Successful and notable social entrepreneurs have been referred to as business-social venture-ers, world changers through entrepreneurship, and social changers. Although not a new term to those who work and practice in the nonprofit field, social entrepreneurship is not a concept that is widely used among the mainstream. In fact, although the term seems understandable at face value, many people don't know what it means, and they should. Aspiring entrepreneurs most often have no frame of reference or contact with these types of successful venture-ers and when attempting to start a social-based business, usually in the form of a charity or nonprofit, they neglect to incorporate business principles in their model and instead take the outdated, traditional profit-less charity approach.
The term 'social entrepreneur' has been in used since the mid 1900s and describes someone who uses business principles to accomplish some social purpose or impose some social change, rather domestic or abroad. According to the IRS.gov Master File, of the approximate 727,000 plus registered charities eligible to receive tax deductible gifts, the majority, approximately 55%, are reported as having earned $ 0 income for 2009. As evidenced by the sheer number of registered nonprofits, people have the desire to develop social enterprises. What they lack is the knowledge and financial capital to make them successful.
With the advent of unprecedented unemployment and worker dissatisfaction, social entrepreneurship as a home based business has the potential to be a viable employment alternative while simultaneously solving some of our biggest social problems. Although often associated with the term nonprofit, social entrepreneurs don't have to be consumed with the hassles of corporate legal structures, reporting, and documentation. These businesses can operate as sole proprietorships and Limited Liability companies.
Social entrepreneurship is the model that existing and newly formed charities must use if they are going to survive. It requires a shifting in the way we have generally thought about charity delivery. In my work as a nonprofit business coach and trainer, this idea is a difficult one to accept. People instinctively want to give their services and products away for free, with no real plan for generating revenue. They think they'll get grants and that these grants will finance their work. Nine times out of ten, this doesn't happen.
The concept is dramatically different in terms of product and service delivery. Wherein charity work is often thought of as a lack, or absence of profit, social entrepreneurship merges the science of business entrepreneurship with the science of social change. This business model offers people the opportunity to earn a living, living one's passion. More than likely developing such an enterprise or project requires starting from the ground up, or starting from scratch. There are numerous best-practices that entrepreneurs can use to build successful, profit generating social-based businesses. Here are a few:
1. Project revenues and expenses first; if a profit is unlikely, don't bother or go back to the drawing board.
2. If a profit is likely, develop a full business plan with market research, SWOT analysis, and marketing plan.
3. If you decide to form as a 501 c 3 nonprofit, don't include grant revenues in your projections until you've been in business for about two years.
So before deciding to launch as a nonprofit, explore a for-profit venture with a social twist. You may find this structure to be the best fit.