Don't start a social enterprise if you just want grants

I’ve been having a little social enterprise wobble recently. I’ve met a lot of people thinking of setting up social enterprises because they wanted to get grants for their work. Then I read a depressing article where a business said they converted to be a social enterprise because: ‘we couldn’t make any money’. Argh, hold head in hands and sob.

I started to think: is this the elephant or sacred cow or third rail (insert suitable metaphor - I like Trojan sea cow) in the social enterprise room. I feared for the future of social enterprise - are we really just a group of pseudo-philanthropic organizations? Can we really change the face, body, heart and soul of commerce?

We like to talk about social enterprises being ‘businesses’. That is, they trade: they sell something to someone. One question I ask all start-up folks I meet is to write down: “I sell x to y” and fill in the blanks. I sometimes feel a flutter of disappointment by the responses. Often there is a dearth of clarity about the market for products and services. I suspect this is probably true for standard businesses starting up too. However, on the positive side, this is always something to work through with social entrepreneurs and, in working it through, you can arrive at some innovative and unusual places.

Then there’s also the old 1% gambit: “the total market for widgets is a gazillion pounds. If I can get 1% of that market it means returns of a, b, c.” Well, if I had 1% of the cash of the one percent gambitters I would probably…not be a rich man. Note that ‘gazillion’ is an indefinite or fictitious number. A suitable term, then, for a fictitious market.

This does get to a gritty issue at the heart of social enterprise - if tackling pressing social and environmental issues was easily tradeable surely someone would have done it by now. That leads you down some tricky paths - making money out of poverty, profiting from others misfortune, etc.

In earlier, rosy-tinted, pre peak of inflated expectation days, people said that social enterprise goes where the private sector doesn’t or that social enterprises operate in areas of ‘market failure’. I always thought, and still think these ideas are red herrings. We shouldn’t be scared to take on the private sector and I’m not even sure what ‘market failure’ is - no one is yet to explain this to me clearly. Answers on an e-card please.

I would advise not to start on the premise that you need a grant to make your business work. Start from a point of knowing there is a clear market for your product or service and that someone in that market will pay for it. Sure grants can be good sources of investment and many standard private sector organizations also get grants - maybe that is another elephant in an albeit more lucrative room - but see them exactly as that: a source of investment; not something to rely on.

Another common difficulty is thinking of an idea and having a vague notion that somehow the state will subsidise or pay for it. In an age of austerity (whatever Philip Hammond might say) that’s a dangerous path for any social entrepreneur.

So don’t start a social enterprise if all you want to do is get a grant. Start a social enterprise because you want to be a business that sells something to achieve a good cause.