In its simplest form, a social business uses business strategies and revenue models to support a social mission. This might be a standalone business, or simply integrating a social business model and/or principles within your existing NGO/organisation.
Take a look at your own organisation. Do you have a product or service that could be developed into a viable business? If it brought in even 20% of your operating budget, isn’t that one less grant application you have to write? Or one less fundraising campaign you have to manage? And what’s more – you can use the revenue generated as you please, not as requested by donors.
Below are seven steps to help you create a social business.
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Identify the problem you are trying to solve
Begin by identifying a pressing societal issue that you feel compelled to help solve. This may involve brainstorming a list of social and environmental problems, then researching the most urgent, unsolved ones affecting large populations.
Consult directly with those impacted to truly understand their struggles. Quantify the size and scope of the problem through data analysis. This validation ensures the problem is substantial enough to warrant solving on a large scale through a sustainable social business.
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Develop solutions to the problem
Once you've identified a worthy problem, the creative work begins to design potential solutions. Let your imagination run wild to brainstorm a wide range of interventions that could help address various aspects of the problem.
Analyse the pros and cons of each proposed solution, choosing one or two options with the highest potential for driving widescale change. Consult experts and stakeholders in the field who can help refine pragmatic solutions. Develop detailed plans for how your chosen solutions would operate and positively impact people's lives.
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Understand your assets
With solutions in mind, take stock of the assets already at your disposal to deliver this vision. Make an honest assessment of the skills, expertise, networks, funding and resources available. Identify gaps between what you have and what would be required to successfully pilot and scale the solution.
Research potential partners who can fill gaps with technical capabilities, local access or other key inputs. Gauge the level of effort and capital required to initially test and refine your concept.
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Define the sustainable business model
The next step is designing a sustainable business model that can provide ongoing funding. Research various models for mission-driven business like subscriptions, marketplaces, cross-subsidisation and others.
Analyse your target customers' willingness and ability to pay. Map out multiple scenarios for how revenue streams could cover costs. Project capital requirements, operational expenses, time to profitability and other key financial factors.
Examples of sustainable business models
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Subscription |
The subscription model involves generating recurring revenue by selling ongoing access to a product or service. Customers pay a subscription fee periodically (e.g., monthly or yearly) to receive continuous access to the offering. For a social business, the subscription fee revenue can fund the socially focused activities. Examples include selling member subscriptions to access exclusive tools, content, workshops, discounts, communities, or events. Media companies like online magazines or video streaming services also use subscription models effectively. |
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Freemium |
Freemium models provide a free or very low cost version of a product or service to get users onboard, while offering paid premium versions with more features, benefits, or access. This helps acquire users and convert some of them into paying customers to generate revenue. For social businesses, this model can provide free basic access to those most in need while selling premium services to others. One option is also to offer time-limited free trials. Creative use of freemium can vastly expand a user base. |
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Cross-subsidisation |
Here a social business sells products or services to an audience or market that can pay, in order to fund or subsidise offerings for a low-income or underserved demographic. Effectively, it transfers surplus from one group to cross-subsidize another; for example, by selling products at full price in middle/high-income regions to finance distribution of discounted versions in poorer markets. Advantages include serving very poor customers while maintaining sustainability. Risks include a low-paying segment becoming dependent. It’s important to be careful to balance financial viability with social impact. |
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Marketplace |
This model involves a platform that facilitates transactions between buyers and sellers. The social business brings together demand and supply, typically taking a small fee on activities conducted through its hub. It enables providers of goods/services access to expanded distribution and marketing. It gives buyers access to social businesses they want to support. Examples are platforms for socially conscious products, or services from disadvantaged producers. Benefits include leveraging networks for efficiency and scale. Challenges involve attracting both sellers and buyers to create liquidity. |
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Franchise |
Here a social business licenses its intellectual property, brand, products, and business model to partners in return for an ongoing royalty on revenues. This allows proven models to be replicated and scaled while spreading risk. Mcdonald's is a classic franchising example - replicating stores around the world, united by brand and operational model. For a social business, franchising can enable partners to replicate successful models in new locations. Benefits include growth, risk reduction and access to local knowledge. Challenges involve franchisee recruitment and ensuring model integrity. It’s a strong option for scaling impact but requires clear operating protocols and brand management. |
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Validate the model
To validate the model, create prototypes and illustrations to demonstrate the social business concept tangibly. Share these with prospective customers and partners, gathering feedback to refine the offering and business model. Incorporate insights from the field to optimise the solution and funding approach. Build out a financial model linking the key revenue and cost drivers to demonstrate long-term sustainability.
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Pilot the product
With a validated concept, it's time to pilot a minimal viable product. Strip down the offering to basic features for initial testing. Create a startup budget, timeline and core team. Officially launch a small-scale pilot, marketing to early adopters and lead users first. Offer the product or service for free or at a very low cost, emphasising user feedback over revenue generation in these early stages.
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Learn and iterate
As customers start engaging, gather feedback and usage metrics to refine the model. Continually optimise the product features, pricing, operations and customer experience. Once the model is proven, you might consider raising investment to scale up. Then rollout across a wider region, focusing intently on maximising social impact within the guardrails of long-term financial sustainability.
Executed comprehensively, this process can lead to launching a social business that sustainably addresses a societal problem. It takes time, dedication and creativity - but the impact can be profound.
As Nobel Laureate Professor Yunus put it: “If you want to do something, you have to imagine it. If you don’t imagine it, it will never happen.” Imagine what is possible - then start building it.
Resources
Here are some further resources to help you on your entrepreneurial journey:
- PITCH: The free resources and funding hub for sport and social business
- Introduction to Social Business Entrepreneurship: Course by the Grameen Creative Lab
- Lean Canvas: An efficient approach to developing a one-page business plan for deconstructing your business idea into key assumptions for better analysis.
Image credit: Kick4Life
