In the course of your work with non-profit organizations, it’s only natural that you have come across clients who want to start an entrepreneurial organization that serves to solve a problem. These types of ventures are noble, and their financial returns blend social benefit with financial revenues, meaning that oftentimes these organizations are for-profit, rather than non-profit. In addition to determining their for-profit or non-profit insurance coverage needs, your social enterprise clients must also ask themselves if they will be able to generate enough revenue and attract enough investment to cover their costs and grow their activities.
Social enterprise organizations depend on investors looking to fund a profitable company that will create social and environmental change. While the social mission component of these organizations does add a layer to the mix of value for a company for many investors and entrepreneurs, the main challenge of funding a social enterprise is the fact that investors often assume the organization is nonprofit. In reality, it’s not about donations; it’s about investment, and these organizations cannot help the people they intend to without that important financial backing.
While a typical business may be able to use its balance sheet and business plan to offer different combinations of risk and return to many different types of investors (such as banks, bond funds, venture capitalists, etc. social enterprises don’t have this advantage. Investors typically are concerned that there is no accurate way to measure the financial impact these social enterprises will create, and don’t know how to figure out that the company’s goals are really going to happen the way the entrepreneur says and have the intended impact.
In our next blog post, we will explore some possible solutions for social enterprise funding. At Charity First, we understand the unique funding needs of not only non-profit organizations, but their for-profit counterparts. For more information about our products and services, please contact us today at (800) 352-2761.