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TECHNEWS · Wednesday, July 1, 2020

6 Challenges Facing Social Entrepreneurs

Social entrepreneurs are having an important impact on communities and social relations. Founding socially responsible startups, it is important to know what are the challenges they are facing with, and how to overcome them.

For the majority of social entrepreneurs, goal number one is saving the world.
Goal number two is making sure their business operates properly and successfully. While this approach is morally well and good, you can’t solve the world’s problems if your startup is shutting down.

From basement operations to Silicon Valley enterprises, socially conscious businesses face both typical structural challenges and roadblocks unique to their niche. In an industry where everything has to be squeaky clean, what are these challenges and how do you overcome them?

Finding funding

There isn’t a business in the world that didn’t wish it had more money to invest in expansion and achieving its mission statement. Unfortunately, when it comes to social enterprises this is usually a much bigger concern than for corporate enterprises.

It’s not ridiculous to call finding funding the number one challenge of a successful social enterprise. A great idea is worthless unless you can follow through on it. And that requires not just funding for action, but promotion, structural costs and paying staff.

There are two major challenges when it comes to acquiring funding: convincing investors that not seeing a return for 5-7 years is worth the investment and standing out in a crowd of high-quality competition all vying for support for their critical issue.

One way to overcome this issue is through alternative funding routes. Crowdfunding, in particular, has significantly grown in recent years, becoming a legitimate method of financing a business that also serves as advertising for your cause. It allows you to champion your issue without reciting a repetitive pitch.

Overcoming suspicion

Social enterprises are often met with distrust. The public often questions their true intentions. Charities wonder why they aren’t non-profit. Some media give them little coverage and assume they’ll fail and fizzle away. This is a unique business hurdle to overcome before you’ve even really got started.

Solving the problem of initial suspicion requires proving you’re invested in the cause and moved by the issue. One way to do this is to offer customers the option to choose where their money is going. Rather than looking like an all-powerful business leader who thinks they know best, listen to customers and show you have support from experts.

Many successful social enterprises offer the option for customers to select whether the profit made from each sale goes to your company or fully to solving the issue. If your idea is solid, people will want to see money go back into your business and you can position yourself as willing to go that extra step without destroying your profit margin.

To really overcome suspicion you need to prove you’re committed to your cause and aware of other problems in the world. Integrating practices that show this into your everyday processes is one of the best ways to align yourself with a solution without looking like its part of a marketing stunt. For example, if your business operates a Shopify store you have access to a number of socially conscious community-built apps, which can do everything from automatically offset carbon emission on every order to make a donation to a charity every time a purchase is made.

Being seen making ethical decisions and working your ethos into every inch of your business, can help convincing customers and investors alike you that you have the best intentions at heart with your social enterprise.

Finding good manufacturers

Unaccounted for additional costs can be a death blow for a business, shutting them down before they get a chance to begin their mission.

Take e-commerce as an example once again, the cost of production can be a huge challenge if you’re selling a quality product with specific requirements. Considering all the additional costs of running e-commerce, it can be hard to make it worthwhile. This can lead to you looking for a good manufacturer in a price range they simply don’t exist in.

Don’t skimp on production though. If you stick with anything, make sure it’s keeping your product of good quality. If the process takes longer and costs more, you need to accept that burden. Instead of lowering the quality of production, look for cost-saving options in other areas. Being able to break down your search to find the perfect production company in the early days of your business can help avoid these complications.

Don’t be deterred by the complications and costs quality brings. The type of customer base you’ll attract is more than willing to accept longer delivery times if it means the enterprise keeps going and they’re getting a quality product for a good cause.

Remaining true to your mission

So, there’s a clear issue that’s bothering you and you have a killer idea to solve it. It’s often said that the simplest business ideas are the best, and that’s no different for social enterprises. Moving away from the initial great idea can kill a business and it’s something social entrepreneurs need to be equally wary of.

As your enterprise grows and receives more outside funding it’s natural to feel you can do more, or you may feel pressured to expand by your investors.

Now is the time to remain true to the original mission though. Until you’ve returned on your investment, remain true to your original mission. Otherwise, you risk developing holes in your initial idea and losing relevance. Don’t follow the money into another issue to gain funding.

Lack of clarity in message

Your social enterprise is all about the message. A social enterprise can fail to attract funding and an audience through a lack of clarity in its message. Without the message you’re just another online store, software service, or half-thought start-up, the goal of your social enterprise is what sets you apart and can’t be sacrificed. Weak messaging can destroy a good-intentioned mission like it can destroy a brand.

Make sure the message is articulated properly and your mission clear. Hire copywriters and social media gurus (and give them the right tools to manage your output and source the right topics to focus on) to get the message out there and associated with the brand. Engage with your audience, understand what they want the message to be and tighten up the edges with their influence.

Aligning with investors

As difficult as funding is to acquire for social enterprises, there has still been an upturn in recent years of impact investors looking for opportunities. This brings with it the challenge of keeping the investor on-side and engaged with the project. Not only are investors always conscious of the bottom line, but they’re also not afraid to offer suggestions out of line with your mission to improve it.

While this differs from investor to investor, try to appeal to the side of the business your investor leans most heavily too. If they’re mission-focused, build your reports around the good you’re doing rather than making it profit-focused. Don’t be afraid to keep them at arm’s length if necessary, and know when and when not to accept their ideas and input.

To avoid this problem be incredibly selective with the investors you choose. A shiny pot of money being thrown at your business may seem appealing, but it can come with added interference from people less than inclined to actually help achieve your social aims.

Social entrepreneurs are seen as noble, innovative, and naive all at the same time. Once you’ve started your enterprise your great idea becomes a problem generator with many more than these six to solve, but not losing sight of the reasoning behind why you started the venture is vital.

Rodney Laws

Article courtesy of Rodney Laws (Twitter @EcomPlatformsio), an ecommerce expert with over a decade of experience in building online businesses. 

Ph. credit: Unsplash

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