When I first began my social enterprise I went through a few conversations to decide whether I wanted it to be a non-profit or a for-profit venture. In the end I started it as a for-profit entity. Mainly I did this for two reasons. First, people told me that non-profits were a beast to set up. Second, I wanted to maintain an incentivized system. I wanted my students to know that their venture had to turn a profit in order to survive. I felt like an organization that was solely surviving on profit (rather than grants or giving) would be much more competitive and lean. Students would have to develop a better work ethic when working in the for profit world.
Recently, my team and I have been thinking about transitioning away from a for profit model. Our margins are pretty good, but because our social mission is so strong many people are trying to donate items to our venture. In our current designation if they do that we have to pay tax on the equipment and they get no write off. It has also become much easier to set up a non-profit than it was 2+ years ago. The IRS has loosened its registration requirements for non-profits partially as a result of the Lois Lerner/IRS scandal. We believe we will still have to be competetive in this new 501c3 model (we haven't made the leap just yet) and that our students will be incentivized to work hard. But, as we have started to make the transition to a non-profit model I started to wonder whether or not a non-profit can really be considered a social enterprise? I mean, was I really doing social entrepreneurship anymore, or had I just become a charity?
I was reading an article the other day in Forbes that was an interview with Atul Tandon who was the Senior V.P. of Donor Engagement with World Vision. Tandon thinks that social enterprise is just as present in the non-profit world as in the for profit. Particularly in his view the designation of an "enterprise" is just a tax designation. I tend to agree with this line of thinking. An enterprise after all is just a business or a new venture in anything. A social enterprise merely denotes that it simply seeks to make a social impact on the world. We are both. Changing our designation changes almost nothing about our company. We still do the same work, the same mentoring, and nothing has changed about our mission and vision. both models had a team of advisers. In the for profit phase of our enterprise they just had no official role since they weren't invested in the company. As we become a non-profit some of them are now my board. They simply were advising me as friends as to how to build the business and the mentoring. The only major difference between the new model and the old is that I no longer own the company. I don't get to profit off of its sale at the end of my career if I can make this thing run that long. Investors also don't profit either. I have no moral qualms with profit. I just never did this to make a ton of money and the advantages of starting these as non profit entities are numerous now that non profits are much easier to set up.
So at the end of the day, I no longer think it matters that much whether your enterprise is for-profit or non-profit. As long as it fully engages the marketplace, is a self sustaining economic engine, and still places its social/kingdom mission first it seems like its a social enterprise to me!