Social Entrepreneurship

Creating a Social Business Model

Social enterprises primarily apply business solutions to social problems. In a non-profit organization, there are no shareholders. Therefore, the profits of a social enterprise are reinvested in the work of the organization itself. Since non-profit social organizations started undertaking revenue-generating activities, they needed a new business model. This model ensured that the market characteristics, business principles and values (in other words diversification, competition, innovation, entrepreneurship, and a focus on the bottom line) can co-exist in harmony and work with the traditional public sector values. These values include serving the public interest, responsiveness to the community, etc. Further, an effective business model is the spine of a successful social enterprise.

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Social Business Model

A business model has two primary elements:

  1. An operating strategy to create the intended impact. This includes the organization’s internal structure as well as external partnerships.
  2. Since any organization needs resources to work (both human and financial), the business model must include a resource strategy defining where and on what terms can the organization acquire the resources.

Browse more Topics under Social Entrepreneurship

Using the business model, a social entrepreneur converts the inputs into outcomes like the generation of social value as well as revenue (economic value).

business model

                                                                                                                                                     

Integrating a social enterprise with a non-profit organization

You can integrate a social enterprise with a non-profit organization in the following ways:

  • Embedded
    • The social enterprise and the social program is one and the same
    • The creation of the business has client service at its heart
  • Integrated
    • The business activities overlap with the social programs
    • The business acts as a funding mechanism and helps in the expansion or enhancement of the mission of the organization
  • External
    • The business and social activities are separate. Further, they are usually not related to the mission of the organization
    • The business is created to fund and support the social activities

Types of Business Models

  • Entrepreneur Support
  • Market Intermediary
  • Employment
  • Free-for-Service
  • Low-income Client
  • Cooperative
  • Market Linkage
  • Service Subsidization
  • Organizational Support

Entrepreneur Support

Business Model Name Entrepreneur Support
How it works Sells business support to its target population.
Examples Microfinance organizations, consulting, or tech support
Key Success Factors Appropriate training for the entrepreneur

 

Market Intermediary

Business Model Name Market Intermediary
How it works Provide services to clients to help them access markets.
Examples Supply cooperatives like a fair trade, agriculture, and also handicraft organizations
Key Success Factors Low start-up costs, allows clients to stay and work in their community

 

Employment

Business Model Name Employment
How it works Provide employment opportunity and job training to clients and then sells its products or services on the open market.
Examples Disabilities or youth organizations providing work opportunities in landscape, cafes, printing, or other business
Key Success Factors Job training appropriateness and commercial viability

 

Free-for-Service

Business Model Name Free-for-service
How it works Selling social services directly to clients or a third-party payer
Examples Membership organizations, museums, and also clinics
Key Success Factors Establishing the appropriate fee structure vis a vis the benefits

 

Low-income Client

Business Model Name Low-income client
How it works Similar to fee-for-service in terms of offering services to clients but focuses on providing access to those who couldn’t otherwise afford it
Examples Healthcare (prescriptions, eyeglasses), utility programs
Key Success Factors Creative distribution systems, lower production and also marketing costs, high operating efficiencies.

 

Cooperative

Business Model Name Cooperative
How it works Provides members with benefits through collective services.
Examples Bulk purchasing, collective bargaining (union), agricultural coops, credit unions
Key Success Factors Members have common interests/needs. Further, they are key stakeholders and investors.

 

Market Linkage

Business Model Name Market Linkage
How it works Facilitates trade relationships between clients and the external market.
Examples Import-export, market research, and also broker services
Key Success Factors Does not sell clients’ products but connects clients to markets

 

Service Subsidization

Business Model Name Service Subsidization
How it works Sells products or services to an external market to help fund other social programs. This model is integrated with the non-profit organization. Further, the business activities and social programs overlap.
Examples Consulting, counselling, employment training, leasing, printing services, and so forth
Key Success Factors Can leverage tangible assets (buildings, land, employees) or intangible (expertise, methodologies, or relationships)

 

Organizational Support

Business Model Name Organizational Support
How it works Similar to service subsidization, but applying the external model. Further, business activities are separate from social programs
Examples Similar to service subsidization– implement any type of business that leverages its assets
Key Success Factors Similar to service subsidization.

As you can see above, the various types of business models are listed. The Social Enterprise business Models can be applied to programs, institutions, or service delivery. they are designed keeping in mind the social enterprises’ objectives (both financial and social), marketplace dynamics, mission, the legal environment, and client needs and/or capabilities. Usually, business models are embedded within the organization.

Solved Question on Social Business Model

Q1. List the primary elements of a social business model and its types.

Answer: The primary elements of a social business model are:

  • An operating strategy to create the intended impact. This includes the organization’s internal structure as well as external partnerships.
  • Since any organization needs resources to work (both human and financial), the business model must include a resource strategy defining where and on what terms can the organization acquire the resources.

Further, the types of social business models are:

  • Entrepreneur Support
  • Market Intermediary
  • Employment
  • Free-for-Service
  • Low-income Client
  • Cooperative
  • Market Linkage
  • Service Subsidization
  • Organizational Support
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