How social enterprises can generate profits: 5 innovative business models

Although social enterprises are businesses that prioritize social and environmental impact, goals and social missions differ from business to business. Running a social enterprise does not come with a one size fits all approach. 

The business model you choose for your business should be one that aligns with your goals and objectives. You can generate a lot of profit as a result of your choice of business model. Whether you have one that you’re currently working with or not you can use additional innovative models to complement your business. 

 Here are five innovative business models that you can use as a social entrepreneur to generate profits while also making a positive impact:

1. Pay-what-you-can

Just as the name suggests, this model allows customers to pay what they can afford for a product or service, ensuring that everyone has access to your product or service regardless of their income levels.

This model has gained popularity in recent years, particularly in the food and beverage industry. Many restaurants and cafes have implemented pay-what-you-can policies to reduce food waste and provide meals to those in need.

 In addition to promoting accessibility, this model can also foster a sense of community and generosity among customers. Like some businesses, you can take the pay-what-you-can model a step further by allowing customers to pay it forward, buying a product or service for someone who may not be able to afford it. This not only helps those in need but also creates a culture of kindness and empathy. Overall, pay-what-you-can is a powerful tool for promoting equality and fostering a sense of community whilst generating profit. 

2. One-for-one/Buy-One Give-One Model

With this model, you can create impact directly because for every product sold, a product is donated to someone in need. This can be a powerful way to make a positive impact while still generating profits allowing customers to make a social impact with their purchase.

There are several companies that have successfully implemented this strategy to make a difference in various industries. For example with the popular brand TOMS Shoes, for every pair of shoes sold, TOMS donates a pair to a child in need. Since its inception in 2006, TOMS has donated over 100 million pairs of shoes. 

In addition, for every pair of socks sold, Bombas donates a pair to a homeless shelter or organization that helps those in need. The company also focuses on creating durable, comfortable socks that are specifically designed for those who are homeless.

When you adopt this model you’re not only helping those in need, but you’re able to create a sense of purpose for consumers who want to make a positive impact with their purchases. It's a win-win situation for everyone involved! You can segment your customers based on their willingness to create a positive impact and provide diversify your product offerings to encourage them to make purchases. 

3. Circular economy

As an individual running a social enterprise you can embrace circular economy principles by designing products that are made to be reused or recycled, reducing waste and generating revenue from the sale of recycled materials.

In addition to designing products that are made to be reused or recycled, you can implement a closed-loop system in which waste from one process becomes a resource for another. 

You can also encourage customers to pay for access to a product rather than owning it outright. This can encourage longer product lifetimes and reduce the amount of waste generated.

Consider adopting a sharing economy, in which products or resources are shared among multiple users. This can reduce the need for individuals to purchase new products, and can also provide revenue streams for the social enterprise through rental or subscription fees.

Embracing circular economy principles, will reduce waste which will positively impact the environment and generate revenue from recycled materials. 

4. Social Franchising

Imagine a world where multiple businesses are doing good and creating impact in various parts of the world. That’s exactly what social franchising represents. This model allows you to replicate your successful business models in different locations and you’re able to generate revenue through franchise fees and royalties.

With the increasing demand for social impact and responsible business practices, social franchising has emerged as a popular method for scaling social enterprises. 

Social franchising allows you to expand your impact and reach more communities without compromising your social mission.

Assess your social enterprise, business model and impact you’ve been able to create. With proper training, and ongoing support, social franchising can help other local entrepreneurs replicate the success of your enterprise in their own communities.

Apart from generating revenue through franchise fees and royalties, implementing a  social franchising model can create jobs, support local economies, and provide essential goods and services to underserved communities.

Take time to carefully plan if you are interested in incorporating social franchising in your business to ensure that your social mission is not diluted or compromised. It's important to find the right balance between scalability and social impact, and to prioritize transparency, accountability, and shared values throughout the franchising process.

5. Cross-Subsidization

Being passionate about a particular project without the needed support can be daunting. Not everyone will be as passionate as you are or would like to give to your cause. Cross-subsidization is a business model that involves using profits from one product or service to fund the development of another that has a high social impact but may not be profitable on its own.

This model can be used in the healthcare industry to fund research and development of new treatments that may not be financially viable otherwise. However, it's important to ensure that the profits being used for cross-subsidization are being generated in an ethical and sustainable manner, and that the impact of the subsidized products or services is being carefully monitored to ensure they are having the intended effect. Don’t compromise to create good as it defeats the purpose of what you are trying to achieve.  

Conclusion

You can touch millions of lives directly or indirectly through your social enterprise if you decide to start now! Consider implementing one or more of the business models we’ve discussed; pay-what-you-can, one-for-one, circular economy, social franchising, and cross-subsidization. Endeavour to choose a business model that aligns with your goals and your social mission. Take the time to carefully plan with your team before going ahead to execute any of these so you can combine financial sustainability with social impact.

‍

‍