When a social enterprise is not an enterprise
Unless you’ve been living under a rock by now you’ve heard the term ‘social enterprise’.
There are many and varied definitions of the illustrious notion of social enterprise, our working definition “a business entity that TRADES for a social purpose” (noting the word TRADES).
In Australia social enterprise is not a legal structure in it’s own right and for that matter, a social enterprise does not necessarily wield a constitution which deems it a not for profit organisation.
Like any business it doesn’t really take a whole lot of effort to hang a shingle above the door and declare the business is OPEN. And like any business it’s the dark, difficult days beyond the exuberance of start-up land things can quickly turn to tears (just ask the 60% of Australian business owners who close the door within the first three years*).
The rhetoric around social enterprise could persuade you to think that social enterprise is a magic bullet, a must have in the social landscape. To some extent I agree that creating opportunity rather than ‘rescuing’ people is an enormous step forward.
But on the other hand, I also believe not for profits, for that matter any person lacking business AND community experience really needs to think long about the potential implications of their social enterprise idea before it starts.
The one thing I know for sure about social enterprise is that it’s a delicate balance between what is financially viable (and sustainable) and what a community will engage in.
I love being the owner of a small business and now in our 14th year of trading we’ve well and truly made it through the dangerous incubation hump. Let’s take a look at a few of my own lessons that could benefit an emerging social enterprise particularly as it’s navigators consider the move from being a social project to a social enterprise (even if the shift is happening unconsciously).
Keeping the business agile and responsive to change means the enterprise can quickly move (if not lead) trends, ducking and weaving larger organisations who were still looking at their belly buttons as you move into delivery. This is not always afforded to an organisation that must consult with a board, target groups, community and funding body before moving into gear.
Failure has been a constant component of our business model and with that the ability to learn, grow and innovate for success. Unfortunately failure isn’t always condoned when spending of the public purse and despite Australia’s move towards an innovative nation we still have a long way to go before we truly embed failure in the name of growth as an OK component of our very risk adverse culture.
Value money as a tool
Something else I had to conquer in the very early days in business was my belief system around money. Many not for profit people I work with consider money to be a necessarily evil (or worse). Most likely this belief will repels money, something that’s OK when you’re constantly spending grant income, but when you need to ask customers to pay for stuff it gets complicated.
Know your industry
And then there’s industry knowledge. When I set out to create a social enterprise in textiles I knew I’d need industry knowledge. But even equipped with a business degree and many year’s operating businesses I had no idea of the nuances involved in running a profitable textiles business AND maintaining the engagement of those it set out to serve.
A business is not a project
Something I learned as I managed and advised not for profit organisations over the years is that while I worked with teams who were fabulous at creating and managing projects, when project logic is applied to the creation of an enterprise it will most likely fall on it’s face. A social enterprise is not a project.
One can, however use the building blocks of a project to create an enterprise – but I’ll comment on that another time.
Anyway, if you are thinking of dipping your toe into the social enterprise arena take at least these few points into account:
- Market test first. Don’t invest a multitude of resources at something you might not really care about once you’ve tried it out.
- Work from a plan, even a one page business plan is better than nothing (and often the best option)
- Keep your enterprise agile ensuring decisions can be made quickly
- Employ someone that knows about the industry
- Invest in your capacity (and that of your organisation) – that doesn’t always mean seeking out free stuff from free training to free advice, sometimes you need to pay
- Look, learn and listen but understand what is authentic to you and your community and stay true to that
- Make sure your book keeper knows about profit as well as expenditure
- Check in on your ‘money mindset’ – are you OK with making a profit
- Expect ONE social purpose to be generated by your social enterprise and count any more as a bonus
*Australian Bureau of Statistics in Huffington Post http://www.huffingtonpost.com.au/2015/09/28/small-business-failure_n_8187166.html