Social Business Start-up School

Introduction

During my assignment in Nepal, between 2017 and 2019, I gathered various startup school curricula and re-designed them for social enterprises. Perhaps it seems not very surprising that the results is very similar to what one can read and find elsewhere. However, the information here after is one thing the interactive delivery of the sessions helped aspiring social entrepreneurs formulating their idea(s) to fight social ills, whilst allowing for profits to sustain their operations.

It should be noted that Nepal is a donor driven country and, hence, most ideas start off with the assumption that, ‘money will be coming from somewhere‘ (quoting a charity’s board member). However, as one local entrepreneur stated that, ‘entrepreneurship does not work with donations’; I had to asked myself why social businesses should be any different?

As a result, and during my interactions with youth, I tried to establish an understanding that even a business with a social agenda needs to remain financially sound. Sure, initially, one might and can rely on grants, but supporting a social cause in the long-run demands more reliable and flexible sources. External funding can always be sought, but in my experience, the best solutions to right social wrongs pay for themselves.

Background

I was assigned to a youth-driven voluntary organization in Nepal, encountering many volunteers who had the potential to become (social) entrepreneurs. In fact, they started on the right path, while supporting the organization pro-bono: a. they did it because they wanted, and b. they had started to understand their customers’ needs (i.e. beneficiaries). So, I decided to create something that would help them in the earliest stages of laying the foundation to bring a great idea out into the world. Even if they didn’t have an idea just yet, we could at least provide the tools to find one?

When it comes down to it, starting a (social) business is about one thing: solving a (beneficiary’s) customer’s (social) problem or bringing them joy. In a way that means that they ‘pay’ you and tell other people about what you’re doing. In business terms, it is known as the ‘product market fit’: the right product or service, given in the right way, to the right market of customers. The same is true for social businesses, as it is with most ideas floating around the sphere of entrepreneurship.

So, the workshop-style process, which will be described hereafter, is based on mentoring start up founders who have launched (social) businesses in everything from reducing food waste, over mobile educational community centers, to sport for development ventures. It’s also based on my own wrongdoings, and the ones I have witnessed others’ make.

Step 1 – Values

Most (social) founders will tell you that setting up a (social) business is the hardest thing they’ve ever done – so you need to have a pretty solid reason for doing it, right from day one. This is your ‘why’, the values or principles that outline what looks good for you in your career and life. Knowing what these are, in black and white, means you can return to them whenever things get blurry, scary or otherwise confusing. They are your guideposts, and as important as any finance/product/marketing principles out there to hold close and constantly go back to.

To take this a step further, use your values to derive your ‘Good idea criteria’. These are the factors that tell you whether your (social) business idea is a ‘good one’ for you. Some ideas will be better suited to you than others – better aligned with your values, skills, and current circumstances. Know your ‘why’ and you’re moving forward with an idea that’s well suited to what matters to you.

Step 2 – Assumptions

We would go as far as to say that 99% of start-up mistakes are based on misplaced assumptions. These are the things you are banking on being true, for success to follow. No business is immune! For instance, Google assumed people wanted to be walking down the road wearing camera-wielding glasses. They bet a lot of money on some very simple assumptions – and lost.

Some assumptions are more conscious than others. There are some basic things that you might find you’re assuming to be true, without even realising that your assumption is just that – an assumption. These are the most dangerous blind spots of all. The success of your business idea is determined by how true your assumptions are. Which means it makes sense to get really clear on what your assumptions are, how you’ll test them, and what you should work on first – so there’s no stepping forward in the dark.

Step 3 – Objectives

Every successful startup, no matter whether for-profit, not-for profit, or anything in between, genuinely solves someone’s problem: the need must be real, and the solution must work. Many founders fall into the trap of focusing solely on their product or (social) service – making sure it works perfectly, developing an array of features, blowing up a specific service to be all-encompassing, making an app slick and user friendly, etc. Doing such work without knowing exactly who you’re creating a solution for is a recipe for wasting time and money. You run the risk of building a beautiful product, delivering a social service that tackles all corners of the problem, that none of the beneficiaries see a need for.

So, who is the ‘someone’ whose problem you’re solving? The temptation is always to say ‘well, everyone’s!’. Your product and services are so good at solving its problem, that surely loads of different types of people would get value from it. Why rule out potential service users, when they might want what you’re offering? The reality is that the most successful (social) startups are dedicated, particularly in the early days, to serving a specific target group. Facebook started with university students before it became the world’s most used social network; eBay initially focused on collectors looking for Beanie Babies and Pez dispensers before turning into the ‘everything’ marketplace we know today. They served a small group of people really, really well – giving their product/service and business model a chance to establish itself and create firm foundations for scale. When starting out, the key is to know who your product/service is for, and who it’s not for.

Step 4 – Service Users

Obvious thing to state, but the reason why most ideas either never make a difference or cannot be sustained is because they do not create products / deliver services that the beneficiaries want. It’s surprisingly hard to really understand your service users because people inherently lie to you when you are trying to get feedback. It’s your job to understand the nuances of what your service users need, the specifics of their expectations, and the intricacies of their current behaviors. All those variables combined define your niche. This is where customer development – or service user research – comes in, and it’s something you’ll continue with at every stage of your social business. Understanding all variables that form your niche is in many ways the most important of all.

Step 5 – Alternatives

If you’re like most early-stage founders, you have a fully-formed picture of your service in mind – a way out of misery, towards a better life. You are an idealist, and that is great! You know what you want it to look like when your service users feel better, and what they will be able to do afterwards; something they cannot accomplish right now. The path from here to there is to design, build, polish, and, don’t forget to sell – as we want to establish a social enterprise. Then put it in front of your beneficiaries who (fingers crossed) will want to use it

Of course, if they don’t, it’s all too easy to feel disheartened and assume ‘my service/product isn’t good enough’. But just as there are many possible niche target service users to choose from, so are there multiple ways to build your product/design your service. The trick is to hold it lightly. Be aware that your first solution for your chosen niche may not be the right one – nor might the second or third. But being adaptable – ready to adjust your product/service design, key features, or even the way it’s used – will mean you can quickly pivot towards product-market fit.  Try to detach yourself from any existing vision you might have of your product/service, think as widely as you can around the problem itself, and find as many alternative solutions as possible.

Step 6 – Financials

For many first-time social entrepreneurs, business models seem like daunting, complicated things requiring Excel wizardry and a head for numbers. But in the first instance, the numbers you can scribble on the back of a beer-mat are all that really matter. These are everything you need to check if a (social) business idea is viable. No complex modelling or advanced calculations can (or should) disguise whether your idea has legs. If revenue minus costs is above zero, you have a business case. If revenue minus costs is below zero, revisit your thinking from Step 5 and choose a different solution.

Step 7 – Prototype

That’s right – it’s Step 7, and we’re only now starting to talk about building a product / designing the service. Now you understand your problem, your potential service users, and the basic numbers for your idea, it’s time to create something and put it out into the world – a first PILOT. The point here is that whatever you create should be embarrassing. If it’s not, you’ve waited too long to launch or wasted valuable time polishing it. This is because, perfecting something you haven’t tested puts you at risk of wasting time and money on something you’ll only need to change later.

If your beneficiaries want your first, embarrassing product and be part of what you have to offer, you can be sure they’ll want your future versions. Whereas if you start off by dazzling service users with something so beautiful, it may mask flaws in the concept that will take longer to uncover – leading to more wasted time and money. Embarrassing, however, doesn’t have to mean sloppy, and it doesn’t have to be held together with tape (literally or otherwise). If creating this first, simple, embarrassing product is taking too long, head back to Step 5 and revisit other, more straightforward solutions. So – got a basic, no bells-and-whistles version of your product to tell the world about? On to Step 8.

Step 8 – Scalability

If you’ve got a target group of service users giving you money for your product / service – or you are being able to cross-finance it otherwise to make a profit – and telling their friends about it, then you’ve hit the ‘startup jackpot’. This is the holy grail for any business. You’re making sales, and each sale multiplies to become more sales. You’ve minimised churn (one-off customers who don’t return or refer) and you’re on a solid path to growth. The chances of hitting the jackpot first time round are, of course, slim. Tackling Steps 1-7 (and revisiting earlier steps where you need to) will massively increase your likelihood of success.

Extra Reading

The web is full of business f*** ups; not less is written about social ventures going wrong. I usually encourage people to surf the web and read up on international development agencies, as it is the easiest to find something. Though, also grassroots or small-scale initiatives that didn’t do anything to help, can be found. However, I leave that up to you, because understanding what is actually going on in an oftentimes ‘glorified’ sector, is daunting. So, here is a little something to get you started, and please feel free to add your selection in the comment section:

https://www.theguardian.com/social-enterprise-network/2013/aug/06/why-isnt-social-enterprise-more-social

https://www.weforum.org/agenda/2017/06/3-reasons-why-social-enterprises-fail-and-what-we-can-learn-from-them/