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Whether you have heard of a social enterprise or not, Australia has an estimated operating number of 20,000. If you want to make a meaningful contribution to society, your business could be the next social enterprise. Let’s talk about what it means to be a social enterprise.
What is a social enterprise?
What is a social enterprise? A social enterprise is a business set up to change the world. While the ultimate goal is to turn a profit, the difference comes from what a social enterprise does with those profits. A social enterprise reinvests theirs into their local community or a wider cause. They generally recruit their workforce from those at a disadvantage in the hiring market. The CEO doesn’t take a giant slice of the profits, the employees are paid fairly, and it’s all open and transparent. It looks like a traditional business but operates for social good.
There isn’t a specific legal structure in Australia by the name of social enterprise. However, it is defined as an organisation driven by a cause (community or public), whether it’s economic, social, cultural or environmental. The majority of the income is derived from trade rather than grants or donations. And, at least 50% of the profits are allocated to their social mission. In Victoria, government figures suggest there are well over 3,000 social enterprises. They employ around 60,000 people. Their contribution is estimated to be an additional $5 billion to the economy.
What are the benefits of running a social enterprise?
The biggest benefit is the knowledge that you are making a difference, whether it’s in your community or beyond. But, that isn’t where the benefits of running a social enterprise end. Here’s a few others.
This benefit is two-fold. The first benefit is that you become an attractive employer. Given the opportunity, many people want to work for companies that align with their values. Having a social mission puts you ahead of the competition. The second benefit is that you give opportunities to people who wouldn’t necessarily get them in traditional business structures. For example, social enterprises often recruit unhoused people, those with criminal records, or people who need a helping hand. So, while a social enterprise has a social mission they are working toward, a happy benefit is a second social mission they fulfil.
2. Cash control
A social enterprise is very much about making a profit, just like any other business. The difference is how that profit is used. While a traditional business will feather its nest and benefit shareholders, a social enterprise puts that money back into the community. The benefit is that you have control over your cash flow, in a way charities don’t, and because you run a social enterprise, you attract like-minded people who will work hard to the benefit of the social mission. This allows you to build a sustainable business that depends on the profits you earn through your business skills.
3. Customer relationships
Much like employees, customers expect more from their brands. They want to know what causes they contribute to and what steps companies take to ensure their products are sourced ethically and sustainably. A social enterprise ticks those boxes easily and helps build trust with customers, which leads to a more loyal customer base.
Types of social enterprises?
There are four main categories into which social enterprises fall.
1. NGOs & charities
Both charities and NGOs can operate on small or large scales. Generally, they are established with a specific social mission in mind. The profits go to furthering that mission.
2. Trading enterprises
A trading enterprise is a collective or cooperative owned by the employees or workers. They vary in size and structure, but they are a joint ownership structure. This allows them a higher degree of profitability resilience when compared to other enterprise types.
3. Community organisations
This refers to a range of registered enterprises, from community centres to housing cooperatives, sports clubs, small shops, and more. These types of organisations are generally membership-driven. They exist for a purpose, and they trade commercially with that purpose and goal in mind. The members support the mission.
4. Financial institutions
Many financial institutions fall under the social enterprise umbrella, including cooperative banks and credit unions. For example, a credit union is structured, so members are owners as soon as they deposit money. The establishment used deposits to help its members. They generally offer lower interest rates,higher savings rates and are less about turning profits and more about helping members.
Top 10 social enterprise ideas
Social entrepreneurship is when an entrepreneur sets out to own a business that makes a societal or environmental impact. If you are thinking about social entrepreneurship, the ideas below might help you get started.
1. Ethical online clothing store
Fast fashion has been all the rage for decades, but fashion is incredibly wasteful and is one of the industries hardest on the planet. If you are thinking about social entrepreneurship, an ethical online clothing store is a great place to start. Sustainable clothing lasts longer, is made from sustainable materials and is also ethically made. Taking your store online can reduce many overhead costs associated with operating a clothing retailer. Square Online is a quick and easy business solution to get your website up and running, and it’s free to set up!
2. Social supermarket
You can obtain donated or heavily discounted food from suppliers and create a food market for low-income communities. Often, suppliers and supermarkets offload items approaching their use-by dates. They may also want to offload mislabeled products or dented cans. This is the perfect opportunity to create a social supermarket where the community can buy discounted items to feed their families.
3. Sustainable water
You have the power to create water purification stations in developing countries. You can use crowdfunding or charitable methods to build the initial funds for this social entrepreneurship project. The communities can be full or part-owners. In Cambodia alone, there are 10,000 deaths annually due to untreated water.
4. Cooking for a cause
Whether you’re a baker, a master chef or a barista, many hospitality businesses are cooking for a cause. Hospitality businesses offer a unique opportunity to underemployed groups. In addition to paying wages, their profits can go to training, social betterment, and other causes.
For writers or people with big ideas, producing an educational book could lead to a lot of good. A social enterprise book will benefit readers, promote a sustainable idea, and the proceeds can be used to further that message or movement. For example, sustainable food preparation can promote recipes for sustainable food and educate people about sustainable food.
Social employment could be the entire purpose of your social enterprise. You can still use a product or service for social good, but it’s less about contributing to it and more about hiring, training, and improving the lives of underemployed groups. It’s a multi-pronged approach, and the profits can go back into the business to hire, train, and improve more lives.
7. A fresh idea
If you’re an ideas person, coming up with an innovative product is a great way to start your social enterprise. Ideas educate people, where education on that topic is limited, are particularly helpful. Often, these are low-income regions. Selling the product in high-income areas to help fund the gifts for low-income regions.
8. Community garden
This is useful in all areas but particularly beneficial to big cities. A community lot allows city dwellers an opportunity to exercise their green thumb, and the entire community benefits from the harvest. If you form a membership group, their dues can fund the necessary equipment, and excess stock can be distributed to those in need.
Social enterprise networks & communities
If you have a social enterprise idea or, you’re just feeling things out, finding social enterprise networks is a great place to start.
SENVIC is a great place to connect with like-minded people, share ideas, develop, research and get your idea up and running.
ASENA represents several regional social enterprise networks, including SENVIC. It’s the best place to start if you want to find a more local social enterprise community to connect with.
SCC isn’t just a place to meet like-minded people; you may also find the solution to your funding problems.
How to form a social enterprise
There are legal considerations when forming a social enterprise. Before you get going, answer the questions below to build your business plan.
- What are you offering?
- Who and how will you fund it?
- Do you have competition and who are they?
- How will you market it?
- Write the business plan.
Now you can choose your business model. The purpose of your social enterprise will dictate your business model. For example, if the purpose is to employ the underemployed, it’s an employment model. If it’s about producing sustainably manufactured items, it’s a goods and services model. And, if it’s about investing in charitable causes, it’s a social investment model. Now you can choose your legal structure. This is a good time to seek advice from a lawyer. You will need to incorporate, apply for an ABN and register the business and its name. It’s also wise to consult with an accountant to ensure you understand your tax liabilities and obligations.
Social enterprise funding
Finance is most likely necessary and in the earliest stages of your venture, you may be able to secure a government grant. You do not need to repay the grant, but they are more often than not inflexible and can limit your attempts to raise alternative capital. Alternatively, some organisations offer grants for social enterprises. You can pursue a venture philanthropist who is willing to provide a grant and assume a hands-on role within the organisation. Commercial loans are also possible and will be more flexible than securing a grant.
There are unique challenges to starting social enterprises so, seeking professional advice is always a good place to start.