If you’re an entrepreneur, you likely have a precise idea of what you want your next business to offer and your objectives for launching it. In some cases, those objectives might extend beyond the business sector and look into what you can do to affect the wider world. This is where social enterprises come in.
A social enterprise is a form of business that combines commercial and social elements. It runs as a traditional business, using strategies to generate trade and revenue, but its ethos will centre on an important social cause, such as homelessness, inequality or climate change. When profits are made, these are reinvested towards whichever cause being addressed to help lessen its impacts.
Social entrepreneurship is a tried-and-tested concept, but it is on the rise globally. Some of the increase may be down to the many benefits that lie in social enterprises, including funding access and demand. In fact, the advantages even extend beyond the businesses themselves to consumers, investors and the broader population.
We have listed all the benefits that come with launching a social enterprise so you can see their value.
Access to funding
One of the most significant advantages for those establishing a social enterprise is the increased access to funding that has become available in recent years. Today, such businesses can access incentives and schemes from the government to raise capital. On top of this, there is the possibility of grants from charities and other institutions. Famous ones include Children in Need, The National Lottery Community Fund and The Arts Council. Many banks will also run such schemes.
On top of government funding and grants, social entrepreneurs can seize the opportunity of social investment. This sees investors placing their money into social enterprises to fulfil altruistic objectives while obtaining a return on investment. Platforms for social investment include Big Society Capital and Social Enterprise UK, helping relevant businesses find financial support.
With this increased access to funding, it may be easier for social entrepreneurs to secure financing and launch their ventures.
Demand and publicity
Following the coronavirus pandemic, consumers have become increasingly conscientious in their purchasing decisions. With social impact and sustainability having a more considerable implication in buyer choices, social enterprises can leverage their emphasis on the cause to draw in customers.
By bringing together social missions and commercial offerings, social entrepreneurs can fill gaps in the market and address niche groups of the public looking to help the world through their spending. In this sense, it can help you generate demand and build a loyal base of customers who will return to you repeatedly – spelling better revenue and profit.
On top of this, businesses who demonstrate robust corporate-social responsibility attract publicity. Helping others creates good news stories that local publications and industry titles will be happy to cover, particularly if you’ve impacted the community or cover a trending topic. You may also get endorsements from charities or organisations related to your business.
All of this has the added advantage of increasing business awareness and building your reputation – which again will drive more customers to your door.
Although social enterprises tend to use commercial structures, they do not follow the same format as corporate or private institutions. As a result of this, owners have greater flexibility in how they run their business.
This means that many social enterprises may use tailored and innovative strategies in their daily operation. Examples could include flexible working environments, allowing them to provide hours that best suit their staff and customers.
So, if you are an entrepreneur looking to do things a bit differently, a social enterprise will give you the chance to find approaches that work best for you, even if they go against the business norm.
Recycling of capital
Social enterprise can also have worth for the investment industry. As the purpose is to generate profit through trading, which is then reinvested into social causes, they recycle capital that can be used to support more enterprises. This is alongside the obvious charitable benefit to using profit for good.
As more social enterprises are established, they begin to earn income that can be paid back to lenders or via a return on investment. This allows investors to help grow these enterprises while still receiving their money back. From there, they can go on to support more social ventures and increase their population in business.
Attracting new funding sources
Due to the combination of commercial and social objectives, social enterprise can attract funding from many sources. As we’ve already mentioned, this can include government schemes, banks, charities and other lenders. In terms of investment, the draw of making an impact on society could bring in individuals and firms who want to do more with their money.
So, enterprises can pool together capital from across mainstream and alternative financial markets. As this money is recirculated back into social causes, it can achieve substantial funding that many different recipients can enjoy – including other enterprises.
Finally, social enterprises offer an alternative type of business for investors to consider. While investment will typically be associated with stereotypical commercial ventures, the inclusion of social missions can add a unique factor to how these businesses are set up and run. For investors looking to diversify their portfolio or embrace a challenge, this could prove a compelling prospect.
Investment in social enterprises can also help individual investors to pursue any philanthropic aims they may have. For investment firms, it means they can fulfil CSR targets, which can help them improve reputation and obtain publicity.
Addressing social issues
The main benefit that social enterprises have in the broader world is their ability to advance social missions. These ventures will have identified and highlighted an issue that they feel is worth solving, helping them address pain points the public is facing. When you consider the comprehensive range of problems being tackled – including healthcare, access to education, environmental damage, poverty, violence and so on – it is transparent that these businesses have a chance to make a real difference that is sorely needed.
Where they succeed, it could result in enhanced support for affected people, fundraising for charities, increased awareness and even alleviate the problems being faced.
It’s also worth noting that social enterprises can indirectly ease other issues. Figures show that 40% of entrepreneurs are led by women and 35% from individuals in BAME demographics. As imbalances continue to plague business, such as with gender and ethnicity, the rise of these demographics opening social enterprises could improve equality in the industry and inspire more people to follow suit.
Due to the commercial nature of social enterprises, they need employees to function. So, when a new one launches, it often means the creation of jobs.
Social enterprises tend to excel as employers due to the flexibility offered in terms of working hours (as already mentioned). 75% offer the living wage to their staff, meaning workers are also fairly paid.
Consider the trading model of The Big Issue, one of the most famous examples of a social enterprise. Their employment of homeless people to sell their magazines shows that the job opportunities offered can do their part to help eradicate social issues as much as the reinvesting of profit can.
Enhanced business responsibility
A social enterprise’s very definition is that it connects commercial strategies with a social and environmental focus. Bringing these facets together can promote the capacity to make a profit while still being conscientious. This can encourage sustainability across businesses, which see it as a way to generate capital rather than a barrier.
With increased attention, this can lead to the establishment of more social enterprises or socially-minded businesses while encouraging existing companies to encompass responsible policies in their operations.
There are many benefits to setting up a social enterprise – not just for owners but also investors, employees and broader communities.
With a rise in funding and the number of businesses being established in recent years, as well as a shift in consumer demand for sustainable companies, we will likely see the market continuing to scale. As such, now is an excellent time to pursue social entrepreneurship.
If you are considering launch a social start-up and want to find out more about the funding and support available to you, we’re here to help. Our advisors can discuss the options available to you, based on your ambitions, and put you in touch with contacts in our comprehensive network who can help.
We can also work with you to prepare a winning business plan and proposal.
Get in touch today to find out more.