Running a business is hard enough!
'What is social enterprise' is only a part of the issue. Running a business is hard enough, now add on achieving a social value as well! The really essential part of the discussion is "Why use social enterprise?" Or, why would anyone want to start a social enterprise?
We've clarified three key reasons:
- To meet a need in the community or the local market not met through traditional business models
- Advance or achieve a specific social mission
- Contribute to the financial sustainability of a non-profit organization
A good social enterprise actually contains all three of these components. The really successful ones have all three, but really understand which is their priority. To demonstrate these concepts let's review some examples of each. Some may not call themselves a 'Social Enterprise', but as we examine them, they are all using a business model to create social value!
1 . Local Market
In Vancouver and across Canada, rural and urban communities have farmers' markets. The farmers market is a business selling stall space (the product) to farmers (the customers) creating a social value for the local consumers by providing access to local, healthy food. The farmers market business model is not to maximize profits nor is it to operate on merely donations to cover its operating costs, it uses a business model to create community value. Most of us won't drive to shop at twenty different farms in the area, but we'll gladly go to our local farmers' market for fresh and healthy vegetables, and hopefully see some friends.
Another common market need which uses a social enterprise model is providing employment opportunities to persons with disabilities or barriers to employment. The private sector does some targeted employment, but given their priority to achieve a financial return for their shareholders, this social value will have limited use. However, a social enterprise, focused on achieving a social purpose in their business, will commit to targeted employment objectives. The employment opportunities and the additional operating costs are acceptable in their blended value return on investment. An example, the Cleaning Solution in Vancouver is a commercial janitorial service employing over 50 people with mental health issues.
Eva's Phoenix Printing in Toronto trains youth at risk in the printing business, preparing them to leave their street lives and enter into the labour market.
2 . Advancing Mission
This sector of the social enterprise spectrum tends towards arts, culture, environment and education. Think of all the art galleries and theatres across the country that are operated solely to support the cultural health of our communities. By far most are operated by non-profit organizations, and by far most use a business model of entry fees, ticket sales and gift shops to create their main source of income. Their sales income may be supplemented by grants and gifts and sponsorships, but without sales of tickets to customers to view the art (the product) they wouldn't be able to open their doors.
Haida Gwaii Higher Education Society operates an accredited University level academic program to bring students to their community to learn about the local First Nations culture and arts, and the unique local biology environment. In addition to the student learning, there is an important local economic impact for the isolated region of Haida Gwaii.
3 . Financial Sustainability
The sources of income for the non-profit sector continues to be a challenge, as some traditional sources, especially direct government support, begin to diminish or disappear. So the non-profit sector has looked more to a business model to contribute to their mix of revenue sources. The models vary widely, from the long used thrift store to the actual ownership of a for-profit business.
Atira Property Management in Vancouver and Inner City Renovations in Winnipeg are both examples of "for-profit" businesses that are owned by non-profits. The for-profit is allowed to donate up to 75% of its pre-tax profits to a charity, and then pay taxes on the balance; and then any dividend goes to the shareholders, the non-profit owner.
The Prince George Aboriginal Friendship Centre rents out the excess space in the building they own. The income from rent covers the mortgage payment and their program administrative costs. A way to gain value from their existing assets, the building in which they deliver their programs.