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Are you an impact seller or an impact employer?
Are you an impact seller or an impact employer?
Written by
UnLtd employee
UnLtd position
Are you an impact seller or an impact employer?
Written by
UnLtd employee
UnLtd position
UnLtd researcher Jami Dixon explores different social business models for social entrepreneurs tackling unemployment. Long-term unemployment has a significant cost for individuals, society and government – in the UK alone there are nearly half a million people who have been unemployed for over 12 months. The good news is that there are social entrepreneurs out there providing solutions, many of whom UnLtd are funding as part of this year’s Big Venture Challenge. For these social entrepreneurs, creating a sustainable business model to both generate income and create social impact can be challenging, especially in the early stages. As a starting point to help social entrepreneurs choose a sustainable model, our most recent research, funded by Big Society Capital, identified the most common business models for social entrepreneurs tackling unemployment – and some of the issues to consider when adopting them. Building on, we identified three common social business models that social entrepreneurs are using to deliver employment-related services: The Impact Seller Who are they? Ventures like the London Learning Consortium (LLC), who provide learning and skills programmes aimed at helping individuals find routes into employment. In 2014/15, 51% of LLC learners came from some of the most economically deprived boroughs in London. Their main customer is the Skills Funding Agency (SFA), who pay for the delivery of courses designed to help people gain skills, employment and formal qualifications. What’s the model? In this model, social entrepreneurs ‘sell’ social impact, often in the form of training courses or delivering other employment-related services. They  typically sell to public sector clients who then pay for specific social outcomes, such as a number of people specifically helped back into employment. The Impact Seller’s sole focus is to help the unemployed back into the workplace. What should I consider before adopting this model? Cuts to public funding mean that Impact Sellers are finding that generating income is becoming increasingly difficult to sustain – our research showed they are increasingly attempting to diversify their income streams. The Impact Employer Who are they? Ventures like the Severn Project CIC, who produce high-quality salad leaves and herbs at its urban farm in Bristol. They recruit people who face significant barriers to the workplace. Since 2010 the Severn Project has supported over 600 people in recovery from substance misuse issues, offending behaviour and poor mental health through a range of volunteering opportunities, workshops, placements and employment opportunities. What’s the model? Impact Employers generate social impact through the sale of other goods or services. They often sell to the general public or other businesses andthe cost of delivering social impact (employing people further from the labour market) is taken from operating margins. What should I consider before adopting this model? Success and sustainability depends on the social entrepreneur’s ability to generate sufficient profit to cover the costs of generating impact over time. It’s only a suitable option in particular markets, for example, luxury goods, and many of the risks are industry specific. We found that Impact Employer is a preferred option for many early-stage social ventures. The Profit Donor Who are they? Ventures like Recycling Lives Ltd, who provide commercial recycling and waste management solutions for Local Authorities and large businesses. With profits from the business they have established a charity, Recycling Lives UK, offering accommodation, education, training and work experience to homeless, ex-offenders and long-term unemployed individuals.. What’s the model? A less frequently adopted model, these social ventures ‘donate’ net profit to create social impact elsewhere, through other social ventures or charities. Very few of the social ventures that we included in this research used the profit-donor model. However, some of the social ventures that UnLtd work with adopt a partial donation model and build it in to the models above. What should I consider before adopting this model? Success and sustainability depends on the social venture being able to generate sufficient profit and donate it elsewhere. As very few start-ups are in a financial position to donate their profits, unless this is specifically integrated into the price of the product or service, this model is a typically a suitable option for more established businesses. The emergence of hybrid models We also noticed that an increasing number of ventures are pursuing a hybrid Impact Seller-Impact Employer model, either  to reduce their reliance on public funding or to increase their social impact.. Hybrid models offer the potential to generate income and deliver social impact sustainably, but are often challenging to manage financially and operationally. Read the full report Identifying common models and some of the risks and opportunities is an important first step for the sector. Through this, we anticipate that social entrepreneurs will be better placed to select the right model for their social venture, and maximise their social impact. At the same time, developing sustainable models that can support the most vulnerable, i.e those furthest away from the labour market, remains a challenge for social entrepreneurs. We suggest that targeted corporate funding, grants and policy incentives are needed to address this. To get more detail about the different models and our recommendations, read our full research report.