Social business is not about social media. Instead, social business is a strategy to solve a social problem with your company without depending on donations. A social business falls in the middle on the for-profit and non-profit scale.
This interesting concept deserves some more attention and understanding, because again, it has little to do with social media marketing or social selling, although, undoubtedly, a social business will use social media.
First, I will offer the definition of a social business as coined by Muhammad Yunus. Then, I will list the 7 principles of social business that Yunus has come up with in 2009. After that, I will give 3 tips on how to start a social business. Finally, 6 examples of social businesses, which have just started, are given as well as the founders’ advice for you.
I hope this blog inspires you to think about your own business model or to consider it when you are thinking about starting a company.
What is social business?
Nobel Peace Prize Laureate Professor Muhammad Yunus proposes a type of business to operate in the same markets as the existing profit-maximizing businesses. He calls this new type of business ‘social business,’ because it exists for the collective benefit of others.
In August 2016, Yunus said: “A social business is a business whose purpose is to address and solve social problems, not to make money for its investors. It is a non-loss, non-dividend company. The investor can recoup his investment capital, but beyond that, no profit is to be taken out as dividends by the investors. These profits remain with the company and are used to expand its outreach, to improve the quality of the product or service it provides, and to design methods to bring down the cost of the product or service. If the efficiency, the competitiveness, and the dynamism of the business world can be harnessed to deal with specific social problems, the world will be a much better place.”
A social business is financially self-sustainable, so it does not depend on donations, private grants or public grants. Its key aim is not to maximize profits, although generating profits is desired because the key aim is to solve a social problem in a sustainable way.
The 7 principles of social business
Below, you will find a photo of the 7 principles that Yunus has written on a piece of paper at the World Economic Forum in Davos in 2009. Yunus is the founder of The Grameen Creative Lab and on its website, you can find the 7 principles as well:
- Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment), which threaten people and society; not profit maximization.
- Financial and economic sustainability.
- Investors get back their investment amount only. No dividend is given beyond investment money.
- When investment amount is paid back, company profit stays with the company for expansion and improvement.
- Gender sensitive and environmentally conscious.
- Workforce gets market wage with better working conditions.
- Do it with joy.
How to start a social business
Before you start your social business, Rebekah Bonaparte says you should be able to answer the following three questions:
- Does my idea solve a problem?
- Who will this business benefit?
- How do you combine profit with purpose to create a thriving social enterprise?
Bonaparte says it might take a long time to get your social business off the ground but, once you do, the success of your business can make a real positive change in your life and other people’s lives. As a social entrepreneur, you still need to be committed to business principles, but you need to deliver a ‘social dividend’ too. This will determine your success.
She offers 3 tips on how to get your social business started:
1. Form a social business
Before starting your business, do market research and draw up a business plan with your social mission at the heart of it. Network with entrepreneurs who have started a social business and look into organizations that support social businesses. Take a class or course if you need more knowledge or skills.
In order to get started, you must choose a legally recognized business structure. As Bonaparte is from the UK, she describes a structure recognized in the UK: a community interest company (CIC) that safeguards the social mission. The bulk of profits will always be channeled into the cause and the businesses assets are protected from being sold privately. If you live in another country, your Chamber of Commerce can probably tell you more about the options in your country.
2. Source social business funding
A wealth of grants is available to start-ups. Go look for the ones focusing on social entrepreneurship. Alternatively, you can apply for bank loans, private investments and other investment methods, such as crowdfunding.
The key to getting funding consists of 2 parts. First, you need to be able to demonstrate a passion for your social cause. Second, you need to prove that your business is sustainable. Whenever you are seeking funding, you need to be able to show where the investors’ money is going, how it will come back and when it will come back. Remember, no dividends!
3. Social business marketing
As with any company, you need to come up with a marketing plan, define your target audience and build a relationship with them. Make sure your business’s principles are central to your brand’s identity. Your social mission can help you appeal to your target audience’s values. This will make them feel invested in both your product and your mission.
You are more likely to get media coverage for your business if it has a good story behind it. If your social mission is in line with the values of your customers, they are likely to share your content via social media (see, social businesses do use social media 😉 ).
Examples of starting a social business and the founders’ advice
I have found this article by Teresa Bigelow, who has met some awesome women starting a social business. You will find their stories and advice below. I hope it serves as an inspiration to you. To these women: I wish you the best and rock on!
Kirsten Dickerson, founder and CEO of Raven + Lily
Raven + Lily is an ethical fashion and lifestyle brand that partners with artisans around the world to employ more than 1,500 low-income and formerly enslaved women.
Advice: As a social business, you have to be careful about bringing someone in who is going to support your mission and believe in your vision for it. I have had to turn down investors because I was not convinced they were committed to the triple bottom line concept as well as me being a female CEO/founder. I do not regret those decisions.
Sarah Prevette, founder and CEO of Future Design School
Future Design School is a series of tools focused on empowering youth innovation through design methods and entrepreneurial experience.
Advice: Do your research on the investor. Most are concerned with your business model, but impact investors want to see your mission first and then how your business model supports it. There are many investors, and also big companies, that will support you. You can find that symbiotic relationship. Make sure you are meeting your impact metrics.
Leila Janah, founder and CEO of Sama and Laxmi
Laxmi is a for-profit luxury beauty brand. It was founded and incubated at non-profit Sama Group, which connects low-income women and youth to internet-based work around the world.
Advice: I went to people that I knew cared about the social mission. The best way to build a social enterprise is to build a product people really need first. I took something in the luxury space into a social mission.
Tinia Pana, founder and CEO of Re-Nuble
Re-Nuble is a technology company that leverages a patent-pending process to transform food waste into non-toxic, liquid hydroponic nutrients.
Advice: You always lead with your revenue model first. More specifically, announce how you are going to (or how you plan to) make money, and you will receive more attention than you would by telling your mission. Even impact investors want to make sure your model to create impact is sustainable. This approach also enables you to capture the interest of less mission-aligned investors as they may view it as a competitive advantage in other ways.
See how Pana and Dickerson have different views on investors? Dickerson only wanted to work with investors who completely believed in the mission and in her, and Pana is less interested in that (I am not saying uninterested!). You need to find your own approach to this.
Nicola Stopps, founder and CEO of Simply Sustainable
Simply Sustainable helps global organizations build sustainability into their operations.
Advice: In my experience, the most successful companies are those that lead with their mission or dream, shortly followed up with the actual product or service the company provides. A company is less likely to attract investments if its founder lacks passion for what he/she is doing.
We often find that social businesses focus on the positive impact they will have in one area, such as climate change, while they forget to look at other areas, such as being responsible in their supply chain, employees, and ethics. Trading on the positive impact means your reputation, and possibly your business, is at risk if you are not truly responsible in all other parts of your business.
Carol Barash, founder and CEO of Story2
Story2 uses proprietary software, writing, and training methods to teach high school students the power of storytelling as they complete college admission and scholarship essays.
Advice: Always lead with vision! What is the huge problem you are solving? When you are successful, what does success look like? Make that future [vision] extremely detailed and palpable. Who is there? What are they doing? What is possible in that future that is not possible today? If they buy the vision, be very precise about how you will get there. How far have you gotten already? And how will their investment aid in your vision? It can be money, advice or other types of engagement – whatever it takes to get you to the next place the business needs to be in order to succeed.
If you are interested in social businesses, the concept of circular economy might be something for you. The blog ‘The basics of Circular Economy explained for entrepreneurs and CEOs’ explains the concept and the blog ‘The Difference between Circular Economy and Blue Economy’ revisits circular economy and summarizes blue economy, so you have an overview of what both concepts mean.
I hope that this blog and the two blogs mentioned will make you aware of the opportunities and that they make you wonder what you can do to make a change for the better with your company.
This article helped me a lot. I have been reading a lot from Mahummed Yunus, Nobel Laureate, and I have been looking for ways to put these ideas into practice. You really did a great job of doing exactly that. I hope that my work at Better Better Better becomes as influential as your work is now.