Chapter - 3

The terms social entrepreneur and social entrepreneurship were used first in the literature in 1953
by H. Bowen in his book Social Responsibilities of the Businessman.
For the longest time, most entrepreneurs chose to accumulate wealth in more private sectors.
Building a company, hiring employees, manufacturing products and running a well oiled machine
was the best approach to be a successful entrepreneur in days past. Today, entrepreneurs can work
to improve social issues and challenge real world problems through their businesses. A new
business model has emerged which meshes with government and social organizations. Nonprofits
and businesses have teamed up to form a hybrid business model, led a by a new generation of
social entrepreneurs.
Social Entrepreneurship
 Social enterprises are social mission driven organizations which apply market-based
strategies to achieve a social purpose.
 The movement includes both non-profits that use business models to pursue their mission
and for-profits whose primary purposes are social.
 Their aim is to accomplish targets that are social and/or environmental as well as financial:
is often referred to as the triple bottom line.
 Many commercial businesses would consider themselves to have social objectives, but
social enterprises are distinctive because their social or environmental purpose remains
central to their operation.
Social entrepreneurship encompasses the activities and processes undertaken to discover, define
and exploit opportunities in order to enhance social wealth by creating new ventures or managing
existing organization’sin an innovative manner.
Social entrepreneurship is an approach by individuals, groups, start-up
companies or entrepreneurs, in which they develop, fund and implement solutions to social,
cultural, or environmental issues. This concept may be applied to a wide range of organizations,
which vary in size, aims, and beliefs.
Characteristics of Social Entrepreneurship:
 Social Catalysts: Social entrepreneurs are visionaries. They bring fundamental social
reforms by changing social systems and create sustainable growth.
 Socially Improvement: The ultimate aim of social entrepreneurs is social improvement as
against monetary profit.
 Innovative: They are creative and innovative. They apply their ideas to new situations.
 Resourceful: They positively expand their resource pool through collaboration with other
besides maximizing utilization of their present resources.
 Accountable: Social entrepreneurs are responsible to their investors and society as a
whole.
Social Business Ventures
• The entrepreneur sets up a for-profit entity or business to provide a social or ecological
product or service.
• While profits are ideally generated, the main aim is not to maximize financial returns for
shareholders but to grow the social venture and reach more people in need.
• Wealth accumulation is not a priority and profits are reinvested in the enterprise to fund
expansion. The entrepreneur of a social business venture seeks investors who are interested
in combining financial and social returns on their investments.

Diagrammatic representation of Social Entrepreneurship

Role of Social Entrepreneurship:
1. Social entrepreneurship adopts a mission to create and sustain social value.
2. Identifying and pursuing new opportunities to serve that mission.
3. Engaging in a process of regular innovation, adoption and learning.
4. Acting boldly without being limited by resources currently in hand.
5. Exhibiting heightened responsibility to the constituencies served and for the outcome
created.
Innovation and Entrepreneurship in a social context:
Social entrepreneurship involves creating new products or services to address social or
environmental needs. The products and/or services are made available through existing market
structures. These are enterprises with a social betterment goal that are structured to make a profit.
This business model creates shared value, meaning that the organization simultaneously generates
financial benefits and environmental and/or social benefits.

Social innovation is about creating new social structures that allow issues of justice, education,
environmental protection, sustainability and/or community development to be reframed so that
new solutions can come forward. Social innovators question the premises on which existing social
structures are built and then reimagine systems and institutional relationships to bring about
change. The distinction between social entrepreneurship and social innovation is fluid, and there
is often overlap between the two changemaking approaches.
Social innovation and social entrepreneurship may work through a variety of organizational
architectures to enable change. We can think about organizations as being on a spectrum: At one
end of the spectrum are not-for-profit entities that fill vital social and environmental needs through
traditional charitable approaches, relying on donations as their primary source of funding. At the
other end of the spectrum are for-profit businesses that fill customer needs through market-based
mechanisms: selling the product or service for what the market will bear. Many for-profit
companies incorporate sustainability and socially responsible practices into their operations and
culture, but they are still primarily focused on the financial bottom line. In between these two ends
of the spectrum are a range of organizational architectures that innovatively address social and
environmental needs by developing new products and services and/or through creative structures
for the delivery of these products and services. This space between traditional not-for-profit and
traditional for-profit organizations encompasses social innovators and social entrepreneurs.
Social entrepreneurs are the engines of innovation. Social innovations are new strategies, concepts
ideas and organization’sthat meet the social needs of different elements which can be from working
conditions and education to community development and health.
Social innovation and enterprise is a tool for social change. Social entrepreneurship helps to
acquire the knowledge, skills and mindset necessary to introduce a new social entrepreneurship
venture. It focuses on the unique entrepreneurial processes associated with the creations or
discovery of positive social change.
Non-Profit Organization:
A non- profit organization is also known as a non- business entity. It is an organization whose
purposes are other than making a profit. It includes- churches, public schools, public charities
public hospitals etc.
A nonprofit organization is formed for the purpose of serving a public or mutual benefit other than
the pursuit or accumulation of profits for owners or investors. The nonprofit sector is a collection
of organization’sthat are private (not government); voluntary; and benefit the public.
Examples include, but are not limited to:
 Charities
 Social welfare or Advocacy Organization
 Professional /Traditional Associations
 Public Hospitals and Schools
 Religious organizations etc.
Purpose of nonprofits:
According to Lester Salamon (America’s Nonprofit Sector), the nonprofit sector exists to serve
four critical functions:
 Service Provision: Nonprofit organizations provide programs and services to the
community. Oftentimes, nonprofits are formed or expanded to react to a community need
not being met by the government.
 Value Guardian: Nonprofit organizations provide a means by which members of a
community can take action in an attempt to change the community they live in. These
actions may take the form of developing a local neighborhood watch program or, on a
larger scale, developing an organization that responds to world relief efforts.
 Advocacy and Problem Identification: Nonprofit organizations provide a means for
drawing public attention to societal issues. Nonprofit organizations make it “possible to
identify significant social and political concerns, to give voice to under-represented people
and points of view, and to integrate these perspectives into social and political life.”
  Social Capital: Nonprofit organizations develop a sense of community among the citizens
by providing a means to engage in social welfare.
Steps in Startup and early stage venture a non-profits organizations:
The following are the steps in startup process:
 Idea of Self- Employed.
 Analysis of Entrepreneurial work Environment (Social Issues).
 Project Identification.
 Selection of the Product.
 Selection of Organization.
 Preparation of Project Report.
 Location of Enterprise.
 Arrangement of Finance
 Provisional Registration.
 Apply for Power and water connection.
 Recruitment and training of workers.
 Procurement of Raw materials
 Commencement of Manufacturing.
 Marketing.
 Permanent Registration.
 Profit Generation

Financing and Risks:

 The management and protection of financial resources must be a concern for all non-profit
organizations.
 Financial resources falls into three categories i.e. money, goods or services.
 The risks in financial management are any actions that contribute to the reduction in value
or loss of any of the organization’s financial assets.
 Fraud is the most common crime perpetrated against non- profit organization’s
 Funds inappropriately expanded can lead to the loss of tax exempt status of the
organization’s or other legal actions.
 Market risk as per demand and supply; when demand is not generated from the market.
 Due to competitive nature of product manufacturing process of different industries due to
this product cost decreased and financial risk appears in the existing industries.
Financial Resources
Cash flow
How fast can a company afford to grow? Starting a business requires cash, and growing a business
requires even more - for working capital, facilities and equipment, operating expenses and more.
A profitable company that tries to grow too fast can run out of cash - even if it’s products are great
successes.
Building and supporting a regular, sustainable and healthy working capital cycle to support and
underpin growth is also fundamental to the success of a scaling business.

Financing growth
To build a sound financial basis for business growth, you must be able to forecast and understand
what investment is required. It is rare to expand a business without some kind of finance.

If we require additional funding, what sort of appropriate financial lines do we need to put in place?
Are we going to take on debt or are we going to sell equity in our business?

Business borrowing can come in many forms, from traditional bank overdrafts and loans, to more
flexible, growth-centered working capital credit solutions such as invoice finance or revolving
credit facilities for supplier payments.

If we’re looking for larger, longer term financial assistance to grow our business to the next phase
of it’s development, then selling equity to an investor might be an option. Finding the right investor
for your business is critical, and many businesses have suffered due to a misalignment of priorities
and outlook between them and their main investor.

Business Strategies and Scaling up

Scaling up a business brings a multitude of new and unfamiliar considerations. Additional financial
obligations, increased delegation, an increasingly complex infrastructure, and demands on your
supply chain can all push you outside your comfort zone.

If our business is already running successfully, and we have the drive, planning and support to
make it happen, then we can achieve remarkable things.

Why Scale Up?

 When deciding whether scaling up is the right move for your business, the first thing to
understand is why you want to expand your business venture.
 Take some time to consider your goals. What do you want for your family; what lifestyle
do you want to develop; what are your personal ambitions? How does running an expanded
a business fit into this?
  Crystallise your thoughts around the expectations for your business growth. Is it for
increased personal income; is it for capital growth, perhaps to sell the business at a later
stage?
 Before you decide that scalability is the answer, ask yourself: Is this really what I want?
 If you’re positive that you want your business to expand, how do you know if now is the
right time?

Signs that it’s time to scale up

There are many signs that indicate that a business has reached a critical point in it’s development
and growth, and is ready to take it to the next level. If your business and it’s market is displaying
most of the characteristics below, you could be well placed to expand your business venture.

1. Financial: Your business must have strong cash flow and a healthy sales cycle, with
returning customers and a solid pipeline. Simply being profitable isn’t enough. If you
always have cash left over after paying your outgoing costs, and retain a healthy revenue
stream, then your business could be in a strong position for expansion.
2. Operational: Are your business operations optimised and running smoothly? Are your
customer experiences and your business processes all optimised? Consider your current
supply chain. If customers have to be turned down due to a shortage of staff, no stock in
your warehouse, or simply because there are not enough hours in the day, then it may be
time to scale up. Do you have quality employees with skills that allow you to be strategic
rather than micro-manage your business? That’s a good sign too.
3. Business Goals: If you have set SMART goals for your business and are beating all of
them year after year, expanding your business could well be your next best move. These
goals can be related to increased revenues, market share, customer satisfaction and
customer retention, or reduced waste, cost of customer acquisition and employee mix.

Why Make a Plan?

When you start scaling your business, you must have an idea of where you are, where you want to
be and how you’ll navigate between the two. Planning must be both operational and strategic.
Having a well-structured thinking process and embarking on a thorough programme of planning
before scaling your business, maximises the chances of success.

Planning helps to build:

1. Focus within the organization: Everybody fully understands what their job is and what
they need to do to achieve the strategy
2. More controlled growth: Scaling is more controlled and there’s more ability to monitor
that growth as you go along
3. Agility and resilience: You have the ability to act quickly if things need to change.
 4. Stakeholder confidence: In the ability of the management team to deliver the strategy,
which in turn means higher likelihood of investment, employee dedication and overall
success.

The Risk of Opportunistic Growth:

When growth is approached in a more opportunistic, unplanned way, the converse is likely to
occur:
a) Uncontrolled and unstructured activity: The growth is likely to become more
opportunistic, leaving your scaling up process more open to chance and exposed to the
winds of change.
b) Instability: Your business is therefore less likely to be able to accommodate peaks and
troughs in workflow.
c) Quality issues and mistakes: As your business struggles to accommodate the peaks of
demand that scaling up of your sales, marketing and distribution processes will bring upon
your infrastructure and strategic direction.
d) Pressure on cash resources: Without a thorough financial forecast and long term cash
flow plan, peaks in demand or expenses that come as a result of your growth will place
your business under potentially life-threatening cash flow pressure.