What is a a "Social Venture?"
You will sometimes hear them referred to a entrepreneurial organizations, social enterprises, or social entrepreneurship. A social entrepreneur is similar to those working in the nonprofit sector. They see a problem and have the ability to visualize solutions. They are unique and driven individuals who question the status quo, exploit new opportunities, refuse to give up and are intent on remaking the world for the better. While traditional entrepreneurs are concerned with profits, social entrepreneurs are concerned with making a living while fostering social change.
Technically, these are legally formed for-profit entities, with one or more owners who have a formal right to control the firma and who are entitled to its residual earnings or net assets. Furthermore, these organizations are designed to serve a social purpose while making a profit. Having a social purpose involves a commitment to creating value for a community or society rather than just wealth for the owners or personal satisfaction for customers. For-profit social ventures measure their success in terms of social impact. This creates a "dual bottom line," where the entrepreneurs have to both financial and social objectives that guide thier decision making.
People may be drawn to this form of business entity because they want to see if they can make a good living, while still doing good works. Others may be drawn to this sector because they see a gap or limit to what the public or nonprofit sector can do that will be best served by a for-profit model.
When embarking on a social enterprise, one must consider whether to set up shop as a nonprofit or a for-profit. Entrepreneur.com published an article that outlines the benefits and possible drawbacks to establishing your social organization within the for-profit model. Some of which I have outlined below.
Profits:
Pros-
You will sometimes hear them referred to a entrepreneurial organizations, social enterprises, or social entrepreneurship. A social entrepreneur is similar to those working in the nonprofit sector. They see a problem and have the ability to visualize solutions. They are unique and driven individuals who question the status quo, exploit new opportunities, refuse to give up and are intent on remaking the world for the better. While traditional entrepreneurs are concerned with profits, social entrepreneurs are concerned with making a living while fostering social change.
Technically, these are legally formed for-profit entities, with one or more owners who have a formal right to control the firma and who are entitled to its residual earnings or net assets. Furthermore, these organizations are designed to serve a social purpose while making a profit. Having a social purpose involves a commitment to creating value for a community or society rather than just wealth for the owners or personal satisfaction for customers. For-profit social ventures measure their success in terms of social impact. This creates a "dual bottom line," where the entrepreneurs have to both financial and social objectives that guide thier decision making.
People may be drawn to this form of business entity because they want to see if they can make a good living, while still doing good works. Others may be drawn to this sector because they see a gap or limit to what the public or nonprofit sector can do that will be best served by a for-profit model.
When embarking on a social enterprise, one must consider whether to set up shop as a nonprofit or a for-profit. Entrepreneur.com published an article that outlines the benefits and possible drawbacks to establishing your social organization within the for-profit model. Some of which I have outlined below.
Profits:
Pros-
- Any profits earn can be received as gains for the owner(s).
- If the company is incorporated, the stakeholders can possibly receive stock and dividend payouts
Cons-
- Most social ventures do not make much money, so due to that fact most people are better off forming a nonprofit
Tax Deductions:
Pros-
- There are no real tax benefits to this structure
Cons-
- While possible, many social ventures cannot elicit the same assortment of donors as nonprofit organizations (seeing as most people who donate desire to use the donation as a tax deduction).
Raising Capital
Pros-
- While they can't offer tax breaks, for-profits can offer investors the opportunity for financial returns, ownership stakes, or equity.
Cons-
- As previously mentioned many of the fundraising and donor participation is limited due to the lack of a tax break; so for-profits have to rely on more traditional methods like angel investors or start up loans
Hopefully, these tidbits can help you determine which model is best for your intended goals.
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