Social entrepreneurs must focus on financial management

Summary

Many emerging social enterprises are reluctant or unable to acquire and actually use, good financial information, in a strategic way to build a sustainable future business model.

29Mar.
0

Posted by Secret Social Entrepreneur on http://socialenterprise.guardian.co.uk

I recently watched a TED talk by an ex aid-worker Ernesto Sirolli. They can be hit and miss sometimes but this one contained some powerful messages for social entrepreneurs. One of those was about the importance of listening carefully to your customers. It was accompanied by a beautifully funny story about his experiences with Zambian agriculture. It’s a lesson learned early on by many entrepreneurs.

But I thought the best bit of the talk was right at the end, where the truth about entrepreneurship was revealed. To make any venture a success, Sirolli says, you must do three things brilliantly well. The first is to have a fantastic product, and the second fantastic marketing – in other words – ‘make it’ and ‘sell it’. The third thing is to ‘look after the money’.

Sirolli says that

no individual is capable of all three activities – indeed, that no successful company in the world today was started by one person alone.

In all my work in public, social and private sector, I have never met anyone that could perform all three tasks to maximum effect.

It’s important for social businesses to get the balance right in their business model. The temptation is to put your efforts where your passion is – often in the ‘make it’ part. But it’s the ‘sell it’ part where I have a weakness. Others are happy to shout about their organisation from the rooftops. I envy their creativity, communications skills and their confidence.

But, even in established organisations, I’m afraid to say, it’s the money bit that people get hung up on. A kind of ‘financial blind-spot’ can plague many an emerging social enterprise. By this I mean a reluctance or inability to acquire and actually use, good financial information, in a strategic way to build a sustainable future business model.

I’ve lost count of the groans I get when I raise the subject of financial management. As far as I can see, no true social enterprise can both sustain itself and fulfil its social purpose without making a profit.

Photo © Shutterstock / Nonwarit

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