Below are some key issues and challenges specific to this model:

• Succeeding at social enterprise is exceptionally hard. Even in the Roberts portfolio – a leader in this area – there haven’t been many examples where achieving financial self-sufficiency and the social mission has occurred in tandem.
• Chances for success are higher if the business and social mission are on equal footing. Making a business succeed and achieving a social outcome at the same time is a tough balancing act. The Roberts experience has been that if either the social or the business mission always takes precedence, then success isn’t likely.
• Chances of success are also higher if a businessperson with a good heart, as opposed to someone with a social services background, leads the organization. The organization needs someone who brings a “Rolodex of contacts” and experience at making money and operating businesses, not to mention an enlightened attitude to applying private sector realities to nonprofit opportunities.
• The leader of a social enterprise requires a peer resource in charge of the social mission. It is tough enough to make business decisions – but who can handle the complexities and emotional turbulence involved in being the watchdog for the social mission? A division of labor and teamwork is required – a creative tension – between business and social aspects of the mission.
• If a social enterprise is initiated within an established agency, it’s critical to set it up with a separate governance and pay structure. Businesses typically operate on different dynamics than nonprofits. Mixing them is a recipe for failure, we found. An operational “firewall” is required to give the revenue-generating enterprise every chance for succeeding on the unique terms of its mandate, which might be different than the organization spawning it.
• There is a high degree of burnout of social enterprise leaders. Getting a social enterprise off the ground requires that leaders undertake an immense amount of work overcome significant challenges. A high level of burnout among the leaders of these organizations indicates how hard it is, even with the best of intentions, to make these enterprises succeed.
• Many of the social enterprises in Canada are essentially “training labs” and not real businesses. Training labs serve a function but they only “simulate” the work experience, not provide the actual thing. As well, since government funding is often provided in correlation to the number of people an organization hires, sometimes there are more people on staff than needed, which can put unneeded stress on a business. Adhering to funding criteria for obtaining trainees can force managers to operate bureaucratically, which is part of the strategic straitjacket that prevents them from controlling their destiny.
• You can’t be all things to all people. Too often, social enterprises get started without a clear idea of who can benefit from the undertaking. People employed in these social enterprises require enough adaptiveness to hold down a job. A social enterprise model can, in essence, only really help job-ready people. It’s important to segment your users – clearly understand what you are doing and with whom. What kind of employment barriers do people have and why? How many hours per week can they work? What skills do they possess and what kind of skills would they like to learn?
• It is an ongoing challenge to create a supportive work environment with realistic expectations of target employees. The key to managing this challege is trust; trust among all individuals involved in the social enterprise.
• This model is not a savior for all of our society’s social issues. Social enterprises may not be able to solve the deepest, most intractable problems – it’s not a solution for every situation and cannot replace the need for traditional agencies. People with significant mental illness, serious drug problems, or other issues that inhibit “job-readiness” are not ideal candidates for these organizations. This begs the question: how much can one achieve within this model?
• Success depends, we believe, on being responsive to three criteria:
  • Social outcomes – What kinds of social enterprises are likely to succeed and will the results be worth the investment? For example -- are people working in teams or in relative isolation, like a virtual call centre? Do the jobs created point to a sustainable future by developing skills that can lead to higher-value employment down the road? Do they provide personal as well as professional development?
  • Financial outcomes – How close to financial self-sufficiency can an organization become? An important issue is: what is the capital to labor ratio? High labor businesses are favored, given that more people can be involved per dollar invested. Ironically, high-labor businesses that are not attractive to private sector investors might be best suited to nonprofits, including commodity businesses.
  • Consumer acceptance – Can the social mission, particularly in a commodity business, be a competitive advantage? Can it be scaled or branded to succeed by getting consumers to switch in support of “good works”? Can the business be differentiated because it has a social mission?