Home / Business Spotlight / Want to launch your own social enterprise? Startup veterans have learned how to do well while doing good

Want to launch your own social enterprise? Startup veterans have learned how to do well while doing good

As founder of The Mission Center, Chris Miller knows one important thing about philanthropy.

“Most people don’t go into nonprofit work because they are passionate about doing accounting,” he said.

Chris Miller

Chris Miller

That’s why The Mission Center exists. Founded in 2010 and housed in the Cortex District of St. Louis, Miller’s brainchild specializes in outsourcing back-office operations for nonprofit organizations.

That’s not just his business plan. It is also his calling. He counts himself as one of many “social entrepreneurs,” a term that has come to encompass a wide array of people who create organizations that straddle the divide between mission-centered charitable work and the standard bottom-line practices of the for-profit world. These aren’t simply enterprises that have a philanthropic sideline. They are businesses where altruism is the central undertaking and baked into the DNA of the operation.

“Being an entrepreneur is one of the hardest jobs. Being a social entrepreneur is twice as hard,” he said. “You are not only focused on a sustainable business model like all entrepreneurs, but you also have to create value for a particular population or a mission space. It is quite difficult.”

Waving the flag

It can be equally difficult just to define the term. Some social enterprises are set up as 501(c)(3)s. Others are for-profit. A few, like Miller’s outfit, choose to designate themselves as an “L3c” a for-profit designation so unusual it doesn’t yet exist in Missouri — which is why The St. Louis-based Mission Center is incorporated in Michigan. Still others use hybrid structures.

Some reject the terminology all together.

Shawn Askinosie

Shawn Askinosie

“First of all, I don’t like the phrase ‘social enterprise,’ and I’ve done everything I can to remove that from our website,” said Shawn Askinosie. “I think it should be removed from business schools. I think people should not call it that.”

Askinosie, the founder of Askinosie Chocolate in Springfield, believes that social entrepreneurship shouldn’t be separated from any other kind of entrepreneurship: Everyone ought to adopt good, sustainable, ethical business practices rooted in kindness and compassion, he maintains.

Profiled frequently in publications ranging from The New York Times to The Wall Street Journal, his enterprise engages in direct trade with cocoa farmers on three continents and has a profit-sharing arrangement with farmers whom he visits personally on an annual basis. Among many other things, Askinosie helps them to open bank accounts so they can bypass middlemen and keep more of their profits, and teaches them to become exporters themselves. The business also helps to fund community development projects from the Philippines to Tanzania and even takes local high schoolers from Greene and Christian counties on trips to those countries to interact with the growers.

“If you are going to be in business, then you have the responsibility and obligation to serve the community — whether that’s your street, your neighborhood, your supply chain, your vendors, your state, the world,” said Askinosie, author of the book “Meaningful Work: A Quest To Do Great Business, Find Your Calling and Feed Your Soul.”

“Everybody should be doing it,” he said. “A lot of people are doing it. They just aren’t waving the flag about it.”

Caught in the middle

Still, the toughest part can be getting enough money to have a flag to wave. Finding backers to invest in for-profit startups is difficult. Social enterprises face an additional challenge.

Theresa Carrington

Theresa Carrington

“First steps are finding other people in that space,” said The Mission Center’s Miller. “There is not a lot of formal support. The government doesn’t invest in this. There are universities that might have a class or two, but there is not a lot of programmatic support like you might see for commercial entrepreneurs. It is really incumbent upon individuals and networks to find each other and support each other.”

Theresa Carrington, founder and CEO of Ten by Three, another St. Louis social enterprise, said she had to fund much of her startup with her own credit cards and lines of credit secured with her house and personal vehicles.

“No. 1 is funding,” she said. “Donors and banks and lenders still don’t understand social enterprises. On one hand, we’re a nonprofit. On the other hand, we generate 75 percent of our revenues ourselves, so we have a more than a million-dollar retail operation that’s running within our walls.”

Carrington’s enterprise pays 2.5 times fair trade prices to purchase handmade goods from the developing world. The United Nations honored it in 2016 for its efforts to fight poverty, including its unique requirement that recipients start three independent streams of income.

Finding income is a challenge social entrepreneurs know all too well. Carrington was thousands of dollars in debt by the time she won the Olin Cup — awarded by the Skandalaris Center for Interdisciplinary Innovation and Entrepreneurship at Washington University in St. Louis in a competition for entrepreneurs to expand opportunities for collaboration, innovation and learning — for her efforts. That helped to bring in funders.

“We’re caught right in the middle,” she said. “If they look at us as a traditional business, we lose money every year because we are a nonprofit. That’s part of our social mission.”

Miller’s advice for taking first steps is logical.

“Identify whatever issue or population it is that you are passionate about, [and] figure out a way to create a program that impacts them,” he said. “Then, on the entrepreneurial side, figure out a business model that is able to sustain that program.”

The structure and the mission

Lauren Conaway

Lauren Conaway

Another question that may float to the top while trying to actualize your business model: What exactly is your business? Do you go for-profit? Nonprofit? Or something else?

“An issue we experienced fairly early on was figuring out how to structure our organization,” said Lauren Conaway, founder of InnovateHer KC, “because we had some opportunities to build some pretty strong for-profit revenue streams, but we also didn’t want to lock ourselves out of seeking grants.”

Conaway, whose organization helps to connect female professionals in Kansas City, eventually created a for-profit entity, although she’s now in the process of putting together a nonprofit subsidiary.

“Cultivate multiple revenue streams so you aren’t entirely dependent on one or another,” she advised. “You definitely want to make sure you are setting yourself up to realize things like donations and grants, but also make sure that you are cultivating revenue streams that can be supportive in the event that you don’t get your grants and you are not able to bring money in on the nonprofit side.”

Miller notes that while a for-profit structure loses out on potential grants that go to charities, a for-profit L3C or benefit corporation does create the opportunity to sell equity in exchange for capital. Moreover, your organization can be more nimble as it does not require a board of governance or as many onerous reporting requirements.

“Social entrepreneurs don’t really care about legal structures on their own,” he said. “What we really care about is which structure is going to most efficiently allow us to see the change we want to see in the world. If you’ve got a business model that aligns with what you are trying to achieve on the social side that doesn’t require grants and donations, then a for-profit is just easier.”

Brian Fogle

Brian Fogle

Brian Fogle, president and CEO of the Community Foundation of the Ozarks, agrees that for-profit is an easier path, particularly if you are going to be pushing a product.

“There are a lot more restrictions than if you are an entrepreneur running your own business and you are doing that off sales,” he said of nonprofits.

However, you should avoid getting so far off-base that you lose your vision.

“What I do think is important, though, is that you are not doing something totally different than what your mission is,” Fogle said. “Just to create a stream of revenue, if it is not related to what you are trying to do, I don’t think that’s a good idea. I think that dilutes your mission.”

Unfortunately, that’s a danger for nonprofits as well. Conaway said one of the things her group struggled with early on was the temptation to engage with other groups in efforts that didn’t align with the reasons for founding the enterprise.

“The fact is that it is really difficult when someone is dangling money in front of you to say, ‘No, I can’t partner in that initiative because it doesn’t speak to our true, original mission,’” she said. “Mission creep is one of those things that keeps me up at night, worried that there is this very shiny grant over here or this corporate partner but in working with them, I’d have to focus on work that isn’t core to our mission.”

Daniel Smith, co-founder of Porter House KC, a social enterprise that assists urban entrepreneurs, said it is a balancing act. Grantmakers and potential partners sometimes want you to do different things, and sometimes you might have to agree.

“That might not necessarily align with your business practices or your goals and aspirations, but to get funding, sometimes you might have to pivot a little bit,” he said.

Diving into the deep end

To know your core mission, the initial step for a social entrepreneur is to define it.

“The first thing we always say is, ‘Is there somebody else doing that?’” said Fogle.

Smith advised trying to get a taste of the mission before you commit to it.

Kyle Smith

Kyle Smith

“Volunteer for an organization that does something similar to what you are wanting to do, or do what it is that you set out to do maybe on a smaller scale to learn about the processes and find out if this is something that you really want to do and something you can really turn into a business to be able to help others,” he said.

Kyle Smith (no relation) of Determination, Incorporated in Kansas City, which helps ex-prisoners look at starting businesses, agrees.

“I would definitely say, test out your ideas before you dive into the deep end,” said Smith. “We started with just our business-support group a couple of times a month just to see if formerly incarcerated people would even show up to a gathering in order to pursue or explore entrepreneurship.”

He also warned potential entrepreneurs not to let their preconceived ideas run wild.

“We have assumptions about what people need or what would be best, but you can learn a lot from actually spending time with people and walking alongside them in their journey,” he said.

Carrington said social entrepreneurs should start with a good group of realistic advisers. Still, determination is the key component, she said.

“Be brave,” she said. “Donors and investors will be looking for your resolve. How committed are you to this idea?”

Melissa Roberts Chapman, a senior program officer with the Kauffman Foundation, recommends an online device called Lean Canvas to determine if your social enterprise has a realistic ring to it. The Kansas City-based foundation focuses on projects that support entrepreneurship, education and civic life.

“It is a really powerful tool that takes you through the process of questioning your assumptions. When entrepreneurs first get started, everybody has an idea that they are passionate about, and they have an idea about the solution that they want to build that they’ve nurtured privately for some time,” she said. “For people to really have the best chance of success, you have to dig in and question those core assumptions you are making.”

Patricia Wolff founded her St. Louis social enterprise, Meds & Food for Kids, in 2003. Now, her factory in Haiti cranks out therapeutic food providing jobs for Haitians and making sales to 14 nations around the world.

“It is exactly the same as if you were going to start your own pizza parlor or doughnut shop,” she said. “You have to have a passion and interest for the thing that you are going to build or make or provide. Then everything falls from that.”

She notes that, in a troubled world, there is no shortage of issues to tackle.

“It’s been very hard, but it has been an exciting journey because if you like to solve problems, we have a huge number of problems to be solved,” Wolff said.

Leave a Reply

Your email address will not be published. Required fields are marked *