More nonprofits are now exploring social enterprise as a means to create a sustainable revenue stream in support of their organization’s mission. In large part, this is being driven by a need to replace harder-to-get government and foundation funding and reduced giving from other sources. Besides the financial advantages of a social enterprise, there are also other intangible benefits, as I described in my last blog, Social Enterprise: What is it, exactly?
As a basis for discussion, I will use this definition of a social enterprise:
Social enterprises are businesses operated by nonprofits for the purpose of generating income by selling a product or service in the marketplace in order to deliver a social, environmental or cultural value consistent with their mission.
If you are exploring social enterprise, there are several criteria that should be top of mind when selecting what the enterprise model will be, based on your organization’s mission and its ability to successfully build, grow, manage and sustain the enterprise. As a board member and advisor to several non profits, I have used these nine basic selection criteria to help these organizations assess potential social enterprise models for viability:
For a social enterprise model to be viable, it must:
- Support and be consistent with your mission
- Have market viability
- Differentiate within its competitive space
- Be one for which the npo has, or can cost-effectively build the financial, staffing, management and infrastructure to launch, manage and grow. A strategic alliance may provide access to needed resources in a cost-effective way.
- Not require a disproportionate allocation of resources which would impair mission
- Be scalable and sustainable
- Be able to reach break-even in a “reasonable” timeframe
- Create greater visibility and market awareness of your npo brand
- Meet any additional criteria specific to your npo to insure that its mission is preserved and supported
In this series, we’ll drill down on each of these criteria, beginning with the first and most important one:
Why must the social enterprise support and be consistent with the npo’s mission?
First and foremost, the mission, whether social, environmental or cultural in nature is why we exist, and the social enterprise needs to be aligned with that mission. Some examples are sheltered workshops which train and employ various populations, such as disabled and formerly incarcerated individuals, or youth at risk. In doing so, they are providing vocational training and creating jobs, with net profits committed to sustaining their mission.
If the social enterprise does not support, or is not consistent with mission, the most damaging consequences are likely to be:
- Staff and volunteers will become disillusioned because they feel that mission is being sacrificed
- The nonprofit’s brand could suffer irreparable damage and seriously impact individual and corporate giving, among other sources
To avoid these and other potential risks, test every potential social enterprise you are considering against the criteria listed above.
For example, I am on the board at one of the nonprofits I work with, and at a brainstorming session, we came up with 12 possible SE models. Everything was on the table. However, as we tested each model against the mission criteria, we found that only three were supported and consistent with our mission.
Then we began testing these three models against the next criterion, the model’s Market Viability, which will be the focus of my next blog in this nine-part series, so stay tuned! And please post your comments or questions!