Unlike traditional businesses, social enterprises are dedicated to help specific groups of people that are socio-economically backward. Since their goal to serve mankind sits above the financial gain, building a sustainable social enterprise is no walk in the park. If you are planning to build a career in social entrepreneurship or already pursuing one, then you should be prepared for the unique challenges and opportunities it brings to your table.
Social enterprise is a different ball game and does not follow a typical organizational structure. You have to be very strategic in executing your business process management plan and ensure that the operating costs do not hamper your profit margin. There are a few tactics that could help you to participate in social entrepreneurship more efficiently.
1) Identify Your Entrepreneurial Elements
Business is about finding a solution for an existing problem; social entrepreneurship works on the same principle. However, as a social entrepreneur, you would be addressing slightly different kinds of issues. It would be community-driven and focused on public welfare. The first step towards social entrepreneurship is to identify the community problems that evoke your interest. The next step is to work on your entrepreneurial elements vital for executing the mission, like goals, core competencies, networking, funding, etc.
2) Have a Firm Social Entrepreneurial Organizations (SEO) Strategy
A firm social entrepreneurial organization strategy is crucial because, unlike the traditional business model, the social enterprise has to tackle social issues in an economically sustainable and self-sufficient way. You need to build a network, make alliances, identify risks, find investors, track performance, develop an income-generating model, and create a value-adding social entrepreneurial organization. The first step towards this is to build a robust social enterprise by conducting market and competitive analysis. You need to perform thorough research to find the criticality of the issue and how it impacts the people. You need to set your target customers and work on the approach towards them. Additionally, you have to perform a competitive analysis to find out if there is any relevant product in the market or market covered by competitors. You also have to document how to fund your social enterprise project and plan strategies to onboard investors. Your job does not end there; you can further find yourself engaged in public relations, marketing, and brand awareness. Social enterprise enthusiasts can also refer to a few knowledge resources that are available online to create a successful social enterprise.
3) Get Your Customers Involved
Your customers can be your brand’s biggest advocate, and if you can involve your customer on a large scale, it can bring success to your social enterprise. Initially, it would be difficult to attract a large cohort of customers, but you can target customers on a small scale and gradually increase the numbers. However, it is a must that your service or product resonates with the customers; only then can you engage your customers. You can use various technologies to address social issues and the company’s motto. For instance, you can use a mobile app to answer customers’ queries or use software to post updates about business events on social media accounts automatically. There are myriads of ways an individual can use technology to involve customers in your social enterprise endeavor.
4) Adopt Innovative Funding Practices
Funding is the foremost thing that stays on the entrepreneur’s radar while designing the business plan. In a typical business scenario, companies approach financial institutes for a loan, but social enterprises are not revenue-oriented, and therefore they don’t qualify for equity capital. Instead, they adopt innovative funding practices.
- Quasi-equity debt: Social enterprises often observe financial crunch due to lack of funding, and in such circumstances, Quasi-equity debt is an ideal way of funding. This type of loan is given based on the future cash flow projection proposed by the social enterprise, and the payment terms are pretty flexible. Mezzanine debt and junior debt are examples of quasi-equity debt; such debts do not require any collateral.
- Pooled funds: In pooled funds, money from several individual investors are accumulated into a single account, which is then allocated to the social enterprise by the head fund manager. It significantly reduces the costs of operation from individuals and shares higher returns.
- VPO (Variable Payment Obligation): In the VPO model, the investors offer funds to social enterprises based on future cash flow. The good thing about VPO is that entrepreneurs are liable to pay only 20 to 30 percent of the return. It enables entrepreneurs to keep most of the income and reinvest in their social enterprise.
- Social impact bonds: In social impact bonds, the government acts as a middle-man and contracts with social enterprises and investors. The government evaluates the project of the social enterprise, and if it is successful, the government pays to the investors.
5) Use the Right Technology
Technology can be quite supportive for social entrepreneurs to amplify their efforts and get in a position to accomplish their work quickly. They can use a range of technologies such as data analytics, cloud computing, AI, automation to solve their core challenges, such as minimizing investment risks, identifying revenue opportunities, increasing productivity, reducing communication gaps, etc. They can even use advanced software solutions to organize their work structure and get a clear view of the entire process. For instance, social entrepreneurs can use policy management software to create, modify and track various social enterprise policies. Mobile apps are further empowering social entrepreneurs to take their mission to a global audience and build a network with other social entrepreneurs.
The global economy demands organizations to build enterprises that could bring positive change in society and overcome the challenges such as poverty, climate change, inequality, etc. Social enterprises have the ability to generate social impact and strengthen the economy. Since social enterprises are more focused on addressing social issues and less on revenue, you need to be tactical in your business approach. You should operate a social enterprise in a way that widens your scope for growth and sustainability. By following a few best management practices for social enterprises and adopting a few latest technologies, you can build a stable social enterprise.
Article written by associate contributor Paul Wheelson