social entrepreneurship

5 Mistakes Social Impact Start-Ups Make (And How To Avoid Them)

 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.

5 Mistakes Social Impact Start-Ups Make And How To Avoid Them

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).

How to avoid this mistake: Create a financially and impactfully sustainable plan! And I’ll help you.


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?

  1. 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.

  2. 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.


Beth Palm, MBA

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.

I'd love to hear from you! Find me on FacebookTwitterInstagram and Pinterest.

2017 Reader Survey Results!

Thanks so much to everyone who participated in our 2017 Reader Survey! If you didn't get a chance to complete the survey, don't worry! We'll be collecting feedback in 2018 too - so we make sure to stay on track with exactly what you need for your social enterprise. If you have feedback or thoughts for us in the meantime, please drop us a note here

Our 2017 survey was completed through Google Forms in August and September 2017. Fifty-seven people completed the survey. The survey results will be used to shape our 2018 content and offerings for social entrepreneurs. 

A few highlights from the results: 

  • All continents were represented! Just over half of the responses were from social entrepreneurs in North America. Hello friends from all over the world! Nearly 40% of you have worked in your social enterprise 3-5 years, and over 60% are actively working to grow your social enterprise. Way to go!
  • Learning styles were fairly evenly split among reading, watching video and listening to audio. We're planning to add new multimedia opportunities to learn in 2018! 
  • The two big things our readers want to see from us are more trainings (free and paid) on best practices in social enterprise, and more face-to-face events with like-minded social entrepreneurs. Stay tuned for a few new ways we are bringing these opportunities to you!
  • We asked you what you're struggling with right now. Most of you said responses related to Funding and Marketing. When we asked what you struggle with the MOST, you responded with Funding, Time/Project Management, and Competitive Analysis (developing your unique value proposition). In 2018, we're excited to bring you new opportunities to work on these items. 
What do social enterprises need? Check out the highlights from our 2017 Reader Survey.

What else would you like to see from us in 2018? How can we help you start your social enterprise, grow your business and impact, and make the difference you are hoping to achieve? Let us know in the comments below! 

A (Somewhat) Quick Guide to Social Enterprise Funding

After receiving messages for over a year about challenges facing social entrepreneurs, there is a common theme: One of the biggest struggles facing social enterprises is understanding, and access to, start-up and growth funding.

What types of social enterprise funding are available to new social entrepreneurs?

What funding should I consider as a nonprofit social enterprise? What about as a for-profit social enterprise?

How do I know I need funding for my social enterprise and what would I use it for?

But before looking for funding or approaching any of these funders, investors or options below, you will want to have a good social enterprise idea and a strong business plan

Quick note before we jump in: I know this isn't a complete list and will be adding resources as they come available and as YOU let me know. If an opportunity is missing from this list, please let me know and I'll add it. And bookmark this page so you can revisit it later and get funding for your social enterprise.

Are you looking for funding for your social enterprise? Click through for our list of social enterprise funding options!

Let's take a look at each of these options. 

*Note: Many of these funding options are related to the United States, although there are international opportunities included throughout. 

Are you looking for funding for your social enterprise? Click through for our list of social enterprise funding options!

Social Enterprise Funding: Savings/Self-Fund

What is it?

Your personal or organization's savings. This could be earned income from previous sales, savings from previous fiscal years set aside to start a social enterprise, or an individual's savings if you're a social entrepreneur.

How do you get it?

Save. But for real, there are tons of articles on advice for saving money, so we won't get into that here. Please do know that as a nonprofit organization, it's ok (and preferred!) to have money leftover at the end of the year to reinvest in your organization. Talk with your organization's Chief Financial Officer about how this money is saved and used, and brainstorm starting a social enterprise as one use for these funds.  

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Friends and Family

What is it? 

Money, either as a loan or not, from a friend or family member. who wants to invest in your social enterprise. 

How do you get it?

Ask for their support. You may be surprised at who wants to help your social enterprise get off the ground or grow! The friend or family member may give you money without an expectation of repayment, or they may prefer to loan you money to be repaid at a later date. So - just be really clear about what your friend or family member is expecting - maybe even put the agreement in writing. You don't want to ruin any relationships by having a misunderstanding about money. 

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Philanthropic Grants

What is it?

Funds from a foundation or other grant-giving institution. There is usually an application and review process before you receive funds, which may include submitting a theory of change and business plan. The funding may be tied to meeting specific outcomes, as reported through a grant report. 

How do you get it?

Complete the grant application for the funder. Most grants require that your organization is registered and in good standing as a 501(c)(3) nonprofit organization, or that you have a fiscal sponsor who is one. You'll want to make sure you meet the eligibility requirements and can actually deliver on the results you propose, before applying for the grant. A few foundations that have been associated with funding social enterprises in the past are:

John D. and Catherine T. MacArthur Foundation

The Chicago Community Trust

Calvert Foundation

St. Paul Foundation

McKnight Foundation

Northwest Area Foundation

Joyce Foundation

REDF 

VentureWell

Draper Richards Kaplan Foundation

Blue Ridge Labs

Manhattan Institute

Chinook Fund

Kauffman Foundation

Otto Bremer Foundation

The Jay & Rose Phillips Family Foundation

The Kresge Foundation

Blandin Foundation

Bush Foundation

p.s. Let me know of other funders and I'll list them here! Drop me a line. 

PRO TIP: When you visit event/fellowship or other websites related to social enterprise below, look for sponsors of those events. Those companies and organizations could also be potential funders of your social enterprise!

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Social Enterprise Business Plan Competitions

What is it?

There are a number of business plan competitions you can enter for your social enterprise. Usually, you will complete an online application and submit your idea and/or a full business plan. Depending on the competition, there may be a number of rounds to narrow the applicants based on votes through social media, or expert judges votes. Not only are business plan competitions a great way to find potential funding, but also advisors, board members and other supporters who can help grow your social enterprise. 

How do you get it?

Win! Or there may be prizes if you're a runner up. A few examples of social enterprise business plan competitions:

McKinsey Venture Academy is a social enterprise competition for university students based in the UK and Ireland.

Harvard Business School New Venture Competition

Hult Prize

Net Impact has a number of Challenges, Competitions and Fellowships

University of Florida Big Idea Gator Business Plan Competition

Eureka! Road to Enterprise

Global Social Venture Competition

The Rise Fund: Under 30 Impact Challenge

The Great Social Enterprise Pitch

PRO TIP: If you haven't written a business plan before, don't worry! We have a free business plan template in our #socent toolkit. Download our business plan template for free!

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Fellowships and Accelerators

What is it?

A social enterprise fellowship or accelerator is a cohort or individual experience, usually including face-to-face learning time and often with online or virtual sessions, aimed at growing (accelerating the growth) of your social enterprise business. These can be roughly 6 months to 2 years in length, depending on the program, and are a great way to meet like-minded people who can be a sounding board for your social enterprise. Often times, the fellowship or accelerator will include a small amount of start-up funding, or the option to apply for funding.

How do you get it?

Complete an application and give it your best shot! Similar to grant funding applications, you will likely need to have a business plan and theory of change prepared as part of the application process. A few examples of social enterprise fellowships and accelerators are:

Echoing Green

Global Good Fund

REDF Accelerator

Kauffman Fellows

Ashoka

Civic Accelerator

Uncharted 

Blue Ridge Labs

Agora Partnerships Accelerator

Voqal Fellowship

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Crowdfunding

What is it?

Crowdfunding is sourcing small amounts ($1-$500 typically) of funds from MANY people, usually in a short period of time. Your crowdfunding contributors pledge the amount they are comfortable with, and usually have the option to choose from a variety of thank you gifts based on their contribution level. Crowdfunding campaigns have been very popular recently, including in the social enterprise sector. It's not only a way of finding funding, but also finding supporters and customers to grow your social enterprise. You'll want to use a crowdfunding campaign strategy when launching a new product, or taking on a new endeavor that requires cash up front (buying a new large piece of equipment in order to be more efficient, for example).

How do you get it?

There are tons of resources online about how to successfully fund a crowdfunding campaign, so here, we'll just talk about a few of the options:

Kickstarter is one of the most well known crowdfunding platforms. This is an all-or-nothing platform, so if you aren't fully funding at the end of the timeframe, you don't receive the funding. It's focused on creative projects so consider that before joining. 

There's a newer crowdfunding platform JUST FOR SOCIAL ENTREPRENEURS called StartSomeGood. And Crowdfund 360 can help you develop the plan to achieve your crowdfunding goals.

Other popular crowdfunding platforms are IndiegogoGoFundMe and Crowdrise. All are fairly similar, but read through their individual websites to see which is the best for you. 

Another platform that's gaining traction is Patreon. While this isn't the same style as other crowdfunding, it is an interesting way for individuals to contribute support on a monthly basis, in exchange for rewards. We set up a Patreon page for Social Good Impact earlier this year - You can become a Patreon member here! Plus, if you're interested in creating a Patreon page for your social enterprise, click here to earn bonuses up to $500!

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Community Development Financial Institutions (CDFI) Fund Loans 

What is it?

According to CDFIfund.gov, "Community Development Financial Institutions, or CDFIs, are mission-driven financial institutions that have been certified by the U.S. Department of the Treasury’s CDFI Fund. CDFIs include credit unions, banks, loan funds, and venture capital funds that operate with a primary mission of serving low-income communities."

How do you get it?

Search the database to find where CDFI Funds have been distributed in your state. Then apply for a loan with one of the awardee organizations. A couple examples are the Nonprofit Finance Fund and Nonprofits Assistance Fund

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Bank Loans

What is it?

A loan from a banking institution that you pay back over a period of time, and pay interest on the amount of the loan. The banker may need collateral (something to ensure you're able to pay back the loan, if you default) in order to approve your loan. You may want to get a loan for a large purchase, like a piece of equipment, to start or grow your social enterprise. 

How do you get it?

Apply for a loan with a bank you trust. If possible, find a nonprofit bank, like a credit union

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Bank Line of Credit

What is it?

Similar to a bank loan, but more flexible. Think of this like your credit card. Your credit card has a maximum limit you can spend, and you receive your statement each month to pay off. A Line of Credit (LOC) is can be helpful if your business has cash flow issues, A/R lag time, or needs for short-term cash, with the intent to pay back right away. 

How do you get it?

Similar to a bank loan, apply for the line of credit with a bank you trust. If possible, find a nonprofit bank, like a credit union

Are you looking for funding for your social enterprise? Click through for the list of social enterprise funding options!

Social Enterprise Funding: Impact Investing, Angel Investors and Venture Capital

What is it?

Impact investing is a newer term and a big buzz phrase in social enterprise right now. According to GIIN, impact investing is basically "investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return."

Angel investors are usually affluent individuals who have money (capital) for your social enterprise to start-up, usually in exchange for convertible debt (debt that will be converted to equity later) or ownership equity (equity in your social enterprise now).

On the other hand, a venture capitalist is an investor who either provides start-up or growth loan capital or equity capital.

How do you get it?

The GIIN's Investors' Council has a large list of impact investors.

Investor's Circle has opportunities for impact investing in select US states.

You can also check out B-Corp Fund!

“The B-Corp Fund is a social enterprise venture capital fund that provides up to $250K in direct financing or participates in syndicated investments that are registered as certified benefit corporations:

  • Access to over $250 million in committed capital for investment

  • Exposure to early growth stage benefit corporations

  • Social and environmental impact, with a positive investment return

  • Targeting media and internet, branded food and beverages, and consumer products


To contact B-Corp Fund, please email 
info@bcorpfund.com.” - http://www.bcorpfund.com

Interested in impact investing for yourself? Search Impact Base's online database to get started. 

Social Enterprise Funding: Non-traditional and other ideas

Your church or faith-based group may have a budget for local missions, and could support your social enterprise efforts. 

A local rotary or other business networking group may have opportunities for annual grants or loans for start-up of your venture. 

Host an event! Ticket sales, silent or live auctions, and raffles can be a great way to generate cash. Don't forget - you can sell your social enterprise product at the event too! With events, be cautious about how much time you spend on it, or it could be a losing battle.

As with any of the options mentioned here, make sure you're following your local laws on fundraising, taxes, etc.

What else? How have you funded your social enterprise start-up and growth? What has worked well and what hasn't? Let me know in the comments below!


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.

I'd love to hear from you! Find me on FacebookTwitterInstagram and Pinterest

Five Quotes by Martin Luther King, Jr. for Social Entrepreneurs

Five quotes by Martin Luther King, Jr. for Social Entrepreneurs

This is a big week for the United States, and the world. Martin Luther King, Jr. Day on Monday, January 16, and Inauguration Day for the new President of the United States of America on Friday, January 20. 

I've delayed writing anything about the President-Elect, partly in hopes that the day would not come, and partly because I just don't know what to say. Even sitting here today writing this post, I'm still not sure exactly what to say.

But I do know that this is not the time for inaction. This is not the time to think that someone else will take care of it. This is not the time to watch discrimination happen and stay silent. Many of the things Martin Luther King, Jr. spoke of decades ago, ring just as true today as ever. 

With the timing of this monumental week, I'm drawing inspiration from Martin Luther King, Jr. that can help social entrepreneurs, and all of us, to stay grounded and motivated. These are five of my favorite Martin Luther King, Jr. quotes. 

Darkness cannot drive out darkness. - MLK, Jr.
Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that. - Martin Luther King, Jr.
injustice anywhere is a threat to justice everywhere. -MLK, Jr.
Injustice anywhere is a threat to justice everywhere. - Martin Luther King, Jr.
Life's most persistent and urgent question is, "What are you doing for others?" -MLK, Jr.
Life's most persistent and urgent question is, "What are you doing for others?" - Martin Luther King, Jr.
The time is always right to do what is right. -MLK, Jr.
The time is always right to do what is right. - Martin Luther King, Jr.
We must learn to live together as brothers or perish together as fools. -MLK, Jr.
We must learn to live together as brothers or perish together as fools. - Martin Luther King, Jr.

What are some of your favorite Martin Luther King, Jr. quotes? How do they relate to your work in social entrepreneurship? Let me know in the comments below.


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.

I'd love to hear from you! Find me on FacebookTwitterInstagram and Pinterest

What is a social enterprise?

One of the questions I get most often is:

 
So, what is a social enterprise?
— everybody
 

Usually followed by: 

"How do you know what one is?"

"Is my organization a social enterprise?!" 

So let's talk a little about what a social enterprise is - and what it is not.

A SOCIAL ENTERPRISE IS

As defined in partnership with the Social Enterprise Alliance - Twin Cities board of directors: 

A social enterprise is an organization that sells products or services in order to achieve its social purpose.

Break it down!  Ok, let's take a couple of those terms in the definition and make sure we understand and agree on what they mean. 

Sells products or services = sells a tangible good or delivers a service for a fee. 

Social purpose = nonprofit with tax-exempt status for social purpose OR business with social purpose declared in Articles of Incorporation, in directors decision-making, and included in regular reporting.

Whoa, what? How do you know if an organization has a social purpose? 

A social enterprise can be social by:

Sharing: Organizations that exist to share some or all of their profits with charitable organizations or causes.

Selling: Organizations that make their impact through what they sell or to whom they sell it.

Sourcing: Organizations that develop their programs by how they make their products or services, typically using environmentally sustainable methods.

Staffing: Organizations that employ underserved communities, for example individuals with disabilities or individuals who are/were homeless.

So, what do we call these social enterprises?

In the nonprofit sector, we call it a COMMERCIAL NONPROFIT.

In the business sector, we call it a SOCIAL BUSINESS.

Confused? It's ok. Don't worry. We'll get through this. 

Ok, now that we know what a social enterprise IS, let's talk about what a social enterprise is not. 

A SOCIAL ENTERPRISE IS NOT

A social enterprise is not a CONTRIBUTION NONPROFIT (a nonprofit organization that exclusively relies on philanthropic contributions; a charity in the traditional sense). These organizations are not a social enterprise because they don't sell a product or service. Remember that part of the definition? Oh yeah. 

A social enterprise is not a TRADITIONAL BUSINESS (a business that exists for the sole purpose of making profit). These companies are not a social enterprise because they don't have a social purpose. There are lots of businesses that have nice things they do for the community, but they are not social enterprises because the social purpose is not part of the structure, goals, reporting and decision-making.

What is a social enterprise? Get the full definition by clicking the image.

Make sense? Agree? Disagree? Let's discuss in the comments section below! 

 


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.

I'd love to hear from you! Find me on FacebookTwitterInstagram and Pinterest