social-enterprise-business-model

Social Enterprise Business Model

The social enterprise business model combines the commercial logic of the corporate sector and the social impact of the charity sector. Thus, it’s a hybrid model that serves to create companies able to create a social impact, at scale.

Understanding social enterprise business models

In essence, the success of the social enterprise business model relies on a company’s ability to balance profit with positive social impact. 

Unlike a corporate business model comprised of the product, operational model, and revenue model, social enterprise models take a fundamentally different approach.

For one, there is a clear focus on social purposes as the beneficiaries of business activities.

This means enterprises strive to make a social impact and care less about creating and sustaining a competitive advantage.

To put it another way, social enterprises create value outside the business while corporate enterprises capture value internally.

As a result, social enterprise business models have an extra component – otherwise known as the “social impact model” – which drives all business decisions and explains how the social impact is generated.

Five social enterprise business model types

Despite the underlying framework of a social enterprise, there do exist a number of specific business models to choose from.

We have chosen five of them to briefly describe below:

Entrepreneur support model

These social enterprises provide support to entrepreneurs looking to establish their businesses.

Support may consist of training, microfinancing, consulting, or technical assistance.

Examples include economic development organizations and microfinanciers. 

Market intermediary model

Under this model, the enterprise assists a client to help them develop, market, or sell their products and services.

Agricultural, fair trade, and handicraft organizations commonly use the market intermediary model.

Low-income client model

This model involves the social enterprise selling various social services to low-income clientele.

Hospitals and other organizations that offer healthcare services use this model

Employment model

Where clients are provided with job training and employment opportunities.

Social enterprises collect revenue from employee salaries and reinvest it to help those still requiring assistance.

Many organizations that deal with disability, homelessness, and youth disadvantage use this model.

The cooperative model

The last social enterprise business model on our list is one of the most recognized.

Cooperatives are fee-based membership organizations that provide services to individuals with the same needs.

Collectively, these individuals own and operate the organization and benefit if it succeeds.

American employee-owned supermarket Publix is one of many examples.

Key takeaways:

  • The social enterprise business model combines the commercial logic of the corporate sector and the social impact of the charity sector.
  • Unlike a corporate business model comprised of the product, operational model, and revenue model, the beneficiary of a social enterprise’s business activities is society itself.
  • Despite the common purpose of all social enterprises, several different business models have been developed to help them achieve their goals. These include the entrepreneur support model, cooperative model, market intermediary model, low-income client model, and the employment model.

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