MoneyMagpie

Jun 02

What is a social enterprise?

If you’ve thought of setting up your own ‘social enterprise’ you will be pleased to know that there is more help around than ever to do this.

According to leading social enterprise, InspirEngage International, Social Enterprise contributes to over £24 billion to the UK economy, creates over 1 million jobs and almost 50% of CEOs are female (compared to just 16% in commercial business sector).

But what is a social enterprise?

Social enterprises are basically businesses that are changing the world for the better. Not only can you make money from this type of business, but you can also help society along the way.  The Big Issue, Eden Project, Age UK Enterprises, Plymouth University  and the Co-op are all social enterprise businesses that you might recognise. Take a look at our guide to find out what a social enterprise is and how you can set one up.

What is a social enterprise?

A social enterprise is a business that trades for both a social and commercial purpose.

Social enterprises have a clear sense of their ‘social mission’ – this is what makes them different from other enterprises.

They have a firm emphasis on tackling social problems and knowing what type of difference they are trying to make, who they aim to help, and how they plan to do it.

The profits a social enterprise makes will usually be reinvested further into the company’s social mission – so the positive social impact is as important to its business objective as any financial gain.

Also check out – Top 20 tips for running your own business

Characteristics of a social enterprise

Any business can call themselves a social enterprise but the Social Enterprise Mark certification is the only guarantee that a business truly operates as one. According to www.socialenterprise.org.uk  social enterprises should:

  • Have a clear social and/or environmental mission set out in their governing documents
  • Generate the majority of their income through trade
  • Reinvest the majority of their profits
  • Be autonomous of state
  • Be majority controlled in the interests of the social mission
  • Be accountable and transparent

How do you make money from a social enterprise?

social enterpriseAs we’ve mentioned, social enterprises specifically address social or environmental needs in society which makes it a positive business model.

Of course, like other businesses they have to compete in the market to make money. But instead of creating value for shareholders or owners, any profit goes towards benefiting the communities or causes that they serve.

Social enterprises make their money from selling goods and services. When they profit, society profits too, this is because they reinvest their profits back into the business or the local community.

Social enterprises can be anything from shops, cinemas, leisure centres, colleges to banks and more. You’ll be likely to find social enterprises in almost every industry because they can encompass a whole range of ideas. The social enterprise sector is huge and it’s growing all the time.

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Can anyone set up a social enterprise?

social enterpriseAlthough social enterprises aim to help good causes, like any business, a social enterprise will have to create a regular income in order to survive, unlike a charity which relies on donations.  If you’re starting the project from scratch you’ll need to think hard about whether there’s a genuine market for the goods or services that you offer. It’s essential that there’s a public demand for your services as well as a social need.

If you’re an existing company looking to transition into a social enterprise we advise you to get in touch with an existing enterprise and talk through what they do and see if this could be applied to your business strategy. Making a social enterprise work takes a lot of time, dedication, passion and commitment. Having an entrepreneurial team behind you will benefit you a great deal.

Thankfully the 2014 budget made social enterprises a more attractive prospect for potential investors. Up until the budget, investors would have gained more by investing in small private companies thanks to the tax incentives offered by the Enterprise Investment Scheme (EIS).

However the government is now encouraging investment in social enterprises by providing the social investment tax relief scheme, which gives individuals a tax reduction of 30% of their investment, the same as it is for the EIS. This should help level out the playing field and make investing in social enterprises more appealing.

As social enterprises are community based there is also a lot more potential for grants, although it is by no means easy to get one. To begin looking for grants try grantfinder.co.uk and biglotteryfund.co.uk. The Big Issue Invest, who have invested £20m in more than 160 social enterprises, also offer loans from £50,000 – £1m for social enterprises.

Examples of social enterprise

  • Buster Coffee – Buster Coffee in Sheffield is a coffee shop that employs adults with learning disabilities
  • Mybnk – Mybnk delivers financial and enterprise education for 11-25 year olds in schools and youth organisation
  • Bloomtrigger – Bloomtrigger is an online funding platform that protects the rainforest
  • 31 Bits – A social business based in California and Uganda that gives internally displaced women from Northern Uganda the opportunity to earn an income through selling jewellery to an international market

The pros and cons of setting up a social enterprise

Running a social enterprise can be a real challenge, especially when your work takes time to have an immediate impact on the community. As with all business models there are ups and downs to social enterprises.

Take a look at some pros and cons below.

social enterprisePros

  • Social enterprises are businesses that trade to tackle social problems, improve communities, people’s life chances, or the environment so of course this is a pro. It is highly satisfying to take part in a project that genuinely makes a difference to society
  • A social enterprise does not depend on funding and is more flexible than charities
  • A Social enterprise business can be an inspiring place to work or volunteer as they usually attract people who are genuinely passionate about the cause they stand for
  • There is a possibility of getting a grant to help cover some of your costs

Conssocial enterprise

  • Since social enterprises are businesses, they can fail if the market changes or an idea doesn’t work out.
  • It can be difficult to set up a social enterprise that both makes money and impacts the community equally. Despite your hard work the social benefits of a social enterprise may take years to appear
  • As your enterprise grows, influence from new people can sometimes get lost or forgotten

Case study: Melody Hossaini – CEO of InspirEngage

We chatted to ex-Apprentice candidate Melody Hossaini, Founder and CEO of InspirEngage International – a social enterprise leading in skills training and youth engagement. Melody has been working in community development since the age of 13 and is a notable professional speaker. In 2011 Melody Hossaini became the first social entrepreneur to appear on The Apprentice.

Melody Hossaini female social entrepreneur Young social entrepreneurWhy did you set up a social enterprise? InspirEngage International grew organically as an extension of the volunteering I have been doing since the age of 13, and I wanted to turn that into a career. Business should be about a double bottom line- the money you make but also the social impact you have and social enterprise offers that.

How does your company make money? We make money by charging a fee for our services which include innovative training Bootcamps that support young people and women to develop skills to become successful by giving back. We mainly work with educational institutions but we also engage with corporates who want to replace outdated CSR with new and exciting social enterprise models.

How do you give back in terms of profit? Our social mission is our cause and we utilise our profits to allow us to do the work we do. Recently we have also created employment opportunities for young people in our local area within InspirEngage International.

What do you consider to be the pros and cons of a social enterprise?  Personally, I don’t think there are no pros and cons- it’s just a different model for business- one which is attracting women and young people as it finally offers an alternative to a dog eat dog world of business in that you can make money but also make a difference. People are making passion their career.

Find out how to get funding for starting a business here.

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