If you’re an entrepreneur who wants to make a real difference in the world, you might be thinking about starting a nonprofit.
However, social entrepreneurship is a rapidly growing field full of business-savvy people looking to make a positive impact. But how is social entrepreneurship different from nonprofit organizations?
Let’s dive into 4 key differences.
4 Differences Between Social Enterprise and Nonprofit
1. Primary Objective
Social entrepreneurship combines business strategies with a passion for solving social problems. Traditional businesses solely aim to generate profit.
Social enterprises do aim to make profit, but it is typically reinvested into the business to further its social objective.
Nonprofits exist to serve a social, cultural, or environmental cause. They acquire funding through donations, grants, or other fundraising activities. Any surplus after all expenses are paid is put back into the cause.
2. Revenue Generation and Sustainability
Social enterprises are, at their heart, businesses. They sell products or services in the market, generating revenue. This revenue-driven model can often provide more sustainable funding for their social mission.
Nonprofits rely more on external funding. This can come from individual donors, governmental grants, or philanthropic bodies. Due to this model, they can sometimes face financial instability if their funding decreases.
3. Flexibility and Innovation
Since they are a business, social entrepreneurs often have the flexibility to pivot, innovate, and adapt to market changes. They can experiment with novel solutions and strategies to amplify their impact.
Structurally, nonprofits can be less flexible due to their dependence on donors or grants. Since the funding is external, it can often come with stipulations.
4. Accountability and Stakeholders
Social entrepreneurs are accountable to both their social mission and their customers. Balancing both can be a unique challenge.
The primary accountability for nonprofits is towards their donors and the communities or causes they serve.