One of the questions I receive the most in my industry is: what is a social enterprise?
Ah, such a great question. It’s not like I’m a great expert on the subject, but: from the very exciting beginnings when every nonprofit wanted to grow up into a social enterprise, to building a space with the sole purpose of ‘becoming a town hall for social enterprise,’ to being the only coworking space in town with a social enterprise focus and community, I have lived this buzzword for the last seven years. This means that my own experience of a social enterprise - through observation - has ebbed and flowed into my current definition today.
I believe that buzzwords are useful because in our current society, we need structure in which to ideate, and new ideas often spring from new words. Even though social enterprise has been a helpful buzzword to develop the overall methodology of doing business for good, I reject the terminology because I believe a social enterprise is simply the way that a business should be run.
My definition of a social enterprise is one that prioritizes its people at every end of the supply chain, from employees to vendors to partners to both the short & long-term needs of its customers. This means that ultimately, it’s not fair, sustainable, or good business practice to operate a business on such thin margins because you can’t prioritize your people.
A social enterprise should have:
- A clear cash-flow model. In today’s economic landscape, being a social enterprise means that you cannot always match your operations to your mission because of cash-flow. Most mission-driven organizations are driving toward long-term investment, which doesn’t often translate into short-term profit. You need that short-term profit in order to get to why you started this company in the first place; forecasting and being attune to the constraints of the realities of today’s market are necessary.
- Three months of operating expenses in the bank. When you’re building a company with a long-term focus, you’re bound to run into hard months in the easily distracted and instant gratification business culture of today. Build a solid cushion as soon as you can.
- A leader with real business experience, or at least a founder who recognizes his/her gaps and can hire for them. So many leaders of social enterprises create their companies because they have a singular passion for what they are building. Emotion and passion are necessary for building a company, but you cannot let that emotion distract you from the gaps of knowledge that every leader possesses.
- A model for longevity. In the merger and acquisition game of today, building a company with a long-term game plan isn’t attractive to most investors. Maintenance is key; you may not be the most exciting thing on the block and that’s okay. Forecast toward the future, keep your values top of mind, and create processes and decision-making that allow you to be flexible and iterate within the changing landscape of today. Today’s model for longevity no longer requires a ten or even five-year business plan.
- And, most importantly: a values-system of doing right by your people, at every end of the supply chain. This means that a company takes care of their people, from vendors to partners to customers (this is where the environmental aspect of a social enterprise comes into play; companies should look out toward their environmental impact on their customer’s future when they make decisions) to their employees. It isn’t fair or sustainable to run a company on such razor-thin margins; it is a sign of immaturity on both the company’s and the leader’s part to expect employees to work for pennies because of mission alone. Pay your people well, and incorporate clear compensation tiers with living wage increases into your yearly budget, and work to create other compensation metrics that matter to your employees, too.
A social enterprise is no longer a buzzword. It is a sustainable and fair way to run a business that actually delivers value to a targeted market demographic. Building a company that incorporates your values and view of how you want the world to look isn’t easy. Testing out new strategies, products and services to create short-term profit while driving toward a long-term mission should be at the heart of a company’s priorities; however, when a company is no longer able to continually pay its people well, set a goal to turn the business around and if that doesn’t work, the fair, sustainable, and mature thing to do is to close down and move on. Closing up shop shouldn’t be seen as a failure, but rather a necessary iteration of building a more equal and fair world in which we all want to live. We are iterating, all the time.