Proving Concepts in Social Enterprise
Does it seem like it is taking longer than usual for supporters to ‘buy-in’ to your social enterprise?
You may be right on track.
Since this blog is about trends and patterns I observe, I am going to tackle this one and shine some light on it.
Lately, I am running into people in the field who are wondering if they are off track because of the extensive concept proving requests from funders and supporters. As I observe, many social entrepreneurs wonder how long the proving season will last. My answer would be that it may be longer than you think, and, that is okay! However, there are a few things you can do to shorten the time period.
What is a concept testing or proving season? For the purposes of this article I would simply define it as a time period that the social enterprise/entrepreneur is ‘proving’ to a set of people that their product, service, or overall organization possesses something of sustainable value.
The set of people targeted could be investors or customers. They may be governance members such as Board or Advisory members. They may be vendors or other professionals.
What are you proving?
Generally, the concept testing phase refers to two main areas of discovery:
1) The product or service works; has been tested
2) There is a market or customer base/demand for your product and service.
While there are many different focuses during concept testing phases, I would submit that most of the testing falls into the two listed categories above. Other elements can be items such as: unique value proposition, other uses of the product, easier methods of production, or details on customer demographics. There are many points of initial discovery that are important.
The season or period of time lasts long enough to satisfy enough people that your organization will now move into a new phase of actually selling your products and services MORE than you are explaining the products and services.
Proving Three Concepts Instead of Two – Social Entrepreneurship
We all know it is normal to move through a season of demonstrating that your product or service has validity. However, there is something unique to social entrepreneurship that I have begun to witness as a pattern.
Social Entrepreneurs are also proving the validity of their organizations’ dual nature. They are literally proving out that an organization can deliver a social impact AND sell a product or service.
I spend a lot of time with impact investors, funders, and curious observers. The magnetic draw to the dual nature of the organization pulls them in. I think we have all watched many social entrepreneurs enjoy the media attention and praise for their concept.
The joyful singing stops suddenly when the potential funders start to ask questions about the sustainability power of the organization. I watch the investor begin to drill in with very technical questions while simultaneously watching the social entrepreneur begin to realize that they are about to have this conversation for the 100th time.
The most gifted business professional will still have questions about the concept. Why?
Okay, get ready for this very technical answer. Ready?
Because it has not been done before with consistent success. Yup, it is not yet normal for many. The reality is that we do not have millions of working examples for hundreds of years. It is new. That is all!
The truth is that social entrepreneurs must prove out three concepts instead of two. It is just how it is right now! They must prove:
1) Product validity
2) Market of customers
3) Organization Model
Given the bigger proving set, the social entrepreneur can, at times, become discouraged. It appears as though it is taking longer than most other businesses. That is because it is true. It is taking longer!
The social entrepreneur may be embraced faster in the local community and praised for their effort earlier than a traditional model. Yet, when requesting funding, the process can take 2- 5 times as long as a traditional business model. This is because of the need to prove out the third element of the organizational model.
Shortening the Season
Here are a couple of key strategies on shortening the season that we are observing in the field.
1) Prepare some materials to address your organizational model head on. Jump right on that elephant in the room and talk about it! Become an expert on this part of your sales pitch.
a. Prepare some written materials that demonstrate how your model works from a financial perspective. For example, a for-profit model can highlight the cost of the social mission that will offset profit. A not-for-profit organization can illustrate how adding in an ‘enterprise’ element to the organization can help reduce donor fatigue.
b. Illustrate your knowledge of the compliance, legal, or tax issues when combining social impact and your legal structure. Demonstrate that you understand how to comply with the highest standards.
Tip: Don’t take a path of a rogue here. It is only cool in the movies.
c. Talk about your team- the depth and the expertise. Include governance persons in your discussion. This shows your willingness to be ‘governed’ for a season if you are asking for funding.
d. Be excited about addressing this organizational model issue. Be excited in front of your supporters that you are a responsible pioneer and honored to do it!
Tip: Don’t have a victim mentality about needing to explain your model.
2) Learn the investment and financial language to shorten the translation. Now, just as I am asking you to learn the language, I am having twice as many conversations with the investors around your language and your models. This is a discovery around credible financial management. Remember that the investor is already at the table because they are interested in you but must be able to demonstrate a financial knowledge so the investor can feel comfortable that basic mistakes will be avoided. The bottom line is that if you can demonstrate that you understand your financial strategies and statements, you will build credibility faster and shorten your concept testing phase.
Putting it all together
So many social entrepreneurs can feel like they are misunderstood or dismissed. I am hoping we have highlighted that you may have been missing a great opportunity to sell your organization by highlighting the validity of your organizational model. If there is any group of business leaders that we want to be capitalistically driven, it is the ones with a social conscious!
As we all know it has been either a capitalistic or social silo type structures. As we combine them we must demonstrate a knowledge of both enterprise and social. While we are not dismissing the social impact it is imperative that the enterprise model is highlighted and honored.
Therein lies the truth of the moment.
Forge On Social Enterprise!