Building a For-Profit Social Enterprise: Challenges, Learnings and Triumphs
There is no right time to talk about challenges than ‘today’. The COVID pandemic is shaping the world as we know today. Just like creating a somewhat new concept (for-profit social enterprise), there are challenges, learnings, and triumphs.
The world today is burdened with a number of catastrophes—from climate change, pandemic to extreme poverty, there’s no dearth of issues that need attention. In a world that’s riddled with environmental, social, and economic challenges, it’s more important than ever to create meaningful solutions that improve the lives of people and the environment. Entrepreneurs can play a significant role in alleviating these problems and help millions of people across the globe. As per data from NASSCOM, there are about 400 social impact startups in India and the number is fast growing. A report by McKinsey titled Impact investing: Purpose-driven finance finds its place in India indicates that India’s market for purpose-driven finance could grow to $6 billion to $8 billion in 2025. With increasing social issues such as economic inequality, poverty, lack of access to clean water, air pollution, there is a definitive need for for-profit social enterprises.
Building a for-profit social enterprise that solves real-life problems is no walk in the park, but it’s also one of those experiences that’s truly inspiring and rewarding. The goal of a social entrepreneur goes beyond just profit. They believe in using the power of their ideas to create large-scale and long-lasting impacts on society and the environment.
Starting a social enterprise, specifically a for-profit social enterprise, comes with a unique opportunity to experience multiple facets of challenges, and wins. Each time, it’s a learning opportunity too.
Challenges and learnings
Staying true to your mission: Like every start-up, you are required to make bold informed decisions with limited resources. You will be caught between making financial decisions over mission-driven ones. Sometimes these challenges will come from your customers, team, partners, or investors.
A business is only successful when your clients, customers, team and the society at large see value in the change you are making. Like Bill Gates said, “Your most unhappy customers are your greatest source of learning.” If you stay true to your mission while making smart decisions, you will end up in the right place.
Knowing when you are failing: You will fail multiple times. Every failure presents a learning opportunity. Failures could result from wrong product-market fit, pricing model, business model, etc. It is sometimes challenging to accept failure when you think you are going to ‘change the world’.
Set SMART goals for your organization. (SMART: specific, measurable, achievable, realistic and timely). This is key to drive a successful social enterprise. If you aren’t achieving your goals, something is wrong. Fail fast and pivot quickly.
Fundraising will be confusing to all investors: As a for-profit social enterprise, you will have to raise capital from philanthropic investors as well as traditional venture capitalists. While the pool of blended capital investors is increasing, the reality is that most of the traditional investors from both worlds don’t understand a business model that might have reduced returns in order to scale impact.
A for-profit social business requires creating multiple narratives for your business model, highlighting impact and scale when talking to philanthropic investors, and highlighting traction and returns when talking to venture capitalists.
One of the biggest wins as a social entrepreneur is the satisfaction you get in the process of building something that impacts the lives of many. When a larger purpose or social good is intertwined with your business model, it has the potential to generate positive change in the world.
Every entrepreneur should equally cherish their failures as they celebrate their triumphs. It always gives us an opportunity to learn. But most important is to enjoy the experience and immense pleasure you get from creating an idea that makes the world a better place.