6 Reasons a Social Enterprise Must Be Managed as a Business

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6 Reasons a Social Enterprise Must Be Managed as a Business

By Martin Zwilling | Inc Magazine | September 21, 2024

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A business lifestyle that continues to gain in popularity these days is being a social entrepreneur. In the simplest of terms, these are people who seek to generate social value rather than profits, and use traditional business and professional career principles to provide solutions to social issues. On the surface, this sounds like business owners who want to build a nonprofit organization.  Yet the term seems to be more often associated with people who intend to make a profit, but whose work is targeted toward long-term socio-economic change.

Whether the objective is to generate profits or social capital, the common element for all new venture owners is the recognition that there is a problem that needs solving or there is an opportunity to improve the status quo.  The vision is always to be a change agent, to invent and popularize new approaches, and to persuade people to take a leap forward. In every case, this requires a committed ultimate realist with the determination to persist in the face of daunting odds.

Another way to distinguish between the two types of business owners is by identifying what social entrepreneurship is not:

1. It’s not a fundraising strategy for nonprofits. A social enterprise may be profitable or not, but the generation of funds is deemed secondary to success with regard to the environmental or social issues in the vision. Generating funds should not be the highest priority.
2. It’s not about profit before social impact. A social enterprise must be financially sustainable only as a means to an end, which is its social or environmental impact and rate of change. The business owner mission is profit always, social impact maybe.
3. It’s not a new definition for the nonprofit sector. The evident and real purpose of the social enterprise must be to make the world a better place through the operation of a business. This certainly also has the potential to enhance the vitality of the nonprofit sector, but it doesn’t move it to a higher moral plane.
4. It’s not an investment opportunity for business investors. Funding for such an enterprise is more likely to come from philanthropists, government grants, or bootstrapping. Business investors are looking for a high financial return, not social capital.
5. It’s not about entrée into the government sector. So far, the largest source of services and funding for social enterprises and social entrepreneurs has been federal, state, and local governments. Yet the enterprises are not government enterprises, and the process for success makes them good business enterprises.
6. Social entrepreneurship is not socialism. Socialist theory calls for compulsory taxpayer contributions to finance social initiatives, while the social entrepreneur uses the standard business model and innovative approaches to attract customers, fund activities, and accomplish social change.

2 key takeaways from the article

1. A business lifestyle that continues to gain in popularity these days is being a social entrepreneur. In the simplest of terms, these are people who seek to generate social value rather than profits, and use traditional business and professional career principles to provide solutions to social issues. On the surface, this sounds like business owners who want to build a nonprofit organization.  Yet the term seems to be more often associated with people who intend to make a profit, but whose work is targeted toward long-term socio-economic change.
2. One way to distinguishsocial entrepreneurship from profit making is by identifying what social entrepreneurship is not:  it’s not a fundraising strategy for nonprofits; it’s not about profit before social impact; it’s not a new definition for the nonprofit sector; it’s not an investment opportunity for business investors; it’s not about entrée into the government sector; and social entrepreneurship is not socialism.

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Topics:  Social Entrepreneurship, Profit, Business and Society