Many investors instinctively like the idea of backing a social enterprise but feel anxious about what might happen to their money. Will a business that trades for social or environmental purposes, and which reinvests its profits in order to further those goals, have what it takes to succeed in a cut-throat marketplace?
Peter Holbrook, the chief executive of Social Enterprise UK, hopes research just conducted by his organisation might allay some of those fears. “Social enterprises are transforming the way business is done: our data shows they are continuing to expand, to do good and to change the lives of individuals and communities,” he argues. “Of course there are challenges, but the sector is clearly in a strong and healthy position.”
Importantly, the group’s research looks into trading performance as well as the wider aspirations and intentions of social enterprises. It suggests five reasons why investors might want to consider investing in a social enterprise, even leaving aside support for its goals:
Social enterprises’ revenues are growing
Social Enterprise UK looked at almost 1,200 social enterprises’ trading activities during the course of 2014. More than one in two (52%) saw their revenues increase last year, while 28% at least maintained sales. Only 19% saw a decrease in sales.
Social enterprises are expanding into new markets
Many social enterprises are investigating new sources of profitable business, Social Enterprise UK’s research suggests. Some 59% of them developed new products and services last year, while 39% expanded into new geographic areas. Nor are these organisations necessarily only domestic businesses – 14% of them now sell overseas, up from 11% in 2013.
Social enterprises are attracting new customers
Part of the explanation for this growth lies in the success social enterprises have had in finding new customers – 83% attracted new clients last year, Social Enterprise UK’s research suggests. Those customers come from a variety of different market places – 59% of social enterprises earn revenues from the public sector, but 53% sell to the private sector. And 58% make sales to the general public.
Social enterprises are proving sustainable
Social Enterprise UK’s figures suggest these organisations are not just enjoying “flash-in-the-plan” success. Half the organisations in the research had a trading record of six years or longer, including 20% that have been in business for more than 20 years.
Social enterprises are promoting management diversity
Social enterprises are far more likely to be led by women – 40% have female leaders, the research shows, compared to 18% of small and medium-sized enterprises generally. Moreover, while just 7% of small and medium-sized enterprises are run by a leader with a minority ethnic background, the figure for social enterprises is 11%. This diversity is important not just for its own sake but also because research repeatedly shows that businesses with more diverse managements have a propensity to perform more strongly.
