Crash Course in: creating a social enterprise

You'd like to run your own business, but you also want more from life than just making money. You want to do something socially useful, but the idea of working for charity doesn't appeal. Could a social enterprise be the answer?

by Alexander Garrett
Last Updated: 09 Oct 2013

What is it? 'A social enterprise is a business that trades for a social or environmental purpose,' according to national body Social Enterprise UK (SEUK). It has a 'social mission' that it promotes through selling goods or services. Think Jamie Oliver's Fifteen restaurant, Divine chocolate or the Eden Project. A social enterprise maximises social good, whereas an ethical business seeks to minimise its negative impact, says SEUK.

Be motivated. 'In my experience, it's anger at injustice or inequality that drives people to start a social enterprise,' says Robert Ashton, author of How to be a Social Entrepreneur (Wiley, 2010). And Jake Hayman, chief executive of the Social Investment Consultancy, says: 'It is difficult to get any organisation off the ground, so if you don't have passion you will struggle.'

Keep your mission in sight. Be clear about what you want to address and how you are going to do it. 'There are many organisations doing great things; it might not be useful to set up another one simply to be your own boss,' says Hayman. 'Bring something specific to the table.'

Get business know-how. If you don't have business skills, hire or partner with those who do. 'Social enterprises are seldom run by a single entrepreneur,' says Hayman.

Stand on your own feet. 'It's perfectly valid to tell people about your values and they may help attract business,' says Ceri Jones, head of policy and research at SEUK. 'But consumers choose products because of a number of factors, including quality and price, and your values won't overcome those other factors if they're not right.'

Don't get hung up on structure. The Community Interest Company (CIC) is designed for social enterprises, but some think it's too restrictive in terms of raising finance. 'Choose a structure to reflect your values and your business model,' says Jones. If you're trading alongside grant-funded activities, a charity may be more suitable; if you're more of a social purpose business, it may be better to form a limited company.

Be clear on profit. To get the Social Enterprise Mark - a kitemark - you'll need to dedicate at least 50% of your profits to social purposes. If you want to keep more of the profit, think social purpose business.

Choose your backers carefully. Mainstream investors seek equity and financial returns, which could soon put pressure on your mission. Social investor funds are more sympathetic and won't compromise your aims. Increasingly, you can tap into high net worth people keen to do something useful with their money, says Hayman.

Do say: 'We are a successful business delivering social benefit to the community.'

Don't say: 'All that ethical stuff is great for our bottom line.'

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