Answers to Twitter #socent101 questions on social enterprise
We recently asked through our Twitter account @CSEDcentralOH what questions people had about social enterprise, using the hashtag #socent101. Seemed answers needed more than 140 characters and would be interesting to followers of our blog. So here are my answers.
Do you think artists, generally, could consider their enterprise a social enterprise? A social enterprise uses commercial strategies to make a social impact, where I would define a social impact to be something that addresses a need of the community that a typical business would not address. While art and culture in general are essential components of a thriving community, I think that the label “social enterprise” requires an artist to go a step further. Let me throw some questions back at you:
- Is your art creating job opportunities in a disadvantaged neighborhood?
- Are you collaborating with neighborhood leaders to create public art that elevates pride or community identity?
- Are you donating a significant part of your profits or providing a significant amount of your art to community nonprofits?
- Would the organization B-Lab certify you as a B-Corp?
What do social enterprises do and why?
Here is the definition of social enterprise we post on our website: an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximizing profits for shareholders. I don’t believe in drawing a sharp line that excludes socially-oriented companies from calling themselves social enterprises, as I blogged recently. Please go to that blog for a discussion of the range of socially-beneficial companies. Social enterprises are started for one of two reasons: a) a nonprofit needs to supplement fundraising in order to have enough revenue to fully meet the community’s demand for their money-losing mission services; b) a company wants to be profitable so it is sustainable but equally important it desires to address a need in the community, much like the needs a nonprofit would address. They donate all their profits like Newman’s Own did; they employ costly employees like ex-felons, the homeless, or developmentally disabled individuals; or, most commonly in the nutritious foods area, they locate in neighborhoods where demand is limited and they will need to provide a large amount of community education to develop healthy eating habits. Please go to our website to see our developing list (and soon profiles) of social enterprises in Central Ohio.
What is the appropriate (legal) structure to use for a social enterprise? A social enterprise can be structured as a for-profit or non-profit and may take a number of legal forms, including but not limited to co-operative, benefit corporation, low-profit limited liability company (L3C), LLC, or a subsidiary of an existing company. The choice of structure should be made after you have a good definition of what your social enterprise will do, how large you plan to make it, and how you want to raise money to build your social enterprise. After you have those answers, the best structure for your social enterprise will likely become obvious.
What suggestions do you have on how to diversity revenue streams? As I say at workshops and conferences, the main difference between making money and losing money is place-person-price. In other words, where you do business, who are your customers, and what price you charge. We are used to social good being done by nonprofits who provide their goods or services in poor neighborhoods for individuals with limited income and often at a zero price. The business survives through donations that enable this business model to work. But the same skills and processes to service a poor market for low-income individuals at zero price is often a good or service, perhaps slightly modified, that can be provided in a prosperous neighborhood of middle-to-high income individuals who are willing to pay a price that is profitable. So look at your basic services and start by seeing if/how you can diversify customers.
Have more questions? Send them to firstname.lastname@example.org or tweet us @CSEDcentralOH.
Allen Proctor, President & CEO
Center for Social Enterprise Development