises pivot in three ways. They can  give up and collapse, innovate and stick to their guns, or find something that sells, even if it isn’t linked to their cause. It’s this last one that can commonly lead to an integrated model and can dilute the nature of the social enterprise.

Then we have the embedded model. Where the substance of everything you do is linked to your cause, it’s sustainable and you have impact pouring out of each department. Your suppliers are all social enterprises, your paper recycled in-house and you have a staff volunteering program with the local community. Social enterprise flows in the veins of everyone involved, directors, workers and buyers, and decisions are made with everyone’s best interest in mind.

It’s not hard to see why we should be striving for such a model. It’s not easy to get there, and definitely takes more effort and skill in navigating the business world we live in. Your original idea will have to be tweaked and improved, and if things aren’t going well then you will be faced with the three options mentioned earlier.

But just like any successful business, when you have that idea, and convince everyone it is the right product or service for them, this time with the added value of being an embedded social enterprise, you will be closer to dominating the market for years to come.

Originally posted on:

https://medium.com/@michaelfreersplit/why-we-should-always-strive-for-an-embedded-model-for-our-social-enterprise-6e66c854e9fd