Tip Sheet: Social Enterprise: A tool to sustain your heritage site

Yes. A social enterprise can (and should) pay salaries to employees and managers that are comparable to other similar jobs in the marketplace…so individuals can certainly make money through a salary or contract. Furthermore, a social enterprise as an entity can also make a profit, as long as business is always actively maximizing social, environmental, cultural or recreational mission(s). Note that profit is defined as when total revenue from sales exceeds total expenditures (including salaries). In a profit maximizing business, there are likely ways in which the profits could be either reinvested in the social mission or minimized in order to maximize a social outcome.

No. You might note that the common elements in the definition do no mention a form of incorporation. Social enterprises can operate as sole proprietorships, companies, non-profit organizations (even registered charities) or as co-operatives. Each of these structures has advantages and disadvantages, and social entrepreneurs should choose the form of the business should follow the function of the business.

Anything that someone will buy. There are social enterprises offering housing, catering, renewable energy, custom woodworking, sewing services and products, bike rentals, landscaping, research services…the list is extensive. The best product or service to sell relies on two fundamental questions: What are you (or your organization) well positioned to do; and what will a consumer pay for? Both of these questions can be answered in a sound feasibility study in which both organizational capacity and market research can be considered.

Absolutely. Any business can engage volunteers, but a social enterprise often will have a cadre of volunteers (governance, advisory, managerial or even front line) working to maximize the social impact of the business. The key is that a social enterprise needs to be planned such that volunteer labour is considered a risk and strategies to mitigate that risk should be addressed as part of a business plan. Note that many social enterprises, as a result of their mission focus, may receive other donations of assets or expertise and these should similarly be welcomed and be monitored as the business grows.

This is perhaps the case of 90% of social enterprises started by non-profits (and 90% of private entrepreneurs, for that matter.) In fact, for many non-profits, social enterprise is often considered only after the loss of longstanding grant or philanthropic support. The first thing to consider is that most social enterprises will take 1-3 years to plan, launch and establish themselves. Social enterprise is an investment by an organization in a long term social impact strategy, not a short term answer to a funding shortfall. It is worth seeking a grant or using existing balances to invest in a strategic planning session followed by a proper feasibility study for 1-2 plausible lines of business. This process might take 6 months to a year.

If the business idea is deemed to be financially feasible, AND would make a significant impact on your social mission, then build a business plan that can be used to leverage start-up capital and launch the business. Small investments in the right things will begin to generate modest sales revenues, that then can be reinvested in the business to expand the scale and scope. This iterative launch strategy may be slow, but can also minimize financial exposure/risk and can generate “live market data” to endorse or contradict the assumptions and expectations set out in the market research.

A sound business idea can always find investors. A sound social enterprise idea might also find investors, but also may be able to access social investments, donations or grants made by individuals, governments, or foundations. Moreover, if the social enterprise has a sound business plan, then a social entrepreneur can access loans or bridge financing from banks, credit unions, or from a growing number of social investment agencies and funds. Of course, like any business start-up, a social entrepreneur can also make a personal investment based upon existing collateral or savings, although this can be risky if the business does not succeed, or if it is owned by multiple stakeholders (as a co-operative or non-profit, for example).

There are two options: find the money to fix the assets or look at other assets you have that could be commercialized. A museum, children’s camp or bed & breakfast cannot be operated profitably (or safely) out of a dilapidated building or a contaminated property. In all likelihood, you might be considering social enterprise as a way to generate the revenues you need to do the repairs or restoration work. Most organizations and individuals have other assets that can be used to create products or services that can be sold. Below is a short list of examples employed by other organizations in the heritage sector:

1. Expertise in land management or historical analysis can become a consulting business;
2. Past camp programming can be sold to other agencies or can be operated in another location;
3. Solar panels can be installed on a property to generate revenue;
4. Adventure tourism (hiking, nature talks, snowshoeing, dog sledding or even bungee jumping) companies can operate on larger tracts of protected land;
5. Out-buildings can be rented for winter storage.

Don’t be restricted to operating a seasonal museums or lecture series as revenue generating activities. Consider all the social, experiential, physical, financial, cultural, and human capital in your organization/community that could form the basis of a successful business venture.

In short: Unrestricted revenue.

Running a business is indeed hard work. And time consuming. And potentially risky. And for many, a new set of skills may be required. However, writing grant applications and building a sound fundraising program is also hard work, and can be an incessant task fraught with risk and disappointment. Moreover, grants are tied to specific outcomes, and rarely cover “overhead” costs that are a fundamental part of running any organization: administrative salaries, utilities, promotions and branding, or other general costs. It is true that social enterprise may not necessarily be the best option for all situations, but it is a useful tool to consider in a strategic plan that would benefit from un-earmarked revenues that can be spent at the discretion of the organization to support a heritage property restoration or operation.

Absolutely. Many organizations rely on both a fundraising/grant-writing program AND sales and earned revenue. This strategy offers safety through diversification. Social enterprise is a tool that can be used with other tools to create social change or social benefit. However, this bifurcated strategy can be incredibly cumbersome and unsustainable (particularly in family or volunteer-driven organizations where the key stakeholders are aging). Moreover, the skill sets to run a business and to solicit donations or grants are not always the same, which can result in either a weak fundraising program, or a perpetually struggling business.