So what the %@&# is a Social Purpose Business?

So what exactly is a Social-Purpose Business?

Let's get right to it. A social-purpose business is a revenue-generating business that advances a social or environmental mission. While not exact synonyms, social-purpose businesses are sometimes called:

✓ Social enterprises

✓ Social businesses

✓ Social-impact businesses

✓ Cause-driven businesses

✓ Social firms

✓ Social ventures
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Social-purpose businesses come in many shapes and sizes. Let's break them down.

Non-Profit vs. For-Profit Social-Purpose Business

Let's start with non-profit social-purpose businesses. These are social-purpose businesses housed within charities or non-profit organizations. This means the organization operates a business in order to generate revenue, which is funneled back into the organization to help fund its programming or operations. The business activities may - or may not - be directly related to the organization's central mission. For example, a non-profit organization dedicated to promoting eye health may choose to operate a social-purpose eye wear store where profit from sales is used to fund the overall operations of the organization. The same organization may decide to operate a social-purpose business coffee truck that sells coffee and baked goods at events across the U.S. - products that have nothing to do with eye health - and, again, use the profits from sales to fund their overall operations. The decision as to which model a non-profit should use is best made through strategic market research - something the team at Social Strategies can help with.

A for-profit social-purpose business is blanket term used to represent a spectrum of social business types. These are social businesses not run by charities or non-profit organizations. Rather, they are what we commonly think of as "regular" for-profit revenue-generating businesses ... except they have a twist. Instead of focusing exclusively on profit, social businesses advance a social or environmental mission. For example, an environmental social business focused on reducing the amount of waste that ends up in landfills each year may create and sell dog leashes and accessories from donated, used rock climbing rope (therefore diverting the rope from ending up in landfills). The business, by its very existence, addresses an ongoing environmental issue and advances an environmental mission (so long as it continues to make sales). Profits from the sale of the goods may be reinvested into the business or may stay with the businesses' founder - that's up to them. Note - this is a real-life example. Canadian social enterprise Releash was founded by 11-year old Taj Field as part of a school project and has blossomed into the successful business (check out www.releash.ca for more information or read our blog post on their initiative).

Business Models

In this abridged excerpt from the book “51 Questions on Social Entrepreneurship“ by Neetal Parekh we see three popular business models used by social businesses (both for and non-profit) to create impact and drive forward their social missions. While an extensive list of business models exist, for now we will stick to what we call the Big 3.

Stuck as to which business model to pursue, or which would prove most profitable in a for a specific idea? Each individual business is different, and the optimal strategy for any given business is best identified through market research and the development of an Impact Strategy - more on that in Our Services.

The "Big 3" Social Business Models:

1. Buy one, give one: TOMS was an example of an impact company using this model when they first started out. Though they have since changed their messaging, their start-up model was simple: every time a customer buys a pair of shoes, a pair is donated .The nice thing about a business model like this is that it’s as easy to explain to your investors as it is to your customers and to your team. This simplicity can be a big plus when telling your story and mapping out impact goals.

2. Sliding scale / pay what you can: This model has been employed by a number of social enterprises. One notable one is the Aravind Eye Care System in India. It is a non-profit social enterprise that performs sight-saving eye surgeries. Founded in 1976, Aravind has treated well over 32 million patients and performed more than 4 million surgeries. In fact, according to it’s 2014-2015 annual report, Aravind medical teams at the 67 affiliated locations see over 15,000 patients and perform 1,500 surgeries on a daily basis.  It utilizes a low-cost, high-volume business model for eye surgery services. About 70% of eye surgeries are performed for free or below cost, while 30% are performed for above cost without compromising quality of care on either side of the price range.

3. Percentage models: Salesforce popularized the 1-1-1 model. As a company that was not founded on impact, it is notable that this giving model has been implemented from its start. It means that the company gives away 1% of its product, employee time, and revenue to charitable causes and to the community. A social enterprise could use a percentage model such as Salesforce’s to effectuate a commitment to impact. Another firm, verynice design, based in Los Angeles, uses a “Give Half” model in which 50% of design projects are completed pro bono for nonprofit or community clients.

Still have questions about what the %@!# a social business is? Don't be shy. Reach our to our team and pitch us your questions. We exist to increase the number of social business working to solve today's pressing social and environmental issues worldwide - let us help you get started on your journey into social entrepreneurship.