NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, April 5, 2018

By Desmond O’Flynn

To become financially viable in the long term, all types of businesses—whether traditional ones or social enterprises—rely on sustainable strategies that will translate to profit. But these are not possible without some level of profit, the main demarcation between a purely charitable organization and a community-oriented enterprise.

The Guardian reported that the growth of social enterprises is impressive and laudable from the point of view of the larger community, which, more often than not, turns to the private sector for aid. Economically speaking, however, some of these businesses fail to adopt the elements of what makes for long-term growth—something that worries potential investors who aim to strike a balance between making a social impact and making a profit.

If a business is not viable, it becomes an option between donating and investing without expecting any returns, which is also tantamount to charity.

Unlike profit-oriented firms, social enterprises have the primary goal of helping the disenfranchised members of the society, Investopedia stated. These are typically founded by activists and entrepreneurs who are working for a cause, trying to make a positive difference—take for example the case of Emily Mathieson’s homeware business, Aerende.

Photo courtesy of reynermedia.