The formation of social enterprises is becoming increasingly important for not-for-profit organisations and charities, as they seek to diversify income and reduce dependence on government funding.
A social enterprise exists to generate not only a positive financial return, but also to achieve broader community outcomes.
There is no formalised definition, but in 2009 Social Traders partnered with the Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) at the Queensland University of Technology and identified the following attributes:
- Are led by an economic, social, cultural, or environmental mission consistent with a public or community benefit;
- Trade to fulfil their mission;
- Derive a substantial portion of their income from trade; and
- Reinvest the majority of their profit/surplus in the fulfilment of their mission.
We have worked with several organisations in developing strategies and implementing concepts for social enterprises. As a result, we’ve seen several elements that we believe are crucial for success.
Provide a commercial focus, while retaining core values
A social enterprise, like any other business venture, needs to generate a positive return. A social enterprise that is continually dependent on grants or donations, is not diversifying the income of an organisation, or expanding its capacity.
As a result, there is a need for organisations to have a commercial mindset that can also recognise positive social outcomes.
We recently worked with six inner city community learning centres to develop a new social enterprise through the Inner North Cluster. The social enterprise will aggregate resources and reduce duplication, with the aim of providing services to other centres. There is a need for a business perspective to achieve the social outcomes that would enable the individual centres to focus on their core services of providing educational opportunities.
Connect the social enterprise with the core purpose of your organisations
The products or services of a social enterprise should have a correlation with the key strengths and purpose of an organisation. Maintaining this correlation will help during the formation of the social enterprise and facilitate the exchange of knowledge.
We’ve worked with Volunteering Western Victoria to develop Governance Mentors, a program that will provide mentors to community organisations and improve the governance of committees.
Governance Mentors correlates to Volunteering Western Victoria’s aim of expanding the capacity of community organisations through training and skills development. The social enterprise broadens the organisation’s reach, but still relates to its core values.
Social enterprises will often require substantial discussion and planning
A social enterprise like any good idea needs a plan
Establishing a social enterprise will require initial financial resources and time. Developing a plan enables an organisation to identify how the social enterprise can achieve its aims, while delivering a positive financial return.
Social enterprises need to add value and not compound existing problems. Planning ensures that opportunities are identified and that risks are considered.
Social enterprises can be time consuming in their initial formation, but they can lead to not only additional income, but also an expanded capacity to deliver the core values of an organisation. We have enjoyed working with a range of organisation to develop their social enterprises.