Social enterprise revenue models
They're not charities, so how does the social enteprise business model work?
The definition of a social enterprise is a business ‘with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or community, rather than being driven by the need to maximise profit for shareholders and owners’.
The purpose of the business is to make money which, in turn, can benefit areas of society. That doesn’t mean however, that you as a social entrepreneur, or your investors, cannot reap the financial rewards of your business.
You may choose to reinvest all the business’ profits back into the venture. This is where the not-for-profit tag comes in, but it’s a misleading term. Not-for-profit doesn’t mean profits aren’t made, they’re just not made for the benefit of the company directors.
However, even if you choose to withdraw some of the profits for financial gain, as long as the primary objective of the business is to benefit a social group, it can still be classed as a social enterprise.
Striving towards making a sustainable and increasable profit should influence every aspect of a social enterprise even if it’s not the overriding priority or purpose of the venture. Social enterprises have a strong future but they need the financial stability to back them up. Relying on donations is not an option.
Liam Black, the former director of The Fifteen Foundation founded by TV chef Jamie Oliver, said part of the reason he gave up working with charities was that more time was spent raising money than getting things done.
He describes social enterprise as: “A different kind of wealth creation that doesn’t try to make lots of profit, gives away a bit to poor people, but attempts to carry out a business that is empowering people.”