What Is a Social Entrepreneur?
A social entrepreneur is a person who pursues novel applications that have the potential to solve community-based problems. These individuals are willing to take on the risk and effort to create positive changes in society through their initiatives. Social entrepreneurs may believe that this practice is a way to connect you to your life's purpose, help others find theirs, and make a difference in the world (all while eking out a living).
Widespread use of ethical practices—such as impact investing, conscious consumerism, and corporate social responsibility programs—facilitates the success of social entrepreneurs.
- A social entrepreneur is interested in starting a business for the greater social good and not just the pursuit of profits.
- Social entrepreneurs may seek to produce environmentally-friendly products, serve an underserved community, or focus on philanthropic activities.
- Social entrepreneurship is a growing trend, alongside socially responsible investing (SRI) and environmental, social, and governance (ESG) investing.
- The four primary types of social entrepreneurs are community social entrepreneurs, non-profit social entrepreneurs, transformational social entrepreneurs, and global social entrepreneurs.
- Social entrepreneurs design their thinking around the 6 P's of launching an idea: people, problem, plan, prioritize, prototype, and pursue.
Click Play to Learn About Social Entrepreneurship
Understanding Social Entrepreneurs
While most entrepreneurs are motivated by the potential to earn a profit, the profit motive does not prevent the ordinary entrepreneur from having a positive impact on society. In his book The Wealth of Nations, the economist Adam Smith explained, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest."
Smith believed that when individuals pursued their own best interests, they would be guided toward decisions that benefited others. The baker, for example, wants to earn a living to support his family. To accomplish this, they produce a product—bread—which feeds and nourishes hundreds of people.
A social entrepreneur might also seek to address imbalances in such availability, the root causes behind such social problems, or the social stigma associated with being a resident of such communities. The main goal of a social entrepreneur is not to earn a profit. Rather, a social entrepreneur seeks to implement widespread improvements in society. However, a social entrepreneur must still be financially savvy to succeed in his or her cause.
Types of Social Entrepreneurs
Community Social Entrepreneur
A community social entrepreneur prioritizes the need of a small geographical region, usually the community it lives in. This type of social entrepreneur is less concerned about the specific nature of their endeavor; the primary purpose of their entrepreneurship is to benefit their local area.
This type of social entrepreneur often builds strong relationships in its community, taking advantage of relationships to leverage how resources flow within its town. Community members, local organizations, and the community social entrepreneur work together to make sure the needs of the community are met and partnerships that make sense are created.
Non-Profit Social Entrepreneur
Non-profit social entrepreneurs are the more common type of social entrepreneur where the entity has a broad stated goal that benefits someone but not necessarily their direct community. With the introduction of remote or online social entrepreneurship, it is now easier to create entities with broader mission-driven purposes.
Non-profit social enterprises usually operate very similarly to a business. The primary difference is the net profits of the non-profit enterprise are often returned back to the entity for further develop into programming. Instead of there being investors to make money, a non-profit social entrepreneur strives to spend as much money it can towards its mission.
Transformational Social Entrepreneur
As a start-up non-profit social enterprise grows, it often shifts into becoming a transformational social entrepreneur. As local non-profits grow, so can their mission. A transformational social entrepreneur look to scale an operation from a single program to benefitting various areas. For example, consider the broad reach of Goodwill; what started as a small non-profit social enterprise transformed into a much richer, broader entity with many more rules and regulation.
Global Social Entrepreneur
Sometimes, social entrepreneur endeavors aren't limited by borders or geography. Sometimes, people may try to solve overarching social concepts such as poverty, depression, or lack of living conditions. Usually, the social entrepreneur may try to solve an issue in a specific region. However, these deep-rooted issues are often not specific to a region. Many of the solutions discovered in one area may be attributable to another.
These types of organizations easily have the greatest reach. For example, consider the breadth of the Bill & Melinda Gates Foundation. Their endeavors to find vaccinations for various diseases impacting those around the world are a clear example of global social enterprises.
Social entrepreneurship continually evolves; what may be a local communal non-profit one year may model into a global social enterprise the next.
6 P's of Social Entrepreneurial Enterprises
As social entrepreneurs embark on turning their ideas into successes, they often work through the following six areas. Each of these categories are different resources, roadblocks, or stages a social entrepreneur must often encounter.
Most social entrepreneurs start their endeavors by identifying what people they want to benefit. Sometimes, this is the people in their specific geographical region. Other times, this is people within a certain demographic (i.e. people with low income). Without a clear definition of who the social entrepreneur wants to serve, they will face difficulty in appropriately defining the scope of their enterprise. This puts the yet-to-be-created entity at risk of not having a clear vision.
Social entrepreneurs try to fix problems. More specifically, social entrepreneurs identify a problem that the people in the previous section face. Usually, during the brainstorm phase of an entity, the social entrepreneur will link the two together. For example, social entrepreneurs may try to defeat homelessness in their region. A social entrepreneur in this situation tries to help certain people (low income individuals) with a problem (lack of available housing).
With the people and problem identified, a social entrepreneur must devise a plan to solve the problem. Social entrepreneurs not only strive to create a business plan to operate an entity, they must also determine how this type of entity will receive funding and remain financially sustainable. The social entrepreneur must also evaluate how external parties can help it achieve its social goals.
One of the largest challenges for a social entrepreneur is a lack of available resources to tackle the problem they wish to solve. Whether that means not enough money, not enough specialized knowledge, or external forces that cannot be controlled, social entrepreneurs face many constraints. This means they must prioritize what they try to solve, how they go about operating, and what expansion looks like.
Because resources are limited, social entrepreneurs often test out solutions in small markets before expanding. This means creating prototype products, services, or processes. It also tests out how different funding and resources can help it achieve its goals. Though this stage may not foster trust in those who have provided an upfront investment with the social entrepreneur, other upfront investors may appreciate seeing a minimum viable product or prototype.
With the test case down, social entrepreneurs identify what went well and what didn't go well. It often surveys those that helped put the solution together as well as those receiving the benefit. This last step closes the full loop of activity, though a social entrepreneur should periodically evaluate each aspect and continually monitor for ways to better make their social change.
Social Entrepreneur vs. Other Social Concepts
Social entrepreneurship is related to socially responsible investing (SRI) and environmental, social, and governance (ESG) investing. SRI is the practice of investing money in companies and funds that have positive social impacts. SRI has also grown in popularity in recent years.
Socially responsible investors will often eschew investments in companies that produce or sell addictive substances (like alcohol, gambling, and tobacco). They may also seek out companies that are engaged in social justice, environmental sustainability, and alternative energy or clean technology efforts.
Socially conscious investors screen potential new investments for environmental, social, and governance (ESG) criteria. This set of standards considers how a company performs as a steward of nature, how it manages relationships with employees, suppliers, customers, and the communities where it operates, and how it treats its company’s leadership, compensates its executives, and approaches audits, internal controls, and shareholder rights.
According to ZipRecruiter, the average annual salary as of January 2023 for a social entrepreneur was just above $53,000 per year.
Examples of Social Entrepreneurship
The introduction of freshwater services through the construction of new wells is another example of social entrepreneurship. A social entrepreneur may have the goal of providing access to communities that lack stable utilities of their own.
In the modern era, social entrepreneurship is often combined with technology assets: for example, bringing high-speed internet connectivity to remote communities so that school-age children have more access to information and knowledge resources. Another example are microfinance institutions that provide banking services to unemployed or low-income individuals or groups who otherwise would have no other access to financial services.
The development of mobile apps that speak to the needs of a particular community is another way social entrepreneurship is expressed. This can include giving individuals ways to alert their city administrations to problems such as burst water mains, downed powerlines, or patterns of repeated traffic accidents. There are also apps created to report infractions committed by city officials or even law enforcement that can help give a voice to the community through technology.
Other examples of social entrepreneurship include educational programs, providing banking services in underserved areas, and helping children orphaned by epidemic disease. All of these efforts are intended to address unmet needs within communities that have been overlooked or not granted access to services, products, or base essentials available in more developed communities.
How Do You Become a Social Entrepreneur?
You can become a social entrepreneur by considering who you want to help and what problem you want to solve. Once you have a targeted idea, it's often best to gather resources, understand where your limitations are, and decide what external parties you want to help craft the enterprise.
How Do Social Entrepreneurs Make Money?
Social entrepreneurs raise capital for their enterprises by connecting with other members in the community. "Community" does not necessarily need to mean physical location, as some enterprises may collaborate around the world for a common social cause. A social entrepreneur may collect grants, upfront donations from major donors (in exchange for public recognition), or use personal capital.
Do Social Entrepreneurs Pay Taxes?
It depends. Social entrepreneurs are usually not personally exempt from paying taxes. This means that almost all individuals are taxed on the income they make, regardless of whether or not the enterprise they work for is a social enterprise. On the other hand, most social entrepreneurs incorporate their enterprises as a non-profit entity so their enterprise can operate tax-free.
The Bottom Line
Some people craft a business to make a lot of money. Other times, people start an enterprise for social good. The latter type of individual is called a social entrepreneur, and they often start by identifying the people and problem it wants to help. Though there are many similarities between a social venture and a full-for-profit enterprise, the core difference is a social entrepreneur prioritizes the good it creates for its community or recipient base.