Key Steps to Starting a Social-Enterprise Venture
Wondering what this "social enterprise" thing you keep hearing about here (literally, it was FS' June cover story) and there is all about?
In the webinar "Charity? Or Mission-Driven Business?" in May, Jean Block and Randy Gleason, principals of Social Enterprise Ventures, explained the basics of social enterprise and shared tips regarding the necessary steps involved in getting started.
With traditional funding — grants, special events, donations, sponsorships, underwriting, etc. — fundraisers get funds, use them and then have to go out and get more, and they're often restricted in some way.
Social enterprise, however, offers nonprofits sustainable sources of unrestricted renewable income while enhancing their missions. Income can be generated through sales, payment for services or other business opportunities, and can be used as an organization sees fit. Social enterprise doesn't replace traditional fundraising, but rather it is a new tool in an organization's toolkit that provides more money to better further the mission.
Block and Gleason noted that some common myths about social enterprise are that nonprofits can't make a profit; it's just a quick fix; if they earn money, they'll lose their nonprofit status; and they'll have to pay tax on the income.
They suggested organizations consider social enterprise ventures because the funding marketplace is changing — corporate giving is now directed toward investing for the long term rather than buying tables for a one-off event; government funding is diminishing and being redirected; and donors are tired of giving to organizations that operate with a poverty mentality. To capitalize on this, the presenters said, nonprofits should shift to earned income, noting that "nonprofit is a tax designation, not a business plan."
Before starting a social enterprise, assess your organization's readiness to take on such a venture. This involves:
- determining if your board and staff are willing to invest in changing from charity-think to sustainability;
- determining if the board and staff are open-minded;
- having board and staff create a dedicated team to learn social enterprise;
- ensuring that every member of the team is committed to the journey; and
- determining if board and staff are willing to invest the time and dollar resources into learning social enterprise.
What typically results from this assessment is:
- fundamental and systemic changes in the way an organization manages itself;
- a business plan for an earned-income social-enterprise venture;
- enhancement of current programs and services by providing added benefits that create new income sources from new payer markets and customers; and
- a new, objective method by which to evaluate current and future programs, services, and income opportunities.