Now more than ever, socially-conscious startups have been some of the most lucrative businesses in our society. The “millennial” push for brands to be more in tune with the needs of our communities has made it just about impossible for small and large businesses to not be socially-driven in some way. Because of this, we’ve started to see the trend of socialpreneurship - a type of entrepreneurship that is centralized around social missions and efforts. But what makes these businesses different than your typical non-profit?
If you’re considering starting a venture centralized around community and civic needs, it’s critical to determine if you want to develop a Triple Bottom Line business (focusing on three bottom lines: profit, people and planet) or completely focus your efforts on a non profit. Here’s some quick ways to discern which one is best for you.
Making Money
Of course, making money is key to any business but you’d be surprised at how many social ventures really aren’t sure how to generate revenue and why they plan to generate it. The first question you should be considering is , “Am I generating money to keep or am I generating money to give away?”. This simple question can sometimes be difficult to answer given that you will probably straddle this line instead of exclusively just being on one side. However, you have to be clear which side you’ll lean towards in order to make an educated decision on which entity to go with.
For example, you might want to start a business that makes recycled goods to support efforts to clean your community. If you plan to make profit off of your sales and donate a portion back to your clean up efforts, this would be considered a social venture, thus making you a socialpreneur. On the other hand, if your business plans to use the profits to exclusively fund cleaning your community, you would be considered a non-profit.
Accounting
Adding on to the first point, the accounting structure is much different for socialpreneurships vs. non-profits. Without throwing a bunch of accounting jargon at you, I’ll break down these two accounting structures in a simple way: if you plan to make more money than what you spend and want to keep those profits, you should probably be a socialpreneurship. If you plan to spend just as much money as you make on your social venture or plan to donate the remaining revenue back into the community, you should probably be a non-profit. This is a very simple and non-descriptive way to look at accounting so I would suggest that you take some time to research the accounting structures for each type of entity in detail. However, I feel like this is a good rule of thumb to guide you as you make that decision.
Level of Involvement in Your Mission
The last factor to consider is how involved you want to be in your mission or social aspect of your venture. Many socialprenerships spend no more than 50% of their efforts on the mission-side of their business. As a co-founder of a socialpreneurship or triple bottom line business in Detroit, we easily spend less than 10% of our time on the social aspect of our business. In order for our mission to come to life, we’ve partnered with a local 501(c)3 non-profit that handles the day-to-day operations of our mission. If you’d like to work more intimately with your social mission, it might be best to be a non-profit.
Although this is a solid rule to abide by, there are some social ventures that spend more than 50% of their time and efforts on their social mission. However, it takes a lot of energy, resources and staff to make this happen so proceed with caution.
There is so much more to consider about socialpreneurship and non-profits so make sure you do thorough research before you make a full decision. If you need professional advice, I’d highly suggest you reach out to a lawyer in your state to work through the formalities. Best of luck with your new venture!
Autumn
Founder, Proxie ⭐️