Social Enterprise has become one of NESC’s most active consulting sectors. Senior Vice President Joe Townsend has headed this practice since its inception. Follow the link to learn more about this growing sector.
Joe, what is a simple definition of Social Enterprise?
Social Enterprise is the entrepreneurial pursuit of a business activity—within a nonprofit organization’s mission—as a means of generating unrestricted cash flow. It entails monetizing and leveraging existing assets.
Why has Social Enterprise become so much more important in the nonprofit world?
The reasons are clear. The slow economy has negatively affected both for-profit and nonprofit entities. And there has been a two-fold change in the funding environment. First, there is less funding for nonprofits available from both public and private sources. Second, unrestricted grants are becoming increasingly rare. Many nonprofit organizations are struggling to obtain sufficient unrestricted funds for operations. Earned income can be one solution. Social Enterprise ventures can contribute greatly to organizational stability.
Please describe NESC’s Social Enterprise business. What distinguishes our efforts?
We offer customized, cost-effective solutions. The keys are people and process. Our team has developed considerable expertise in this area. And we have a highly-disciplined and structured three-phase approach. Here are the three phases, and some of the key activities and considerations for each:
- IDENTIFY existing underleveraged and/or nonmonetized assets. Brainstorm and evaluate opportunities. Measure social value, market potential, competition, and ease of entry. Study organizational capacity, readiness and resource requirements. Estimate scalability and sustainability.
- CREATE a focused business plan. Define the strategy. Perform SWOT analysis. Set goals. Prepare financial projections. Set a timeline. Consider stakeholder involvement.
- IMPLEMENT the business venture. Identify and empower leadership. Dedicate resources. Detail the organizational and business structure. Plan tactics. Consider financing.
How can a nonprofit organization determine if it possesses the potential to develop a Social Enterprise venture?
The one necessity is to possess underutilized and/or nonmonetized assets, which can be of four types: human assets, physical assets, technological assets, and social/brand assets. We ask questions such as the following: Do your staff and/or volunteers have the time and energy to do more? Do you have physical space that is not being used? Could you offer services to another agency in your community? Do you have a proprietary technology or system? Is there demand for the product or service you may offer? Does your organization have local or regional visibility? Is it known as a recognized brand?
Does one element stand out as the biggest roadblock to success?
Leaving aside issues related to the nature of the asset(s) to be exploited and the availability of resources to do so, viable Social Enterprise endeavors require greatly broadened mindsets on the parts of both managements and staff. People who have spent their lifetimes dedicated to a nonprofit organization’s mission sometimes need help transitioning their thinking to the requirements of running a business with the purpose of generating cash flow. NESC, whose entire existence has been focused on assisting nonprofits with business problems, is especially well-suited to help with this process.
Are there ways that organizations can obtain unrestricted cash/investment funds or other start-up financing?
An exciting trend which is still in its early stages is the development of Social Venture Philanthropy/Impact Investing, which I would define as applying the tools of venture capital funding to promote start-up, growth and risk-taking social ventures. We prepare and connect our clients to attract funds. NESC can act as a catalyst to bring new Social Enterprise investees and projects to social venture funding sources, and conversely, to guide social venture funding sources in finding mission-suitable Social Enterprise projects for their portfolios.
For a typical medium-sized nonprofit organization considering moving in the direction of Social Enterprise, what are the chances of success?
The record is that about one venture in four can be truly categorized as having prospered. At NESC we believe that we can improve those odds for our clients. Beyond the requirements already discussed, we have found that scalability is a critical determinant of success. An enterprise must be capable of attaining a certain size or critical mass. Scalability engenders sustainability.