This post was written for the Terra Digital Media audience and is reposted below.
In 12 years of working in social enterprises, I’ve noticed a few mistakes most social impact start-ups make. Most of these aren’t malicious, but can cause major pain to your social enterprise. Here are five mistakes I’ve seen most often, and the ways to avoid them so you don’t make the same mistake.
Mistake #1: Starting without any plan at all
Most social enterprises start with no plan. No business plan, no strategic plan, no plan at all. And I totally understand prototyping and testing and failing and all that garbage that’s trendy right now. But this “jump in and see” attitude is not the same as critical thinking. There’s a time and place for prototyping (I talk about that later in this post).
I’m not saying you need a 40 page business plan before you start your social enterprise. But you do need to research and think enough about the business to know at least an ESTIMATE of your costs and expenses, reasonable revenue projections, competitive analysis, what staff may be needed, an idea of an operational plan, how you’re going to find and engage customers… and of course, how you’ll track and measure your social impact. Without this, you could find yourself 10-years into your business, still consider it a “start-up” and not have generated any profit or social impact (true story of a social enterprise I know).
Mistake #2: Not paying your staff
You probably won’t be able to pay staff right off the bat. But the sustainability and growth of your social enterprise relies on stellar staff to keep it going, so compensate them appropriately! And when I say stellar, I mean the very best person you can find for the job. If you have an open position, take your time to find the right fit. Hire slow, fire fast.
Volunteers can supplement your staff, but not replace them. Board members are not your staff. And just like your paid staff, onboard board members slowly and if possible, dismiss them quickly.
How to avoid this mistake: Build compensation into your business plan from the start. Be clear about how and when you’ll reasonably be able to pay staff (including yourself), to retain the talented unicorns you’ve got on your team.
Mistake #3: Starting a social enterprise in an industry you know nothing about
Don’t be Jon Snow. Know a little something about the industry you’re starting your social enterprise in. Don’t know anything? Hire someone who does. Can’t afford that? Work in the industry for a bit or learn about it yourself.
Just because you had the idea doesn’t mean you’re the best person to start or run the social enterprise.
For example, if you’ve never worked in construction and don’t know anything about the construction industry (regulations, licenses, safety, vendors, contracts, etc), would it make sense to start a social enterprise in that field? Probably not. Maybe work in that field for a bit. Take some classes in construction. Read some books. But just hoping that things will work out in your favor because of your social mission - well that’s just an expensive disservice to the people you’re trying to help.
How to avoid this mistake: Start a social enterprise in field you already know. If you don’t know the industry, hire someone who does.
Mistake #4: Assuming people will buy your product or service simply because of the social purpose
They won’t. People will not buy your product or service simply because of the social purpose. Your product or service needs to be competitive on price, quality, value, accessibility, and availability as every other in your niche - and all other things being equal - the consumer may decide to purchase in your favor because of the social purpose. Now, there are varying degrees of this elasticity depending on your product/service industry, but the general concept stays the same.
Considering many social enterprises are selling a product, let’s take that example for a moment. Say you purchase a cup of coffee from a local coffee shop that only sells fair trade, organic coffee. If that cup of coffee doesn’t taste good, how many more cups of coffee are you going to buy from that coffee shop? One? Maybe? Even if the coffee shop is convenient, you love the social mission, and the price is right (or less than other places!), the quality is poor and customers won’t come back. And it costs five times more to attract a new customer than retain an existing one, so let’s make sure they have a great experience, eh?
How to avoid this mistake: Make sure your product or service is competitive on the factors the customer looks for: price, quality, value, accessibility, and availability. I have a free Competitive Analysis guide to do this work BEFORE launching your social enterprise, in the free social enterprise toolkit. Access the social enterprise toolkit here.
Mistake #5: Assuming there’s a problem where there isn’t
The other mistakes I mention here are mostly related to the business side, but there’s a major mistake I see on the impact side of creating a social enterprise: the assumption of a social or environmental problem where there isn’t one.
What I mean by this is assuming you know the answer to the issue without fully understanding the problem.
How can you get to the root of the problem and fully understand it?
Ask the people experiencing the issue. This process is called Human Centered Design, and is essentially a method of asking people what they want and creating a solution specifically for them. Ideo.org has a free, 4-week course in this topic and exactly how to do it - I recommend signing up for it here.
Use the 5 Whys. This is an activity you can do by yourself or with your board or cofounder. Start with stating the social or environmental problem you’re trying to solve. Then ask why, and answer as clearly as you can. Repeat this until you’ve asked why five times, or until you have clarity on the root of the issue. You might get stuck on the third or fourth time you ask why, and may need to do some research before you can answer. That’s great! Don’t feel like you have to have all the answers - you probably don’t.
How to avoid this mistake: Use Human Centered Design and the 5 whys to get to the root of the issue. Get to know the Sustainable Development Goals. Get to know others who are addressing the same issue already.
ABOUT THE AUTHOR: BETH PALM, MBA
Hi there! I'm Beth. I'm here to equip social entrepreneurs and change makers like you with the tools to change the world. As a jack-of-all-trades nonprofiteer and recognized social enterprise expert, I've walked the talk in this emerging industry. With over a decade of experience launching and managing social enterprises, I want to share my best tools, resources and knowledge with you.