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Make your social enterprise profitable

Social enterprises need to have a revenue model for being able to sustain themselves.

Tags: social enterprise

BY Entrepreneur  |  Sep 21, 2010 comments ( 0 ) |


It may work towards achieving a social motive but needs a sound revenue model to sustain itself, just like any other business. After he won the Nobel Prize in 2006, Muhammad Yunus, the founder of Grameen Bank said, “...poverty is an artificial creation. It doesn’t belong to human civilisation, and we can change that, we can make people come out of poverty. The only thing we have to do is to redesign our institutions and policies.”


Conferring the world’s most prestigious award upon Dr Muhammad Yunus did not just establish the fact that social enterprises can be profitable but it also encouraged numerous other people with plans of starting a social enterprise. It helped in reinstating the idea that social enterprises can be made profitable and hence sustainable.


What is a social enterprise?


Primarily, social enterprise work towards achievinging a social motive, but they apply market based strategies. The movement includes both profits and non-profit organizations that adopt business models to pursue their mission. In a layman’s term, a social enterprise is about creating business model around products or services meant to earn money for underprivileged.


The Mission


The objective of a social enterprise is to generate profit for social causes. These profits might be in the form of employment generation or enabling eco-friendly initiatives to save the environment or providing facilities like healthcare etc. 


Masuta Producers Company Limited is one such social enterprise. It constitutes of rural women who produce tasar silk yarn to earn their livelihood. Madhaband Ray, founder of Masuta recalls the plight of women in rural areas of Jharkhand (former Bihar) when he was working with PRADHAN (a national developmental organisation working on enhancing livelihood opportunities for the underprivileged across India) back in 1995, which motivated him to start Masuta.


He relates, “They (those women) used to walk for kilometers to bring a bundle of firewood, cut and dry them and then sell them in far off market places just to earn Rs 15 for all the hard work. During agricultural season they worked as daily wage labourers and earned far less than their male counterparts. There were no decent jobs that they could do.”


This irked Ray. He remembered a traditional weaving cluster where he had seen women are tasar yarns to be used by the male in weaving. He then worked towards making this a means of livelihood for the women in the rural areas, and thus started Masuta.


‘Dial 1298 For Ambulance’ started as charity. The company provides a network of life support ambulances 24 hours x 7 days a week started with two ambulances run on charity in Mumbai. “We had a personal experience in which one of our friend’s mothers choked in her sleep at midnight. Had it been the US or the UK he would have called an ambulance. But in Mumbai there was no such facility. He had to put her in his car and rush her to hospital,” said the co-founder of Ziqitza Healthcare Limited, Sweta Mangal.


The need to be sustainable


No matter how noble the idea is, a business model is indispensible to make it sustainable. Generally, social entrepreneurs either have their customers pay subsidised amount for their product or services or partner with bigger organizations to be able to sustain them and keep the cash flowing.


When Sweta and her team felt the need for such a facility in the city, they wanted to expand. When we increased the number of ambulance, we realized we cannot sustain this on charity, said Sweta. They met Dr Sam Pitroda who encouraged them to have self sustainable model and in 2005 the team decided on a sustainable module and take the social work on a full time basis. Now people who use the ambulance have to pay for it, for going to private hospitals they pay the entire fee and for government hospitals subsidised or no fee.


Reshma Anand of Earthy Goods, a social enterprise which was set up to authenticate natural handcrafted products made in Indian villages in urban markets, says that the se goods were not considered lucrative because many of them are either forgotten (and hence have low demand) or just didn’t make it to our markets.


Though the intention of starting the company was to authenticate handmade products like soaps, apricot oil, beeswax lip balms & body butters, a business model was crafted around it. “All market-based business development work is anchored in a for-profit company.  We aggregate products across partners and channel them to consumers through a network of common distributors, organized retail stores, private labels for retail clients. The revenue model is margins on sales and management fee on projects,” says the founder.


Ray also had to carve a business model around the production of tasar. “I realised that such enterprise can sustain only when linkages could be established sustainably with the markets (input, output, finance, technology markets). Linking such remotely located, scattered, small producers with the market requires aggregation and the producers should have complete control (ownership) over such aggregation. Therefore a two tiered structure of yarn producers was created, MASUTA being their apex organisation of village level primary, informal group of yarn producers,” he says.


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