Prejudices on Social Entrepreneurship

March 20, 2013

Here are eight myths on social entrepreneurship that we wish to examine as well as try and dispel.

 

Myth No. 1: Social enterprises are exclusively non-profit organisations
This myth is the most widespread. In reality there are various forms of social businesses. If we look for these types of companies, we’ll find that many of them are profit-orientated or exist in the form of a hybrid association (part profit, part non-profit). What is important here is that the solving of societal problems remains in the spotlight and not the monetisation.

 

Myth No. 2: Profit-orientated business doesn’t have anything to do with social values
The profit generated by business activities is nothing more than the compensation for the risk carried by every entrepreneur and the time invested in the company because there is no guarantee of success. Everyone strives for a reward for that what they accomplish, above all, when no-one else is prepared to take a similar risk. As long as social businesses tackle societal problems and sensibly reuse the profits generated, and this solely depends on the attitude of the entrepreneur, there are no objections to making profit.

 

Myth No. 3: Social entrepreneurship only makes sense in developing countries
There are actually many societal problems in developing countries but you definitely cannot assume that everyone living in highly industrialised countries has a good quality of life. Societal problems exist in Germany as well, for example, child poverty. In particular, due to the aging population in Germany there are many opportunities for social businesses. However, this is not the only area in Germany or other industrial countries where opportunities for social businesses exist.

 

Myth No. 4: The foundation of a social business only requires low-cost investment
Anyone wanting to start a social enterprise should not underestimate the investment needed for it. It would be naive to think that a social business is a “low-price” project. Even if social entrepreneurship concentrates on solving societal problems, that doesn’t mean you get everything for free when you start up a social enterprise. The expenses here are usually not higher or lower than in founding a traditional start-up.

 

Myth No. 5: Social entrepreneurship is a simple matter
Many outsiders or even social entrepreneurs, who are at the start, take the view that they only have to offer a charity product/a charity service or develop a business model built on charity and the customers will come automatically.

 

However, several studies have shown that people only opt for a sustainable product or service when the following conditions are fulfilled; these include quality, service and price. In the case of an innovative product, customer benefits also play an important role.

 

Just imagine going into a shop and buying something. If you come to the conclusion that the quality or service is reprehensible, then it makes absolutely no difference if your own money is going to a charitable project or not.

 

Myth No. 6: Social entrepreneurs do not have to worry about finances
Another myth related to social entrepreneurship is the assumption that as a social entrepreneur you don’t have to worry about the financial performance of your company. The truth is that the social aspect alone cannot determine success. In the same way that traditional companies have to, the social entrepreneur also has to examine costs to remain successful in the long-term.

 

Myth No. 7: A social business has to be (inter-)nationalised
Obviously every business should be slightly scalable in order to, for example, keep fixed costs as stable as possible during an expansion of the business. As a social entrepreneur it is however, not really necessary to think big. Many social businesses are successful on a local level. However scalability increases the chances of success.

 

Myth No. 8: Social entrepreneurs are not proper entrepreneurs
Although social entrepreneurship is different to classical entrepreneurship in many ways, social entrepreneurs still have to adhere to important business principles: Efficiency, profitability, growth and so on. In contrast to classical business, however, there is the social aspect involved in social enterprise.

 

The founder of a social business has to analyse the market, write up a business plan and manage the company just like any other entrepreneur would. A social business also rests on the pillars of procurement, marketing, sales, customer service etc. In this respect, the social entrepreneur is just like any other “normal” entrepreneur.

 

(See the original posting in German here http://www.gruenderszene.de/allgemein/social-entrepreneurship-mythen )

Anton Nagatkin
Anton Nagatkin

Anton Nagatkin is the founder and editor-in-chief of the platform social-startups.de. He studied International Business at the Business Technical College of Higher Education of Economics in Paderborn, Germany. During his degree, which primarily focused on the question of which strategies businesses can follow to maximise profits, he tackled the question of whether pursuing profits ought to be the most important goal of an enterprise. Due to his strong interest in the establishment of companies and the solving of societal problems, he decided to create the online platform social-startups.de, which considers both these issues.

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