Recipe for success

Good intentions not enough to ensure longevity of social enterprise

Recipe for success
Stone Hearth Bakery in Halifax, N.S. is a social enterprise established in 1982, providing a work-based training program.

When Halifax’s Stone Hearth Bakery was established in 1982, it really didn’t have a term to describe its business model.

Fast forward 36 years, and the bakery is one of many businesses that fall under the social enterprise banner, a term used to describe businesses or organizations that have a social, environmental or cultural purpose. Often they are non-profits like Stone Hearth, which offers jobs to those facing mental health difficulties and employment barriers.

“Social enterprises getting more attention these days is a good thing,” says Dave Rideout, president and CEO of Metro Works, which run Stone Hearth and other programs. “The fact that people are looking more at social exclusion and social responsibility in what they do is a fantastic thing.”

According to a 2016 poll on global social entrepreneurship from Thomson Reuters, in partnership with Deutsche Bank, UnLtd and the Global Social Entrepreneurship Network, Canada was named the second-best country for social entrepreneurs. This is due to current entrepreneurs being able to make a decent living, the sector’s growth and the public having a good understanding of what these people and organizations do.

Support for social ventures is also building. In 2012, University of New Brunswick’s Pond-Deshpande Centre opened; it operates social venture program B4Change. It currently has 27 businesses listed on its alumni page.

Despite the growing awareness and popularity, not every social enterprise succeeds.

Farmers’ Truck, a mobile farmers market and B4Change alumni from Moncton, folded after two years. Its CEO and co-founder Frederic Laforge says Farmers’ Truck was started to help a friend, who was new to farming, sell his produce. Initially, the venture seemed to be successful, but that soon changed. He cited many reasons for its closure, including not paying attention to those he was trying to support.

“What I’ve learned through this is I was trying to build something for the farmers and I wasn’t really listening to (all) of the farmers,” he says. “When I had a chance to talk to them, they didn’t want to take too much of a risk and I thought maybe they didn’t understand what I was trying to do.”

He thought they would be able to franchise the Truck, but he didn’t think of the size or scope of his market. He says New Brunswick farming isn’t always a lucrative market and many farms are small-scale operations, which is why they were apprehensive.

“You have to design like you’re right and listen like you’re wrong,” he says.

David Upton, a member of The Social Enterprise Network of Nova Scotia’s secretariat, says this issue is one of many. “A lot of starters come from social side and they find themselves running businesses they aren’t particularly able to deal with,” he says. “Running a business from a business perspective is a technical process. What it requires is critical thinking and an understanding of both internal and external forces (such as cash flow, products, price) to run.”

Founded in 1995, Newfoundland’s Stella’s Circle is the parent organization of the Hungry Heart Café and Clean Start. Stella’s provides support and programs to those who struggle being part of a community due to factors such as mental health, long periods of unemployment and homelessness. Its ventures have had their share of problems, says Rob McLennan, director of employment services at Stella’s Circle. However, he says social enterprise can be more equipped to deal with smaller problems, if it is fully developed and thought out.

“I would say there needs to be …an incubation (period) to fine tune the enterprise,” he says.

The Hungry Heart Cafe in St. John’s, N.L. is a socially responsible neighbourhood cafe featuring the freshest local products and many homemade specialties. As a social enterprise initiative of Stella’s Circle, the Hungry Heart Café provides training opportunities to support those who have faced barriers to successful inclusion in the community. 

While many issues can grow into larger ones, Upton says the biggest social business problem is monetary. If an organization doesn’t have proper financial support to supplementary revenue, it’s going to fail.

“Social enterprises, because many of them are non-profit organizations, are unable to provide personal guarantees on loans,” he says. “They can’t sell shares to raise capital and financial institutions sometimes don’t lend to them because they would be reviled if they realized on their loan security in the event of default.”

Rideout also finds that’s a challenge.

“Because we’re a social enterprise and we’re not for profit, we’re not eligible for a lot of the funding mechanisms that are out there,” he says. “We can’t go to the bank and get a loan and there are a lot of government programs that we aren’t eligible for.”

A solution for this is finding alterative means of support. Recently, Stella’s Circle partnered with Chevron Canada. It’s a move that McLennan calls “instrumental.”

“It’s moving toward a better model of sustainability,” he says.” It’s doing whatever it takes to find ways to make the enterprise work. Both Clean Start and the Hungry Heart Café create self-generated revenue and have support from partners such as Chevron.”

However, for Upton, there needs to be more than just small pockets of support from other organizations. “If we were to work creating a market for investment in social enterprises, particularly non-profit social enterprises than that would solve half the problem,” he says.

In Atlantic Canada, there has been some development in this area.

In 2017 the Atlantic Growth Strategy Subcommittee on Innovation, a committee made up of five Atlantic MPs, released A Faster, More Agile, and Certain Atlantic Canada report, which included social enterprise. Among its recommendations were development of an industry strategy and allowing these businesses to access government funding that is proportional to for-profit businesses. Since then, many provinces have issues press releases agreeing that social enterprises should be supported.

“The thing is, social enterprise is 50 years behind the small business sector in terms of development, so change won’t happen in a week,” says Upton. “The big question is how to we provide social support as more and more operations engage in social opportunities and their impact on community.”

Still, where some businesses succeed, others fail no matter how much support, financial or otherwise, they have. Social enterprises, as Rideout points out have to keep in mind they are more just social.

“Ultimately, you are running a business and you have to ensure those clients are taking care of; prices, product delivery (and other factors) have to meet expectations,” he says. “In order for it to work it has to be a business and you have run it like a business.”

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