Do social enterprises have an exit plan?

Create, pitch, sell, retire…

Photo by Dustin Tramel on Unsplash

As an entrepreneur, I like to keep abreast of the general world of business and startups. I read the latest news from huge corporations, keep my finger on the local, national and European startup scene, and spend the most amount of time reading about social enterprise developments.

Recently I was having a conversation about exit plans, and how the lack of them can lead to investors not being interested in the business, because after all, that can be their big payday. I was then asked about social enterprise exit plans, and it got me thinking.

Traditional startups

Despite the startup scene being so diverse across the world, we often see similarities in the way they are financed.

The bootstrappers like to build responsibly. They invest their own money, move at a steady pace, sometimes have the need to have a full-time job elsewhere whilst developing their business, but can be quite against getting investment from outside.

Then you have the fun[d] seekers. They got so far with their own input, but then look for angels, VCs, or whatever money they can get their hands on. They often go to pitch events, or reach out to high worth investors, trying to sell their vision.

The IPO or the exit plan

Both of these groups often have some sort of exit plan. It could be going public with their product or service, being bought out by a bigger company or selling it onto someone else to run.

Whichever end might be in sight, it’s effectively about giving up control, getting a nice reward for what you’ve done, and for many, moving onto he next thing.

The social enterprise way of thinking

Social entrepreneurs aren’t averse to this, as we can see through funding options these days.

There’s this new dawn of impact investment, which you have to presume was driven by demand from social entrepreneurs rather than by the impact investors and philanthropists.

If they were against it, we wouldn’t see the amount of funding available locally, nationally and for example, from the EU. You can find something for all stages of social enterprise, from idea development to scaling.

However the difference is that these funds often come with a lot of requirements. They have to meet both financial and social outputs, outcomes and returns. There aren’t many people offering £4m no-strings-attached to social enterprises, as profit isn’t the sole reason for the enterprise to exist.

Furthermore, many social enterprises are based on a community need, a community that the owner knows well and is invested in emotionally.

When you take these two reasons into account, you start to understand why many social enterprise stay relatively small, manageable and to a certain degree — bootstrapped. You start to see why maybe social enterprises don’t think too much about an exit strategy, an IPO or a buy-out.

A history of social exits

That’s not to say it doesn’t happen, so here are two examples of well-known social enterprises being bought out.

Ben & Jerry’s was initially established to provide high quality products based on the superb source of milk it had. The key was making sure their community was fully motivated — the staff well looked after, the cows healthy and ‘happy’, and the farmers ensured this and were well compensated for their work.

Just over twenty years later, there product was so good that Unilever came in with an offer which was accepted. $326 million was paid[1], with employees protected and the social causes remaining at the forefront.

They are still a certified BCorp today, showing they do still hold that social enterprise status.

The Body Shop on the other hand, has been sold more than once. Originally set-up in the 70’s, its goal was to stop animal cruelty, source local products and use natural ingredients. Seeing the success, encouraged the owners to look at franchising, something some existing social enterprises do today.

The Body Shop then went public in the 80’s, was taken over by L’Oreal in the 2000s and just two years ago was sold on again by Natura. Interestingly, they only recently became a certified BCorp, as their commitment to social causes has fluctuated over the years.

Key takeaways

  1. We can have an exit plan as a social enterprise — but we have to offer something with a great brand and high quality.
  2. We have to be prepared to let go of whatever it was we set out to do, if we do want to exit. (But this is the same as any company!)
  3. There is a chance that after 10, 20 or 30 years, if the sale is done in the right way, that the social causes will remain intact and relevant.

If you’ve exited a social enterprise, we’d love to hear from you.

[1] https://www.nytimes.com/2000/04/13/business/ben-jerry-s-to-unilever-with-attitude.html