No Frontiers 21 Century Association
SOCIAL ENREPRENEURSHIP Publication under Project Shift -> Towards Online and Offline Entrepreneurship Community
This project is co-funded by EU trough the INTERREG - IPA Cross-border Programme CCI 2014TC16I5CB006 EUROPEAN UNION
This publication has been produced with the assistance of the European Union. The content of this publication is the sole responsibility ofÂ the Center for Intercultural Dialogue Association and the No Frontiers 21 Century Association and can in no way be taken to reflect the views of the European Union
Partners: Center for Intercultural Dialogue Association No Frontiers 21 Century Association
WHAT ABOUT SOCIAL ENTERPRENEURSHIP? Social entrepreneurship in its most basic meaning is an enterprise set to advance social issues. It foresees an entrepreneurial approach to solving social problems and initiating and creating a far-reaching social change. A social enterprise can be based on different business models, but in its essence it assumes developing a feasible business idea and adapting it to serve and contribute to a social cause. А social enterprise differs from а classical enterprise by setting its social agenda prior to its profits. It can engage poor and vulnerable groups as employees, provide drinking water and free healthcare, advance education and protect the environment by introducing renewable energy or delegate part of its profits to specific problems in the community. In supporting these social causes it may work in a way that is less economically viable than a forprofit, giving priority to creating social change rather than the financial gains of its shareholders. Yet this does not mean that revenues are not important for a social enterprise. They are crucial for its financial sustainability and making a bigger impact on its social mission. What distinguishes a social enterprise from a classic nonprofit organization on the other hand, is its entrepreneurial concept. While non-profits are usually not self-sustainable in terms of finance and rely on outside funding such as donations, the social enterprise is embedded in a business idea, one that operates on the market, serves a client group and generates income. Yet, its basic success criterion is not profit but contribution to a social problem, meaning that most decisions are based more on the benefit towards the social cause and not the profit margins. This doesn’t mean that social enterprises cannot be highly profitable; it simply means that when they are, their priority is the reinvestment of profits into their social mission rather than payouts to shareholders. So what does a social enterprise do? It can educate, provide services and organize underserved groups and entire communities for the benefit of a social cause. A successful social enterprise is one that is able to sustain and develop its social mission while maximizing the productivity of its business to ensure sustainability. For example, a social enterprise can work to provide food and shelter to homeless people. It can do so by producing any type of goods needed on the market (just like the classic enterprise), but it will do so by engaging the homeless as their employees, paying them a fair compensation, and eventually contributing parts or all of its profits to building shelters and homes for their employees. So whatever business they are in, they are eventually training and giving a chance to a highly marginalized group to re-integrate in society, earn a living and reach some level of quality of life. This is their social mission. In today’s world social enterprises become more and more important because they represent a unique combination of the key strengths of the profit and non-profit organization, while balancing the weaknesses of both models. While the for-profit businesses rely on a certain need for a service or a product for which a group of clients is willing to pay, thus ensuring its financial sustainability, the key benefits from its operation are limited to an owner or a group of shareholders in the form of profits. The classical non-profit organization (a charity or a civil society organization), on the other hand, although focused on advancing a social issue or a problem, is highly dependent on external funding, and in this sense is only spending but not creating resources. A social enterprise combines both concepts by creating its own resources from selling a service or a product, and further investing these resources in a social issue or a problem. In a world that is boiling with problems, starting from unethical use of resources and destruction of the environment to poverty, hunger and health problems, where millions still do not have access to basic life necessities such as clean water and shelter and where many face discrimination and violence on the basis of
gender, sexuality, race and origin, social enterprises are needed more than ever. Social enterprises, by providing employment and resource creation while also developing communities and addressing world problems represent a sustainable part to global development. And the good thing? Anyone can be a social entrepreneur! TOOLS FOR DEVELOPING YOU SOCIAL ENTERPRISE So, how do you go about developing a social enterprise idea? First you will need to identify a social mission. A problem or an issue you are passionate about. Something you care for deeply and want to see it changed in the community. The social mission you identify is a very important motivator, not only for you at times when you may think on giving up, but for all the others you see joining your social venture, such as your future employees and volunteers. It will also be important for your funders, the individuals and companies that may finance your startup or its growth, but also your clients, which of course will be more willing to buy a service or a product from you than from your competitors knowing that in this way they contribute to something important. As you can see your social mission IS important. 1. Identifying your social mission One way to identify a social issue you care about can be to start brainstorming different issues that interest you, and you can use the following table for that. Take about a half an hour and try identifying as many issues as you can for each field. If there are fields you are not specifically interested in or you do not know much about, thеn go with the areas you feel most comfortable or familiar with. Once you are done you will have a long list of issues you can work on. GLOBAL ISSUES - Climate change LOCAL ISSUES - Air pollution
NATIONAL ISSUES - Women‘s rights in the country INDIVIDUAL ISSUES - Poor households
Now that you have a long list for each group you can structure it by ranking the issues based on the following criteria: 1. How burning/critical is this issue? 2. How many people are affected by this issue? 3. How many people are aware/care about this issue? 4. How bad are its current consequences? 5. How devastating is its impact if leaving it unsolved? 6. How passionate am I personally about this issue? 7. How realistic is it to think I can do something about this? You can rate each issue for each of seven questions provided on a scale from 1 to 10, and then calculate the total for each issue on your list. For example, let’s take a local problem such as the Air pollution in Tetovo. 1. How burning/critical is this issue? I give it a 10! Tetovo is the most polluted city in Europe and among the first 10 in the world. 2. How many people are affected by this issue? I give it an 8. Tetovo has about 50 000 inhabitants, making this quite a large group of people being affected by a very serious issue.
3. How much are people aware/care about this issue? I give it a 9! The people of the town are becoming quite aware of it. Protests have been organized throughout the year against industrial capacities polluting the city, especially in the winter months and against the local government that does almost nothing to address the issue. If I would start working on this issue I am sure there are a lot of people that know about this and may be willing to help. 4. How bad are its current consequences? I give it an 8! Air pollution affects the health of the local population in many ways, but especially in increased number of respiratory and cardiovascular diseases, mostly in children and the elderly. It also worsens and complicates diseases and symptoms in people with chronic health issues. The number of deaths in Macedonia caused by the pollution in estimated at over 1300. 5. How devastating is its impact if leaving it unsolved? I give it a 10! Pollution rates are going up each year as nothing has been done to manage the current situation. If left unresolved these pollution levels will represent an incredible risk to the health and wellbeing of the whole community. 6. How passionate am I personally about this issue? I give it a 7! I am quite passionate about this issue, but I am also aware that I am more interested in global issues such as climate change and animal agriculture. 7. How realistic is it to think I can do something about this? I give it a 7! Although this is a complex issue that must be solved by the institutions themselves, there is quite a lot that can be done by people themselves. From becoming more environmentally aware and seeking greater responsibility from local government to adopting a less-polluting lifestyle, starting from transport to using renewable energy. Sometimes, a lot can be done just by sharing information on an issue and informing people about practical approaches they can implement themselves. TOTAL: 10+8+9+8+10+7+7 = 59 You now need to do this for all the items in your list. The ones that have the biggest score are probably the ones you can consider working on more in detail. Of course personal preference means a lot in this, so do feel free to select an issue with a lower score, if your instinct tells you that this is what you need to work on. 2. Learning about the social problem you want to address Of course it is hard to make an impact on a problem you do not know much about, so at this point it is good to read a bit more on the issue (or issues) you have selected as a top priority. In todayâ&#x20AC;&#x2122;s online world, access to information is abundant, so read up on research and statistical data relevant to the problem you are interested in. You can also check newspaper stories, personal blogs as well as projects already done or planned to be implemented relevant to your issue and government policies to overcome the issue. In this sense it is good to know what current measures are in place (if any) to solve this issue, things that have been tried but have or have not worked and due to what reasons. It is also good to get informed on how the problem has been created, what other issues are connected to this issue, how the problem is treated elsewhere, as well as other peopleâ&#x20AC;&#x2122;s creative ideas in tackling the problem you want to work on. All this information will give you a much better idea of the problem you are about to embark on, but also a lot of material to design a sustainable idea that can contribute to its solution.
3. Social issue analysis Once you are stocked up on information and knowledge, it is time to make a proper problem analysis. This means to formulate the core issue you want to be working on, identify its causes (why has this happened), as well as what consequences we will be facing if this problem is not resolved. The simplest and most commonly used tool to do this is to develop A PROBLEM TREE. A problem tree analysis focuses on 3 elements of the issue: The core problem, represented by the tree trunk - WHAT WILL WE BE WORKING ON? The problem causes – tree roots – HOW/WHY THE PROBLEM IS CREATED? The problem consequences – tree leafs. HOW WILL THIS PROBLEM PROGRESS OR BE REFLECTED IN THE FUTURE?
When you are doing your analysis, remember to focus on here and now. For example, if you want to work on the air pollution in Tetovo, in general terms your analysis should look something like this:
Note that you need to be identifying problems at this point, not solutions. You also need to be asking yourself why this is a problem, and how this has happened. In this process it is also possible to find out that you have set the problem in too general and too big terms, and maybe you can only contribute to one of the causes for this problem. In this case you should re-do your problem tree by taking the specific cause as a core problem and trying to work out its causes. Knowing the reasons for a problem will allow you to develop more relevant and effective approaches in contributing to its solution and creating a long-lasting change.
4. Defining your social mission Once you have completed your problem analysis you can draft your social mission by translating the core problem into an action oriented goal statement. E.g. Core problem: Incredibly high level of air pollution in Tetovo Social mission: To decrease air pollution levels in Tetovo. CONGRATULATIONS! Now you know what your social business will be about.
5. Defining your entrepreneurial idea Now that you know what you want to contribute to, the next step is to find out how. Looking at your problem tree and especially at what causes the core problem you are helping solve with your social enterprise, try to generate ideas on how some of those causes can be addressed. For example, in the problem we have been discussing above, the air pollution in Tetovo, by looking at the causes that create this problem we can say that alternative transport means that would pollute less (such as bikes) would decrease pollution coming from the use of vehicles. Another way perhaps would be the identification of affordable heating options through the use of ecological energy sources that would decrease pollution created by private households in the winter months. Yet this is where the most complicated part comes in. Now you need to think of a business idea that can create the resources needed for your social mission. So if you are a part time engineer, you can start thinking about developing affordable ecological heating options for private households. If you are not, then you can see if there is something like that developed already that you can bring to this community. Yet, in order for it to be a social enterprise it will need to be earning money. So you could be selling these heaters for minimum price which can be a form of a social business. However you must also consider if people would be interested and willing to buy these heaters and at what price. If you have less resources at hand you can start thinking about bikes and developing the local biker culture as alternative transportation. Maybe you can open up a company that would buy off and repair old and used bikes, and then sell them to the local population for an affordable price. By increasing the peopleâ&#x20AC;&#x2122;s awareness on pollution, while also offering them a cheaper and more convenient way of transport you may just start triggering a social change. Yet in this part you also need to be thinking as an entrepreneur. So think about whether you can include some additions to the bikes that regular bikes do not have, such as a coffee cup holder, a phone holder, or just give them a creative and posh design... The idea is to identify what little extra you can do to make your product more desirable for people to buy. Ask yourself, what kind of a service/product I can sell that people will be willing to pay for, while at the same time contributing to my social mission? A step further in the biking company is to also provide delivery services or door-to-door package delivery for local people and companiesâ&#x20AC;Ś You get the picture. So, as presented above, the core difference between a social enterprise and a classic non-profit/nongovernmental organization is that the fist is self-sustainable on the market. Meaning people are willing to pay for their service and/or product.
Starting from this notion, your next task is to identify a business idea that you think you can use to contribute to the problem you previously analyzed, but for which you also think there is a need, or can successfully perform on the market. Try to develop at least 3-4 business ideas which you think have market potential and can be designed to contribute to your social mission (employ the group you are set to help, promote certain ideas – equality, nondiscrimination, human rights, promote better way to do things – introduction of renewable energy, nature conservation etc..) To get you going, here are a few examples: -
One made is a social enterprise of the Association of single mothers “One can”. They have opened a line of organic cosmetics for the production and sale of which they engage their members, the unemployed single mothers. In this way they empower their target group, providing them with a paid employment, while also using their company’s revenues to advocate for single parent’s rights in the country.
Signs, a restaurant in Toronto which is employing mostly deaf waiters, where customers are encouraged to order in sign language using a provided cheat sheet. The restaurant is an effort to create jobs for deaf Torontonians who are especially excluded from the service industry, as well as educate and sensitize the city's hearing population on what it is like to live with the condition. Inside the restaurant the walls are covered with instructions on how to use sign language for basic communication. The idea is to change the misconception that deaf people are disabled, when in fact they just speak another language. “For many of our members of staff this is their very first job, so it is a new experience for them, too.”
Brigit’s Garden is a 4.5 hectares land organized in Celtic-themed gardens, nature walks through native habitats, visitor centers and educational programmes for pre-schools, primary and post-primary schools, youth groups and teachers. It provides a resource for the community to access nature and beauty, while also offering tourist services, education on environment and sustainability, hire of rooms and facilities for local businesses and a space for family events.
As illustrated in the examples, besides the social mission at hand, it is crucial that the social enterprise is based on an actual market need and thus it is able to sell services and be independent in financing its social mission. Now, once you have developed your business ideas, try to select one that you think would be most viable. In this process pay attention to how realistic it is to set up the enterprise, whether people would be willing to buy/pay for the service you envisage, which idea would contribute to your mission the most, and which idea you are most passionate about. This will be the concept you will be building your social enterprise around. 6. Defining the key elements of your social business While developing your business idea, here are the core elements you must work out to set the basis of you social enterprise concept. Fill in the table below. Product / service (What will I provide/sell?) e.g. My products are used and renovated bikes with authentic design and smart add-ons.
Clients (Who will use my product /service?)
e.g. I will be targeting mostly people 16-35 although in the future I may consider a special line for kids.
Objectives (How will the SE contribute to the social problem identified?) e.g. By providing affordable means of transport and raising the awareness of the local community, it will increase the practice of environment friendly transportation habits among the local population and thus contribute to lower air pollution in the city.
7. Market research Once you have your enterprise idea set-up, it is also good to double check the market viability of your social business. This means to research whether the envisioned group of clients will be interested in buying the product or service you intend to sell. While you are there, you can also check what kind of price they are willing to pay for it (pricing), whether there are any specific features they will need from your service/product (customization - e.g. a private kindergarten which also offers a pick-up/drop-off service), and if they are currently getting this product/service from someone else (who is your competition). This is called market research. To do this you will need to identify your client group in the best way you can and work out the most effective way to approach them. Think about whether you can find your clients through some existing channels (e.g. parent groups online), or living in a certain area and then decide whether you want to set-up a questionnaire online, or you want to do interviews on the streets. Once you know how to reach them you will need to develop a questionnaire reflecting the questions we outlined above. This small research should give you a better sense of whether there would be interest in your business, as well as valuable data on how to structure your service/product so that it is better received by your clients. 8. Drafting up your business plan Following the market research, where hopefully you have gained better understanding of your clientâ&#x20AC;&#x2122;s needs and wants, the next step is to develop a simple business plan. You can use the following business plan format to gather up all your ideas in one place: OVERVIEW What will you sell (product/service)?
Who will use/pay for this?
How will your business help people?
SALES How will clients learn about you?
How will you ensure recommendations?
FINANCES How much will you charge?
How will you ensure payments?
In what other ways can you earn from this business?
WHAT DOES SUCCESS LOOK LIKE Number of clients
CHALLENGES Challenge/risk 1
Well, now you have a business plan. It is not the most detailed one, but it shows well what you are about to embark on! 9. Setting up your finance Next step â&#x20AC;&#x201C; expenses. You need to know how much money you will need to start and run your social enterprise, at least for a year. As a simple framework, try listing out the following expenses per month: 9.1. Fixed costs (these are expenses that are more or less the same every month, regardless of how many clients you have or how many products you sell). Fixed costs usually involve: rent of office and/or other business space, transport, monthly utilities such as electricity, internet, phone and other. You should also include monthly consumables in terms of hygiene and cleaning products, stationary (paper, toner etc.), coffee, water and whatever else you expect to have in the office. Some lump sum for marketing and amortization of equipment is also a good idea. Then, there are the salaries. Identify the minimum number
of people you would need for starting off your enterprise and a viable staring salary. Make calculations per month. 9.2. Variable costs – here you calculate the costs related to the creation of your product or service. What are the inputs needed to provide what you are selling? In a take-away coffee shop for example this would be coffee, milk, branded cups, napkins, straws, cookies, fruits, juices, sodas etc. Based on the assumed number of services/products sold, try to come up with a monthly cost for all the supplies you need. 9.3. Setting-up costs – these are starting out, onetime costs related to buying the necessary equipment and machines for your business as well furnishing your working space. Depending on your idea, you may also need vehicles or other office /work equipment – phones, laptops… Make the list as detailed as you can and come up with a total cost. If you have expenses for training or finding employees, as well as other one-time investment related to the social mission of your enterprise, put these in here as well. As it is known that the minimum time needed to start up a business is one year, you must calculate the total of your expenses for a year of running your social enterprise. This will give you an idea of how much resources you need to mobilize for starting out your social venture. Of course maybe you can count on some income form sales after the first few months, but nevertheless it is good to know an overall total of what it will cost to be in business for one year. 10.
This refers to the format you want to setup your social enterprise in. As we have already discussed, a social enterprise is a hybrid between the classic enterprise and a charity/civil society organization. Many countries have special legislation that determines the ownership structure and administrative and legal guidelines for operating a social enterprise, but many also don’t. Both Macedonia and Bulgaria are currently in the process of developing legislation on social entrepreneurship, but until this is completed you can register your social enterprise either as a classic enterprise or as a non- profit (civil society) organization. The benefits of registering it as a non-profit are that you will be exempted from some taxes, such as VAT, as well as be more inherent to your social mission. It will also give you a better approach to grants and donations for starting off you venture. Yet, setting up your social enterprise as a civil society organization will mean that you will need at least 5 people as founders of the organization, as well as an assembly and a governing board which may sometime slow down the process of decision-making as it will add more constituents to your business. If your register as a classical enterprise, you lose the financial benefits that come with the non-profit status, but you can have a clearer ownership. You will probably be less eligible for some forms of donations, but more eligible for business loans for your startup. Regardless of what you decide, in order to ensure that your social business will remain true to its mission, it is crucial that you develop internal procedures that will regulate how incomes are distributed and invested (e.g. minimum 50% of the company’s profit is invested back in the social mission of the enterprise). As for the legal status, our advice is to go with the option of registering your enterprise as a non-profit organization that should give your idea a better chance for financing by both private donations and external donors. The non-profit structure is also better suited for your social enterprise, as it will allow you to include people that are relevant to your social mission in the structure and governing bodies of your enterprise.
Access to finance
Once you have all your plans in place and you know how much it will cost to start and run your venture for a year, it is time to work out the finance for your social enterprise. 11.1.
Using your own resources. As with any other start-up, you may end up being the initial financer of your social business. If the social venture does not require big amounts of initial investment and you think you can gather up the resources yourself, it may be the simplest option. Your 1-2 year financial plan will then include returning your starting investment prior to distributing profits for your social causes.
Donations. If your social enterprise holds a mission that is well recognized in the community, than people may be willing to donate for your cause. This may not only mean money, but also space for your office or free labor â&#x20AC;&#x201C; volunteers. You can also organize open/community events for raising money, or use a crowd funding platform to gather up donations from people you do not know but may support your cause. Private businesses may also be a source of finance, if they can see benefit from your engagement in the market.
Subsides. The state may have some grants or other subsides for starting up a small business or a social enterprise you may be eligible for. You can check this out in your local Employment Agency or on the web-site of the Ministry of Finance.
Micro grants and loans. As social enterprises and their benefit are becoming more and more recognized across Europe, the EU has set up a variety of microfinance mechanisms and loans you may be eligible for. Check this out at: http://ec.europa.eu/growth/sectors/social-economy/enterprises_en. With a good business plan, and especially if this is not your first business, you can also try getting a loan from a bank.
Business incubators & accelerators. Another source of support may come through business incubators and accelerators, that can offer you both options for cutting down your costs (such as low-cost office and utilities option), but may as well support you in getting the funding, approaching clients and other valuable guidance and advice.
Regardless of the option you choose to finance your venture, do know that representation means a lot. Draft your business plan well, include information and images, even accounts relevant to the social mission you are contributing to, brand your business idea with a logo and a motto statement and make precise calculations that are easy to understand. Only by being well prepared you can approach potential financers with a lot of confidence and make a good impression that will obtain their support. GOOD LUCK!