How to Set Up a Social Enterprise Step-by-Step
25 March 2021
Want to change the world for the better? Take action: Set up a social enterprise to fund the change you want to see.
This is your essential step-by-step guide to setting up a social enterprise. We’ll cover the actions you need to take, the decisions you need to make, and the key things you need to consider to reduce risk and find success.
What Is A Social Enterprise?
A social enterprise isn’t quite a business, and it isn’t quite a charity. It’s a bit of both: An organisation that sells goods or services in order to fund social programmes. Most charities depend on fundraising, grants and donations. This is where social enterprises differ. They instead rely on a sustainable revenue model.
Social Enterprises offer goods or services, just like a regular business. However, unlike a regular business, the aim is not to maximise profits. Instead, a social enterprise will channel revenue into their ongoing operation, and into the social programmes that will help them achieve their goals.
Can Social Enterprises Distribute Profits?
Another key difference between a social enterprise and a charity? Social enterprises can pay up to 50% of their profits to owners and shareholders. By law, charities are simply not allowed to do this. In this way, running a social enterprise can enable to you to make a personal profit while effecting real change.
How to Set Up a Social Enterprise – Step-by-Step
If you want to start a social enterprise, first you need to define what you want to achieve, and how you want to achieve it. Then there are specific steps you’ll need to take to ensure that everything’s above board:
- Choose your cause
- Do your research
- Advice, inspiration and guidance
- Your big business idea
- Secure funding
- Register your social enterprise
- Marketing push
- Long-term vision
We’ll explore each of these in detail below.
Step 1 – Choose Your Cause
What exactly do you want to change?
It’s not enough to say, “I want to save the environment.” We all want to save the environment. So how exactly are you going to do it? It’s better to say, “I want to plant more trees,” or “I want to help companies reduce their paper usage.”
Also, it’s not enough to say, “I want to help disadvantaged people”. How do you want to help them? By employing them directly? By offering them training and development opportunities?
Your social mission should be easy to explain and easy to understand. The more specific you can be about your mission, the easier you’ll find it to get the support you need.
Step 2 – Do Your Research
Once you know what you want to change, do your research to determine how you’re going to change it.
Look for local schemes, causes, and initiatives. These are the people and organisations that you can fund or support with the income from your social enterprise.
Step 3 – Advice, Inspiration, Guidance
Want to know how to start a successful social enterprise? Look to the people who have already achieved what you hope to achieve.
Here are some social enterprises that you might have heard of:
- The Big Issue – They produce and distribute a magazine about key social issues with the express purpose of helping homeless people make a living and get off the streets.
- Fifteen Restaurant – Helping disadvantaged youth, including those with substance problems, the unemployed and the homeless, to build confidence and find long-term employment as chefs.
- TOMS Shoes – A shoe shop with a difference: For every pair of shoes you buy from them, they’ll donate another pair to a child in a developing country.
- Baron Fig – They make excellent notebooks, and they plant trees to offset the paper they use.
Each of these enterprises has identified a problem, and found a way to fix it. Let this idea guide your research: For every problem, think of a solution. And for every solution, think of a way you can fund it via products or services.
At this stage, try reaching out to people from established social enterprises. Ask to meet them for a coffee and a chat, even if it’s over Zoom. Many in the social enterprise industry will be more than happy to talk about their mission and their solution.
Step 4 – Your Big Business Idea
Many charities exist to raise awareness. A social enterprise isn’t a charity. It’s a business. Your focus isn’t on starting conversations, it’s on making money to fund social change.
So you’ve thought about your mission and you’ve done your research. You’ve talked to the people who have made their social enterprises happen. Now think about your plan: What exactly are you going to do to achieve your goal? And what products or services are you going to offer to fund this mission?
At this point, you need to define your market too. Who’s going to buy your products or services? Is anyone else offering what you plan to offer? If so, how will you stand out in a crowded market?
Step 5 – How to Get Funding for a Social Enterprise
All businesses have start-up costs. So all businesses need start-up funds. But don’t worry if you haven’t got a large sum of cash to hand, or a wealthy donor in mind. There are many ways to get the funding you need.
The School for Social Entrepreneurs has an excellent resource on their website listing grant providers and social investment schemes. For each source of funding, they outline who the funding is for, with key contact links to get you started.
If you know you’re going to struggle with the financial side of your social enterprise, consider appointing an accountant. Through helping with things like funding, taxes and cashflow, a good accountant can pay for themselves in no time.
Step 6 – How to Register Your Social Enterprise
It’s time to make everything legal! As your social enterprise is a business, you have a legal requirement to register it with the UK government. You have numerous options here. You could register as a limited company, a charity, a co-operative, a sole trader, a partnership, or a community interest company.
How you choose to register your company will determine many things, including the type of funding you can receive, the amount you can pay yourself as a salary, your personal liability in your company, as well as your tax obligations.
The path you choose will depend on your personal circumstances and your mission as a social enterprise. But for a more thorough explanation of what each option means, head to the government’s website, where you’ll also be able to start the registration process.
Step 7 – The Marketing Push
At this point, if all’s gone to plan, you’ve:
- Defined your mission.
- Identified your business plan.
- Done your market research.
- Secured funding.
- Registered your social enterprise with the UK government.
The next step is obvious: You need to make a lot of noise to ensure that people know who you are and what you’re doing! It’s time to start marketing.
There are many long books about marketing businesses and social enterprises. We simply don’t have room to talk about designing a marketing strategy in any great detail here. But if you’re struggling with where to start, consider the following essentials:
- Website – A place to talk about your mission, and your plan. If you’re selling products as opposed to services, your website can also act as an online store, to help you reach customers beyond your local area.
- Social Media – There are many social media platforms out there, but you don’t need to sign up to every single one of them. With some additional research, it should be easy to determine the platform that’s most popular with your target audience. Then it’s a case of sharing your story to spread the word about your mission, gaining support and customers as you go. It’s a long-term process, so don’t expect overnight success. But many social media platforms allow you to pay for exposure, if you want to reach a lot of people quickly.
- Offline Marketing – Posters, leaflets, pamphlets, press releases. Where does your target market hang out? What publications do they read? What TV shows do they watch? Once you understand this, you’ll know where to target them, and how.
- Word of Mouth – Remember earlier, we talked about how important it is that your mission statement is easy to explain and understand? The simpler it is, the more people will talk about it. Come up with something so simple, so brilliant, that people will naturally tell their friends and family about you. And of course, commit to offering excellent customer services. You’re a business, after all. So treat your customers right, and they’ll treat you right too!
Step 8 – The Long-Term Vision
It’s hard work to set up a social enterprise. But it’s perhaps even harder to maintain a successful social enterprise in the long-term.
You need to think about two things here:
- Proof that you’re making a difference. Your social enterprise exists to make change. If you can prove you’re making a genuine social impact, you’ll find it easier to secure support and funding in the long-term. You’ll start to gather case-studies and other amazing stories that demonstrate your successful model, which could in turn kindle your future growth. So think about the sort of things you can measure to prove you’re making a difference, and start measuring them as early as you can.
- Plan for long-term growth. How might you grow your social enterprise operation? Could you expand your market into different cities, or even different countries? Could you pivot so as to broaden the causes you support? You could even start offering consultancy services, to help other businesses work towards your shared goal.
Finally, like with any business, running a social enterprise can be risky. Things can go wrong, and if you’re liable for mistakes, it could cost you dearly.
You need to ensure that you have the appropriate insurance cover in place. At Hazelton Mountford, we offer specialist social enterprise insurance to cover your unique requirements as a not-for-profit enterprise. Head here to learn more.