Risky Business

Sections of this topic

    There’s just no way to avoid it. You might fail with your social enterprise. Lose your shirt. Wish you’d never started it. There’s no safety net for social enterprise, and there never will be.

    The U.S. Census Bureau reports that half of business startups with employees are gone five years later. Social enterprises probably do a bit better than that. So perhaps your odds are a bit better than 50-50. But it’s still risky business.

    Yet all is not lost. There are things you can do to reduce risk. Write a business plan. Need help? Review the Free Management Library and blog on business planning. (Full disclosure: I’m the author.) The blog is currently running a series about feasibility testing, a central part of good business planning. That means lower risk.

    Also, don’t forget the “enterprise” part of social enterprise. Many nascent social enterprisers behave as if awareness of their social impact will translate into sales and profitability. While in certain circumstances people will purchase, and even pay extra, for something that creates a desirable social impact (think Girl Scout cookies), most of the time they won’t. Or if they will, it’s only if the product meets or exceeds their expectations. Fair trade coffee sells if it tastes great, but if it doesn’t, no matter how much the other stuff exploits indigenous Latin American farmers, it sits on the shelf. That particular social premium ends at their taste buds.

    Finally, failing isn’t as bad as it’s cracked out to be. Most successful entrepreneurs hit their stride after failing a few times. But each time they learned important lessons. So my final tip for this risky business is to decide that you’re OK with failure. Stuff happens.