In many ways, it’s much easier to start a business that only needs to focus on the bottom line, so why create a venture that requires not only this but much more? Because for many, the challenge posed by social business is much more rewarding. Social entrepreneurs get to combine their passion for a social mission with their business expertise, innovative ideas and drive to pursue an entrepreneurial spirit. For many, this offers an experience that can’t be matched by a traditional, solely profit-driven business model.
Social businesses are becoming increasingly popular, especially among young entrepreneurs and MBA grads who want to give back to the community. Before diving headfirst into your own social venture, it can be useful to learn about some of the more successful business models and companies that are already on the market and to learn just what you’ll need to do in order to make your own social business successful, too. You may just realize you’ve got a lot of work ahead of you before you’re ready to launch the next big social business.
Tips for Starting Your Own Socially Conscious Business
Learning about what other businesses are doing to promote social change is interesting, but most civic-minded entrepreneurs want to know how they can get in on the game themselves and use their own great ideas to shape their communities and change lives.
Although many of the aspects of starting a social business are the same as starting any business, there are certain aspects you’ll need to carefully consider that are unique to more altruistically driven types of ventures. Here are some critical questions every social entrepreneur needs to ask him or herself when starting a new business.
- Are you for-profit or nonprofit? According to Dana Brown, program director at The GroundFloor, a social business incubator and investment fund, one of the first things that aspiring social entrepreneurs need to do is to figure out whether their idea is best suited for being a for-profit or a nonprofit. Each has their own model for how they generate revenue, and some ideas may simply work better under one model.
- Do you have a solid business plan? Brown cautions aspiring social entrepreneurs from jumping into their social mission too quickly. “The market for social businesses is getting really crowded so entrepreneurs need to make sure they have a viable business model before focusing on purpose.” Purpose alone, she says, isn’t enough to get the attention of investors or to stake a claim to a part of the marketplace. “If you can put together an outstanding business plan from a factual standpoint then the fact that it’s furthering a social purpose is just gravy,” she says. “You have to fill a market need because after the honeymoon is over you still have to be able to compete.”
- Can you quantify your social impact? Once a solid business plan is in place, however, entrepreneurs should pay attention to how they’re going to measure their social impact. It’s critical not only to have goals in place but also solid, quantifiable ways to detail just how many people they’re helping. “From day one you’ve got to be able to quantify your profit when you make it,” Brown says. “The same goes for your social impact. You’ve got to be able to showcase how many people are being assisted to your investors and your customers.”
- Are you living up to your brand promise? Most consumers have heard stories about businesses that weren’t really giving back what they said they were and as a result, building trust is an even more critical aspect of starting a social business than any other kind. Brown offers two suggestions to help build your brand and become a name consumers associated with legitimacy. First, she suggests that social businesses be incredibly transparent about their income and social output. This can mean putting out annual impact reports or showing off results.
Secondly, she says it’s smart to learn more about the thought leaders or researchers in the space entrepreneurs are addressing. “Get them to be a spokesperson for your idea. This can break barriers down in peoples’ minds, because these people have more credibility than you do as a new voice in the marketplace.”
- How will you balance profit and impact? Even if you’re planning to start a nonprofit, you’ll need funding to keep you up and running. Finding a balance between the two can be challenging but not impossible. Clifford Holekamp, a professor of entrepreneurship and director of the entrepreneurship platform at Washington University’s Olin Business School, says that profit and impact need not be in conflict. “Elegantly designed social ventures increase the social value being generated in concert with the growth of the enterprise,” Holekamp notes. Essentially, a well-developed business plan will ensure both always stay in balance.
- Will you have enough funding? It’s not uncommon for social entrepreneurs to underestimate how much funding they’ll need to get started because many don’t have a realistic expectation of how long it will take to generate substantial revenue for the market. “Social entrepreneurs can be particularly guilty of overestimating market adoption because of the passion they personally have for their mission and their assumption that most others would share that enthusiasm,” Holekamp says. As a result, it’s critical that social entrepreneurs not let their social vision cloud their business projections.
- Are you ready for the challenges? Starting any kind of business isn’t easy, but social entrepreneurs can face unique challenges. “In a commercial business, defining success can be easily connected to net income and return on investment,” Holekamp says. “Social entrepreneurs have the additional task of determining what defines success, finding a compelling way to measure their social impact and educating and communicating this message to their stakeholders.”
- Do you have the passion? While all entrepreneurs are passionate about what they do, those starting social ventures need to be especially so, because they’re not just selling a product but also a social mission. “First, be inspired by your understanding of a problem or need in the world and your desire to do something about it. Then explore the possibility of developing a social venture to help address that need,” advises Holekamp. Being passionate and building an authentic business will be central to the long-term success of your business.
There are many ways to build a business that focuses on more than just the bottom line and can actually play a valuable role in addressing serious social, environmental and health issues for people around the world. While passion and purpose are important, entrepreneurs can’t let them get in the way of focusing on the fundamentals that make any business, social or otherwise, successful: a solid business plan, investors that believe in the project and an as yet unfulfilled market niche. Those who can strike a balance, however, may just find that their business expertise can do much more than make them successful; it might just change the world.
Reprinted by permission.