First of all, it depends a lot on your country’s social sector regulations. Secondly, it really depends on your vision. Contingent to these initial points, you can build up the business model that is more suitable for you and your country’s legislation. In the UK, for example, you can have different forms of social enterprises: from the ones that are just like any other business, to the ones such as the CIC (Community Interest Companies) , which are limited by a guarantee where all your asset is locked and your profits are mostly reinvested to support your mission. The first allows you to have access to investors’ funding and not much grant funding. The second allows you more grant funding and very little private funding. Also, a Social Enterprise has to support itself by trading and your social mission has to be supported from the resources thereby generated. For this reason, you have to be careful not to forget about your social mission just because the necessity of generating business has driven you away. Your customer is the community that you support, not the one that supports you (e.g. who buys your services). This is one of the two most common mistakes made by social entrepreneurs in the UK. The other frequent misconception is to think like a charity and try to rely merely on grants, forgetting that, at the end of the day, you run a business which, as such, has to generate a profit. The hybrid system can also be a really good solution for a charity that wants to become sustainable and stop relying on donation only. In the UK there are many examples of charities that have a social business, such as a CIC, connected to it, which supports the charity through trading. A good example are charity shops. It's like having two sides of a coin and neither of them is good or bad, but it is fundamental that you maximise the opportunity given by each side and tailor it to your strategy and social goals. What is radically important is how you measure the impact that you have on your community. This can be based on many different factors, that can be financial or just social and these factors will also affect your ability to fundraise and your operation/production capabilities. Here are two extremely simple examples.
a) Let’s imagine you have a non-profit organisation whose mission is to provide education to disadvantaged kids. This could be funded with 50% of your profits from your social enterprise selling vegetables or any other product of your choice. In this case, you could also set up a very tax efficient plan for your Social Enterprise. Your impact would be measured on the amount of money donated by your social enterprise but also on the number of educated kids helped by your non-profit organisation.
b) Now let’s imagine you have a very lucrative software business selling Apps for smartphones. You then channel your company into a very specific project to design an App to help disadvantaged people through a charity of your choice, or even partner with an existing charity that will do so. In this case, your social impact will be based on the number of people your project will affect. In this case, your model will be based on the pro-bono work generated by your main business.
Bare in mind that a "Social Entrepreneur" is a disruptor, someone who thinks outside the box and sees opportunities where others see problems. Someone who finds solutions and changes the market and, most of all, the mindset associated to it.
- There is no model that fits all. The perfect model for you is the one that you create
- A hybrid model can be used to attract different sources of funding and people interested in what your social mission is about
- It can follow a tax efficient (accordingly to your legislation) business model
- It varies from country to country
- It can be tailored to your changing needs and the changing needs of your community
- You can start it as a non-profit or a Social Enterprise, whichever is better for you
- It can be sustainable and measured with different criteria of impact