What is a Social Enterprise?
Traditionally, nonprofits and social-mission businesses have addressed social needs through programs funded by donations those nonprofits have raised from outside sources. Today, however, many of these organizations are also addressing social needs by launching business ventures, otherwise known as social enterprises.
A social enterprise is a business that directly addresses a social need either through its products and services or through the people it employs.
How is Social Entrepreneurship similar to/different from Business Entrepreneurship?
In launching a new profit-making enterprise, a business entrepreneur applies highly disciplined business strategies and skills.
Those who launch a Social Enterprise use business-like discipline to get their venture off the ground as well. But the similarity ends there.
For social enterprises use earned-revenue strategies not to make a profit for the managers of the business…but to address social needs. They do this through the specific goods or services they market and/or by employing people who are physically challenged or economically disabled. Typically, the products or services that a social enterprise markets will be closely related to the nonprofit’s mission (for example, a nonprofit committed to lessening hunger might open a soup café).
In addition, the income generated by a social enterprise isn’t restricted the way income from charitable funders often can be. So, the sponsoring nonprofit can apply that income without limitations toward its general operating budget.
Social Enterprises and Greater Cincinnati
Based on the responses to a survey conducted by Flywheel and Community Wealth Ventures, we estimate that 30 percent of the nonprofits in Greater Cincinnati operate a social enterprise. Some 44 percent of those ventures were launched just in the last decade.
Of those area nonprofits with social enterprises, 50 percent operate one, 30 percent operate two, and 20 percent operate three or more. A good example of this are the social enterprise activities of Easter Seals TriState and People Working Cooperatively.
According to our recent survey of 40 existing social enterprises in the area, the average social enterprise in Cincinnati/Northern Kentucky is a small business with three employees and annual revenues of $137,000.
Economists estimate each social enterprise-related job adds $80,000 to the economy annually. That means each year, the average social enterprise in Cincinnati/Northern Kentucky is adding $240,000 to the region’s economy.
View a timeline of social entrepreneurship in Greater Cincinnati
Background of Social Enterprises in the United States
Social enterprises have existed for at least a century. Across the United States, three of the best-known social enterprises are Goodwill Industries, Girl Scouts, and YMCA.
In the 1990s, the creation of social enterprises among all types of nonprofits began to accelerate. And since the recession, the pace of growth has increased yet again. Currently, it is estimated that 50 percent of social service organizations across the United States now operate at least one social enterprise.