A social business venture packs a lot of punch. If you care strongly about mission and impact but don’t want to solicit donors and institutional funding, it might be the right model for your work.
By definition, this type of enterprise generates profits, which are reinvested into the business to advance the cause and sustain the company financially. The business exists to ameliorate a social or environmental concern, not to maximize profits. It sounds Eden-like, but it’s still a living breathing thing, which incurs challenges and benefits. Let’s take a quick look at some.
- Dual priorities. (At times) it will be difficult to balance your company’s social mission and financial sustainability. Unavoidably, they’ll sometimes clash.
- Succession can be tough. Conceiving and building a social business venture often takes someone with strong leadership qualities and personal vision, which can make succession hard. Philip Rosedale is the charismatic founder of Linden Lab. His leadership style gave employees the option to vote on his dismissal every quarter. Eventually, they voted that he wasn’t adding as much value to the company as was needed, so he left–only to return eight months later to lead again.
- Replication. Traditionally, social businesses have been harder to replicate than mainstream businesses. If you set up a venture to meet social and financial needs, it’s going to have a very specific structure and approach that fits the sector, country, funding, culture and laws where it operates. Another threat to replication is the relative limited funding options for social business.
- Society can relate. Consumers, investors and employees can relate to a social venture more than to a leveraged nonprofit or hybrid nonprofit because capitalism is still at play. A social business is a more attractive partner, supplier or investment. This type of venture can solicit capital (something a nonprofit hybrid or leverage nonprofit can’t do).
- Iconoclast potential. We admire social impact organizations that are financially self-sustaining. And we admire entrepreneurs who’ve found innovative ways to use business for good. Just look at Muhammad Yunus.
Tomorrow, I’ll profile an expanding social business in California that you’ve likely never heard of. But, I’d love to hear from you! What companies and entrepreneurs should be sharing their stories and experiences here?
In full disclosure, I sometimes feel I’m splitting hairs when I try to isolate different types of social enterprises–I’m about to rename this site the Mobius Trip. So weigh in or push back.