There is much discussion and confusion around the definition of social enterprises amongst folk. Here's our interpretation and hopefully it will help your understanding. And if you are thinking about setting up a social enterprise you need to clearly understand what it is about. While lots of different definitions circulate on the web, we believe that the key to understanding social enterprises is that they are businesses like any other. The difference between social enterprises and other businesses is that social enterprises have a social purpose through which they want to create a social impact. They use their profit to do something good for others, such as young people in need of extra care, or for a cause, such as the environment. What we learned from years of experience in the third sector is that what separates successful social enterprises from the less successful ones is the awareness that they are a business like any other, and that they have to generate a sustainable income.
Basically a social enterprise can be anything: a train, a pharmaceutical company, a bank or whatever else. The important thing is that social enterprises must understand that they still need to operate like a normal business and deliver the value the customers want and expect from them. Make sure that whatever your product or service is, you do it well! Quality matters. It's not enough to be just a social enterprise. You have to deliver quality. For example a restaurant must create a great customer experience and serve good food. People go there for tasty food, good customer service and a nice atmosphere. Not only because it’s a social enterprise.
Interestingly – although social enterprises are about making a social impact – when having a look at enterprises through the lens of small communities, pretty much every business has a social impact. Because they generate jobs, involve locals, and make a difference in that community. Therefore, it is important to keep that in mind as a social enterprise. Depending on the size of the community, by competing with small private businesses it could have a negative effect on the community. Highlands and Islands Enterprise would call that "displacement". There is no point in creating a café that sells tea and coffee for 20 pence if what you are going to do is put a café down the road out of business and cost somebody their job. That's not what social enterprises are about.
Therefore, remember: A social enterprise is a business like any other but with a social purpose. You need to generate income. And what better way to do that than through delivering best quality for your customers. And be fair - don’t try to compete with existing businesses in small communities.