SSE’s Charles Rapson shares some nuggets of wisdom he’s picked up over the years about why social enterprises should pursue profit.
I’ve spent the first 35 years of my adult life working in industry.
I stumbled into social enterprise by accident and was immediately confused. Why did so many people refer to it as a “not-for-profit business”? In all my previous jobs, profit was nice to have and something to keep the shareholders happy.
Perhaps I chose badly?
But profit is vital with social enterprise. It’s the lifeblood of the organisation. It’s what enables you to fulfil your purpose.
Since moving to the world of social enterprise, I have become far more interested and driven by profit.
Without profit, we are in danger of becoming busy fools.
I’m a big fan of wealth generation – I just want to see it distributed as widely as possible. (I love the old Social Enterprise UK slogan: “Business where society profits.”)
Learning by experience: profit and purpose
One of the social enterprises I ran was a factory offering assembly and packing services to manufacturing companies. It employed learning-disabled adults, among other disadvantaged people.
When I told potential customers that we were a social enterprise, they either didn’t understand or saw it as an opportunity to pay us less because they saw us as “not for profit”.
One misguided but well-meaning businessman invited me to his factory to show me some products we could pack for him.
“How much are you offering to pay us?” I asked.
“Oh, I wasn’t going to pay you – I thought it would help keep your clients occupied,” he replied.
We didn’t get the business. And I stopped telling people we were a social enterprise until after we secured the business.
Following that, another customer confessed to me, with a big smile on his face: “If I thought you employed people with a learning disability, I might not have given you the work. Now that I know you do, I can’t ever take it away.”
We still work with him, nine years on. He won a £6m contract by including a statement on who we were and the subcontract work he would give to us. It scored that extra vital point in his bid.
My top tips on generating profit as a social enterprise
- Grants can restrict your growth and aren’t sustainable. Income from trading (e.g. sales and contracts) is unrestricted and sustainable.
- Get out there. Talk to people. Be evangelical about your business.
- Ask for business. Be direct.
- Don’t be shy when pricing your goods or services. Be proud of what you do and the added value you create – and price to match it.
- People want to – and will – pay for products and services from a values-driven organisation.
- Businesses might just want the added value you bring – but know when to use it.
- Get your customers to see the social or environmental impact you achieve. It creates loyalty and makes pricing conversations much easier. They are human too and might just care.
- Think like a capitalist, act like a socialist.
Profit is …
- bad when it only benefits a few.
- good when it benefits many.
- brilliant when everyone gains.
Charles Rapson is a social entrepreneur and director of SSE in the Midlands.