A journey as unique as your mission: the various stages to social enterprise development
By Lise Genzo, Engagement Manager
When moving from idea to impact, and establishing a sustainable business, social enterprises have a lot of ground to cover. And when you’re on a mission to make a difference, it’s hard to anticipate what’s on the road ahead.
Building on the work of The Centre for Social Impact Swinburne, Impact Seed, Social Impact Hub and our own experience working with social enterprises, The Council of Australian Social Enterprise Intermediaries (CASEI) has developed 'The Five Stages of Social Enterprise Development.’ This includes a framework and common language for describing a series of organisational stages for enterprises and their leaders. You can use this framework to help recognise where your organisation is on the journey.
It can also help you focus on what’s important right now and access the right support and finance at the right time, for a better chance at viability and understanding the different pathways to unlock your impact potential . It’s also a good reminder that other social enterprises have had and will continue to have similar experiences and challenges.
While this framework looks linear, the social enterprise journey is anything but.
This is something that Green Fox Studio (GFS) experienced. Well into its development journey, GFS a social enterprise that provided training for people in correctional facilities , supported by a fee-for-service creative agency lost its major government contract. Suddenly, the organisation went from focusing on growth to making sure it would survive.
GFS is not alone.
Navigating the journey to building a sustainable enterprise generating social impact means facing a range of challenges at the different stages of organisational development. At Sefa, our experience tells us that an enterprise’s capability and capital needs are different at each stage, and will vary again depending on the type of business model. We work with social enterprises at most stages of the journey – and help organisations like GFS get back on track when things change. Using a framework like this can help identify your organisation’s place in its development journey, understand what to expect and what support you could benefit from at each stage.
Here’s a look at the five stages.
The Five Stages of Social Enterprise Development
1. Vision
This is the idea stage, when social entrepreneurs identify a problem they want to solve and a cohort that they want to support. It’s crucial to dive deep and explore if there is a market for the idea and a network to support it.
What’s important in this stage is:
Customer Testing
Market Research
Resource planning and
Initial team formation.
This stage could go from 3 weeks to 3 months or longer.
Organisations in this stage might need support with mapping their Theory of Change and raising pre-seed capital without a repayment obligation such as philanthropy, crowdfunding, or equity to back their idea.
GFS’s two co-founders wanted to use their experience as professional graphic designers to create more opportunities for offenders in prisons. They could have just created a graphic design studio and employed former offenders. But they looked further into the problem and found that people were losing their digital literacy while inside.
So the co-founders introduced training in digital literacy skills for offenders and offered more specialised training for those who showed skill in graphic design. Improving people’s skills and confidence to better prepare people for their next stage in life is core to their impact narrative.
2. Validation
This is the stage where social enterprises are confirming the level of demand for their offer. In this stage it is usual to refine your Theory of Change and start thinking about how to best capture the information you need to be able to measure outcomes. Now is the time to find people with relevant skills and experience to work with and help confirm your approach and get advice on challenges.
This is a tough stage, where organisations may feel like they’re battling to keep going. Money is tight, founders work lots of long hours and often rely on volunteers while trying to establish the business. Social enterprises cannot afford to pay for all the skills and people they need so they are grappling with the challenge of deciding what staff to bring on now. The reality is that the organisation is a few passionate people spread thin. Sometimes you can’t see yourself making it beyond the next three months. But your drive to solve a problem or help a particular cohort keeps you going.
Organisations in this stage might need support with setting up an outcomes and reporting framework, confirming the right business model and raising patient or affordable seed capital. Questioning how your enterprise is going to make enough money is what keeps social entrepreneurs awake at night during this stage and organisations gaining support with sharpening their commercial acumen is key.
At the validation stage GFS were getting their training courses into prisons and working through the challenge of lack of internet access in prisons.
3. Development
This is when social enterprises start to stabilise. You have enough money to pay some more people and you’re no longer in survival mode. Social entrepreneurs finally have time to breathe and then consider the next challenges.
In this stage there is more time think strategically, and you might start planning for the next three to five years.
This could include things like:
strategic hiring, including the leadership team, frontline staff and program managers
building financial capability
establishing a board or group of advisors
deciding where you need to invest to grow
achieving your initial goals.
Capital raising is often important during the Development stage, and it’s something most organisations need support with. It can help maintain the stability you need to operate and grow by allowing you to secure what you need (e.g.: larger premises or specialist equipment). Social enterprises may also need support developing sales and marketing capability and getting on the path to financial sustainability.
The duration of this stage is dependent on a range of factors including the financial resources of the enterprise and market conditions.
4. Growth
At this stage, social enterprises are financially sustainable and growing, while also making a significant social impact. We see a robust operating model, an established board and effective leadership team, and the ability to measure outcomes and contribution to impact goals.
Organisations in this stage might need support with scaling and building their capacity while also expanding their impact. Many social enterprises are looking to attract impact investors to provide them with flexible capital that aligns with an increasingly efficient and sophisticated business.
GFS was in its growth stage when market conditions changed, and they lost their biggest contract. As a result, they pivoted to focus on growing revenue from their graphic design business and adapting their programs to service other client cohorts including, at-risk youth, women escaping domestic violence and refugee and asylum seekers.
5. Established
Social enterprises in this stage are financially profitable, confident that they are maximising their impact through their activities and with an impact model, that where appropriate, is scalable. This also means it can be replicated or influence other models, businesses or policy.
To back their ambitious trajectory, organisations at this stage may need support with securing additional capital to expand and achieve even more social impact, from a larger and more mainstream range of repayable capital such as credit unions or banks.
Social purpose organisations always need to balance impact and business sustainability. This means scaling and expanding operations may not be a measure of success for every social enterprise and reaching this stage of the journey may not be their end goal. Sustainability will look different for every social enterprise.
Every journey to impact is different, but there’s a framework to guide you
While this framework presents as a linear journey, the reality is different for everyone. And racing through to the final stage isn’t what it’s all about. Founders and CEOs must make decisions about when to prioritise impact versus growing, so don’t be afraid to spend as much time as you need in each stage of the journey. And if you need support, know there are organisations like Sefa ready to help.