Before Cathy Truong joined Our Community as GiveNow’s executive director, she sat on one of the federal government’s Social Enterprise Development & Investment Funds (SEDIF) investment committees and had been a member of the Impact Investment Australia Working Group. She says any successful social enterprise must consider the following:
1. Governance structures matter
In 2023, there is still no legal structure called “social enterprise” in Australia. Therefore, a social enterprise may take one of many structures. One of the most common models sees a unit within a not-for-profit legal structure established as the “enterprise”. There are many advantages to setting up a social enterprise as an entity notionally separate from the parent organisation. Enable the “enterprise” to leverage the organisation’s subject matter expertise, but give it the freedom to develop the policies and processes needed for commercial success. The mindset required to generate income is different from the one required to minimise costs. Leaders and managers need the freedom to act accordingly.
2. Develop your business case
Then halve (if not quarter) the internally generated income projections. It always takes longer for a business with a social mission to break even than you think it will. Be conservative in your estimate of the number of years this will require, and have patient capital sitting in the funding mix. Have the projections reviewed by an outside person with a business background to test your assumptions, or at least create best-case and worst-case business plans. Anyone who thinks their business can be self-sustaining in less than five years is kidding themselves. This is the hardest business model of all!
3. Research case studies
Consider your sector/geographic area/service area and understand what has worked and what hasn’t worked for other people. It’s dumbfounding how often people fail to do this! The number of good examples of social enterprise success stories has taken off in recent years, so seek some of them out.
4. The leadership absolutely matters
This is even more important than the idea. The success of a social enterprise, like the success of any business, all comes back to the skills and dedication of the people creating the enterprise. If I were assessing a social enterprise, I would always assign at least half the weight of the assessment to the skills and experience of the leader.
Cathy Truong also helped develop a social enterprise reporting framework and financial training tool to support not-for-profit CEOs and executives.