One of the biggest operational challenges of nonprofit organizations is securing a steady stream of funding. Starting a social enterprise, in which earned income is brought in while simultaneously creating social value, can be a tempting solution for many organizations looking to diversify.
You must take several thoughts into consideration, though, before jumping into the world of social enterprise. It’s very tempting, and can be extremely viable for many organizations, but be sure to ask these questions about your motivations first:
• Is there demand for your venture? There’s a reason 80% of new businesses fail within the first five years. It’s incredibly difficult to run one, and the market can be pretty unforgiving. Ask yourself if market demand for the social venture you’re creating exists. Is there really a dearth of bakeries or catering companies in your area, or does it just sound like an appealing idea? Do your research—find out if you’ll even be able to compete before you do anything else.
• Does the potential venture align with your mission? After you’ve determined that there is significant business demand for your venture, you need to consider mission output. Is the social value of the venture directly correlated with its business growth? Or put another way: Beyond funding, how will the venture support your organization’s mission? Say you’re a youth employment organization, and you have youth working at your social venture. You’ve got earned revenue aligned with mission right there.
• What is the purpose of creating a social venture in the first place? Like any other venture, you need to ask yourself what the objective of it is. Is it strictly to diversify your fundraising stream? Will the potential funds earned supplement or support administration, or a particular program? Is it the best possible investment of your funds, or could you add better value overall with a partnership? There’s no one answer, but make sure you know what you’re aiming for before you begin, so you know whether or not you succeed.
Starting a Social Enterprise: 51% MONEY VS. 49% MISSION
So let’s say you ask yourself all of the right questions and get the right answers—and it’s a go. How do you carry out your social enterprise operations? How do you balance a for-profit revenue model within a nonprofit social mission framework?
Good question. There’s a whole lot of tension that can develop in a social venture. For example, in our organization, we might have a high revenue-yielding opportunity that might not create that many jobs. Other times, we might have an opportunity to create several jobs in the short term that might not yield much revenue. It’s all in the balance. And the way we approach the balance is with the concept of 51 to 49, or 51% money and 49% mission. This crucial perspective ensures that we don’t neglect our social mission, nor our responsibility to maintain the business value that sustains it. It’s a balance of direct and indirect mission fulfillment.
This concept and others will be discussed at length on Friday, November 2, 2012. The San Diego Association of Nonprofits (SANDAN), in conjunction with AKT LLC, will host Social Enterprise: A Growth Strategy for Nonprofit Organizations from 8:30 a.m. to 10 a.m. in sunny San Diego, CA. DePaul Industries’ President & CEO Dave Shaffer will present on the 51 to 49 concept and others, and discuss the struggles and triumphs of a social venture strategy.
Click here to register or to learn more about the November 2nd event on starting a social enterprise!
