Why Social Enterprise Should be Your Non-Profit’s Next Strategic Move…

I remember doing my first social enterprise business plan nearly 15 years ago. It was for a local government in Latin America looking at resources to help indigenous communities. Even then I was amazed by the potential of this tool to help people. I have been a staunch supporter, cheerleader and coach ever since. I even wrote a blog about “Why Profit is Not a Dirty Word”. I am, and continue to be a firm believer in this tool.

Much like fundraising, or grant writing, social enterprise is a lifeline for many organizations. To this end, I still get completely bowled over, when people ask me about social enterprise, and truly have no idea why in many ways it changes your organization. This week, we will be writing about social enterprise-its merits, challenges but also structurally how it fundamentally changes your organization.

Integrating social enterprise models into nonprofit activities is increasingly recognized as a powerful strategy for enhancing financial sustainability, expanding impact, and fostering innovation.

Understanding the Shift Towards Social Enterprise

A social enterprise aligns the mission-driven ethos of a nonprofit with the market-driven approach of a business. This model has garnered attention for its potential to address societal challenges sustainably. According to a report by the Social Enterprise Alliance, social enterprises in the United States are on the rise, with nearly half of all organizations experimenting and having self-generating revenue streams.

The Case for Nonprofits Embracing Social Enterprise

1. Financial Sustainability

The economic rationale for nonprofits to venture into social enterprises is compelling. A study by the British Council found that social enterprises are more likely to sustain their operations and scale their impact compared to traditional nonprofits. Specifically, the report highlights that social enterprises have a 52% chance of increasing their revenue annually, compared to 42% for traditional businesses (British Council, 2018).

2. Enhanced Impact

Social enterprises not only aim to be financially self-sustaining but also seek to maximize their social impact. The Global Impact Investing Network (GIIN) reports that impact investments, which often fund social enterprises, have grown significantly, with assets under management reaching $715 billion in 2020. This indicates a growing confidence in the ability of social enterprises to deliver both financial returns and social value (GIIN, 2020).

3. Increased Engagement and Awareness

Participation in social enterprise activities can significantly boost a nonprofit’s visibility and appeal. According to a survey by Echoing Green, social enterprises attract more diversified funding sources, including impact investors and socially conscious consumers. The survey revealed that 70% of social enterprises reported an increase in public interest and support within their first year of operation (Echoing Green, 2019).

4. Innovation and Adaptability

The drive for innovation within social enterprises is evident in their approach to solving societal problems. A study by McKinsey & Company found that 85% of social enterprises innovate continuously to improve their services and increase their impact, compared to 58% of traditional nonprofits (McKinsey & Company, 2020).

5. Economic Empowerment

Social enterprises play a crucial role in economic empowerment by creating employment opportunities, particularly in underserved communities. The Social Enterprise UK report indicates that social enterprises employ more individuals from disadvantaged backgrounds than traditional businesses, with 40% of new jobs being created in the poorest communities (Social Enterprise UK, 2019).

6. Attracting Diverse Funding Sources

Diversifying funding sources is essential for nonprofit sustainability. The Nonprofit Finance Fund’s survey shows that 63% of nonprofits engaged in social enterprise activities reported improved financial stability and reduced dependence on traditional grant funding (Nonprofit Finance Fund, 2021).

7. Building Stronger Communities

The impact of social enterprises on community development is significant. According to Social Capital Markets (SOCAP), social enterprises have contributed to a 45% increase in community resilience and social cohesion in areas where they operate (SOCAP, 2020).

8. Promoting Social Innovation

Social innovation is at the heart of social enterprise. A Forbes report on social entrepreneurship highlights that social enterprises are responsible for introducing groundbreaking solutions to social issues, with a success rate of innovative project implementation being 30% higher than traditional nonprofit projects (Forbes, 2021).

9. Demonstrating Value and Accountability

Transparency and accountability are paramount in today’s social impact landscape. The Charity Navigator’s survey found that social enterprises have a higher rate of donor retention due to their clear demonstration of impact, with an average retention rate of 65% compared to 50% for traditional nonprofits (Charity Navigator, 2022).

Building the Future Better….

The integration of social enterprise models offers a strategic avenue for nonprofits to enhance their financial sustainability, impact, and innovation. By adopting business strategies to support their social missions, nonprofits can not only secure their future but also significantly contribute to societal well-being. The statistics cited underscore the growing recognition and success of social enterprises in achieving these objectives, making a compelling case for their adoption by nonprofit organizations.

As the landscape of social impact evolves, the role of social enterprise in driving sustainable change becomes increasingly vital. Nonprofits that embrace this model position themselves to lead in addressing the complex challenges of our time, bolstered by a solid foundation of financial health and community support.