Social enterprises sit between traditional business, nonprofits

In Business Organizations by Coolidge Wall

Broadly speaking, a business’ primary focus is on making money and expanding itself, instead of benefiting others. A nonprofit’s goal is to help the community in some way, but often struggles to find the money to make this happen.

Somewhere in between these two stereotypical extremes is the social-enterprise business. As described recently by The Cleveland Plain Dealer, social-enterprise business focuses on some social problem, but is not the same as a traditional nonprofit. They provide a product or service to raise money for the owners’ particular cause.

In Ohio, a few social-enterprise businesses have gotten off the ground, including a restaurant that trains people recently freed from prison in French cooking. Another is an inner-city vineyard and winery.

Often, these enterprises are an offshoot of an existing nonprofit. Besides the fact that they are closer to traditional businesses, starting a social-enterprise business can be a new experience for those in the nonprofit sector. Instead of raising the money through donations and grants, it is common to obtain loans from the bank.

Though the business’ mission is important, a social-enterprise organization operates virtually the same as its purely for-profit competition. The owner of a chicken restaurant in Columbus that mostly employs people affected by homelessness or incarceration says customers may have no idea of the restaurant’s interests in helping people in that position. The restaurant builds customer loyalty by making the restaurant as good as possible, the owner said.

Whether starting a social enterprise is a good way to help your nonprofit may be a subject for discussion with your organization’s attorney.