A social enterprise is an organization with a purpose to create earned income that benefits people and places for future generations.

Social enterprises can take on different models, legal structures, and roles but all share a purpose of common good.

So here’s the big question: Why do it?

The answer may be different, depending on if you a for-profit or non-profit business.

Let’s take a look at the top reasons why each of these two types of organizations consider operating as a social enterprise.

For new or existing for-profit businesses:

Consumers want value + impact.

Gone are the days when a corporation could say they were supporting a certain cause.

Millennials and conscience consumers want to be assured that the product materials or labor to deliver value was sourced with fair and equitable practices.

Businesses are now being held more accountable to their governance, labor practices and fair wages, as well as their carbon footprint and adherence to sustainable practices and standards.

Therefore, being intentional as a social enterprise can give you a competitive advantage or create a raving brand loyalist to your product or service.
‍There are new sources of capital.

Businesses that grow require capital. And social enterprises are able to unlock a new emerging class or investors and funds called impact investors.

From progressive grant-makers to large asset class managers, there are more funds available businesses with a social mission.

According to the Global Impact Investing Network, impact investing markets have grown from $2 billion in 2013 to $502 billion in 2019. While this is still only a small percentage of the overall traditional trading market size, it is a growing asset class and is clearly gaining momentum.

Doing good is good for business.
More studies are showing that using common sense and human-focused policies and practices create happier, more productive employees.

In our new knowledge-based and human service economies we need to treat our employees, customers and communities with the love and respect that we would want.

So the golden rule turns out to be good business.‍

For non-profit organizations:

Government and philanthropic grants are not reliable.

Until we see significant policy change, we will continue to see government spending decrease and philanthropic grant-makers will specialize more in targeted areas, locations and impact areas.

Even personal income tax deduction changes are starting to reduce local giving to nonprofits.

This leaves non-profit organizations vulnerable to funding gaps in a time when demand for services may be increasing. COVID-19 may be the spark that starts a change in this trend, but unfortunately it may take some time and political reforms.

Earned income programs are allowable for most non-profits.

If you continue to serve your chartered mission and deliver products/services to or with the beneficiaries in your mission, you can earn a considerable percentage of your total revenue by earned revenues without jeopardizing your exempt tax status. (Please consult your attorney first for advice specific to your situation.)

So say this with me “earned revenues are good” for the overall health of our non-profit.
Have more impact.

When a non-profit behaves more like a business it forces them to manage people, resources and time better. While “profit” is not the motive, “impact” is the motive and is a virtuous cycle.

Once you achieve sustainable impact it attracts more people and resources to your agency so that you can scale up and have even more impact.

I’m sure that you might have other benefits you can think or. I would love to hear your ideas and experiences. Send me an email and let me know what are the top reasons why operating as a social enterprise can be of benefit to you and others.

*Photo by Leon on Unsplash

About the Author Paul Wright

Paul Wright is the founder of WVS Courses and Coaching, and is passionate about helping entrepreneurs launch and grow new enterprises. He especially enjoys working with social innovators who create a greater good in the world with their businesses.

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