Your Social Enterprise Idea: How Do You Know if it's Realistic?

By Adam Brock, Joining Vision and Action

Have you ever talked yourself out of a zany business idea—only to see that same idea make millions for someone else a couple years later? Has your organization ever pursued a money-making strategy long after it became clear that it was failing?

Starting a business is inherently risky, and doing so with a social purpose in mind is even more so. Therefore, it’s critical that social entrepreneurs have the right tools and skills to effectively evaluate if their venture idea is actually worthwhile. Ultimately, there’s only one way to tell if a business will work – by launching it into the world and seeing how it does. But there are a number of tricks that smart social entrepreneurs use before making that leap to help them assess if it’s actually worth it. Here are a few of the most common:

Estimate your target market size. You might think your concept for a Cambodian rice pudding store is amazing – and you might have even convinced a few friends and relatives. But how many people are there that think the same way? Even without a Ph.D. in statistics, it’s relatively easy to estimate the size of your potential market with some quick demographic data. Recently, for example, a client of ours asked us to estimate the feasibility of their social enterprise idea: a dog grooming business. We started our analysis with the assumption that the core audience for such a concern would be childless couples making over $75,000 annually, since they would have the time and disposable income to pamper their dogs with regular grooming. Fortunately, the client was located in a relatively affluent community, and a quick demographic analysis told us that there were nearly 25,000 households that met those characteristics. Next, we used statistics from the American Veterinary Medical Association to estimate dog ownership rates for those 25,000 households, and researched similar businesses in the area to get a sense of how much market share the new businesses could expect to capture. All in all, we guessed that if our client could capture 5 percent of the community’s grooming market, it would make just over $100,000 annually from basic services alone – nothing huge, but enough to justify taking the next step in launching the enterprise.
Look for best practices. What other organizations are doing what you’re doing locally? How about nationally? Unless you happen to be both perceptive and lucky, it’s unlikely that you’ll succeed with a business model that’s completely new. On the other hand, you don’t want to enter a market that’s too saturated with other offerings just like yours, either. Ideally, then, you’re looking for something that’s been proven to work relatively successfully in similar communities, but that there’s nothing similar to in yours. Of course, you might have variations on the best practices based on your mission, local culture or any number of other factors, but it helps enormously to have some template to work from. Find the websites of a few similar organizations across the country and try to find what makes them tick. Get employees on the phone and dig for the stories of drama and struggle that aren’t being shared on the landing page. Do the organizations seem to be thriving – or failing for the same reasons? What are the common denominators for the groups at the head of the pack? Can you replicate those critical success factors for your own business?
Develop a prototype. No matter how much research you do, there’s no substitute for putting a product in front of actual customers. Therefore, the sooner you can have something to test out the better – even if your test is a cobbled-together version of your ultimate vision. Startup evangelists call this the “minimum viable product”: a bare-bones version of your idea that gives something for ordinary, everyday users to respond to. Serve a batch of homemade Cambodian rice pudding to a roomful of strangers and gauge their response. Test your new service delivery model with a trusted client before rolling it out organization-wide. If you start to fall into the trap of thinking that you need more time or funding for an MVP, just remember that rapid prototyping evangelist Tom Chi developed an MVP for high-tech Google Glass in a day out of coat hangers and toilet paper tubes.

Demographic research, best-practices scans and rapid prototyping each offer valuable tools for evaluating the viability of your social enterprise idea that any aspiring social entrepreneur can implement. Even so, it can often help to have an unbiased source assess your idea’s viability.

With decades of experience and dozens of successful social enterprise clients, JVA has carefully developed a number of tools to help you refine your social enterprise idea. The five-day Social Enterprise Basecamp gives participants an intensive training in a number of social enterprise tools, including the ones outlined above. Our Social Enterprise Assessment Navigator, meanwhile, provides you with affordable one-on-one consulting for determining your idea’s viability.