Building Impact: Deconstruction of a Social Business

Social businesses are on the rise. Enough about fairy tales of unicorns, the time of the zebras has come. Fast growth is out, building impact is the order of the day. At least when you consider the hype and voices around social businesses. Can your business build impact too? What does it mean for bootstrappers? Let’s deconstruct a social business!

So… have social businesses to be something new? No. If we look at Ecosia, one of the flagships of the German social business scene, the social part is just an addition to an existing business model.  It’s a classic search engine selling ads to earn money. In their words: “Capitalism as a social good” The goal is still to expand and make Ecosia as profitable as possible. Selling search ads is indeed very profitable. The company’s total income has been 2,735,507€ in December 2020. A lot of profit to build impact. In their case: 1,317,812€ just for planting trees in one month. So that is a very practical view on this social business. But it’s this angle that shows how almost any business can be a social one.

Let’s break “creating an Ecosia 2.0” down in two steps:

  1. Pick a proven business model that is very profitable (e.g. Ads, SaaS etc.)
  2. Pick an established process that converts money to environmental or social impact

For a company builder, the best thing about looking at social business this way is, that you can focus on the first step. Building a company with a classic model. Once it works you can choose your path. Continue reinvesting the profit or leave the dark side and become a social business.

That’s it? Building impact isn’t that simple, though!

Despite the two steps you have to consider some things beforehand. It starts with picking the right model for step 1. The business model should have no negative influence per se. You can’t burn Cole and pay for zero-emission projects. Step 2 would be just there to compensate. That would be like operating on a patient, and you were the one who pulled the trigger.

It’s important to know your customers.

On the other hand, the social component is also a powerful marketing weapon. Ecosia heavily communicates the planting tree action. This generates more traffic and profit for the company and therefore the social aspect. This flywheel is worth considering when picking a business model for your social business. You have to differentiate between B2B and B2C. In the B2C sector, social impact can create an emotional tie between potential customers and the company and this leads to more purchases. Young parents are more likely to become customers of your social business, willing to save their kid’s future. Big companies tend to seek efficiency.

This marketing effect is also very useful for bootstrapping. Public attention through the social component can be valuable in attracting customers and thus in self-financing.

With this pragmatic perspective, a social business does not need a new fancy business model, more of a social add-on. So the question is not: “is it possible?”, it’s: “Do I want money or sustainability and social justice?”