Joe Johnson, PhD
Entrepreneur. Investor. Startup Expert.
The rise of social entrepreneurship suggests that many people believe that one can have a successful business that also addresses social issues such as food shortages, homelessness, poverty, and more. Sounds ideal, right?
But, how do you measure success? Is it in profitability or in impact? Is it in ROI or in lives positively affected? Well, ideally, it’s both. That’s a pretty tall order, though, which begs the question: Can you really succeed as a social entrepreneur?
The Rise of Social Entrepreneurship
Social entrepreneurship is idealism on a large scale. It’s about taking big ideas that can change the world and making them come true. The past couple of decades have seen a rise in social entrepreneurship. Is this ego or sound business?
As with many things in life, it depends. While many people enjoy supporting businesses which they know give to the community in some way, there’s a lack of research regarding the failure and success rates of social business.
Social entrepreneurship over the past three decades has increased, but that probably means there have been plenty of failed business ideas, as well. The Stanford Social Innovation Review estimates that 50% of social businesses probably fail within five years, assuming the same failure rate as other business ventures.
Social entrepreneurs aim to fix a real problem in the world, but not every idea makes for a sound business or a good solution. Coming up with new ways to attack old problems (or even new problems) can be difficult. There isn’t always sufficient research to support a clear path or to ensure that a venture is working as it should.
Not only did they find that the community’s motorcycles were in poor condition, they discovered a further need for healthcare workers to have reliable transportation. Because they hadn’t previously visited the area they wanted to help, they didn’t have a full understanding of the problem. With the new information in hand, they were able to formulate a better plan to help the community.
Measuring the Success of Social Entrepreneurs
According to the Schwab Foundation for Social Entrepreneurship, the success of social entrepreneurs should be primarily measured by “…the social and/or ecological value creation.” Essentially, they suggest that the importance of social entrepreneurship is that it actually effects change in the manner intended. While the financial aspect is important, especially if you want the business to be self-sustaining, it is secondary to effectively addressing a social issue.
You’ve probably seen some items sold as part of a social business. One that has gained massive amounts of popularity is TOMS, the shoemaker.
TOMS, which began by providing shoes to children in need when consumers purchased a pair of their slip-ons, has expanded their consumer offerings as well as their social mission. According to Investopedia, Blake Mycoskie, the founder of TOMS shoes, and his company have “…provided those in developing countries 35 million pairs of shoes and 67,000 weeks of safe water.
Additionally, the TOMS Eyewear program has helped to restore sight in 325,000 individuals by giving recipients prescription glasses or surgery.” Pretty amazing what a simple idea can accomplish. (You can read about why Blake started TOMS at esalen.org.)
Part of the success of a social business comes from research. In order to solve a problem, it must be fully investigated and understood. It’s necessary to ask questions and make observations, as well as to examine failed solutions, so that new solutions can be found.
For example, businesses that aim to provide clean drinking water must not only look at distilling water or building plumbing systems, but at the obstacles to those solutions, whether they have been attempted before, and why they didn’t previously work. Through this process, it may be possible to divine a new solution or method that can help solve the problem while creating a sustainable business model.
Lending for Good: Microfinancing
Kiva and microfinancing is also another great example. Kiva has created a micro-lending platform or market, if you will, where people like you and I can go and find microloans that we want to support. I didn’t come up with the model but I have used it to help fund over 7,500 microloans to underprivileged entrepreneurs in over 75 countries without charging interest (see: https://www.kiva.org/lender/drjoejohnson).
The reason for my small contribution is due to the genius of the people behind Kiva and their social entrepreneurial model. They make is so easy to fund microloans to needy entrepreneurs. Since 2005, Kiva has crowd-funded over a million loans, almost $1 billion in microloans, with a repayment rate of between 98 and 99 percent.
Choosing Your Path to Social Entrepreneurship
Social entrepreneurship isn’t a trend, it’s a legitimate mode of business that takes into account passion, the possibility of effecting change, and the ability to create a sustainable business that helps the world while also taking care of your needs.
If you’ve considered becoming a social entrepreneur, chances are there was some fledgling thought that inspired the idea. You may have found a social problem you are suited to fix. But to do so, you’ll have to work hard and thoroughly research the relevant issues.
Explore the feasibility of changing the world with your business model – and don’t just look for success stories. Face the failures and learn from them. Research your ideas and give your elevator pitch to a few trustworthy friends and see what they think.
Research and planning are integral for a successful business and should not be bypassed or rushed. Take your time and check out the market before getting your feet wet.
Every business idea faces the risk of failure, especially social enterprises, because of the added concern for measuring impact vs. profit alone. However, if have a great idea, a good strategic plan, and you’re ready to work hard, there’s a chance you could be the next Blake Mycoskie.
About the Author
Dr. Joe Johnson is an entrepreneur, investor, and startup expert. He is the founder and principal of GoodField Investments and the GoodField Foundation (www.GoodField.com).
Joe has a PhD in Entrepreneurial Leadership and an MBA. He is the author of the upcoming book on The Science of Why Most Entrepreneurs Fail and Some Succeed.
Most importantly, he is the incredibly blessed husband of one amazing wife and father of six wonderful children, and resides in Bradenton, Florida. For more information on Dr. Johnson and his work, go to www.JoeJohnson.com.