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10 Rules for Sustaining Your Social Enterprise

Marcia Stepanek | Thursday 29th October 2009

The climate for investor funding is still a stormy one; it's always tough to hear about the social ventures that don't make it past the early stages. It's no wonder, then, that a recent post by Peter Haas on the TED Fellows 2009 blog caught my eye. It's all about how to avoid getting blown out of the water before you can scale.

Herewith, with thanks to Peter [and apologies to him for some paraphrasing] are some suggestions about how to sustain you and your social venture -- from the start:

1. Don't start a new organization. Better to ask what you can do to help something that already exists to become more effective. Think twice about starting something from scratch when you might achieve your goals faster by working first in a management position somewhere else.

2. Clearly define what you do and stick with it. In other words, take baby steps. Don't try to save the whole world in one fell swoop. "In the massive unmet need, there is always the temptation to run the feeding-housing-water-sanitation-ecotourism-renewable energy-child education-dolphin-saving program," Haas says. But being too diverse in your goals can be a turn-off to potential investors. Better to propose doing one or two things well and being selective about program expansion, he says.

3. Clearly state your budgets and cash flow. Track where you are regularly. Haas suggests pulling out an excel sheet, and recommends this template from the for-profit world: http://caribbean.smetoolkit.org/caribbean/en/file/195?1194044785. You will end up doing more harm in the world than good if you have to close your program down because you were caught by surprise on your finances.

4. Ask for more than you think you need. "If you have a well-communicated business plan, have made the right connections, have the right board and advisors, you have a better chance of making your impact by starting with enough resources to atually enact your mission at some scale instead of constantly being stuck dealing in trials," Haas says.

5. Get a lawyer and get legal. Get everything in writingfrom your contracts and grants to your partnerships and lease records. Keep those records in a safe place. Great documentation attracts capital down the road.

6. Pay yourself and your staff from the start. Sure, everybody wants to volunteer in the beginning but many early stage social enterprises end up fizzling because they and their staffs are too broke to get by while creating their new venture. Again, it's like the airplane rule: give yourself oxygen first so you can save the baby.

7. Transparency is key. Communication openly with your staff and board and spell our roles and responsibilities from the start. Assign authority and make it clear who has the final say in decisions. Many new enterprises fail to get off the ground because they try to run themselves by committee. Appoint a benevolent dictator to get you movingbut somebody who will listen and is great about building consensus.

8. Treat your donors and the people you serve as your customers. You're a middleman, beholden to the funds you get in the door and the people you're trying to serve. It's not about you.

9. Play nice with others. Think partnerships. Figure out early how to leverage the strengths and experiences of other more established groups instead of trying to do everything yourself.

10. Don't be a nonprofit. Haas cites Tom's Shoes, SKS Microfinance and others as being able to scale quickly because they were for-profit entities. Investment can be easier to find than donation, and there are plenty of social ills that can be solved in a for-profit model, he says. "See if your cause fits."

What do you think?

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Carolyn B 12 November 2009

This is a fabulous point, Rodney. Thanks for sharing. We went through the same process when developing the Brighter Planet business plan, and also chose to go the socially-responsible, for-profit route. As they say, the best way to change a system is from within the system, and to lead by example.

Equal Exchange 12 November 2009

We would second suggestion #10 - "don't be a non-profit". To be more specific we tell aspiring social entrepreneurs to at least seriously consider the for-profit options.
Sometimes non-profit _is_ the way to go, but not always.
For example, at Equal Exchange the 3 founders thought long & hard about the for-profit/non-profit issue when hammering out their business plan and ultimately chose to be a for-profit worker co-operative that would compete directly with big corporations in the market places (specifically in the aisles of America's grocery stores.)
A huge benefit of that choice was that the example of our social and commercial success would later demonstrate that business could in fact be done in radically different way. Further, it helped to create peer pressure for conventional companies to move towards the Fair Trade practices we were using. Lastly, we _think_ that it also encouraged more than a few entrepreneurs to strongly emphacize Fair Trade in their own coffee start-ups.

Posted By: Rodney North