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

Balancing your head and your heart

The battle of social entrepreneurship

Photo by Nathan McBride on Unsplash

I was recently training a group of current and potential social entrepreneurs about key stakeholders and how to ensure their buy-in at all stages from idea to execution. We discussed various methods, channels of communication, tools such as Social Return on Investment and how to share stories in a convincing and moving way.

I also got the participants to do a small quiz on how they make decisions. Overwhelmingly, the outcome was that most people supposedly used their head rather than their heart, however at the end of the workshop one lady came up to me and shared her current situation.

She had been running her own social enterprise for 9 years, with success, ensuring schools have access to clean water in Tanzania. However the idea came from the need for social change and better resources, with the financial side, and thus the business, following this. She had recognised herself in what I had said during the workshop.

“With a large numbers of social enterprise coming from the third sector, quite often people care so much about the social goal, they might, to some degree, neglect the financial sustainability.”

Her question was simple — how do you solve this problem?

Having been seen as both ‘the capitalist’ and ‘the socialist’ in different organisations, I offered up three solutions.

Get some sales training

One big problem is simply that owners or employees of social enterprises have never done any selling in their lives. They’re not equipped to sell, they don’t know the basic tricks of the trade and because of this lack of education and experience, they avoid selling as it’s out of their comfort zone.

If this sounds like you, then think about how you could improve your sales technique. Perhaps it’s about learning how to use persuasive language, storytelling or valuing what you have to offer, or a combination of these things and more. Put together a list of your strengths and weaknesses of your selling style, fill in the gaps through coaching and education and then get the experience through getting out there and doing it.

Set financial goals for yourself linked to your social outcomes

You may be a great salesperson but making a lot more money than you actually need to, might not be in your psyche. If you’re not motivated by money then sometimes it’s pointless setting sales targets. Each month you have a good idea of your outgoings, so you probably settle when you sell enough to cover those costs and nothing more.

Instead of having sales targets, have impact targets. Remember that every sale you make could lead to a great impact. For example, if you sell another water filter, that’s 10 more people with access to clean water or if you provide consultancy to one more business, that’s a further x amount to spend on an awareness raising campaign.

By swapping the sales target with an impact target, you’re appealing to your ‘heart’ more than your ‘head’.

Get someone else on board

They say fake it until you make it, but perhaps even when you swap the cold hard cash for warm fluffy (but still concrete!) outcomes, there’s still no faking it. Instead, you just want to work on the product, the story and the impact.

The last option for you is to think about getting a salesperson on board. It could be in the form of a business partner or an employee, but either way you’ll have to work closely with them to ensure the ethos of the company is present throughout.

This was one of the fears of the participant, that by getting a salesperson who is driven by the dollars, the social side may be undermined. This definitely doesn’t have to be the case, it’ll just be down to you to find balance, communication and results.


Need to work on your pitching skills, or to figure out what to charge for your product or service?

Types of Social Enterprise — Embedded Models

A seamless model of impact and profit

Having previously looked at the external and integrated models, we move to the third model of social enterprise — the embedded model.

Impact and profit sources are the same

This model rarely exists unless the organisation was born as a social enterprise, as advanced planning and strategical thinking is required.

Put simply — it’s when the product or service you are offering, directly solves one of the social or environmental needs you set out to solve. Each unit or hour that you sell, has a direct positive impact which goes towards achieving your mission and vision.

It goes a lot further than the integrated model with this direct approach, as everything done is intentionally. A product design phase may have taken place to adapt or improve an existing product or service on the market to make it social enterprise appropriate.


Example 1 — Sanergy

One of my favourite social enterprises to talk about, Sanergy not only provided a simple solution to a growing problem, they went further and ensured there was a circular economy within what they do.

First off, they build what are effectively toilets in a portable style for slums and communities without toilets. These are franchised out to local entrepreneurs that can then make money in maintaining and offering them. Straight away, the toilet provides an income for an individual, whilst providing everyone else a safer, cleaner place to do their business.

Next up, the waste is collected from all of the Sanergy toilets. This means there isn’t illegal dumping or the need to build complex infrastructure that requires a large amount of time and funds, and can lead to the upheaval of communities. Once again, this provides further jobs.

Finally, with that waste, they treat it and turn it into further products such as fertilizer that local farmers can then use instead of potentially harmful chemicals.

It goes without saying, the amount of impact Sanergy must have on the community is mind-blowing, all through leasing of toilets!

Example 2 — Grameen Bank

Grameen Bank was founded by perhaps the most well-known social entrepreneur Muhammad Yunus. They started off by offering microloans to people needing money to start or expand their business.

A fairly common service in developing countries right? Grameen Bank went many steps further to ensure it had an embedded business model.

The loans mainly target female entrepreneurs across Bangladesh, a country where in some parts women are shunned when it comes to owning or running a businesses.

Furthermore, it is a co-operative, and anyone borrowing money from GB is a member, meaning trust and participation is needed in order to successfully apply for a loan.

Finally, the interest charged on the loan is reinvested in other individuals applying for a loan. It is in this way that the simple offering of a loan, has turned into a sustainable social business where strategical decisions are influenced by those borrowing. The funds available to others across Bangladesh has grown exponentially, since there isn’t a group of stakeholders who are paying themselves bonuses.

Just like with Sanergy, the value comes directly from the ‘product’ itself — promoting equality, encouraging entrepreneurship, independence, financial literacy and economic growth.


This is social enterprise at its purest, where a problem was identified and a solution directly developed to solve the problem. Through the problem solving process, stakeholders, sustainability and impact were taken into consideration to produce a cycle that keeps giving.

Perhaps you have a social or environmental problem that you think you could solve? We would love to help you make it viable and sustainable. 

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