5 Essential Tips For Setting Up A Social Enterprise

So you want to start a social enterprise? Good for you - here are some essential tips to help you achieve early success.

You’ve got a great idea. It might help the world. Or it might just help some people. Either way, you want to do good and make a living. So where do you start? Our latest guest #pebblesmakeripples post is from Dr Pragya Agarwal, founder of the Art Tiffin, who talks us through the essential questions to ask when setting up a social enterprise.

What is a social enterprise?

A social enterprise is an enterprise where a percentage of the profits are invested back into a charitable cause.

The aim is to have a social mission and to make a social impact. It is the perfect combination of doing business and doing good.

Why is it not a charity?

Because a social enterprise relies on selling products or services to make money, and not on volunteering, grants or donations.

Is it ethical?

Most social enterprises are ethical businesses, but not all ethical businesses are social enterprises.

An ethical businesses aims to reduce and minimise the harmful impact on people and planet, while a social enterprise actively benefits people and planet.

For example, I set up The Art Tiffin, an ethical, eco-friendly art and mindfulness subscription box where a tree will be planted for every box sold and part of the profits will go to a nominated mental health charity. This stems from a personal story of workplace bullying, the huge impact that it had on my physical and mental health, and how art and creativity helped me heal.

Through this social enterprise, I want to bring the value of art to others who would benefit from a creative spark, and a moment of calm amongst the stresses of life. The initiative is informed by peer-reviewed research and expert opinion to encourage mindfulness and ethical choices over mindless consumerism, by making all art materials vegan and cruelty-free.

5 Essential Tips For Setting Up A Social Enterprise

Why do I want to set up a social enterprise?

This has to be the first and most important question.

Either the business emerges from a need to serve the society in some way, and have a positive impact on the society, or there is a business idea that can be developed into a social enterprise by bringing in an ethical and positive dimension to it.

Either way, the will to do good and help the community has to be the ethos that the venture is grounded in. Usually it stems from a personal story, a passion or a cause very close to the heart.

Who will benefit and how?

It is important to have a clear sense of mission. Think about who will it benefit, what difference will it make, and how are you going to go about it? It helps to determine the level of social impact in the short and long term and how it will be measured and evaluated. This will also help in reaching the right audience and identifying your marketing and networking strategies.

“The will to do good and help the community has to be the ethos that the venture is grounded in”

How do I fund my social enterprise?

It is important to write a business plan, however brief it might be. It is also important to be clear on how social responsibility is built into the business plan.

There are self-funded initiatives, community participation schemes, crowdfunding and loans. Plans should be in place to recover the initial funding but also earn running costs without relying on donations.

There are a number of organisations offering grants such as the Arts Council and Big Lottery Fund. Social investment providers such as Big Issue Invest expect to see a clear social impact and also expect to recover their grant with interest. School for Social Entrepreneurs is a good place to look for a range of funding options.

Which legal model is right for my social enterprise?

This will depend on the size and the scope of the mission and the impact, both in the short and long term. The legal structure has to fit the business, the potential customers, your activities and source of money.

A Community-Interest Company is a limited company and, compared to an ordinary company, has more checks built in through the CIC legislation and has transparency of directors’ remunerations and assets.

A co-operative is the most common, it’s more participative and democratic. A registered charity has a board of voluntary trustees, is more heavily regulated by the Charities Commission, and has greater access to tax relief. Most small businesses are set up initially as sole traders and can then convert to other models as they grow.

How will I evaluate my impact?

Your social enterprise can have a social or environmental impact and it is essential to build an evaluation process into the business plan, as well as indicators and parameters for impact assessment.

It is also important to identify how the social enterprise will handle scaling up with growth. A social enterprise is transparent, and in assessing social change, the qualitative measures are often as, if not more, useful as quantitative statistics. In the impact strategy, the challenges as well as areas of improvement should also be clearly identified.

The key thing is to start questioning, measuring and testing from day one, as like anything else, the impact model might need to redefined with the growth of the social enterprise.