Emerging social enterprises face a unique set of circumstances. For the social enterprises that rely on a retail or service based model, they face the double bottom line challenge of earning enough revenue to keep up with operating costs, while also earning enough to create socially impactful initiatives. This double bottom line is a large part of the reason why so many social enterprises will fail. This, however, is unsurprising considering that most small retail businesses face similarly struggle with profits. According to Jim Schorr in the Stanford Social Innovation Review, a study of small social enterprise reveals a need for about one million dollars in annual revenue to achieve social impact goals. Although some social enterprises may reach this threshold, most will remain small-scale for quite some time. To overcome this challenge, social enterprises must re-imagine sustainability. Although social enterprises inherently do not focus purely on financials, the long-term sustainability of these enterprises must focus on long-term funding relationships with a broad-based coalition of funders.
One critical benefit of these small scale social enterprises is their ability to train and develop valuable members of the mainstream workforce. Once these employees leave these social enterprises, they often bring with them a unique socially and often civically engaged work ethic. This is one example where the benefit of small scale enterprise shines. Although small scale social enterprise is often far, far away from bringing their enterprise to scale, their effects in the local community are almost immediate.
Overcoming the double bottom line, as well as continuing to strengthen the community through workforce development and training requires new models of sustainability. One option is developing social enterprise businesses designed to scale to generate the necessary profits. Another option is to acknowledge the vast majority of social enterprises will never generate enough net income on their own, and make alternative plans such as developing stable, ongoing funding sources to subsidize their organizations. While not all social enterprises will ultimately fulfill their mission goals, the process of getting there and creating community partnerships and training could prove to be the world’s most effective employment programs for people who lack access to mainstream employment opportunities. Broad-based coalitions of government, foundations, and other funding sources.
Primary Source: Social Enterprise 2.0: Moving Toward a Sustainable Model by Jim Schorr from the Stanford Social Innovation Review
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