An imperative study about differences between profit and non-profit social enterprises
by Suhani Sharma
INTRODUCTION: Essence of social enterprise
In this greedy and selfish world social enterprises emerge as beacons of change. They challenge the traditional business paradigm and give a better version with their mission-driven approach and unstoppable spirit. In this mercenary world, driven by self-interest, these enterprises provide a fresh and compassionate outlook to existing business approaches. While the ultimate goal of such enterprises is creating a positive difference in society their profit, structure, and approach often have a drastic difference. Let’s compare a few such differences
Diving Deeper: Profound Contrasts in Mission and Approach
Though the ultimate and final mission of every social enterprise is to socially create a positive impact, we do see a huge difference between the marketing style and approach of profit and non-profit-driven social enterprises. Usually, profit-driven social enterprises attract people with a substantial income for example a dairy providing milk in glass bottles is selling milk a few rupees more than usual packet milk. While the non-profit-driven social enterprise attracts people earning below modest income like a shop selling used books or the “raddiwallas”.
Let’s take a look at bigger examples and understand better. For-profit social enterprise:
Donate Applique is a very big thrift store chain in the northeastern United States where it buys lightly used clothing and wholesalers. It keeps a quarter of a huge chunk of profits for investors and another quarter for expansions while donating the rest. They limit huge chunks of waste by repurposing them alongside earning great profits.
Non-profit social enterprise:” Rewind Fight” is a social enterprise made for cancer patients where they seek writers who write compelling stories to raise money. The maximum part of the earnings directly goes the the patient and a small part to the writes making it equal to zero return to the investors.
REVENUE MARGINS: Navigating Profit Goals and Social Responsibility
Revenue is one of the primary goals of a profit-driven social enterprise. They market their positive goals for business benefit and either keep the huge profit chunk in investors’ pockets or into the expansion of the business. Their products/design usually attract people who have modest incomes making their profit margin bigger. Meanwhile, non-profit social enterprises engage in revenue-generating activities like grants and donations. The excess funds here don’t go to investors but instead, go to the needy. The difference that sets apart an NGO and a non-profit social enterprise is it’s scalability, product, marketing, and design.
For example: Aristocrat lace is a very popular athletic footwear company where for every fifty dollars spent in the shop the company donates two pairs to the poverty. The remaining profit margin goes to investors and into expansions directly by still making a huge profit margin.
Meanwhile, Greensole which is an Indian based shoe company sells recycled shoes keeping negligible profits and spending whatever is earned on manufacturing and transporting. Their revenue system is a collaboration between NGOs and schools.
Both parties have equal risks in maintaining their profits and collaboration and nonetheless maintain a common ultimate goal of social benefit. The sustainability and smooth functioning of for-profit social enterprises usually lie in it’s ability to generate revenue and make distinct profits for better marketing whereas non-profit social enterprises usually focus on receiving grants from time to time from different collaborations for it’s smooth functioning.
Conclusion A Beacon in the Business Battle
In this ongoing battle between where thousands of enterprises emerge daily and fall on the same day, social enterprises give a bright perspective on this so-called business battle. Made for society or the environment these enterprises though having different approaches provide a stable equilibrium for equalising the effect of the greedy enterprises. To understand the complexity of these types types stakeholders and investors need to have a clear idea about this world of social entrepreneurship . Regardless of the chosen mode, even a small success of social enterprises creates a huge positive impact on society.
