Eight reality checks for social enterprises

By: Simon Wicks

Date: 21 January 2010

This week, Doug Richard, former Dragons’ Den investor and founder of the School for Startups hosted a ‘bootcamp’ for social enterprises in London. Much of the day focused on comparing businesses run to generate profit for shareholders with those run to create a social impact. Just how “business-y” should a social enterprise be?This week, Doug Richard, former Dragons’ Den investor and founder of the School for Startups hosted a ‘bootcamp’ for social enterprises in London. Much of the day focused on comparing businesses run to generate profit for shareholders with those run to create a social impact. Just how “business-y” should a social enterprise be? Richard attempted to answer the question by focusing on the realities of running a social enterprise in a competitive marketplace. Here are eight lessons that every social entrepreneur would do well to bear in mind:

  1. Don’t assume that being “good” is good enough. If the sole difference between your social enterprise and other businesses in the same marketplace is that you are “ethical”, ask whether that is enough in itself. You may need to rethink your offer or your business model.
  2. You’re in the business of marketing and selling something to somebody. Whatever your ethical objective, you can’t achieve it unless you are selling people something they actually want. Like any business, you need to know your customers, understand your market, and so on. As Doug Richard puts it: “Understand the industry you are in and you can understand how to prosper within it.”
  3. People will not queue up to give you money. Just because you are doing “good”, that doesn’t mean people will lend to you or invest in your business. The “market” is mostly indifferent to the good that you do; your enterprise has to be strong enough to survive on its own terms.
  4. Do one thing and do it well. Successful businesses tend to have one type of expertise; those trying to do too much often over-reach themselves and fail. “A narrow business is better than a vague one,” according to Richard. Whether it’s the thing you’re selling or the thing you’re giving, do one thing and do it well.
  5. You don’t have to be a “social enterprise” to be a social enterprise. The legal forms of social enterprises (such as Community Interest Companies) are still evolving and you may find they limit your capacity to grow. There’s nothing wrong with being a limited company with a social purpose. Richard advises going down this route and incorporating your ethical aims into your company memorandum and articles. (NB: this can be a confusing area as this blog by The Capable Manager explains. Mi-Tee have also kindly offered to share their solution to this problem if you contact them via their website).
  6. Present your cause in a way that actually engages people. As Julie Devonshire of Global Ethics Limited, which runs The One Foundation, puts it: “You have to make your cause so brilliant that people will not just listen but will get off their backsides and act for you.”
  7. Try to avoid paying for anything. Global Ethics Ltd got BT to give them £3.3 million of human resources. They also paid just £293 for a television advert that would normally cost £200,000. Do everything in your power to persuade people to give you things for nothing.
  8. Don’t give it all away. Says Doug: “You need to give away exactly as much as your business model can afford to sustain and to grow.” It’s obvious really; if you’re giving everything away, you have nothing left to develop your enterprise so you can give even more away in future.

Simon Wicks, BHP Information Solutions

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