Why Social Enterprise Without Profit Isn’t Enough

By Ed McLaughlin and Wyn Lydecker

Today, social enterprise is often positioned against profit: producing social good vs. generating profit. Instead of pitting social good and profit against each other like two feuding schools of thought, I believe that when they work together, they create powerful synergism. One does not prosper at the expense of the other. Rather, one enhances the other.

Indeed, whether you are a for-profit company with a social commitment or a not-for-profit company with 100% social commitment, you cannot fulfill your chosen social mission if your organization is not vital, innovative, and generating both new ideas and cash flow. Only then are you in the position to support the social responsibility that you have chosen.

For example, TOMS Shoes, the quintessential model of corporate responsibility has given over 35 million shoes to children worldwide with their one-to-one campaign. For every pair of shoes purchased, they give one pair away.

But the shoes aren’t free. They range in price from $7.99 to $129.95. The cloth and rubber are durable but inexpensive. There’s plenty of wiggle room for profit.

Social Enterprise Depends Upon the Ability to Make a Profit

Good businesses like TOMS, with good products that are fairly priced, create sustainable jobs that put food on the table. Employees don’t have to worry about their jobs or whether they will receive a paycheck. They can pay for their families’ shelter, clothing, and education. Their families can thrive and bring life to their communities. All these factors come together to allow for the proliferation of the social mission.

Profit Engenders the Social Mission

A profitable business can pay the bills, satisfy creditors, keep their doors open, and reinvest its profits in growth. TOMS first began selling shoes in 2006, but growth and expansion has allowed the company to scale, improve more lives and become the benefactor of multiple causes.

Toms’ Eyewear was launched in 2011. Every purchase of eyewear (priced from $68 to $189) contributes to sight-saving medical care or prescription glasses for over 275,000 people in 13 countries.
TOMS Roasting Company: Launched in 2014, this arm of TOMS provides safe drinking water with every bag of coffee purchased. You can also buy coffee mugs, tee shirts, and bag totes, all collectively priced from $12.99 to $28.
TOMS Bag Collection, which started in 2015, provides a safe birth for a mother and baby in need with tote sales priced from $38 to $248.

Giving Back

The best of all scenarios is for a business to create value and simultaneously serve a social purpose, while also expanding, growing, creating jobs, and generating a profit – the fuel for continued success. A close second to that ideal scenario would be to create value, expansion and growth, jobs and profit, and then be able to give back to a social need after profit has fueled the company and made it sustainable. The first scenario is best, but the second order of giving back, if that’s how it has to be, is a close second.

Perfection is social mission with a profit, right from the get-go. But that is not always realistic. However, I believe you can achieve both.

We have just released The Startup Roadmap: 21 Steps to Profitability. The Startup Roadmap is a step-by-step guide designed to help you understand the mechanics of starting and running a profitable new business. The print edition is available on Amazon. For a limited time, you can get a complimentary eCopy at our website (click here).

Ed McLaughlin is currently co-writing the book “The Purpose Is Profit: The Truth about Starting and Building Your Own Business,” with Wyn Lydecker and Paul McLaughlin.