Thinking about social entrepreneurship

While I have been away from my blog for the last month, I have done a good deal of thinking about two topics, nonprofit capacity building and social entrepreneurship. While I am doing research on both topics for an academic audience, some of what I am thinking about has some wider importance.

In interviewing nonprofit founders and social entrepreneurs, one of the common strategies they identified for starting their organizations was to use a business model that they had seen work before, often copying directly from a similar organization in another location. While this is not necessarily a bad strategy, many times it shortcuts an important set of questions that need to be addressed. These include:

1. What are my short term and long term goals?
While this makes common sense, asking this question before choosing a business model may help entrepreneurs make better informed decisions. Both sets of goals ultimately should be measurable, meaning that you will know if you achieved them.


2. What are the business model choices I could make?
Before identifying what other programs are doing, get informed about the difference between a 501c3 and 501c6, learn about whether your state has a low-profit corporation option, and learn about various for-profit business models and social entrepreneurship models. Many organizations jump into a 501c3 status before thinking about the other options, simply because it is what others have done. While copying other organizations can reduce the time spent researching and keep your organization from making unnecessary mistakes, it can also lead you to make choices that are ill timed in the current market. What was right for their organization 20 years ago may not be right for your organization now. Some legal statuses, like the low-profit corporation, are only recently available.

3. Try out different business model statements.
What would your proposed business model statement look like under two or three different business models? Which business model would help you to meet your short term goals? Which ones would hinder or enable your long term goals?

4. Finally, consider the costs associated with each business model.
If your project is going to require significant general operating costs, consider if the 501c3 status is right. Many foundations and donors seem to prefer to fund program costs. If you offer a valuable service, maybe you could charge for it. If your project could use a social enterprise model, what sources of revenue are you rejecting? If you are in the health or education or environmental space, there are several partnerships with businesses that your organization could form as long as it has a nonprofit status.

Much of the research on starting small businesses suggest that successful ventures spend more time planning before they launch than ventures that end before the 2 year mark. While using other organizations' templates and plans may seem like a good way to save time, entrepreneurs should take the time to do scenario and strategic planning before launching their venture.