Challenges with For-Profit and Non-Profit Social Enterprises

There’s a great article on business management by Mary Catherine O’Connor, from the Triple Pundit, entitled ‘The Business of Alleviating Poverty.’

In it, she interviews the inspiring founder of Samasource (a social enterprise), Leila Chirayath Janah. Samasource is focused on linking people from developing countries to people in the USA, in order to provide computer-based work. Alot of interesing questions are asked and answered, but the most fascinating response from Leila was in regards to the challenges of social enterprises.

Regarding for-profit social enterprises, she mentions:

While there’s a lot of talk about social investing, ultimately investors who are in the for-profit space have to measure their performance on the returns that they’re getting. That’s starting to change a little bit, but for the most part that’s what you see in the for-profit sector.

Non-profits, on the other hand, face a different type of challenge:

Nonprofits have to run a fundraising business and the service they are trying to provide. Fundraising is about finding the right donors, providing marketing collateral and refining your pitch. I think that’s much more burdensome than what for-profits have to do because you’re selling a mission and a vision to people who are not going to get any return on an investment in your organization.

Interestingly, Leila and her team had chosen the non-profit model of social enterprise.

Challenges in Both For-Profit and Non-Profit Social Enterprise Models

Overall, you’ll come to understand that both models of social enterprise contain systematic challenges. You’ll have to decide up front which sort of model you’ll undertake, and the pros and cons of each.

For-profit social enterprises may sometimes be tied to the desires of investors, particularly investors who seek only the profit aspect of the bottom line. Although, there are a number of venture capital firms and social investors who are willing to invest in social enterprises with the understanding that there is a mutual working of both a social and financial return on investment.

Similarly, non-profit social enterprises may also be tied, particularly to the wishes of donors and to actually finding suitable donors. Therefore, it is very mission-driven, and fundraising may take up alot of time and energy.

Deciding On Your Social Business Model

From my point of view, the suitability of a for-profit or non-profit model will depend on the social issue at hand and the viewpoint of the social enterprise founder and subsequent management. As Samasource deals with the sensitive and challenging issue of refugees, it is understandable why they had chosen the non-profit model in order to reach their goals as the best business management model.