There are several misconceptions surrounding the process of starting and scaling a social enterprise. And unfortunately, these myths are keeping too many people out of this great field. So let's change that immediately. Here are five of the most insidious myths:
Myth #1: Social enterprises are not profitable:
One of the most common myths about social enterprises is that they are not profitable. While the primary goal of a social enterprise is to make a positive social impact, it is also important for the enterprise to generate income and remain sustainable in the long run. Many social enterprises are profitable, and some even outperform traditional for-profit businesses.
Grameen Bank was the world's first for-profit anti-poverty bank. By creating micro-finance loans with an innovative collateral model, they secured a 97% repayment rate and make millions in profit per year.
Myth #2: Social enterprises don't need a business plan:
Some people believe that because social enterprises are focused on a social mission, they don't need to follow traditional business practices such as creating a business plan. However, a solid business plan is essential for any social enterprise to be successful. It provides a roadmap for the organization's goals, strategies, and financial projections.
d.light designs and distributes affordable solar-powered products worldwide, and swept their business plan competitions using a simple, one-page plan for their social enterprise.
Myth #3: Social enterprises can't compete with traditional businesses: Another common myth is that social enterprises cannot compete with traditional businesses. However, social enterprises can often offer unique products and services that traditional businesses cannot, and they may have a competitive edge in certain markets.
Warby Parker disrupted the billion dollar eyewear industry by cutting out the middle man, working directly with consumers, and providing a necessary product at affordable prices.
Myth #4: Social enterprises can't scale up:
Some people believe that social enterprises are limited in their ability to scale up and grow, but this is not necessarily true. With the right strategy, social enterprises can expand their impact and reach more people. In fact, many successful social enterprises have scaled up and become major players in their respective industries.
TOMS Shoes scaled their operations using their innovative One-for-One business model, strategic partnerships, expanded product lines, and lean production methods.
Myth #5 : Social enterprises are only for non-profits:
Some of the most effective social enterprises have been structured as for-profit entities, so they can continue to generate the profit they need in order to deliver the impact they want..
Not coincidentally, each of the models above are for-profits.
Overall, it's important to approach starting a social enterprise with a clear understanding of what it entails and dispel any myths or misconceptions that may prevent success.