Balancing doing good and making money

Using the 360 degree social enterprise tool

Running any business is difficult, but when that business also has to act ethically and transparently in everything it does, while delivering positive social and environmental impact, it can be difficult to strike that fine balance.

Fear not! It is possible, as we have seen with numerous examples of social enterprise in the UK and beyond. The likes of Grameen Bank, Patagonia and Who Gives a Crap have shown us the way, and no doubt if you reflect on your social enterprise network, you can find further examples.

Here we reflect on getting that balance right.

People, planet, profit

When we define social enterprise, we always use the triple bottom line, and in this case it acts as your starting point for every decision you make. It’s the basic check, in which you can go into a lot more detail depending on what you are deciding.

For example, if you are looking to source a raw material, and you find two suppliers, one locally and one from a country halfway across the world, you will need to go through each other the three P’s.

What effect will this have on people, my staff, the producers, the community and my customers?
What effect will this have on the environment?
What effect will this have on my profit or the price of my product?

Answer these three questions for both suppliers and see whether you get a clear answer.

It has to make financial sense

It doesn’t matter what type of social enterprise you have, you still need to make enough money to stay in business!

This means you can’t make decisions that are going to lose you money, unless you’re able to cover that loss from somewhere else. As with the questions above, if the raw material sourced locally changed the price so much, that your would no longer be competitive, then you’d have to think again.

This doesn’t necessary mean think about using the other supplier, but about your model and pricing strategy.

Is there a reason the local material is priced in such a way? Could the quality and reputation actually mean you can charge a premium and therefore still run a successful social enterprise?

It shouldn’t have a negative effect

Another bare minimum of balancing good and profit, is by making sure that your actions don’t have a negative effect. Even though this sounds pretty obvious, when you look at the conventional workings of business, then it’s not so crazy.

Communities left without water, staff working in dangerous conditions, products breaking after a week.

These are some of the worst examples, but for each decision you make, you should take into consideration knock-on effects and how to minimise any damage. This could be in the form of greener transportation, better quality material, or could result in you looking to offset parts of your business with doing good elsewhere.

Take into opinions of stakeholders

If you, as the decision-maker, find yourself in a bit of pickle when making a decision, don’t be afraid of reaching out to stakeholders. Make sure it meets customers’ expectations, that your staff are on the same page as you and you have the board’s backing. Share the costs and make a decision together, after all this way of working is key for any social enterprise.


If you need help with starting a social enterprise, then get in touch with us for some social enterprise consulting.

Social Enterprise or Corporate Social Responsibility

Three important differences

There has been a noticeable shift in the amount of good that companies are saying these days. There are numerous foundations, sponsorships, grants and donations going on from big corporations, that some might start to think they’re a social enterprise.

Well, quite frankly, 99% of them are not, they are just exercising their CSR departments to show you that they care, and unfortunately in some cases that they want you to think that they care.

This is completely different to being an actual social enterprise, so we’ve broken it down into three parts for you to be able to assess whether a company might actually be one, or is just doing a bit of good and shouting about it.

Stakeholders vs Shareholders

As a social enterprise, you are constantly thinking about all your stakeholders. You reach far and wide, not just at your staff, but your customers, your suppliers, your local community and the environment.

Yes, the environment.

Potentially one of the biggest stakeholders for anyone out there, and I’m not too sure as a percentage, how many companies support that stakeholder. As a social enterprise, you are looking to have a positive impact on all your stakeholders.

In traditional companies, it’s the shareholder that rules supreme. If it involves cutting quality and therefore costs in certain parts of the world to create more of a profit and thus more dividend for your shareholders, you’ll do it. If it means shipping or flying something halfway across the world for better profits at the detriment of the environment, you’ll do it.

It’s a careful balance, as any enterprise has to make a profit, but how much profit at the loss of others is the key between being a social enterprise and not being one.  

Enshrined vs entwined

Social enterprises are often started as a social enterprise, they haven’t converted into one, or drifted into becoming one. More often that not, the impact they wanted to see was the reason they started. Therefore, when establishing the company, they would have used a structured which set certain things in place, an asset lock, or a CEO pay ratio, by making them part of the company’s constitution and terms.

Meanwhile CSR departments can often represent as much of the company as they wish, in fact they can even work separately to the company, as a silo, doing so much good and working closely with the marketing department so others know what good is being done.

In more progressive companies, CSR is found in each department, after all, every employee is part of their social responsibility and should benefit from and contribute to any policy or program.

However, the entwining can be untwined and then brushed to one side when say, profits aren’t as good or customers aren’t asking for it.

Being vs doing

Finally, a social enterprise is, day in and day out, it breathes, eats and cries social enterprise, impact, wanting to better the environment and society whilst also wanting to grow financially to increase reach.

Meanwhile a company does CSR when it wants to, or when it needs to, it forms part of the day, or part of the work. CSR often gives the workers a chance to give themselves a pat on the pack for some great impact made, whilst social entrepreneurs get so used to doing good, they see it as normal, and strive to do more.

Positive Impact

Both social enterprise and CSR produce positive impact, but the key thing to look at is the rest of the impact being caused by the company who has a CSR department. Are they merely greenwashing what they do, or trying to balance out the harm?

If you have a CSR department and want to improve, get in touch and we can work on making your whole organisation deliver a better and stronger impact.

Who are social entrepreneurs exactly?

We’ve split them into three groups.

As the concept of social enterprise has grown and gathered pace over the past years, there has been an explosion in numbers of people starting their own.

Just as a social enterprise can be almost any business that already exists, a social entrepreneur can be anyone, however they often fall into three categories, each with their own strengths and experience to bring to the table.

NGO Leaders

With the ever-changing economical and political environments that we face, NGOs often find themselves second guessing how much grant or donor funding will be available. Add this to the long wait for project funds, in some case up to 12 months from submitting a work report, and suddenly NGOs face cash-flow problems that they shouldn’t really based on the great work they do.

This can often force innovation and a shift outside their comfort zone, as they identify where they could possibly generate income through trading which would then be used to enhance the work they do or at the very least provide cashflow for those months where you’re waiting for the funder to approve your interim report and release the funds!

Accidental social entrepreneur

These people started doing something for a bit of fun and sometimes for free, think of products like upcycled furniture, clay maps for the blind or high quality climbing equipment. Then people started asking if they could buy it. First it was their family, then friends of the family, and suddenly a few people they didn’t even know.

At this stage they realised the impact they could have and the income they could generate, and so had to suddenly enter the world of business. Often reluctant, most definitely accidental, their social enterprise began to be formalised and with strategical direction and decision making.

Passion entrepreneur

A number of people have worked in the same line of work for a decade or two, and whilst at first the rush and buzz of the 9–5 had them trapped, they slowly grew tired of this and dabbled in other things.

These other things may have included running art sessions for kids, cooking up plant based food for vegetarians or providing workshops to single mothers. Not too long after do these passion entrepreneurs realise they’d missed a trick, this is actually what will get them up in the morning.

They harness their earning income, save up for a period of time, use their transferrable skills and soon after start a social enterprise that focuses on their real passion, instead of their profession.


The fourth group that is gaining traction are the people who start purposely start social enterprises, having learnt about them at school, from their network or their own research. Let’s hope we see a shift in primary, secondary and tertiary education to ensure social enterprise becomes the norm, different from teaching in the 2000s where we were taught the only point of business is profit!

If you need help developing your idea or social enterprise, get in touch with us via our website.

What funding is available for social enterprises?

Grants, loans and angel funds too.

As we know a social enterprise, by definition, should generate at least 50% of its income through trading. However just like any other company, it may take a while before it gets to this point, and therefore there are a number of ways that a social enterprise can sustain itself before hitting that goal.

Some are able to bootstrap or fund their own social enterprise until that moment, which definitely provides you with a unique story to tell, but let us look at one of the advantages of being a social enterprise — access to a range of funds.

Public funds

Due to the good that social enterprises mostly do, they can identify and often access a range of funds and tenders that usually non profits go for. These can come from local authorities, trusts and foundations, and usually come with a strict set of expectations and reporting guidelines.

They will be published to meet a certain need, and there will be a tender or application process where you will explain what you do and how you do it.

While the majority of these funds might fund only your social and environmental activities, it is up to you to be inventive in ensuring your social enterprise benefits from this funding, and that you continue on the path towards the 50/50 split.

You can even more proactive, and reach out to local commissioners or departments to see if they are willing to pay for your service or product without going through a longer tender process. Being a social enterprise, they are receptive to ideas, as long as you already have a good reputation in the community and they understand what a social enterprise is, of course!

Private funds

On the flip side, you have all the funds that private companies can apply for, be it credit based such as loans or finance, or also commonly a capital investment.

If you’re thinking about access loans or finance then it’s important to look at all the organisations offering this, as you may be able to find preferable rates depending on the status of your company.

If you’d prefer to have a bit of advice with the money, then you can look out for coworking spaces, startup competitions, entrepreneur programs and similar who will provide funding in return for a stake in your company, and often a few other criteria too.

To be able to access these sorts of funds you often need to have some sort of pitch deck available, and have researched the potential your company has to make it big. It’s well worth having a lawyer look over the contract you might be signing too, and think about what restrictions you might want in that investment contract.

Pitching at a startup competition can often seem quite daunting, so just get out there and try a few times with no worry about the outcome. You’ll learn a lot about how to present, your name and company name will be out there and you can always reach out to funders later on.

Social enterprise funds

Last but also least, are funds specifically for social enterprises. It’s a growing pot of money but for now, nowhere near the amount in the other two funds. The best thing about these funds is they understand that you’re trying to balance people, planet and profit.

Therefore, there won’t be any awkward questions about why you wouldn’t want to maximise shareholder profits, or why you’re involved in filthy capitalism!!

Sometimes you’ll find them easily by search for social enterprise funds, but other times you will have to try other keywords such as impact, for good, purpose driven and similar phrases. Ultimately, you should join forces with other social entrepreneurs in your region and support each other in staying in the loop.

There are also some private companies offering discounts on services for social enterprise, for example AirBnB remove their 20% fee for any social enterprise or nonprofit experience. Keep any eye out for them, or simply drop them an e-mail and ask, the worst they can do is say no!


If you need help with your pitch deck, then get in touch via our website.

Becoming a social enterprise — for NGOs

Transitioning from donations and grants, to a mixed revenue stream

So you’ve seen the number of grants and projects in your area of expertise diminish, be it due to emerging trends or a change of government. Donations are down as the economic crisis looms, or your service users aren’t deemed donation worthy.

You’d read about social enterprise a long time ago, and thought it’s about time you change your model to ensure the sustainability and longevity of your organisation. However you’re unsure what steps you need to take next.

Here are a few pointers that we found useful when working with NGOs before:

Get the board on board

No matter where you are based, the likelihood is that you have a board of some sort to help with the direction and strategy of your NGO. This board will stay in place as you become a social enterprise, however you need to ensure that it gives you support during the transition.

Having a board that is extremely risk averse, slow and unresponsive will not help. Selling a product or service needs a certain amount of quick decision-making and the ability to meet current market trends, if these decisions don’t need board approval then great, but if they do, you better have a board in place that will ensure the success and not death of your entrepreneurial exploits.

We’d suggest speaking to them individually about their views and gauging their support, then looking at what skills they could offer to the new ideas. Once you have this, you can see what else you need to bring on board to ensure a comprehensive, complementary board that will guide you onwards and upwards.

Make sure you’re legally able to trade

Depending on your country and the rules for NGOs or charities, there’s a chance you can’t trade. You may be able to add the trading activities to your organisation, and if so then make sure you do so in a cost efficient way. If there isn’t this option however, then maybe it’s time to open something new.

As a legal entity (NGO/charity), you can actually open another legal entity, ensuring decision making remains by the owner (in this case the NGO). This also gives you the ability to set up whichever legal entity would be best for your product or service (get advice on this if you’re not sure). In some places (EU countries) this also enables you to move the profit from one to another without paying tax.

Or you might decide to set up a completely separate entity, such as a CIC, benefit corporation or locally recognised social enterprise.

Whatever you do, make sure you have the ability and meet all minimum requirements to start trading exactly what you want to.

Get your business head on (or bring one in)

We often say that NGOs are all heart (impact), and traditional corporations are all head (financial return). Well it’s now time to combine the two powers to make one superpower. However if you’re lacking the business brain, then look at ways to bring it in.

You could develop the skills yourself if you have the time and nous through training and mentoring, you could hire a social enterprise development manager if the funds are available, or you could see whether you can partnership with a local university and offer an internship or partner with a corporate sponsor and get some pro bono work.

Whatever you decide, it’s a key step, and we’ve seen many social enterprise ideas fail to get off the ground because there isn’t somewhere with the time or brain to do such a thing.

Utilise your existing support to extend to new support

Where would NGOs be if it wasn’t for their network or supporters, donors, volunteers, trustees, staff, service users. The list goes on. We are as good as these stakeholders and they always want the best for us.

That’s why when you have a new product or service, and you’ve thought about your customer profile that you’re trying to reach, you should share it with them. Tell them who you think your customer is. They might know 5 or 10 or 100 of these very people, and can tell them to check out your new offer. The old adage is true ‘it’s easier to keep a customer, than to make a new one’, so you’ll need all the help you can get!


They’re our top tips, what else would you add in there?

If you’re thinking about shifting to being a social enterprise, get in touch and maybe we could be your business head! We offer personalised rates and flexible methods of payment (it doesn’t just have to be cold, hard cash!).

Are there unethical sources of funding?

Perhaps just two sides of the same coin.

Photo by Pocky Lee on Unsplash

The social entrepreneurship sector continues to go from strength to strength as old capitalism loses it grip and individuals are looking at how they can make both a positive impact and a profit.

With this, we have seen a large amount of funding become available for the sector. There are local and national grants, EU funds, as well as funded schools and workshops. 

Then come the programs from the corporate world. It could be a sponsorship, a partnership, or their own social entrepreneurship program, however when you look who the company is, sometimes people baulk. 

This topic recently came up with some fellow entrepreneurs and here are the arguments we shared if you accept the funding.

Please note I am sharing all arguments, not necessarily mine!

It’s accepting greenwashing and similar

One argument is that by accepting the funds by these corporations, is essentially supporting their CSR efforts, which is some cases are deemed futile given what the company sells or the sector they work in.

As social enterprises, we should be leading the way by showing how impact is really done, and how it isn’t a matter of picking and choosing where you make a positive impact, especially if you are having such a detrimental one somewhere else. 

For example, having an oil company run a hackathon to solve an issue, including a prize fund at the end to continue the development of the solution. People could argue that the issue itself has arisen due to the company’s operations, and therefore the money has come from a dirty source.

It will affect your reputation

Perhaps it’s not the money that’s the problem, but the fact you are then aligned with a certain corporation. Whether you got a grant or a sponsorship, the likelihood is that your logo and name, has to appear their logo or name for the whole world to see. 

So then you have to think about your stakeholders and how will they react to it. Every individual has companies they dislike, perhaps due to their previous experience with them or because of their ethics, and if you start losing customers or partners because of this you’ll have to start weighing things up.

In a world where consumers are thinking more and more about where they buy from, and where news travels fast, you have to think about your brand and your reputation when making any decision such as this. Would you want to be associated with a pay-day loan company charging ridiculous interest?

Competition for funding is tight, so you don’t have a choice

There are lots of funds and programs out there, but the awards available are less than demand. Therefore when you see a pot of money that fits in with what you’re trying to do, and you’re in very early stages where it’s hard to secure money from elsewhere, then you have to take what you can get.

Also with it being the early stages, you are less likely to have built a brand yet nor have a large audience, and therefore once you are more stable you can work on this whilst ‘cleaning’ your history of working with a potentially controversial partner such as an investment bank or tobacco company.

It’s not where the money comes from, it’s where it’s going to

At the end of the day, you can’t really be sure where the money that goes into your company, comes from. If it’s from a customer, you’re not going to do a back check on who that customer works for or how they got that money. If it’s a government fund, you can argue against the way the government raised that fund at the detriment of certain social groups.

If the money is from a company’s CSR department, then you know what that company to sell in order to make that money. It could be any sector, and as you look deeper maybe their business practise isn’t so good.

But that’s where you come in, because you know that the money will be invested in an excellent service or product, as well as in your own social or environmental goals. After all that is why they came to you. 

It may be supporting their weak CSR efforts, but at the same time it helps grow the social enterprise sector, which in the future hopefully will be their competition or remove them from the market completely. 

Therefore money can be seen as ‘dirty’ wherever it comes from, but where it’s going to spent on is way more important.


Four arguments, two from each side. What are your thoughts when it comes to accepting donations or funding, or even offering your services or products?

Have you ever felt used for your impact by corporations, or quite the opposite, that you have seen they are actually trying to create something good as a company, not just a department or one or two individuals?

We’d love to hear your opinion.

Key Elements of a social enterprise

Separating us from the private and third sector

Some charities call themselves a social enterprise, and some corporates call themselves a social enterprise. Then social enterprises call themselves social enterprises.

Confused already? That’s the problem, many people can’t really differentiate what is really a social enterprise which can then lead to a lack of trust in the sector. There are standards such as B Corp certification, and legal structures such as CIC that can demonstrate who is and who isn’t, however these aren’t necessarily available or accessible all over the world.

Here I discuss the key elements of social enterprise, based on legal structures, certification and strategies from around the world. When deciding if a company/charity/social enterprise is or isn’t what they say, ask yourself these questions.

Who is/are their priority/priorities?

Stakeholders should be the number one priority for a social enterprise. These stakeholders are often defined by the mission or goals of the social enterprise, and can be a group of people or part of the environment. These stakeholders will have some sort of say on how the social enterprise is run. Obviously, the Amazon Rainforest can’t fill in a questionnaire or attend an AGM, but it is still able to tell us its needs.

After that priority, which can be multidimensional, it’s profit, which we will look at later on.

If you answered that SHAREholders were their priority, then I’m doubtful that they’re a social enterprise. To maximise shareholder satisfaction, you normally need to increase profits and are willing to sacrifice certain social or environmental responsibilities to do so. Could Shell, Google or Nestle really claim they were a social enterprise, when ultimately it’s about profit?

How do they make and spend their profit?

Profit isn’t a dirty word, it’s a positive word when used in the right way, and the majority social enterprises around the world commit to investing a percentage of their profit into their goals. It varies from state to state, and country to country. A rough guide would say at least 50% should be spent in such a way. The rest can be paid out to shareholders or co-operative members, but maximising that profit hasn’t negatively effected your stakeholders. If they’re not making any money on the market, often defined as at least 50% of income, and therefore any profit, they’re not a social enterprise.

What does their social impact report look like?

Transparency and accountability are important for charities and social enterprises. If they’re doing something good in a right way, they will be able to open up their books for everyone to see. Their director won’t get ridiculous bonuses and people shouldn’t be kept on zero-hour contracts. They won’t need to greenwash what they do, and can demonstrate their services and products have their goals running through them. The most organised and developed social enterprises have great social impact reports with social return of investment numbers, social SMEs often do something less impressive, but still take time to report (we’re working on being more impressive in the future!).

Are the board, on board, or is it just one section?

A social enterprise is named that way for a reason. It’s not an enterprise with a socially responsible department. Whoever started it, did so because they believed in a better more equitable and less harmful way of doing business. If the whole organisation is leading by example and dedicated to a cause, you’re onto a winner.


Four questions and you should be able to differentiate between a social enterprise, a charity and a traditional company. If the lines seemed blurred before, then they shouldn’t with the 50% income from sales, 50% profit to a good cause general rule.

Are you a social enterprise and want to argue with the questions and points made above? Send us a message or comment, we’d love to debate this a bit more, and create the much needed clarity.

Making funded projects more sustainable

Shift your short term thinking

Having dedicated my career to the third sector and social enterprise sector, I have seen a lot of funding pass through either the organisation I’ve worked at or organisations around me. 

These projects have been funded by a variety of grants, small local ones from the local city, larger ones from national foundations or bodies, and others valued at 6 or 7 figures from European or International funds.

I cannot deny the impact that the majority of these projects have had is excellent, however one thing that always seems to be severely lacking is the sustainability of each project. The question of sustainability is always on the funding application, usually towards the end, however the weight it carries changes from case to case. 

Often the mentality on these projects is limited to the project life cycle, it is seen as part of the organisation yet doesn’t fully connect to the before or after. Most probably if there is no funding for after, the project will cease to exist, and the impact of all that money spent on developing x or y, will also stop.

What do you write in that box for sustainability? How often do you actually do what you write? Isn’t all that money a missed opportunity for lasting change?

Sustainability hacks

We need a new mindset when running these projects. We need to look at each part of it and think how can we make it last for longer. There are limitations which I will look at after, but for now, here are a few hacks.

Leaflets, posters, banners, t-shirts…

Visibility is always important for the funders, so you are often faced with all these rules of what has to be put on any printed material. Despite these we can still design things in a smarter way. 

Think of all those banners you have stacked away somewhere, never to be used again but at the same time you’re unsure what to do with them. The project is over, the event has ended and they’re useless. 

Why so? On those banners you put a project name that’s over, a date that has passed or something related to that short-term project that is finished. 

Next time you design, don’t include a date, focus on text that is timeless, and if there is a project name that must be on there, make sure it’s smaller than your organisation name. Suddenly the banner can be used at any event to promote you.

The same with leaflets, instead of just focusing on the project, you can make it generic enough that can be still read, used and distributed afterwards.  

Your online media can be used to promote events or time limited projects, or short term media such as newspapers, flyers and posters.

Websites + social media

Most projects demand a website, so organisations go out, buy a domain name and some hosting, spend money on design and have a new website built from scratch. Two years later and the only thing that remains are the deliverables. They might also disappear once the hosting runs out, or are lost when the domain name expires.

Instead of this, you can buy a domain name that redirects to an existing website of the organisation, or a subdomain. Your IT guys will know how to do this if you don’t. This means all the information and deliverables will be stored on your central hosting and be on your main website, which you won’t let die like a project site, unless your nonprofit folds.

Social media provides some further problems, because posting needs to be regular and consistent. Creating new social media profiles for a project is often a necessity, but again they aren’t maintained once the marketing manager has gone, unless the project itself has sustainability. 

Think about using hashtags to identify a project, rather than a page itself, and also think about groups which spark more conversation than a page which is fairly passive.

Deliverables — toolkits, handbooks etc.

Quite often there is some printed material that is made during these projects. Whatever they are, arrive in a box and are put in a cupboard, sometimes remembered when there are fairs or conferences where they can be shared. 

Just with the materials above, it’s good to keep them as time neutral as possible. Where references are made to something that might be time limited, you could think about putting in links to more generic things instead. 

For example, if you want to talk about an upcoming conference, you can talk about it being annual, if you want to talk about some legislation, you can encourage the reader to check a website for updates or changes to that legislation.

Then when it comes to using them, first of all make sure they are digitally available on your website for downloading, and that they’re clearly listed and easy to find. People might search for something similar and come across the materials. 

In terms of all the material, make sure you’ve factored in the cost in the application for posting them, then you can pull together a list of schools, nonprofits, government agencies, doctors surgeries — wherever your resources might be useful — and send them out. Create a pack of these materials for you to take to conferences, meetings or other projects, so you can simply pick them up and go, instead of rifling through the cupboards.

Limitations

Staff

One of the dilemmas of being in the project cycle is that you’re always looking for the next piece of funding to keep your staff employed. This is similar to how private companies are always looking for more customers to keep the business going. But only similar, because as we know, the competition for funds has increased as the funds have decreased, plus the time before applying and getting results can vary drastically. 

That’s where social enterprise might come in. Is there any way you can use the funds to develop a service or product that can be sold on the market? When you are creating these materials, are you looking at it to tick an output box, or to fill a need?

For example, in the project you hired a video maker to create YouTube tutorials about a subject. Could you create additional videos or masterclasses outside the project outline that could be monetised?

Or say the project funds enabled you to buy some equipment, make sure you buy something that might be of use to others. Sports equipment or tech could be rented out or fire ovens and packaging equipment used to produce something different.

Finally, if you receive project funding for something that is meant to become sustainable, say production of gifts or sewing machines for upcycling, make sure you don’t overemploy and set yourself up for failure. Be lean, and be realistic.

Measuring beyond project life

The final limitation we come across is the ability to measure the impact long term. This is normally for one simple reason — it’s not something we are measuring within our organisation and therefore no-one is responsible for it. Perhaps because we don’t have the finances for it, or perhaps we don’t all have the skillset within the organisation.

However it’s very important. It demonstrates to future funders that you do actually care about sustainability and impact. It demonstrates that you are committed to showing how everything you do, creates positive and lasting change, which should complement your theory of change.


By working smarter with the funds we can access, we can slowly shift away from the reliability of funding some organisations currently have. We can relieve those cash flow problems as we wait for tranches to be released, and we can develop materials because they are truly needed. 

All of the above might not apply to your organisation, however there are always bits that we can take, implement and improve how we work and save time, money or waste long-term.

Clarifying positive impact

Finding the real meaning

As the effect of Silicon Valley ripples through each country, sector and entrepreneur, I’ve witnessed both the positive and negative changes.

An abundance of money is being pumped into startups all over the world, whether or not they actually have a working prototype or in some cases, a feasible idea. Fine, it’s your money (well kinda), you can invest it where you want.

Then you had the philanthropists, who were looking to donate large amounts of money to green or social projects. Excellent, with both government funding and donations decreasing, there’s a funding gap to be filled.

More recently, social entrepreneurship has found its footing and is starting to become prevalent in some countries. Legal structures have been formed, governments have set up policies and strategies, and universities have started teaching it. Now we have impact investment, and funds for impact companies.

What is impact investment?

In a nutshell, impact investment follows the usual rules of any investment. The investors are looking for a return over a number of years and will also have equity in the company.

However with impact investment the return isn’t just financial, but can be linked to a number of social or environmental indicators. These indicators tie in nicely with what the organisation sets out to do generally, or through a specific project.

For example, if an impact fund invests in a company selling affordable water filters, the fund will look for two things:

A financial return — the product itself has to make a profit in order for the company to be able to offer a return on investment at a certain percentage

A social or environmental return — the product has to have a positive impact on the buyers life that can be measured and thus relayed back to the fund.

What’s happening now?

As more and more funds have opened across Europe and the world, we have started to see a large change in the way they classify impact and social return.

You have the ‘purists’ who focus on specific problems such as hunger, housing or education, but then there are other funds that leave it open to interpretation.

Is xyz, a tea company really having a positive social impact on their drinkers so much so that they receive these funds? Perhaps if they are employing a certain community, developing educational opportunities there and paying them a living wage, most of which wouldn’t be possible otherwise.

Is abc, a new taxi app really changing the way we commute in a way that returns something valuable to all? Perhaps if the fleet is only made up of electric cars, or there are subsidised services for certain customers.

Have a think yourself at recently awarded funds. Would you class them all as impact-focused companies?

Impact is impact, no matter large or small though.

That’s the argument put to me when I ask. As long as you can come up with an appropriate reason for getting the funds, then it seems that any impact flies.

I think we have to really ask ourselves a few questions:

Are there not enough social entrepreneurs out there generally?
Or not enough applying for these funds that impact gets diluted?
Or do the funds want to prioritise the financial return that ‘purists’ may simply not be able to offer?

Whatever the reason, and whatever your point of view, it’s great to see that there are funds now for the causes, projects and organisations that are committed to producing real, positive, social and environmental impact. If you’re one of them, make sure you access the finance made for you, and stop abc and xyz to it!

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