6. Social Enterprise Business Models In-Use

The business model appropriate for an individual social enterprise needs to match the social aim / purpose of the organisation, its customer base, and the beneficiaries from the business activity. Each sphere of social enterprise activity may include the following types of social enterprise business models, namely

  • entrepreneur support
  • market intermediary
  • employment
  • fee for service
  • low income client as market
  • co-operative
  • market linkage
  • service subsidisation
  • organisational support
  • complex
  • mixed
  • franchise
  • private – non-profit partnership

The main features of each of the above types of business model that could be applicable to social enterprise organisations is now considered together with some case study examples of organisations located in differing parts of Europe

 

  • The entrepreneur support model – This type of social enterprise sells business support and /or financial services to targeted groups of clients. This type of service allows the social enterprise to generate an income and so remain viable as a business.

Nicholls (2006) indicates that this type of social enterprise is an example of an organisation with an embedded business model as the social enterprise is the business and it has a mission that is focussed on helping its clients to achieve financial stability by supporting its entrepreneurial activities. This type of social enterprise may well engage in providing training courses and the hosting of network events / seminars.

(ii) The market intermediary model – This type of social enterprise provides services such as product development, marketing, and credit to clients who are typically small and medium sized enterprises so as to allow them to access the market place and acquire added value.

This type of social enterprise can be considered to be an ‘embedded’ type as the social programme is its business and its mission addresses strengthening markets and helping to achieve clients’ financial security through the sale of their products. Fair trade organisations are prime examples of this type of social enterprise.

(iii) The employment model  – This type of social enterprise business model is used to create employment opportunities for marginalised groups of people within a society. Forfas (2012) indicates that such business models would include social enterprises set up to help immigrants or refugees or gypsies or ex-offenders or long term unemployed or people with disabilities to find work.  Adler (2007) indicated that this type of embedded social enterprise seeks to create employment opportunities for their clients. Such social enterprises often provide soft skill training, therapy, mental health counselling support within their business model so as to achieve financial self-sufficiency through the sales of its products and services.  The income stream generated in such social enterprises is used to pay its operating expenses and any associated social costs incurred by inter-acting with its clients.

(iv) The Fee for Service Model  – This type of social enterprise charges a fee for the service it offers to users. Such fees allow the organisation to generate revenue to pay for the direct costs of the services provided by a social enterprise. Such ‘fee-for-service’ business models are becoming more popular as faith based organisations and community organisations experience a squeeze caused by a decrease in their direct funding streams and an increase in the demand for their services. As funding sources become scarce due to governmental policies of austerity so competition for the limited funds available becomes more intense. There are differing types of ‘fee-for-services’ business model that could be used by a social enterprise and these are: – the mandatory, the voluntary, the requested, the membership and the hybrid ‘fee-for-service’ models. Adler (2007) identifies this model as being an embedded type of business model as the social programme is the business and its mission centres on providing social services in a particular sector, often health, education or welfare.

(v) The low income client model – This type of social enterprise business model has been characterised by Michelini, (2012) as being any one of the following, namely

  • a customer base – the poor are the main target of the social enterprise as it sets the price for its products and services at a lower more affordable level for those on limited incomes
  • suppliers, distributors or business partners: the poor are involved in their value chain and companies contribute to job creation and knowledge sharing but target the average or high income local population, traditional/global markets and non profit local or international organisations
  • customers and as suppliers, distributors or business partners: the poor are both targets and actors involved in the company’s value chain

Adler (2007) identifies this type of business model as being an embedded activity that provides access to products and services that increase clients’ health, education and wellbeing.

(vi) The co-operative model  – This type of business model comes in differing forms with the most common being identified as being a ‘workers’ co-operative. The Local Government Association (2011) indicates that this business model exists for the mutual benefit of its members and operates with its own registered objectives which state permitted activities and rules. Co-operatives are organised on a one member one vote basis and all members are equal.  Most co-operatives are managed by a committee of elected members drawn from the differing stakeholder groups that are involved in the organisation. The Local Government Association (2011) indicates that any trading surpluses need to be distributed as a dividend to the co-operative’s members as set out in its rules.

(vii) The market linkage model – this type of social enterprise business model enables trading relationships to be developed between differing clients / target groups.  Alter (2007) asserts that ‘ the social enterprise functions as a broker connecting buyers to producers and vice versa and generates income by charging fees for this service”.  Another aspect of income generation for this type of business model is the marketing of business information and research services. This type of business model does not sell or market clients’ products rather it connects clients to markets.

Adler (2007) indicates that this type of social enterprise business model can be considered to be embedded in the business as its income is generated from enterprise activities and it is used as a self-financing mechanism. However, the same model could also be considered as being an example of an integrated approach as thus type of social enterprise can also be created by commercialising an organisation’s social services or leveraging its intangible assets such as trade relationships and income is used to subsidise its other client services.

(viii) The service subsidisation model – This type of social enterprise business model sells products or services on the open market and uses the profits for social dividends or its own social programmes. Forfas (2012) defines this type of social enterprise business model as ‘an organisation that trades in a service or product that has a social good and a high potential income generation capacity’. Alter (2007) indicates that this sort of business model can be considered to be integrated as its business activities and social programmes overlap, share costs, assets operations and income.  This business model is used mainly to generate finance so as to enhance the organisation’s social mission.  This type of business model can operate across any business sector.

(ix) The organisational support model – this type of social enterprise business model provide direct services to clients. Alter (2007) indicates that its business activities are separate from its social programmes and the net revenues from the social enterprise provide a funding stream to cover its social programme costs and operating expenses of the non-profit parent company. Although organisational support models may have social attributes, profit not social impact is the pre-requisite for this type of social enterprise business model.

This type of business model can be considered to be external in nature as it is created as a funding mechanism for the organisation and is often structured as a subsidiary business owned by the non-profit parent company.

(x) The complex model – this type of social enterprise business model combines two or more of the previously described operational models so as to maximise the social dividend and commercial revenues available to the social enterprise.  Such business models can be considered to be either integrated or external to the social enterprise. Alter (2007) indicates that complex business models are flexible in nature and usually occur in longstanding social enterprises and have arisen as a result of organisational diversification and business growth strategies.

(xi) The mixed model – Alter (2007) asserts that this type of social enterprise business model is commonplace in many non-profit organisations that operate multi-unit or mixed operations. Each operation or project may have different social aims, financial objectives, market opportunities and funding structures. Each project within the non-profit organisation may have a differing target population, social sector, mission, markets or core competencies.

(xii) The franchise model – this type of social enterprise business model allows successful organisations to be reproduced / replicated in multiple locations whilst maintaining their social impact and financial sustainability. A social enterprise with a franchised type of business model would incorporate a legally binding franchise agreement, clear fee structures, common marketing strategies, and common quality control systems. Hurley (2016) identifies three different types of social franchise business model, namely

  • a commercially organised system designed to achieve social benefits
  • a non-profit replication system, which includes core elements of franchising, but without the classical fee and profit elements
  • a subsidised franchise system to make services available at a lower cost than commercial solutions

(xiii) The private not for profit model – this type of social enterprise business model features a mutually beneficial business partnership between a social enterprise and a for profit business organisation. Alter (2007) indicates that the social enterprise may or may not be mission based and uses the non-profit organisation’s assets, such as their relationship with the target population, community, brand, or expertise. For the for-profit organisation the partnership provides on or more of the following benefits, namely, lower costs (cheaper labour costs), lessens restrictions (less regulatory oversight), improves community relations and public image, allows new product development, penetrates new markets or increases sales.

The private-non-profit partnership model is a partnership based on active operational involvement in a social enterprise and is not simply a business relationship which could be funder, customer or supplier represented in other social enterprise business models (see above)

The following Table 1.6 provides examples of social enterprise organisations that are using the business models set out above that are drawn from the SEDETT project partners home locations across Europe.

 

 

 

 

 

 

 

 

 

 

Table 1.6 SEDETT project partners National Business Models In-USe

Business Model Case Study Organisations
Entrepreneur Support United Kingdom

Ireland: ClannCredo: Community Loan Finance

Italy :                   PerMicro

Spain

Poland

Lithuania

Romania: Romania & the Balkans | NESsT

 

Market Intermediary United Kingdom

Ireland :              Fair Trade Ireland

Italy:                    Alleanza delle cooperative italiane

Spain

Poland

Lithuania

Romania Vlasca 2008

Employment United Kingdom

Ireland :              County Wexford Community Workshop (Eniscorthy) Ltd.,

Italy:                    Tandem

Spain

Poland

Lithuania

Romania UtilDeco sheltered workshop

 

Fee for Service United Kingdom

Ireland :              Carebright

Italy:                    Federconsumatori

Spain

Poland

Lithuania

Romania: Not known

 

Low Income Client as Market United Kingdom

Ireland :              My Mind: Centre for Mental Wellbeing

Italy:                    Altro mercato

Spain

Poland

Lithuania

Romania Bio Hrana Prietenia

 

Co-operative United Kingdom: Tyn-y-capel

Ireland :              Loughmore Community Shop and Tea Rooms

Italy:                    Programma integra

Spain

Poland

Lithuania

Romania Lunca Somesului Mic Agricultural Cooperative

 

Market Linkage United Kingdom:

Ireland :              Social Entrepreneurs Ireland

Italy:                    Camera di Commercio

Spain

Poland

Lithuania

Romania: Not known

 

Service Subsidization United Kingdom:

Ireland :              Waterford and Suir Valley Railway

Italy:

Spain

Poland

Lithuania

Romania: Not known

 

Organizational Support United Kingdom:

Ireland :              Enable Ireland Charity Shops

Italy:                    Camera di Commercio

Spain

Poland

Lithuania

Romania: Romania & the Balkans | NESsT

 

Complex United Kingdom

Ireland :              Rehab

Italy:                    Comunita di Capodarco

Spain

Poland

Lithuania

Romania: Not known

 

Mixed United Kingdom:

Ireland :              Fledglings Early Years Childcare

Italy:

Spain

Poland

Lithuania

Romania Vegetables of Vidra

 

Franchise United Kingdom:

Ireland :              Fledglings Early Years Childcare

Italy:

Spain

Poland

Lithuania

Romania: Not known

 

Private – Non Profit Partnership United Kingdom:             The Moneypenny Foundation

Ireland :              Reapak

Italy:                    Sodalitas

Spain

Poland

Lithuania

Romania: EcoSocial network