DYO – Three Key Questions to Answer Before Starting a Social Enterprise

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Thank you to Dr Craig Furneaux for this article.

So you want to start a social enterprise? Awesome! At ACPNS we get a lot of people asking us for help on how to start a social enterprise. We even run formal classes on social business planning. Obviously every situation is different, and if you are planning to start a social business you really should get professional advice.  However, there are three key questions you need to answer before you start.

Question 1: What’s the great idea (or how will you use business to solve social and / or environmental problems)?

Like many other organisations, social enterprises seek to deliver financial, environmental and social outcomes. This ‘blended value framework’ seeks to maximise value far beyond just profit, and instead seeks to work out how to conduct businesses in such a way that social and / or environmental value is generated as well. Some commentators get a bit caught up arguing over what percentage of trade income you need to be defined as a social enterprise. I’d just rather encourage people to find innovative ways to solve social and environmental problems! If you want to see how other people solved this, then there are a number of great video cases which can help you get started.

Question 2: What’s your legal form (or what is the best type of legal entity)?

OK so you have a great idea, but to progress it, you will also need a legal entity to trade. While places like the UK have special legal entities for social enterprises such as community interest companies, Australia currently does not have a specific social enterprise legal form. So you need to pick from the range of existing forms: either a for-profit or a not-for-profit legal structure. A good place to start is Nonprofit Law resources, and here for examples of actual organisations and their structures.

Apart from legal and risk implications associated with your legal form, different structures can also restrict what resources you can access, and moreover what you can do with finances once you actually have some. A brief summary is here:

Question 3: What’s your strategy (or how will you organise your business to achieve your mission)?

So you have a great idea, and a legal entity, now the question is how will you arrange and organise your business in order to achieve your mission? There are a great number of ways to organise your social enterprise.

Some organisations trade to generate income in Australia and then deliver social outcomes overseas (e.g. Thankyou), while others enable businesses in developing countries to get fair income (e.g. Oxfam). A great overview of a variety of multiple organisational models is really worth having a long think over.

Obviously, there is a lot more involved, but those three questions, and the resources to help you answer them, are great places to start your social enterprise journey. If you want another great resource the Stanford Social Innovation Review is great. Don’t forget ACPNS provides nearly 30 years of publications to help you with the accounting, governance, law and management of social businesses, nonprofits and foundations which you can access for free.

Thanks for reading!

Did you know that ACPNS offer courses for staff, board and other volunteer professionals who work in, or are entering the philanthropy, nonprofit or social enterprise sectors? In fact one of the units deals specifically with social enterprises.

Introduction to Social Enterprise

There has been a significant increase in interest in social enterprises in many OECD countries recently. The nonprofit sector continues to mature and expand with the establishment of more sophisticated social enterprise programs, as organisations explore innovative approaches to achieving mission. This interest is driven partly by significant reductions in the traditional sources of revenue for nonprofits, together with increasingly sophisticated competition and dramatic changes in expectations from clients and stakeholder groups. These shifting expectations create demand for more strategic approaches to developing business models, the need for improved business planning, and allowing for more collaborative and hybrid business practices. The unit offers a background to social enterprise and ‘hands-on’ experience in social business planning.

Check out our Study with us page for more info or contact us for a free course information pack. +61 7 3138 1020 | acpns@qut.edu.au

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