In order to achieve the social or environmental impact they seek, social enterprises need to consistently earn revenue by creating economic value for customers.
While many of us might be most familiar with social enterprises that deliver economic value by producing products and services consumers love (think: TOMS’ shoes, Good Foot Delivery's courier services, or Out of This World’s catering), there are at least eight other ways social enterprises earn revenue by creating economic value for a wide variety of customers.
Thinking of building a social enterprise? Consider these eleven models for revenue generation...
Warby Parker, an American social enterprise, sells sunglasses and prescription glasses. The social enterprise creates economic value for customers by producing something that customers would have to go to great difficulty to create for themselves. Warby Parker creates a social impact by supporting a nonprofit that trains people in developing countries to give basic eye exams and sell glasses to their communities at affordable prices.
German social enterprise AFB provides data cleaning and electronic waste recycling for companies across Europe. By providing these services for their customers (the majority of whom are medium-large businesses), AFB offers to save them time, money and hassle. AFB creates a social impact through work integration -- over 50% of AFB's staff have a disability -- and creates an environmental impact by refurbishing used electronic devices.
3. Shared Resources
The Centre For Social Innovation, a Canadian social enterprise, creates economic value by providing customers with access to shared resources -- a co-working space and a community of similarly minded social entrepreneurs. Businesses that provide shared resources are valuable to customers as they provide them access to resources that they are unlikely to be able to afford, access or build on their own. CSI creates a social change by amplifying the impact of their tenant's endeavours, all of which have a social mission.
Conscious Period is an American e-commerce social enterprise that offers customers subscription-based feminine hygiene products. This business creates economic value for customers by offering a more convenient to purchase organic tampons. For every box of tampons purchased from Conscious Period, the company donates a box of pads to a woman in need.
Ten Thousand Villages is an American social enterprise that re-sells products made by artisans throughout the developing world to consumers worldwide through both e-commerce and brick and mortar stores. Ten Thousand Villages' resale model creates economic value for customers because it makes it more efficient for customers to purchase a variety of fair trade products.
Home Turf Lettings is a UK-based social enterprise that provides a variety of services for landlords, including leasing properties from them. The company provides economic value to landlords through leasing because it guarantees landlords rent payments for a pre-defined period of time when a landlord agrees to house a formerly homeless individual. Through this model, Home Turf Lettings achieves its social mission of supporting the housing of formerly homeless individuals, while providing economic value for landlords.
Give Realty is an American social enterprise realtor that creates economic value for customers by supporting them to purchase or sell real estate. Agencies create value for customers by marketing and selling something that they don't own, on behalf of the customer, in exchange for a transaction fee. Give Realty creates a social impact by donating 25 percent of their commission to the nonprofit of the buyer’s or seller’s choice in the customer's name.
8. Audience Aggregation
Pioneers Post is a UK-based media social enterprise that creates economic value for customers through enabling them to advertise to an aggregated audience. Pioneers Post tells the stories of social entrepreneurs and impact investors, and thus attracts a socially, environmentally, and economically-minded readership. Companies pay Pioneers Post to advertise to this aggregated audience because Pioneers Post has done its customers the service of attracting folks they'd like to reach.
Social Investment Scotland is a Scottish social enterprise that creates economic value for other social enterprises and charities by providing them with loans at affordable interest rates. Companies that offer loans create value for customers because they enable them to access more capital than is currently at their disposal (which can be used for purchasing assets that help them to grow). Social Investment Scotland creates a social impact by helping socially-motivated organizations to maintain or grow their impact.
Lexi Cinema is a UK-based social enterprise movie theatre that creates economic value for customers by selling movie tickets -- which are, in effect, options. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell the underlying asset they've purchased (the movie ticket) at a specified price by a specified date. While options are best known in the financial world, they can also be things we use regularly, such as pre-sale event tickets, groupon orders, or otherwise. Customers like options because they provide them with the flexibility to decide, at a later date, whether they would like to engage in a specific activity. Lexi Cinema creates a social impact by donating 100% of their profits to their partner charity, The Sustainability Institute.
Microfund for Women, a Jordan-based social enterprise, provides insurance to low-income women and families, reducing the financial shock associated with a family members' illness or sudden death. Insurance companies create value by providing customers with peace of mind that should a certain "bad thing" happen, they will cover all, or a portion, of the cost to remedy the bad thing. Insurance is just one product that Microfund for Women provides Jordanian women to help them escape cyclical poverty.
This post is inspired by Josh Kaufman's typology, The 12 standard forms of value that customers are willing to pay for. In researching for this post however, I couldn't find an example of a social enterprise that generates revenue by providing the last form of value on Josh's list -- capital.
We know that investors can create economic value for for-profit companies by providing them with access to capital in exchange for equity in their company. These Investors can then earn revenue through ongoing dividends, or through a one-time payout if the company goes public. There are a good number of impact investment funds that are investing in for-profit social enterprises, and thus, potentially earning revenue from dividends or Initial Public Offerings (IPOs), but I couldn't find one that identifies as a social enterprise. If you can think of examples of social enterprises in the insurance or capital businesses, tweet me or leave a comment below!
N.B: Thanks to Ellen Martin of SoJo, a wonderful Canadian social enterprise, for identifying a social enterprise the provides insurance.