Social Enterprise: Purpose, How It Works, and Practical Guidance
What is a social enterprise?
A social enterprise is a business organized to achieve positive social or environmental outcomes as its primary purpose. While it operates commercially and seeks revenue, profits are mainly reinvested to advance the mission rather than to maximize shareholder returns. Social enterprises commonly target issues such as poverty, unemployment, access to healthcare, affordable housing, and environmental sustainability.
How social enterprises operate
- Primary goal: deliver measurable social or environmental impact.
- Revenue model: generate income by selling goods or services (and may also receive grants and donations). This revenue focus distinguishes social enterprises from charities that depend largely on external funding.
- Financial use: profits are reinvested to expand programs, improve services, or reach more beneficiaries.
- Governance and participation: many social enterprises emphasize stakeholder participation—engaging beneficiaries, employees, and community members in decision-making.
Social enterprise vs. social entrepreneurship
- Social enterprise: an organizational form (a business or nonprofit) that embeds a social mission into its core activities and revenue model.
- Social entrepreneurship: the practice or mindset of developing innovative solutions to social problems; social entrepreneurs may found social enterprises, nonprofits, hybrid entities, or influence existing organizations.
Notable examples
- Warby Parker: eyewear retailer that donates glasses to people in need for every pair sold.
- TOMS: retailer known for its one-for-one giving model for shoes and eyewear.
- Grameen Bank: microfinance institution in Bangladesh providing small, collateral-free loans to the poor.
- NeighborWorks America: nonprofit supporting community development and affordable housing programs.
Key considerations for founders and operators
- Mission clarity: explicitly define the social outcome you will pursue and how business activities advance it.
- Sustainable revenue: design products or services that customers will pay for to reduce dependence on external funding.
- Legal and governance structure: choose a legal form that supports your mission and desired financial flows (nonprofit, benefit corporation, cooperative, hybrid, etc.).
- Impact measurement: set metrics to track outcomes and demonstrate effectiveness to stakeholders and funders.
- Workforce and hiring: many social enterprises prioritize hiring from marginalized or at-risk communities and may aim to pay living wages.
- Balance of priorities: maintain a clear plan for reinvesting profits while ensuring operational viability.
How to start a social enterprise
- Identify a specific social or environmental problem and a feasible solution.
- Validate demand for your product or service with potential customers and beneficiaries.
- Create a business plan that integrates mission, revenue model, and impact metrics.
- Choose an appropriate legal structure and financial model (sales, grants, impact investment).
- Build partnerships with nonprofits, community groups, or subject-matter experts to strengthen credibility and reach.
- Pilot, measure impact, iterate, and scale.
How to get hired by a social enterprise
- Research organizations whose missions match your values and skills.
- Volunteer or intern to gain relevant experience and demonstrate commitment.
- Network within the social impact sector and use specialized job boards and nonprofit listings.
- Tailor your resume to highlight mission-driven work and measurable outcomes.
- Prepare for interviews by understanding the organization’s impact model and explaining how your skills advance its goals.
Bottom line
Social enterprises combine business discipline with a mission to create social or environmental value. By prioritizing impact and building sustainable revenue streams, they offer a practical alternative to traditional charities and conventional businesses—scaling solutions that improve lives while remaining financially viable.