For Profit or Non-Profit

One of the biggest questions for any social enterprise is whether to be for profit or not-for-profit. The former gives you access to venture money as well as a lot of flexibility in what you comprises your enterprise; the latter provides the opportunity for grant money and provides tax benefits.

The larger questions, however, are what you see as the force that empowers your social mission and where you want to take the business. I think that The Body Shop qualifies as a social enterprise -- particularly before it was sold to L'Oreal -- and Anita Roddick made no bones about using the power of the marketplace to have the greatest impact on the beauty business. She had clear and consistent social goals and built a large following by engaging with customers.

But when you decide to go that route, you ultimately are beholden to the demands of shareholders. If you go public or are acquired by a public company, your shareholders are likely to pay more attention to your quarterly financial returns than your return on mission. You are fine so long as you make money but as soon as you make a decision to do something that serves your mission but does not increase your financial performance, you are going to get serious grief from those same shareholders.

Non-profits are taken seriously for their pursuit of their missions but don't have a great track record in revenue generating activities. A social enterprise can be non-profit, for profit, or some combination of the two so long as it serves a social mission and there is no clear consensus on the best model to follow.

I think that if you are going to make business activities integral to the pursuit of your mission, for profit is the way to go. But plan to stay private. Get your money from angel investors or venture capitalists who are committed to your mission as well and who will be satisfied with the returns the enterprise can spin off without a sale or an IPO. It's not an easy choice.

What do you think?