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Oct 8, 2014

Where Nonprofits Can Learn about Social Enterprise

The Center for Social Enterprise Development  (@CSEDcentralOHIO) just finished its inaugural series of workshops for 2014.   They were all sold out and participants were enthusiastic.  There is definitely a thirst for information and exposure to social enterprise as a source of additional revenue to support nonprofits’ missions.

Whenever one offers a workshop one makes assumptions about what will be the “aha” moments for the participants.  Well, I guessed wrong.  Here are four areas which turned out to be where participants had the most questions or which seemed to provide the newest insights.

First, how to think about competitors.  Nonprofits have experienced competition largely through competition for donors.  This has given a negative cast to competition, so when our workshops delved into social enterprise ideas, many participants viewed a lack of competition to be positive.  But this is not the case in evaluating the feasibility of a new business.  Having competitors can actually indicate a lower risk to starting a new venture.  The existence of competition means that there are customers that are willing to pay for the product or service.  This makes a start-up much less risky than if there were no competition, perhaps suggesting no one wanted to pay for it.  Competitors also are a great source of information.  Barring the unusual presence of a monopoly with 100% market share, a competitor gives you an opportunity to find out the market segment they are serving so a start-up can investigate if its approach and attributes might tap a segment not served by the competitors.

Second, the need for a champion.  Nonprofits are used to having a mission as the impetus to maintain momentum in the organization.  In starting a new social enterprise, it is essential to have a champion to create and maintain impetus.  A champion is a person who is committed to making this new enterprise happen, a person who will make sure progress is steady.  A nonprofit executive director cannot keep the social enterprise ball rolling by himself or herself.  Ideally that champion will be an influential board member, who will develop and maintain support by the board and steady progress by the staff.

Third,  the need to ask, not assume.  Nonprofits are strong advocates on behalf of their clients.  Since the mission is usually well articulated and the demand for mission services greater than supply, it is easy for nonprofit staff to rely on their personal opinions about the worth of their product or service.  When starting a social enterprise, personal opinions are not so useful.  A social enterprise needs to sell goods and services at a profit, which requires meeting the needs of customers so well that the customers are willing to pay a reasonable price and to become steady customers.  For this to happen, the social enterprise needs to proactively and directly ask the prospective customer what they require in a product or service for them to be willing to buy.  The social entrepreneur must be vigilant to never assume that what he or she would want from a product or service is what the customer wants.  Indeed, the customer’s opinion is the only relevant opinion.

Fourth, the importance of describing the product or service.  Nonprofits are so used to “selling” to donors that they instinctively focus on the “why” of buying rather than the “what.”  Why the mission is important, why the impact of the services is significant, why the donation will help the community.  A social enterprise is selling a product or service to someone who wants it.  When we asked workshop participants to describe their product, we initially heard “why” the product was worthwhile.  We sometimes had to ask, “what exactly are you selling?”  A customer needs to know the “what” before they can evaluate whether the “why” is convincing enough for them to buy.

Simple concepts, and obvious once described.  But this is the value of workshops.  One never knows which ideas will be the nuggets.  Look for our 2015 programs which will be announced in November.  and follow us on Twitter @CSEDcentralOHIO.