Study Into Resilience of Social Enterprises – Challenges and Opportunities

The availability and access to suitable financial resources and the need for clear policy leadership around social enterprises entering or operating in the National Disability Insurance Scheme (NDIS) were two of the most pressing issues facing Australia’s start-up entrepreneurs, according to a new report.

The Australian report, A Year in the Life of Western Australia’s Social Enterprises, is described as the first study to explain the challenges and opportunities that socially minded business men and women face.

Report author Dr Chris Mason, a senior research fellow at the Centre for Social Impact at Swinburne University, told Pro Bono News that entrepreneurs that took part in the study in Western Australia had plenty of enthusiasm but sometimes lacked the knowledge that ensured their survival.

“Without a doubt they’re quick to learn, eager to take on challenges, and are quite savvy in partnering and growing their business,” Mason said.

“But where they’re struggling is around the areas that ensure their longevity  –  securing external finance, retaining staff and adapting to market changes such as the NDIS.

“Undoubtedly the most pressing issue for many social enterprises was availability and access to suitable financial resources, which directly affects longer term resilience.”

Mason said there was a lot of research for small businesses on what makes them resilient and what strategies they put in place to keep them going but there was very little knowledge about what was unique about social enterprises.

“We were trying to understand what makes social enterprise tick basically,” he said.

“We had an opportunity to walk alongside quite a few social enterprises in WA to understand what it is they do to overcome the many barriers that they face in starting up and growing their social enterprise and their social impact.”

The study followed 10 social enterprises over a 12-month period and is the latest in the Bankwest Foundation Social Impact Series.

“We found that social enterprises tend to use their relative scale, so many of them are medium to small size businesses, to their strengths. So strategically that makes them a lot more nimble in responding to new opportunities,” Mason said.

“For example they are very open to discussing ways that they can work with other organisations and collaborate and form partnerships. We have found that the small to medium social enterprises have certainly become more active in doing that.

“They also have a very strong social impact in what they do… and that’s a bit of an intangible so as markets change such as has occurred with the NDIS, one of the reactions to that for social enterprise is to look around and say that despite these changes we believe very strongly that what we are doing is having a significant social impact for our beneficiaries and that is what is going to keep us going.

“It’s kind of like their X factor.”

However, the report found that due to the typically small nature of the social enterprises, many entrepreneurs found it challenging to dedicate adequate resources to systems that would enable effective reporting on their financial and social performance.

“This in turn meant that investors had little information upon which to base their decisions, creating a vicious circle surrounding attracting and maintaining funding levels,” Mason said.

“If we could overcome this hurdle it would help these businesses communicate better with potential investors, help them secure funding and help give them a competitive edge in applying for grants and tenders.”

The report recommended the need for clear policy leadership around social enterprises entering or operating in the NDIS and policy development to secure government support.

“Despite the changes that are going on in WA, political and economic and social changes in the last two years, not one [social enterprise] has gone out of business.They are still going, they are still growing and still finding new ways that they can develop not only themselves as organisations and how they are structured but how to they deliver their services and do it better and be competitive and work smartly with other organisations,” Mason said.

“And that’s what we are beginning to see. Its one of the biggest dynamics.That willingness to say look we are open to collaboration… and how do we compliment each other. Look at the role of social enterprise in the NDIS, I think marketisation, which is a common part of schemes like the NDIS it is all about opening up service provision… I don’t think social enterprise is the answer to NDIS but it is a model that can work.”

Mason said that to be successful in the NDIS there was a need for policy leadership.

“[That] comes from a really a clear understanding that if you want social enterprises involved in this space to work alongside not-for-profit or for-profit providers then you have to develop actually for those organisations to sprout up and provide services. It’s about a supportive environment for social enterprise.”

Mason said that having identified the need for a streamlined data-collection and reporting system the Centre for Social Impact was now working on producing a web-based tool to be released later this year.

“Of all the issues thrown up by the report this is the one where we feel we can make the most difference. Attracting and holding on to investors is the key to everything and so if we can ease the path through that minefield then we hope these sustainable enterprises will benefit greatly,” he said.

Study participant and social entrepreneur Nick Maisey, founder and director of Befriend, said that he was excited by the immediate practical application of the research.

“The development of a web-based tool for social and financial data collection and analysis will be incredibly useful and will enable great efficiency and effectiveness for social entrepreneurs,” Maisey said.

“It’s an important step in developing an ecosystem in which social enterprises can flourish.”

A full copy of the report is available for download here.