How to Become a Social Enterprise - Interview with Bob Prenovost
Bob Prenovost, who is the Managing Principal at Propellor Advisors, joined us on our Strategy & Leadership Podcast to explain the strategic benefits of social enterprises. While we commonly think of a social enterprise as being either a non-profit or a not-for-profit organization, a social enterprise can also be a for-profit company that is committed to a social cause, whether it be for example humanitarian or environmental. Regardless of the sector, Propellor Advisors' mission is to help organizations become social enterprises.
We asked Bob why organizations might be interested in becoming social enterprises, especially non-profit organizations who might be struggling to retain funding. He explained that government and donor funding is increasingly limited, and not guaranteed, and the continuous search for funding may take more resources and output than income generated in the end.
- By acquiring an existing business. For example, a non-profit struggling for funding could purchase an existing for-profit business, and use the profits of that business to fund the programs for the non-profit. The business they purchase does not have to be directly related to the mission of the non-profit itself (For example, the Canadian Mental Health Association owns and operates a well-known coffee shop.
- An organization, whether for-profit, or non-profit can develop a start up venture on the side, using proceeds to fund their non-profit directives. Again, the for-profit side business may or may not be directly related to the mission of social enterprise itself.
Moving through the interview, Bob also talked to us about how he leads people, inside and outside of his organization, and how this impacts and influences organizational strategy. His first piece of advise is to focus on engagement, as your people are the ones who will be helping to execute the organization's strategy.
Listen to the full podcast below:
Full interview transcript:
Anthony Taylor (AT): Welcome ladies and gentlemen. Anthony Taylor here with the Strategy and Leadership Podcast, and today I’m joined by Bob Prenovost, who is the Managing Principal at Propellor Advisors. Bob, how are you today?
Bob Prenovost (BP): Anthony, I’m just super today. Glad you could meet with me.
AT: Fantastic. I’m excited to chat with you today. We’re going to do a little bit of a different podcast, and I’m super excited because we’ve known each other for a few years now, in a variety of roles and capacities. I’m really excited to share with our listeners what you’ve taken on in your career and what you’re doing right now.
Can you tell our listeners a bit about Propellor Advisors, and what you guys do?
BP: Yeah. Propellor Advisors is a team of professionals, and we work with impact businesses, so basically organizations that are striving to create not only a financial return on investment, but also a social return on investment. We work with organizations that, for example, are creating employment for people would have traditionally would have had barriers to employment.
We work with organizations that are striving to clean up the environment in some way, either by recycling, reducing waste. We work with organizations that are involved in the mental health field, that are looking to reduce stigma for people who are re-entering the workforce, that perhaps have been out because of mental illness. So, just a wide variety of organizations that combine a business focus with a social impact focus.
AT: Got it. Can you explain a little bit more about how a social enterprise works, and who can start a social enterprise?
BP: Yeah. The great thing about social enterprises is really, anyone can start one. Our clients are literally anywhere from an individual who comes to us with a great idea, that says, “Hey, I want to make some money with this, but I also want to help a disadvantaged group,” or, “I want to give money back in some way, to an organization that is helping disadvantaged groups.” So, anyone can start one.
It can be an individual entrepreneur. It can be a non-profit organization that’s perhaps starting a social enterprise, to help them beyond the financial sustainability side. It could be someone who’s looking to buy an existing private sector business and turn it into a social enterprise. It really can happen in a variety of different ways.
The commonality of all of them is that they are striving to make some money. They don’t want to lose money. They don’t want to rely on funding or grants, but really what they want to do is at the same time that they’re generating financial income, they also want to have a measurable social impact on the world.
AT: Cool. Basically, anybody who wants to do good, could use a social enterprise as an avenue to do that, in a way?
BP: Yeah. The great part about where we are in the social enterprise sector now, is we’re surrounded now by social enterprises. We’ve got a great example of Tom’s Shoes is the one that comes to mind, where you buy a pair of Tom’s shoes. For every pair of shoes you buy from Toms, they make sure that a pair of shoes goes to somebody in a place, or a country where kids, for example, can’t afford to have shoes.
People have argued that Tesla, the maker of electric cars, is a social enterprise, because one of the things that Elon Musk has shown us, really is that you can run a company that has a high stock price and value, and making those electric cars is really helping us reduce our carbon footprint. What he’s saying is, “I can make money, I can be financially successful, and I am also doing something that’s helping the environment.”
AT: Got it. A social enterprise, some might here charity, or non-profit out of it, but what I hear you say is that even a for-profit enterprise, who’s actively for-profit, can use social enterprise principals to create a uniqueness in the market, create market share for themselves, while also having a positive impact on the world.
BP: Absolutely. In some ways, I actually think that in the for-profit world, we have much, much, much more potential to create social impact through our work. It’s really a question of looking at our current businesses and industry sectors, and saying, “Hey, how can we tweak our existing business models to make them more socially impactsble?”
AT: Yeah, absolutely. How can we do more, as leaders, so that it impacts the world? One of the reasons that I wanted to have you on the podcast today … Obviously our listeners here are from a variety of sectors: government, for-profit, and not-for-profit.
We’ve sort of touched on the benefit of for-profit organizations, how they can incorporate a social impact aspect into their business, but what I really want to talk to you about is for the non-profit folks here, is what can a social enterprise really do for them? One of the things that you had said is that you don’t want to rely on funding, or you want to actually, you don’t want to lose money with the activity that you’re doing.
I sort of have two questions. One, what are the biggest challenges that are facing non-profits in that realm right now. The second question is, how can a non-profit create a social enterprise that will benefit them?
BP: Great questions, Anthony. Number one, I think one of the biggest challenges in the non-profit organization space right now is donor fatigue. Traditionally, many non-profit organizations have gone out maybe annually, or semi-annually and done a major drive to get people to donate to them, whether it’s private individuals, or corporations, or foundations. What’s been happening, particularly in the last 10 years, is that those traditional sources of donations are drying up.
What non-profit organizations are finding is they’re spending more and more money trying to fundraise and get donations, for just a lower annual return on that activity. That’s one key challenge for non-profits. The other one is a lot of non-profit organizations, particularly in the Canadian market, have relied on government funding, whether that’s provincial government funding, or federal government funding, or even maybe at the municipal level, but it helps them pay for some of their programs.
Again, governments in this country are being squeezed, financially, and they’re just not making that level of government funded programming available to non-profits, to the extent that they once were. What all of this means for non-profit organizations, is if your traditional donor streams are starting to dry up, and the government funding’s not available, then you’re faced with some difficult choices.
What do we do? Do we cut programming, or do we try to find other ways of replacing those donations and government grants? This is where social enterprise comes in. For many non-profit organizations, and these are some of the people who are clients of Propellor, they’ve looked at it and said, “Look, maybe one of our alternative actions is to open up a social enterprise that generates revenue for us, that we can then take and use to fund our programs that would have traditionally been funded through donations and grants.
At the same time, if we can take that same social enterprise and also do something like creating employment for people with barriers, or perhaps provide meals at reasonable prices, or groceries at reasonable prices to people that otherwise couldn’t afford them, that’s an added social benefit of what we do. This is how social enterprises and non-profit organizations have really developed this symbiotic relationship.
AT: Is there a special process? This might be a plug for you, by the way. I have no problem doing that. Is there a special process that an organization can go about looking at how to create a social enterprise? You’re basically hedging your bets, because yes, you could rely on donors, and the energy, and the time that it takes to get the money, and from what you’re saying, you’re getting less and less return over time, for the same amount of work.
The government giving you money, yes, while you’re providing an essential service, and we at SME Strategy work with non-profits all the time, so we know that to be true as well, but then reach out to them to ask for money, but that’s becoming less and less certain. How can non-profits actually take the next steps, whether that’s conceptually, as in the design stage, or within the execution stage, to help them get more money, so that they can fulfill their ultimate mission?
That’s what it’s all about. The organization exists for a purpose. How can we, like you and I, and everybody else, support them in moving that mission forward?
BP: Absolutely. There’s a well developed social enterprise development path, and it really starts with: what’s the concept, what’s the idea we want to pursue? Taking that through validation, or we’ll even call it a feasibility study, looking at the opportunities, looking at the risk, you know, us helping them develop some financial projections to see if does that really meet both our financial returns that we want to make, and does it really generate the type of social impact?
You know, if that looks good, at that decision stage, that’s where we really move forward and help these organizations and individuals develop a business plan, go find the initial investment funding that’s needed to start it up, and then help them get rolling. Really, from there, it’s a process of us, once they are up and rolling, helping measure their outcomes and impacts, looking at areas where they can improve their operations, and hopefully either scale up or scale out, with their successful social enterprise.
Certainly, from our point of view, that’s really the mission of our organization. That’s what we’re here to do, is to help people really from the idea stage, right through to execution and scaling.
AT: Got it, so as the organization, itself, not yours, but the non-profit or for-profit enterprise for that matter, they have their mission, and purpose, and their reason for existing. What the opportunity of a social enterprise does is sort of create an off-chute business on its own, that you’d have to create its own feasibility, create the vision, make a business plan, such that it can not only generate revenue, but also fulfill on a social purpose that is, in theory, aligned with the overall strategy of the main organization. Is that correct?
BP: Yeah, that’s correct, but it’s interesting because that certainly is the mainstream of social enterprise, but we’ve also seen an interesting thing where a non-profit organization will look at and acquire a business that’s very different than what they do in their existing non-profit. For example, we have a client, the Canadian Mental Health Association, and they actually own and operate a franchise coffee shop, a very well-known brand, a commercial brand franchise.
When people go and visit that coffee shop, they really have no way of knowing that that’s owned and operated by the Canadian Mental Health Association, but yet, all of the profits from that coffee shop go back into the Canadian Mental Health Association, and they use that to fund many of their programs. Sometimes there’s a very direct connection between the social enterprise and the non-profit’s mission, and sometimes it’s not as direct. Both work.
AT: Cool, so any not-for-profit organization can take on its own start up business, regardless of it’s aligned or not, because you can be in business to make money, and ultimately help people, so they don’t have to be aligned. That’s pretty cool actually. I’d never considered that before.
BP: Yeah. It’s pretty cool, and another variation that we’ve seen of this that’s probably come around more recently, is really, non-profit organizations looking at existing for-profit organizations that, for whatever reason the owners have maybe reached a stage where they’re thinking about selling or retiring, and wondering what to do about their businesses.
These are great opportunities for a non-profit organization to actually acquire an existing for-profit business, and say, “Look, let us become the owners of the business. We’ll run it, and then we’ll use the profits from that existing business to help us with our social programs.” It’s an interesting time for organizations to consider that, because we have the Baby Boomers retiring. We have them selling their businesses.
The next generation of these families don’t always want to take these businesses over, so we’ve seen several examples where there’s been opportunities for non-profit organizations to acquire significant sized businesses, and really convert them, if you like, to a social enterprise, without having to go through the whole risk of start up.
AT: That’s awesome. That falls under that mandate of not losing money.
BP: Exactly, because one of the benefits of acquiring an existing business is you don’t start from zero. Right? You already have existing customers. You already have existing cash flow. You often are acquiring the opportunity to really expand the business, but usually you’re starting with a good base already.
AT: That’s awesome. Cool, and then they can come talk to you about that as well, if they’re looking to buy a business of that sort?
BP: Absolutely. Yep. We’ve worked with a number of organizations on those types of situations.
AT: Fantastic. Let me sort of take a different path right now, because as I alluded to, we’ve known each other for a long time. I really want to touch on a bit of your experience in the leadership realm, both in the non-profit and in the for-profit side, and ask you about your perspective on creating and implementing strategies with your team.
In this conversation so far, we’ve discussed social enterprises primarily as a strategy or a tactic to fulfill on the vision or mission, but in your experience, both as a founder of a non-profit and as an Executive Director in the private sector, what are two or three of your best practices to creating and leading strategies with teams, that would be applicable to our listeners today?
BP: I think the first one always is engagement. A good strategy really revolves around engaging the people that are going to be part of executing that strategy, very early on in the process, and really making sure that they have an opportunity to impact what that strategy’s going to be, and what the implementation path will look like.
A great example of this: I started my career in the hospitality industry, and one of the things that we learned very early on is when we were expanding our concepts across North America, was really, you know, it’s fine for us to have a strategy that says we’re going to build so many units, over so many years, in so many markets, but really getting the people on board in those markets, that we were going to be depending on to help us expand, was critical. I think that engagement with key stakeholders, early on, is key around strategy.
I think the other thing, and there’s many different takes on this, is this whole concept of doing things incrementally, and doing them well, but not perfectly. One of the things I would say about implementing strategy is focus on doing things in steps. Don’t worry about every step being perfect before you get it done. I think the important thing is to get out there. Implement what you’re doing. Get it done. Look at your results. If you need to go back and tweak it, that’s fine, but definitely don’t wait until you’ve got every little detail nailed down.
I think the third point, really, is about, which kind of relates to that, is around measuring your results. With a strategy, with a strategic approach, one thing I’ve always really emphasized is let’s make sure we understand what will define success for us and how we’re going to measure it. Let’s be very honest in our measurement. If we say, for example, that … You know, when I founded pmvolunteers.org, we said, “Ok, in our first year, we want to work with at least 25 organizations, on high-risk projects, in the non-profit sector.”
Ok, let’s be very sure at the end of the year, when we sit down to measure those results, what we wanted to do is, did we work with those 25 organizations? Did we help them move 25 high-risk projects forward? You definitely want to have some measurable benchmarks to measure your strategy against.
AT: Excellent. What I heard from that was: As you lead the strategic plan, make sure it gets out there with your people, because ultimately, they’re the ones who are going to be executing on it, so make sure that you get them to engage and participate, so that there’s a dialogue and sense of team work in it, that you want to do things in steps. For us, at SME Strategy, when we roll out a strategy, we recommend having three strategic priorities, and then moving on them.
I see that for you, at Propellor, you do 90 day plans, so just start moving in a direction, as long as it’s in line with a strategy, and don’t worry about it being perfect, just make progress. Then, the third one, is having a KPI, or important measurement, a key measurement for if you are going to know if you’re successful. So our listeners know this, if success was a place, how would we know if we actually got there? Having a key measurement that will dictate activities as you move forward. Would you say that that’s a close summary of what you recommend?
BP: I think you’ve nailed it, Anthony. Well done.
AT: Perfect. Well, we have a few conversations, you and I, so it’s not the first time we’ve talked about strategy development. Excellent. One other thing that I actually wanted to mention, if we switch tracks back to the social enterprise space … When we chatted earlier, you had mentioned another non-profit doing really cool stuff in the social enterprise space, Mealshare. Can you speak to it a little bit? They’re my buddies, too, so I’m going to give them a plug, because I can.
BP: They deserve it.
AT: Can you tell us a little bit about what they’re going, and how that falls into the social enterprise model?
BP: Yeah. Mealshare’s a brilliant model. In Mealshare, basically what they’ve done, is they’ve created a model whereby anyone, average person, you know, you, me, our family, we can go into certain restaurants and if we buy a certain Mealshare designated meal on the restaurant’s menu, for every meal we buy, what Mealshare and the restaurants do is to provide a meal for someone else, who perhaps can’t afford to go to a restaurant to have it.
They provide those meals to a number of different programs, including local food banks, and community food centers, and places where people can easily access those free meals in their communities. I just think that’s a brilliant way of kind of paying it forward. They’ve taken that pay it forward philosophy, and really captured it into a social enterprise model.
They’ve been tremendously successful; started here in Vancouver, and now we the Mealshare concept really expanding across North America. I really … Full credit and kudos to the Mealshare team, for really showing what can be done.
AT: Here, here. One other thing that I like about what they’re doing is that there’s a lot of people out there, just in life, that want to do good, and they don’t necessarily know how. They just haven’t been presented with an opportunity, or they’re not empowered to do it. Mealshare both gives an opportunity for the consumer to vote with their dollars, in something that has social impact, as in picking a menu that has a Mealshare stamp on it, and it also allows restaurants to participate in that social giving model.
They don’t necessarily need to go to the work of creating their own social enterprise, but by Mealshare approaching them, allows them to do their part. It’s really a win-win-win, which in my humble opinion, is what the world needs, and what will be the next level of enterprises that do good in the world. Yeah, it’s very cool to see.
BP: Yeah, great model.
AT: Absolutely. Bob, how can people get a hold of you, and how can they work with Propellor if they want to get more information on how to launch a social enterprise?
BP: Super easy to get a hold of us. My email address is firstname.lastname@example.org. My phone number is 778-686-4334. Happy to have a chat, coffee, with anyone at any time.
AT: Fantastic. Thank you so much, Bob. Again, I’ve known Bob for a few years now, and it’s been really excellent seeing all the work he’s done. The reason I wanted to have him on the podcast is because helping great businesses do great things and help people in the process, that’s what we’re about. If he wins, if we win, everybody wins. Thank you so much for sharing with us today. I really appreciate the time.
BP: Thanks, Anthony. Always a pleasure to talk with you.
AT: Thanks. Once again, it’s been Anthony Taylor here, with the Strategy and Leadership Podcast. Today I’ve been joined by Bob Prenovost, who is the Managing Principal at Propellor Advisors. Thank you so much for listening today.
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