If you’re one of those people who think social business is about social media (I was one too), let us explain it correctly in simple terms.
The truth is that a social business operates in the same markets as existing profit-maximizing businesses. The only difference is that the social business’s main focus is fixing concrete social problems, and the financial aspect is there solely to ensure the self-sustainability of the business.
One of the best definitions of the social business was given by Nobel Peace Prize laureate Professor Muhammad Yunus: “A social business is a business whose purpose is to address and solve social problems, not to make money for its investors. It is a non-loss, non-dividend company. The investor can recoup his investment capital, but beyond that, no profit is to be taken out as dividends by the investors. These profits remain with the company and are used to expand its outreach, to improve the quality of the product or service it provides, and to design methods to bring down the cost of the product or service. If the efficiency, the competitiveness, and the dynamism of the business world can be harnessed to deal with specific social problems, the world will be a much better place.”
To give you concrete ideas about products, you can read a few examples of young people creating social businesses and their products.
Now that we’re on the same page regarding what a social business is, let us walk you through the step-by-step guide. We tried our best to provide you with a short, actionable guide without a lot of fluff.
1. Do your homework
This is a very important part.
Here, you will have to be able to answer these critical questions about your business:
- What concrete problem are you going to solve with your product?
- Who will pay for your product? Why?
- What are alternative (competitive) products and companies? Why will your product or service be better and make people pay you instead of them?
- Also, do the basic math: Calculate the costs vs. revenues you will earn from your product.
It’s important to answer these questions as clearly as possible. Keep in mind that many of your initial insights and plans will change during the process and with new learning experiences. But to start, you have to give your best answers to the above questions, as clearly and thoroughly possible.
If you need expert help to guide you through the venture-building process, we highly advise you to join the Watson Institute’s Summer Accelerator. During the two months you spend in Colorado, US, you will learn how to design, test, and validate an impact-focused project or venture. Apply here by April 15, 2020, to join their next group.
2. Prove it works.
The next important milestone will be to prove on a smaller scale that your solution works. Usually that includes thinking of the most basic but workable version of your product so that you can bring in your first customers (or at least engaged users).
If your product is a web platform or any other software, think about a minimum viable product (“MVP” in the startup world) that would be enough to attract initial users (ideally paying customers but if not, engaged users). For example, it can be a landing page or basic platform that attracts people to sign up and share their email address (if not their own cash).
I don’t suggest investing too much money into building your initial website version. If you do not have coding skills yourself, you can always set up a simple website using Envato Sites or GoDaddy Website Builder.
If you are planning to build a physical product, try thinking about the most basic but still workable version of that product—something that would at least give your potential customers an idea of how your product is going to work and the potential it has. Anything from a signed contract to a memorandum of understanding, invoices, and testimonials will be useful here in proving your initial traction and the market need for your product.
If you can demonstrate that you have initial customers who are willing to pay or at least use your service or product, that is a huge early success and the best indication your social business can scale up and become a successful and impactful business.
3. Find a mentor.
Creating a business can be a lonely and often difficult journey, so start building your network of friends of supporters who can provide you with anything from mentorship to media exposure and even their investment networks. Finding a mentor can be a turning point for your business. In addition to great business advice, mentors can unlock wonderful opportunities for your business.
The best way to find a mentor is to do an initial brainstorming about the top 10 mentors you would like for your business. Ideally, this would be someone who has experience in your business’ field and who can help you with their own experience and network.
Then write a personalized (short but powerful) email to each one of those potential mentors, explaining briefly what you are doing, why are you doing it, and why you decided to contact that person. First, ask them for a short 15-minute call whenever it’s most convenient for them. Remember, your email has to be short, clear, and personalized.
You can contact potential mentors on LinkedIn or by email (here is the full guide on how to find anyone’s email).
4. Legalize your status.
Upon gaining initial traction as proof that your social business has great potential, the next step is incorporating it. That provides you additional credibility when you start talking to investors, potential clients, and anyone else who might become your business supporter.
The key here is to find the most suitable legal form of enterprise that will fit your social business. For example, in the UK the most suitable would be a community interest company (CIC) that safeguards the social mission. The bulk of profits are always channeled into the cause, and businesses assets are protected from being sold privately. Your chamber of commerce can probably tell you more about the options in your country.
5. Apply for funding and business accelerators
If you have already proven there is a market demand for your business, getting accepted and receiving funding from a business accelerator is the ideal next step.
Even the process of applying for funding and business accelerators will be an invaluable business exercise in which you dig even deeper into your business plan.
There are lots of business accelerators out there, but here are some of those that encourage social businesses to join: Y Combinator, Bethnal Green Ventures, Fast Forward, Techstars, 500 Startups, Wayra, Conscious Venture Lab, and Halcyon.
Also consider other sources of funding such as:
- Crowdfunding campaign. Here is the full guide on how to create and launch a successful crowdfunding campaign.
- Grants from governments and other organizations (for example, the Global Innovation Fund). Many of these grants are locally or regionally focused. You will have to do your own research in your own country and region about available grants.
- Angel investors interested in impact investing. If you managed to find a mentor, looking for an investor is a similar process. Here is the full guide on how to find an impact investor, and here is a list of the most prominent impact investors.
Get ready for lots of rejections, rewriting of your business plans, and ups and downs. But that is the integral part of the business game, isn’t it?
After you successfully get accepted by a business accelerator or secure any other source of funding, the next step is improving your product and scaling your business.
If you want to squeeze these five steps into two months of intensive experience in the US, apply to the Watson Institute Accelerator by April 15. You will be guided by a team of expert social entrepreneurs while enjoying your time in the US with other budding social entrepreneurs from all over the world.
Best of luck! Don’t forget to enjoy the challenging but beautiful entrepreneurial journey!