Social Enterprise Ocean or Evaporating Puddles?

The Start Up industry was on the front foot recently contrasting the value of Government investment in one sector with return in their sector.

It’s a debate Australians need to have. Maximising taxpayer’s ROI on scarce resources is a key concern when the viability of regional/rural and remote communities is challenged, government is in deficit and initiatives are funded by borrowings. 

The debate will be richer for exploring the value of social enterprise in delivering long term community benefit.

Government Investment in Community Benefit

Many Australians would agree that

  • Taxation is revenue for government to deliver maximum public benefit.
  • Government has a responsibility to use tax payer funds for public goods, commodities or services without user fees for all community members (e.g. public hospitals) and other goods commodities or services for the benefit of eligible community members (e.g. higher education).

Public private partnerships, where government partners with private providers to deliver public goods, subject to a user fee, have muddied the waters between public and private goods e.g. tollways on public land providing benefit for users and private shareholders.

Public benefit remains a key consideration in expending tax payers funds.

Government Investment ROI and Opportunity Cost

The Turnbull Government’s proposed billion dollar loan for Adani’s coal railway is the highest ever government investment in a private business in the history of Australia.

It is unclear how this investment will achieve a return for taxpayers in economic social or environmental benefit or jobs when the mining industry is increasingly reliant on automation and robotics to replace labour. The opportunity cost may even exceed the tax payer investment because government deficit restricts investment opportunity.

A billion dollars is easy to say. Written numerically $1,000,000,000 better represents the tax payer dollars being invested in a business model reportedly reliant on taxpayer subsidy. Where else in the world have taxpayers provided a loan of $1,000,000,000 as a lender of last resort?  How could that investment achieve better ROI?

Startups, Social Enterprise and Community Benefit

Community benefit should be the essential criteria for use of finite and scarce taxpayer funding. 

The social enterprise sector can learn from the startup sector to inform the community benefit debate.

Successful startups generate benefit to owners through their commercial objective to meet market demand.  Uber and AirBnB are examples using technology to provide a commercial service without government subsidy.

A social enterprise meets a community benefit objective through a commercial initiative investing in human and environmental well-being.  The objective is maximum social impact in delivering goods/services for which there is demand either not being met or which can better meet.

A startup is a social enterprise by exception. A great exception is Orange Sky Laundry delivering an invaluable public service to the homeless using technology to remove a constraint previously seen as unmanageable.

Time to better inform the public, local communities, politicians and public servants about the tangible human, environmental, social and commercial impact of social enterprises.  Time to develop appreciation of the benefits of community initiatives particularly where optimism is hard to find but needs are frighteningly obvious and growing. 

Consumption, Social Enterprise and Local Benefit

Just as the Australian budget relies on growth in national consumption spending for taxation revenue, so to do businesses in regional, rural and remote Australia.  Without local consumption, businesses close, jobs are lost, communities suffer and costs increase.

Social enterprises initiated in regional, rural and remote Australia can compensate for the current lack of investment in job creation by meeting local demand to become sustainable and deliver ongoing community benefit.

In communities where there is diminishing or no employment, (regional, rural and remote Australia), social enterprises can be the backbone of a ‘new economy’ by:

  • increasing the turnover of a local business
  • creating employment where there is little prospect of employment growth
  • growing services to strengthen a regional/rural/remote community

We read too often of job losses but don’t see enough evidence of new jobs being created directly & indirectly.

The Geelong experience has valuable learning. G21 Region Opportunities for Work is an example of a successful initiative to be explored and developed for community benefit across regional/rural/remote Australia.

Shop My Town is another excellent local initiative whose objective is to grow revenue, community connection and resilience and save small towns for their children’s future by empowering 150,000.00 family business to embrace digital marketing.

Lean Start Up and Social Enterprises

Minimum Viable Product (MVP) in lean start-up is a version of a new product based on the maximum amount of validated learning about customers with the least effort. 

A different MVP is relevant to a social enterprise whether a start-up or not.  A social enterprise achieves a breakeven objective by delivering a minimum viable proposition (MVP). That is, over time, it meets all operating costs and has sufficient assets in excess of liabilities to pay debts as they become due and payable. 

Viable social enterprises understand and meet customer’s needs over the long term.  They learn from each ‘moment of truth’ to pivot to better meet their customer’s needs. In a market of sufficient size, when customers value the goods or services produced, a social enterprise will eventually generate a profit to become financially sustainable.

Financial sustainability is the social enterprise growth phase beyond minimum viable proposition. The shift to forecast demand because customers appreciate value and make repeat purchases. The phase beyond demand push, through sales and marketing, to customer’s demand pull with predictable continuous revenue.

Social Enterprise, Community Benefit and Taxpayer Investment

‘Opportunity Cost’ is even more important when government is in long term deficit.  Australia cannot afford to exhaust scarce taxpayer resources as the ‘lender of last resort’ for projects which Banks judge to be contrary to their shareholder interests.

Startups are important but the community development principles implicit in a social enterprise can make a greater contribution to meeting the growing needs of Australian regional, rural and remote communities. 

Social enterprise provides a positive opportunity for politicians to engage with their shareholders and increase shareholder return. An opportunity to put the ‘local’ back into local representative and sustainable local communities.