Social Enterprise: Advantages and Disadvantages
The social enterprise business model has set itself apart from others. Its motives are similar to those who want to drive profits, and also those who want to make positive change. While it is not a charity, nor a traditional business - a social enterprise is a unique blend of the two.
When a social enterprise profits, society profits. By selling goods and services to the public, it reinvests its surplus back into the business, creating employment and serving the local community. This allows it to provide training, support communities and even help the environment.
Characteristics of a Social Enterprise
Social enterprises can come in many forms - from coffee shops to cinemas, from pubs to leisure centres. No matter what market it belongs to, all social enterprises share these common attributes:
They directly manufacture goods or provide services
They have social objectives and use responsible methods to accomplish them
They must always strive to make a profit as they cannot completely depend on donations or grants the way charities do
An example of one of the best social enterprises is Access Employment Ltd (AEL). Based in Larne, it provides disadvantaged people with training and employment opportunities, enhancing their lifestyle, and thus allowing them to operate more effectively in the community. Their aim is to develop sustainable businesses to provide disadvantaged people with the skills, experience and confidence to find employment within the open labour market. AEL currently employs 41 people across 6 different businesses such as Candyrush Online Shops, Lunchbox Cafe and Clearer Water.
While it is a win-win situation, the social enterprise model comes with its pros and cons, which we will now explore.
Advantages of Social Enterprises
There are many benefits of social enterprises, including:
Creating Positive Impact
There’s no denying that social enterprises make positive contributions to society. Whether it be supporting a single person or a large group - they are responsible for changing lives for the better.
By choosing a certain specialism and claiming a corner of the market, your social enterprise can constantly evolve and enhance its offering. With this, comes trusting relationships that can pave the way for future success.
Greater Employee Motivation
Nowadays, people want more than just a pay cheque. They want a purpose. By helping to make a difference in the world, this sense of reward is guaranteed to boost staff satisfaction and retention.
Social enterprises are at the heart of societal change. This motive appeals to a lot of prospective employees. As social enterprises are diverse, you can recruit people of different skill levels who all share the same passion. This creates a strong community among staff, inspiring unified dedication to the cause.
Strong Customer Relationships
With social enterprises, customers can be anyone from a family whose child is receiving support - to a prospective volunteer or stakeholder. Social enterprises have the power to form strong connections with customers, which can create regular profits.
This compelling unique selling point overrides commercial competitors. It builds brand loyalty, and can even lead to brand advocacy. Purpose creates relationships that go far deeper than just transactions. And when this is maximised, a social enterprise is in a better position to expand.
Enhanced Brand Awareness
In today’s online world, social enterprises can gain exposure and praise for their work more easily. These days, a socially conscious ethos is key when it comes to raising both awareness and reputation.
When you think about it: buying products and services from companies that boost the local community makes customers feel good. Social enterprises should therefore use this opportunity to spread the good word about their initiatives. Letting people know that you have a purpose beyond profits will help boost public image.
You can use many social media platforms like Twitter, Facebook and Instagram. Or you can get one step ahead and join local online groups.
Disadvantages of Social Enterprises
However, there are a number of disadvantages when it comes to social enterprises:
Competing with rivals
Unlike charities, where they can boost donations by hosting special events - social enterprises have to make steady money through the constant provision of products and services.
Usually, social enterprises trade in busy markets. But this doesn’t mean that there isn’t other competition to be wary of. This disadvantage means they must always remain competitive in their chosen market, facing the same challenges and risks common to all businesses.
Rules and Regulations
A social enterprise must follow certain rules when trading. Social Enterprise UK define social enterprises as businesses that:
Have a clear social mission that is set out in governing documents
Earn more than half of income through trading
Are driven entirely in the interests of a social mission
Reinvest at least half of profits towards the social purpose
Are transparent about how they operate and the impact that they have
regular market research
Social enterprises offer products and services that target distinct communities. Since consumer needs are always changing, you must constantly monitor your market.
This may involve regular research via online surveys or focus groups which can be time consuming. Falling behind can result in your business missing the chance to make sales or update your strategy to maintain interest.
All in all, the benefits of a social enterprise outweigh the drawbacks. If you want advice on how to start an enterprise, or how to maximise your output and profits, contact the S3 Solutions team today.
If you want to learn more interesting insights, check out the rest of our blog.