Author: Rolfe Larson

One of the nice things about writing a blog is getting comments. And now that the Free Management Library blogs are attracting more than 10,000 readers each week (wow!), we’re glad to hear what readers are thinking. Here are two particularly interesting recent comments:

On whether the “social” in social enterprise is redundant, Andy Horsnell wrote, quoting the book Mission Inc by Kevin Lynch and Julius Walls, Jr: “After all, a business cannot survive without meeting a social need, real or invented. One could craft an argument, no matter how hollow, that any enterprise is a social one: the NFL’s purpose is to provide an escape from everyday life; the fashion industry’s purpose is to create and celebrate beauty; the beer industry’s purpose is to help a guy take the edge off after a hard day. So, yes, if you really want to argue about it, every business has a social purpose. But we all know better than that. Some things really matter, and some things really don’t. Those things that matter are part of what we might call the common good, and everything else just isn’t. We would argue that the social purpose that is this target of any social enterprise must be squarely aligned with this concept of the common good.”

On social franchising, Adrian Aston wrote: “I’ve been active in social franchising since 1998 ‘over the pond’ here in the UK – we certainly seem to be a bit behind your thinking and stages of development in this field. I’m just finishing a thesis paper critically reviewing the tools available to social enterprises in the UK who are considering franchising as a growth strategy, but thought you might also be interested in some of my other writings on this subject to date to get a feel for ‘the British perspective’ –
http://thirdsectorexpert.blogspot.com/2010/03/franchising-social-enterprises.html “

Keep sending in your comments. And if anyone wants to write a guest blog, just let me know.

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Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010
Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own
Read my weekly blogs on Social Enterprise and Business Planning

Google “social enterprise” and you’ll get 2.1 million citations. I kid you not.

So, if you want to be more selective, here’s a quick guide on what we’ve found to be the most useful online sources of practical information about how to succeed with social enterprise (SE). (Full disclosure: I’m affiliated with several that I’ve marked with *’s)

1. Social Enterprise Alliance*. North American membership association offers many resources, some available to all, others members only. (Well worth $75, IMHO.)
2. REDF. San Francisco based funder that’s probably started and supported more successful SE’s than anyone else. Web site chock full of practical advice.
3. Community Wealth Ventures. Washington DC consulting firm founded by Bill Shore; resources include SE database, franchising report, L3C report, and more.
4. npEnterprise Forum*. Free, global, 7000+ subscriber listserv focused exclusively on social enterprise. Post a question and you’ll likely get five answers in days.
5. IdeaEncore. Many tools and techniques, some free, some for a small fee.
6. Rolfe Larson Associates*. Denver consulting firm with a Free Resources section with practical work sheets and templates on starting an SE.
7. Free Management Library*. Section on Social Enterprise and Business Planning packed with resources and links about the field. Weekly blogs also.
8. Wikipedia. Nowadays every research project has to include Wikipedia, although in this case, it is a bit sparse on practicality.
9. RootCause in Boston has an excellent free guide to SE business planning.
10. Aperio in Toronto offers some good articles and case studies.

And if you want more, well, you can always go back to those 2.1 million Google citations…

Financial reward can be a powerful motivator. The potential for personal profit can provide intense focus and efficiency to almost anyone. Indeed, incentives drive entrepreneurs in their relentless search for success, overcoming obstacles along the way. Money might not be their only motivator, but dollars (the kind they get to keep) are always their favorite measure of success.

That’s mostly missing for most nonprofit social enterprisers. Why? Many folks in the nonprofit sector believe that incentives are not permitted by the IRS. In fact, if structured properly, incentives will not put your tax exempt status at risk. Sales people can receive part of their compensation through commissions; and managers can be incentivized as well — as long as it’s “reasonable.” (Caveat: I am not a lawyer; be sure to discuss with counsel.) Secondly, many nonprofits believe that making a difference in the world is all the motivation that’s needed to get the most from people.

Fair enough, but the fact of the matter is that incentives work. In public radio, where I worked for many years as an executive and now as a consultant, an important source of revenue comes from underwriting. Underwriting is a kinder and gentler form of on-air advertising that public radio stations are allowed to “sell” to companies that want listeners to hear their messages. Some stations incentivize their underwriting staff, others do not. Guess which stations tend to do a better (in fact much better) job of generating revenue to support the station?

I’m confident that many social enterprises would be more successful if they structured incentives that line up with their priorities. Don’t miss out on an important tool that firms in the for-profit sector never ignore.

Consider making greed part of your social enterprise creed. It works.

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Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010
Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own
Read my weekly blogs on Social Enterprise and Business Planning

We occasionally come across organizations considering franchising as a strategy for developing a social enterprise.

A franchisor is a company that has a successful product or service, business model and recognizable trade name (think chain stores), which it offers on a continuing contractual basis to other businesses (its franchisees), for a fee.

The advantage of participating in a franchise is that it allows an entrepreneur (social or otherwise) to focus their efforts on operating a business that already has a successful business model and track record.

In rough terms, franchising in the US accounts for more 750,000 establishments, ~10 million jobs, and more than $1 trillion in sales. And, for the nonprofit sector, Social Franchise Partners, an offshoot of Community Wealth Ventures, was created by Billy Shore to help more nonprofits become franchisors as a strategy for generating resources as well as social impact. A couple of years ago they published Streams of Hope, which provides extensive information and case studies on how franchising works and how to determine if it’s the right thing for your organization.

For a very small number of social enterprises, franchising might be the way to go. But for most others, the cultural gap is so great between the franchise model to pursue personal wealth at almost any social cost, and the social enterprise model to pursue both social and organizational financial stability, that we have seen more failures than successes on this path. Presently there are about 100 nonprofit franchisees in the US.

The Streams of Hope publication can be downloaded for free. So if you’re at all interested in franchising (or just curious), take a look and decide where to go from there. Franchising is not for everybody, but perhaps it’s just right for you….

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Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010
Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own
Read my weekly blogs on Social Enterprise and Business Planning

It used to be that there were essentially three choices: private, public, or nonprofit. Privately-held companies offer the most flexibility, without outside investors or the IRS constantly looking over your shoulders. A privately-held social enterprise can choose to invest some of its profits into achieving social impact without anyone second guessing those decisions. But if you’re ready to raise large amounts of capital, going “public” through an initial public offering is the usual way to go.

There’s a price for that, though. Publicly-held companies need to justify their actions to investors, who, as the legal owners, have the legal right to force management to do everything it can to increase profits, even at the expense of social impact. Public boards are obligated to sell the company if doing so would enhance “stockholder equity.” For that reason, Ben & Jerry’s went from being an independent company with a social purpose, to being part of an international conglomerate. Ben and Jerry didn’t have a choice in the matter, nor did their board.

That’s why many for-profit social enterprises tend to be privately held.

But the times they are a changing. A number of states have approved the Low-Profit Limited Liability (L3C) corporate structure, which attempts to bridge the gap between for-profit and nonprofit models. L3C’s must “significantly further the accomplishment of one or more charitable or educational purposes,” but can still have private investors and make a profit. See http://en.wikipedia.org/wiki/L3C

Another “hybrid” is a For-Benefit Corporation, or B-Corp. Based on an independent assessment, B-Corps receive a certification as socially responsible, and in so doing make it clear to investors that the company will consider other stakeholders, such as the community and the environment. See http://en.wikipedia.org/wiki/B_corporation,

So as you consider how to get “organized” with your social enterprise, be sure to consider these other structures as well as the usual suspects including LLC, partnership, S and C corporations, and nonprofit.

Get some expert advice, and then pick the structure that best fits your purpose. There’s no one correct answer, just the structure that’s best for your purpose and your market. Form Follows Function.

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Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010
Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own
Read my weekly blogs on Social Enterprise and Business Planning

So you have piles of venture ideas and don’t know where to start. Or perhaps there’s just one idea that you think looks pretty good. Either way, you need to some feasibility testing.

To narrow a long list to a manageable number, try the Quick Feasibility Screen (at www.RolfeLarson.com click on Free Resources). It’s a list of ten multiple-choice questions that has been used by hundreds of organizations to winnow down a long list into the best one or two ideas. In most cases, you can do this just using what you already know or can find out quickly.

Once you have it down to one or two ideas, take a look at the Quick Feasibility Test, which takes more time. Here are our top 10 tips for efficiently gathering the information you need to answer those questions:

1. Start with your goals. What do you want to accomplish? How will you define success?

2. Write a one page “first cut” summary of your venture, describing its products or services (benefits not just features), customers, operations, marketing strategies, and likely competitors.

3. Decide whether you want to do the feasibility research yourself, bring on a team, or hire a consultant to help.

4. Go online to find similar ventures and interview them. You’ll be surprised how open they are.

5. Your online research should also guide you to some “experts” in this field: could be retired managers, consultants, state employees, even academics.

6. If this is a venture idea you already know something about, you probably already know some other folks who can offer some insights. Talk to them.

7. If there’s an industry association that covers that area, contact them.

8. “Secret shop” potential competitors to learn how they do things.

9. Identify your target customers and then find ways to interview some of them. A dozen interviews can yield great results. Evaluate their willingness to pay; what do they currently purchase that’s more or less similar?

10. Write down everything you’ve learned. You can use the Quick Feasibility Test structure above to organize your work. Crank out some projections based on your research, and run the whole thing (5 -10 pages max) past a half dozen people with business experience. Revise and do more research if needed.

Good luck!

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Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010

Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own

Read my weekly blogs on Social Enterprise and Business Planning