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