Name: Building Social Business
Rating: 4.1 (39 reviews)
Author: Muhammad Yunus

What’s in it for me? Learn what a social business is and how you can start your own.

Although capitalism has brought prosperity to many parts of the world, far too many people have been excluded from its benefits and live a life of crushing poverty. But what can we do to make the world a better place? Well, a great first step is to build a social business.

Charity, social entrepreneurship, nonprofit organizations, nongovernmental organizations and so on are all meant to support a good cause – but a social business is something entirely different.

In these blinks, you will learn what a social business is all about and what differentiates it from other social enterprises. You will be given advice on how to come up with a concept for your own social business and how to get it started.

You’ll also learn

how poor Bangladeshi people run a bank;
why a social business actually should aim for profits; and
why capitalism is incomplete without social businesses.

There’s a different way to do business that’s about solving society’s problems rather than getting rich.

You’ve likely already heard of the term “social business”, but what does it really mean?

Fundamentally, a social business isn’t based solely on its bottom line. Most businesses, private ones in particular, are all about maximizing profit; on the other side of the coin are nonprofits that rely primarily on philanthropic donations. But a social business is distinct from both.

The primary aim of a social business is to solve social, economic or environmental problems. To accomplish this goal, such businesses employ regular business methods like the production and sale of a product or service that makes the venture self-sustaining.

For instance, Grameen Danone makes and sells affordable yogurt products loaded with micronutrients, and their overriding goal is to combat malnutrition among children in Bangladesh.

But it’s not quite that simple. In fact, there are two forms of social business: Type I and Type II. A Type I social business produces profits but does not dispense dividends – that is, they don’t regularly pay out a percentage of their profits to the company’s owners.

So, while Type I social businesses are still owned by investors, all the profits are reinvested in the company, resulting in neither a gain nor a loss for the investors. Grameen Danone is an example of one such Type I social business, as they operate without dividends.

On the other hand, a Type II social business operates like a typical for-profit company. However, unlike a Type I social business, it is owned by poor people rather than wealthy investors. As a result, the profits of the business go directly to low-income people and, therefore, serve a social function – namely the alleviation of poverty.

For example, the Grameen Bank is a Type II social business. It’s owned by the poor of Bangladesh and provides loans to low-income citizens.

A social business is distinct from other charitable and socially oriented organizations.

There’s a lot of confusion surrounding social businesses, and discussions about them are likely to feature terms like social entrepreneurship, NGO, social enterprise and foundation. However, these ventures are all different from social businesses.

For starters, a social business is not the same as social entrepreneurship. Social entrepreneurship is all about one person – the entrepreneur – and his or her idea. So, while such initiatives can have a social impact, they can be driven by non-economic, charitable or business intentions.

Start your social business by identifying a problem that you think you can solve.

Think of a standard, profit-maximizing business. When founding such a company, entrepreneurs generally seek out a gap or niche in the market that they can fill. Their main intention in doing so is to earn as much money as possible.

However, when launching a social business, it’s essential to start by identifying a social issue that you want to solve and are uniquely suited to tackling. As a social business, you’ll by definition be serving a social function, which makes turning a profit a requirement, not a goal, for your enterprise.

Attract investors with a reasonable business plan, and look to for-profit companies when building your social business.

Now that you’ve got an idea, the next step is to secure funding. But how exactly?

Well, it’s important to come up with a reasonable business plan to attract potential investors. This plan should include a detailed five-year budget and forecast for operationalizing the business, complete with both cost and revenue structures.

Capitalism has meant prosperity for some, but it is incomplete and inequitable without social businesses.

As World War II was finally coming to a close, global prospects appeared bleak. Poverty and hardship were widespread across the globe.

As the years passed, capitalism advanced, resulting in positive changes for many – but not for everyone at once. In the decades since the Second World War, many economies have done extremely well, particularly those of Europe and North America, significantly increasing the wealth and quality of life of hundreds of millions of people. But still more people were left impoverished in the wake of this boon.

Kernaussagen in Building Social Business