The Beginner’s Guide to Starting a Social Impact Business
Table of Contents
As a human being who needs things and buys products, you have probably heard of or engaged with brands with a social mission. And if you’re pondering about starting a business, you may wonder if incorporating a social mission is right for you. You can do this! Starting a social impact business is very possible with a little grit and motivation. When you have a good reason for something you’re grounded in passion to drive you forward, so now is the time to execute.
The truth is your timing is perfect because there’s no better time than now to start a social business, as people increasingly desire to be associated with brands that are ethical:
- 56% of US consumers have stopped buying from companies that are unethical.
- 63% of consumers feel that ethical issues are becoming more important.
- 58% of consumers revealed that buying ethically produced products makes them feel good.
If you’re really stuck starting, start here: I Want to Start My Own Business But Don’t Know What to Do!
And, if you’re struggling to come up with your social impact idea, we’ve got you covered. Check this out: Stop Struggling to Find Your Social Business Idea and Read This!
However, it’s not always easy to wrap your head around all the intricacies of starting a social business.
This guide will share some insights from the trenches and answer some common questions:
What’s a Social business?
The concept of social entrepreneurship has evolved rapidly over the past few years, blurring the lines between traditional (for-profit) business, government agencies, and non-profit sectors.
The Social business Alliance defines social business as:
“Organizations that address a basic unmet need or solve a social problem through a market-driven approach.”
Social entrepreneurship often promotes a “triple-bottom-line” approach that simultaneously seeks profits, social impact, and environmental sustainability. In other words, social businesses are organizations that use business principles to achieve social aims and make money in a socially responsible way.
Driven by a deeper purpose beyond profit, social entrepreneurs solve social issues through innovation by creating systematic changes that are often disruptive. There are steps you can take before you make the decision to take the leap!
For-Profit vs. Non-Profit Social Business
Traditionally most social businesses have adopted the non-profit status, which allows them to accept grants, offer tax deductions to donors, and receive tax-exempt status.
However, their growth could be hindered by the limit on revenue generation and the inability to make equity investments.
On the other hand, the for-profit social business can accept equity investments and therefore aren’t restrained by limits on revenue generation. However, they have limited ability to receive grants and can’t offer tax deductions to donors.
Some organizations take a “hybrid” approach to their business formation so they can get flexible funding without being limited in their revenue-generating activities. This kind of business structure involves running two distinct organizations and is, therefore, more complicated.
- East and Market Founder Renee Jones: How to Create a Side Sustainable Clothing Gig
- How This Teacher Started a Social Change Business on The Side
- How to Get Your Impact Startup Off The Ground: Lessons From Combat Flip Flops
- Meet Aloha for People: Fashion. Clean Water. Better Jobs.
- PROTRASH’S Winning Strategy to Clean Up Poverty and Waste!
- From Corporate Lawyer to Impact Entrepreneur: Startups. Sexy Socks.
- How Ingrid Caldironi Is Building The First Zero-Waste Supermarket in London
- How this Moving Company is Addressing Income Inequality
- How Fitppl’s Social Mission is Helping Busy People Stay Fit
- Yarden Garden: Starting a Social Enterprise Spotlight
- How to Grow a Company from the Ground Up: Lessons from Back to the Roots for All of Us
- Building TechSoup and Impact: Daniel Ben-Horin (Interview)
Why Are Social Businesses Important?
Social impact businesses matter. Social business tends to fill the gap in solving social and environmental issues that aren’t addressed by traditional businesses, governmental agencies, and conventional non-profit organizations.
They’re typically more nimble so they can experiment with innovative solutions. They also have the ability to reach people who are excluded socially by offering volunteer, training, and employment opportunities.
In addition, social business often focuses on local communities. They offer solutions that are sensitive to the unique culture, environment, and social dynamics of those participating in and benefiting from the venture.
Their focus on local solutions means they’re more likely to retain and reinvest their profits back into the local economy – creating a virtuous cycle that empowers populations that are often disenfranchised.
Wisdom From the Trenches: Tips On Starting a Social business
The most successful for-profit social businesses, such as Chuck Slaughter’s Living Goods, from issue 11 of Change Creator Magazine, achieve social aims through the application of sound business principles. The more profitable these organizations are, the bigger impact they have.
To get your social business up and running, you have to think like a businessperson:
Play To Your Strength
Just like starting any other venture, you need to use your knowledge, leverage your strengths, tap into your experiences, and turn them into innovative ideas that are practical and profitable.
Brian D. Evans, the founder of Influencive.com, built a wildly successful media platform by leveraging his knowledge and experience in driving online traffic – a skill he learned while building apps for affiliate marketing.
Dan Kurzrock combined his passion for beer and his knowledge in economics and entrepreneurship to create ReGrained.
Keep your eyes and mind open to see how you can solve social problems in new, different, and better ways by applying the unique combination of your knowledge, strengths, and experiences.
Find the People And a Cause That You Care About
Most social businesses got started because the founders care deeply about a group of people or a specific cause based on an experience they had personally. This is why empathy is such a powerful tool.
By getting clear on what motivates you, you’ll be able to stay focused on a vision and serve those people in the best way you can for the long term. Like any business, running a social business isn’t always smooth sailing. There will be times when you have to stick it out or make tough choices. Having a clear sense of who you serve and why you’re doing what you’re doing will help you stay the course. There are many ways to find opportunities in social enterprises.
Understanding your deeper reason “why” also gives you the flexibility to pivot without falling prey to the bright shiny object syndrome.
You may have to try a few business models or experiment with a few ideas before finding your sweet spot. Having a steadfast vision helps you stay focused on what truly matters. How you get there may change but where you’re going does not.
You might also want to check out these inspirational articles:
- Guy Kawasaki: Secrets to Startup Success
- How To Choose a Social Enterprise Idea That Will Fire Up Your Life
- 3 Social Enterprise Startup Examples to Get You Inspired for Change
- How to Start Your Business After a Career Setback: You Can Do It!
- 4 Ways to Turn Passion Into Profit: You Can Start Today!
- Why Great Businesses Start with Niche Market Ideas
- Social Responsibility Advice For A Good Life: An Open Letter
- 5 Key Ingredients to Conceiving Your Big Entrepreneurial Idea
Listen To Your Customers
No matter what products or services you provide, you need to understand the demand in the market so that you can create something that people want.
You need to position your brand in a way that your ideal customers can understand – why you’re relevant and how you solve their problems – by listening to their situation and wants and making sure you speak to their needs. It’s important to do your research, get into the trenches, interview the community, connect with influencers, and identify the gap before you devise a solution.
Many founders of successful social businesses started their ventures while living amongst the community they serve, making the process co-collaborative. E.g., Chuck Slaughter of Living Goods and Gavin Armstrong of Lucky Iron Fish.
Unleash Your Inner Alchemist
Many for-profit social businesses succeed because they combine tried-and-true business ideas with a social cause to create novel and disruptive solutions.
Be open-minded and look for opportunities in unlikely places. Ask questions, be curious, be open to learning, and exercise your creativity! Sasha Fisher planted the seed of her venture when she started asking questions about things around her during her time in South Sudan.
Combining this curiosity with her love and desire to help the local communities, she founded Spark Microgrants that enables local communities to design and launch high-impact projects.
Tinia Pina, founder, and CEO of Re-Nuble, got her “aha” moment when she was volunteering in Harlem. She let her curiosity lead the way – talked to people, asked questions, and came upon her big idea.
Get All the Help You Need
Don’t forget to get help, which can come in many different forms. You can join a community or mastermind of other social entrepreneurs and support each other. You can get mentored by those who have entered the space earlier and created success.
Or, ask your fans and followers to spread the word about your social venture. Or, collaborate with institutions that are already doing work with those you want to help or developing an idea that you’re passionate about.
Ron Bills, one of the founders of Envirofit, started his venture by collaborating with the Colorado State University on an idea, which later evolved into a real business. To get things up and running quickly, e.g., setting up a website, you can outsource many tasks affordably using freelancer platforms such as guru.com or upwork.com.
In addition, there are many affordable marketing tools you can use to automate your business without paying an arm and a leg.
Here are some further resources for you:
- Starting a Social Enterprise and Landing Funding with Justin Goodhew (Pitch Deck Inside)
- Should I Become a Cannabis Entrepreneur? (Advice From 5 Experts)
- 9 Proven Signs That You’re Ready to Start Your Own Business
- How Kind Karma Launched Their Ethical Fashion Social Business (interview)
- How Zoetica is Helping the World Go Waste-Free
- How Sarah Kauss Grew S’well into a $100M Company Combating Plastic (interview)
- Turning Your Inner-Activist Into a Business for Good
- How Vangst Built the Number One Cannabis Recruiting Platform From Scratch
- How Vangst Broke into The Emerging Cannabis Market and Skyrocketed Growth (Interview)
- Turning a Passion for Minimalism into an Impact Business (interview)
- 5 of The Best Social Entrepreneur Fellowship Programs
- What is a Social Entrepreneur?
- Why Social Entrepreneurship is Picking Up Steam
- Interview with Kathleen Janus: Secrets to Scaling Your Social Venture to Over $2 Million
- Interview with Gautam Shah: Risking the Absurd to Achieve the Impossible
You Must Embrace Side-Hustling
Many social businesses were started as “side hustles.” That’s often advantageous because you’re not under the pressure to turn a profit right away. Take a deep dive on into the side-hustle life in our interview with Nick Loper. And, take the time to check this out: 5 Expert Tips on How to Turn Your Side Hustle Into a Good Business!
You can take the time to refine your message, stay true to your vision, test your ideas, and find the right business model that will set you up for long-term success.
However, don’t treat it like a hobby. Set realistic and measurable goals to help you stay on course.
It’s not always easy to have a full-time job and run a business on the side. You have to stay productive and make sure you’re spending your time on the most meaningful activities that will move your venture in the right direction.
More Side-Hustle Resources:
- 15 of the Best Podcasts for Entrepreneurs in 2018: Listen and Grow Your Business Today
- 6 Startup Apps To Help New Entrepreneurs Get Results
- How This Acumen Fellow Networked Her Way Into Great Opportunity
- When a Startup Benefits from a Virtual Assistant
- Start Manifesting More Money For Your Impact Business with Cassie Parks
- What Early Phase Entrepreneurs Need to Know About Conferences
Commonly Asked Questions About Starting a Social Business
Starting a social business can be quite intimidating. Just like running any business, there are many moving parts and unique challenges:
How Do I Choose a Business Model that Drives Impact?
Change Creators often need to think outside the box and devise innovative ways to achieve their vision.
A business model gives you a framework to execute your vision, but keep in mind that it should be a tool to help deliver your offerings profitably rather than a “paint-by-number” structure that restricts your creativity.
Your business model depends on your mission, the type of integration, and the target population so there’s no one-size-fits-all approach. Here are some common ones to consider:
- Entrepreneur support: selling business support, such as micro-financing, consulting, or tech support to local entrepreneurs.
- Market intermediary: helping clients access markets.
- Employment: providing job training to a population in need, e.g., disabled or youth, and facilitate their hiring in the open market.
- Cooperative: providing members with benefits, such as bulk purchasing, through collective services.
- Market linkage: facilitating trade between clients and the external market.
How Do I Get Started On a Tight Budget?
How much do you really need to start a social business?
Not much… if you’re willing to be nimble and creative.
Sam Parr, one of the founders of The Hustle, spent $20 on a WordPress site to promote his first conference, which was hosted in his kitchen. They went on to make $60k in 7 weeks.
Lee and Griff of Combat Flip Flop attended a trade show last minute with only a website, a merchant account, and a bank account. They grabbed the opportunity, met with influencers, and sold thousands of pairs of flip-flops.
Here are a few things you can do when the budget is tight:
- Set up the right business model and tax status so you can get the right kind of funding.
- Consider a service-based business model that doesn’t require a large investment in manufacturing and inventory.
- Start small with a minimum viable product (MVP) as a proof of concept for generating interest and traction.
- Think outside the box to get things done. Social business often have unconventional and disruptive ideas – which means you may also need to do things differently!
- Put in the elbow grease – time is your biggest asset if you don’t have the money. Be prepared to roll up your sleeves and dig into the nuts-and-bolts of getting things done.
- Don’t be shy and ask for help. Whether it’s mentors who can show you the ropes or friends and family who can pitch in to help you build a website/ install a cabinet/ spread the word on social media – just ask! Show your passion and enthusiasm – you’d be surprised how helpful people are!
How Do I Get Funding For My Social business Startup?
No VC funding? No problem! Here are a few ideas to raise money for your social business:
- Get sponsorship from brands that align with your message.
- Collaborate with existing institutions that are doing work complementary to your products or services.
- Look for organizations that can provide a loan guarantee so you can take out commercial loans.
- Work with a pooling institution to obtain funding from investors.
- Raise funds with crowdfunding – this method has become increasingly popular among social entrepreneurs. Besides the usual suspects such as Kickstarter and Indiegogo, you can use platforms dedicated to helping social businesses, such as Alex Budak’s Start Some Good.
The “King of Crowdfunding” Brandon Adam shares his secrets in this ChangeCreator podcast episode.
Keep in mind that if you’re a for-profit social business (i.e., you’re paying taxes on profits,) you can’t receive traditional grants or tax-deductible charitable contributions, like 501(c)(3) public charities can.
How Do I Start Making Money?
A social business is a business and a business needs to turn a profit to scale its impact. First of all, we need to challenge the misconception that “doing good” and “making a profit” are at odds with each other. After all, the most profitable social businesses are the ones that have the biggest impact.
The good news is that being profitable doesn’t mean you need to have a big product line, fancy marketing materials, or a lot of investors. In fact, being small gives you the ability to pivot quickly and find the most profitable way to offer your products or services.
Dan Kurzrock started ReGrained with just a couple of products, sold the beta version, and made adjustments along the way.
After you have the products out on the market, keep track of the metrics – research, analyze, and see what works and what doesn’t. Product mix and price points are the two most common reasons for failing to make a profit. You have to look at what’s happening in the market and respond accordingly.
How Do I Market My Social Business?
Many people get scared when they hear the word “marketing.” Don’t! There’s a lot of resistance because we don’t want to be seen as pushy or sales-y. However, when done right, marketing is just a natural extension of your message.
Think of it as a way to tell people about your vision. You’re passionate and excited about what you do, so it’s only natural that you want to tell the world about it!
Good marketing has the ability to tell an intriguing brand story about your company. It has the power to recruit fans and followers who will not only become avid supporters but also tell others about your business.
Check out some key marketing and storytelling articles here:
- How to Create a Brand Guide that Sells Your Impact
- Marketing Overwhelm? We’ve Been There. 3 Tips to Help!
- Uncover 5 Marketing Tips and Powerful Lessons from Gavin Armstrong, Founder of Lucky Iron Fish
- Ethical Strategies to Increase Sales and Manage Your Sales Teams
Speak To the Local Culture
Ron Bills, one of the founders of Envirofit, told ChangeCreator that they use different marketing strategies in different countries based on their understanding of the market.
They have a local team in each country to cater to the customers and use a variety of channels, such as social media, direct marketing, billboards, local partners, and radio spots to reach the target audience.
Use Content To Build Relationships
Content marketing can help you reach your target market and start a conversation with them.
It also allows you to tell your brand story and get the attention you need to build publicity.
Content marketing is great for startups and entrepreneurs because it doesn’t require a lot of resources to get started and is very scalable. With the widespread use of mobile technologies, many people in developing countries now have access to the Internet through which you can distribute your content.
Sam Parr, one of the founders of The Hustle, told ChangeCreator that they posted controversial articles during their first month in business, which brought in 300-400k visitors.
In addition, don’t forget to stay top of mind and build relationships with your fans and followers by sharing your ideas and progress using email marketing.
Leverage Word Of Mouth and Referral Marketing
Dan Kurzrock built ReGrained through community development and community engagement while Sam Parr relied on word-of-mouth and an ambassador program to get the referral his company, The Hustle, needed to grow.
In addition, you can develop relationships with key partners and help each other by cross-promotion.
Choose the Right Format and Channels
To get the right message to the right people at the right time and in the right place, you need to use the right promotional channels.
Growth hacking expert and co-author of Secret Sauce Vincent Dignan recommends Instagram for physical products, Facebook groups for consulting, LinkedIn for recruitment, and Twitter for the startup niche. Vin takes a deep dive into growth hacking with us in this interview.
Leverage “Conscious Consumerism” For Your Messaging
Consumers are feeling a pervasive sense of “guilt” brought about by the conflicts between their consumerist impulses and their aspirations to be “good” (e.g., being environmentally conscious, conserving resources.)
Trends such as conscious consumerism and “guilt-free consumption” has enabled the growth of socially conscious enterprises that allow consumers to “have their cake and eat it too.”
Highlighting this aspect of your business and sharing a brand story on how your vision came about can help you stand out in the marketplace and gain a loyal following.
How Can I Gain Traction And Scale My Social business?
Don’t worry about being “big” or being “perfect” when you launch your business. Instead, focus on raising enough funds so you can put your product on the market as a proof of concept.
Often times, people are willing to support impact initiatives once they’ve gained traction and proved that the model works.
Another way to increase credibility and scale-up is to partner with established social businesses. They have relevant audiences already that you can tap into. We interviewed Chris Out who’s the founder of a growth hacking company called, Rock Boost. He shares his take on scaling up here.
Hiring the right people is also super important. In the beginning, you may not have enough work or budget for a full-time employee. You can use freelancer sites to outsources specific projects so you can access different expertise without hiring a team.
When you start hiring, it’s important that team members share your passion for the cause. Not only do they need to be competent but they also have to be dedicated to your vision. Create a culture in which team members understand and respect each other’s strengths.
In a startup environment, it’s important that each team member is in alignment with the business’s vision, willing to wear many hats and complement each other’s strong suits. In addition, make sure to put processes in place so you can delegate effectively. Writing up a standard operating procedure (SOP) document will help you save a lot of stress and frustrations down the line.
If your enterprise operates overseas, consider hiring team members from the local community – not only do they understand the lay of the land but it’s also often more economical to do so. For example, Chuck Slaughter, founder of Living Goods, was able to gain enormous traction with just one employee that he hired locally because that person knows how the market works. Besides monetary compensation, you can attract quality new hires with other benefits (e.g., flexible schedule) and “sweat equity” if cash flow is a concern.
Shaping the Future of Social Entrepreneurship
Social entrepreneurship is a relatively young and fast-evolving discipline. It’s not always easy to find a tried-and-true solution for every challenge you encounter.
It’s therefore important to stay current and get inspiration from other successful social entrepreneurs.
When you do, you’ll be able to discover so much about yourself, exercise your creativity, and deliver enormous social impact to those in need.
We look forward to hearing your success story!