There are many theories why some social enterprises flourish while others languish. Is it leadership, business planning, funding, market or timing that makes a successful social enterprise?
So we took a deep dive into the research into what makes for a successful social enterprise. We studied what works and what does not, to help practitioners, leaders and funders gain research-backed perspectives on the common ingredients for success.
Research shows that successful social enterprises often share common characteristics.
1. Buy-in from existing organization
If you are starting a social enterprise as part of an existing nonprofit organization, the board, executive director and other management staff must agree that operating a social enterprise would be beneficial to the organization. In addition, there needs to be a ringleader or champion responsible for the coordination, support and expertise in the social enterprise. This person should possess both the skills necessary to run an enterprise and the passion to carry the idea through to reality.
2. Active and fluid business plan
Having a roadmap to follow is essential to the success of an enterprise. Starting with a business model canvas helps you develop your hypothesis surrounding the main areas of your business. Once you have tested that hypothesis, a business plan is useful—as long as it is active and constantly updated as you begin piloting your project. Successful social enterprises are able to strike a healthy balance between planning and practice.
3. Use of data to drive decision-making
It is becoming increasingly important for social enterprises to demonstrate their impact; having accurate data available is critical for decision-making. Successful social enterprises have a ‘dashboard’ to provide key stakeholders with the right data to inform good decision-making. Once that information is on hand, it is important that it actually gets put to use; organizations must be willing to self-correct if the data points in a new direction.
4. Specialized niche/competitive advantage
Market demand is a major determinant of the success of any enterprise. If the product or service created is not meeting a need, the enterprise will not be financially profitable. The product or service must have a unique quality that separates it from competitors as well as a strong identity that allows it to stand out in the marketplace.
5. Ability to adapt to change
The culture of a startup is constantly shifting as the organization grows. Furthermore, even established social enterprises must continuously change to adapt to the broader market. Learning how to manage organizational change is a key to longevity.