Operational Models

The following section elaborates possible operational models of social enterprises.

The operational models should not be confused with depictions of organizational or legal structures. Rather, they illustrate configurations used to create social value (measurable impact) and economic value (income), and can be applied equally to institutions, programs, or service delivery.

Operational models are designed in accordance with the social enterprise's financial and social objectives, mission, marketplace dynamics, client needs or capabilities, and legal environment.

Fundamental models can be combined and enhanced to achieve maximum value creation.


Fundamental Models

  • Entrepreneur Support -- The entrepreneur support model of social enterprise sells business support and financial services to its target population or "clients," self-employed individuals or firms...
  • Market Intermediary -- The market intermediary model of social enterprise provides services to its target population or "clients," small producers (individuals, firm or cooperatives), to help them access markets...
  • Employment -- The employment model of social enterprise provides employment opportunities and job training to its target populations or "clients," people with high barriers to employment such as disabled, homeless, at-risk youth, and ex-offenders...
  • Fee-for-Service -- The fee-for-service model of social enterprise commercializes its social services, and then sells them directly to the target populations or "clients," individuals, firms, communities, or to a third party payer...
  • Low-Income Client -- The Low Income Client as Market model of social enterprise is a variation on the Fee-for-Service model, which recognizes the target population or "clients" a market to sell goods or services...
  • Cooperative -- The cooperative model of social enterprise provides direct benefit to its target population or "clients," cooperative members, through member services: market information, technical assistance/extension services, collective bargaining power, economies of bulk purchase, access to products and services, access to external markets for member-produced products and services, etc...
  • Market Linkage -- The market linkage model of social enterprise facilitates trade relationships between the target population or “clients,” small producers, local firms and cooperatives, and the external market...
  • Service Subsidization -- The service subsidization model of social enterprise sells products or services to an external market and uses the income it generates to fund its social programs. The service subsidization model is usually integrated: business activities and social programs overlap, sharing costs, assets, operations, income and often program attributes...
  • Organizational Support -- The organizational support model of social enterprise sells products and services to an external market, businesses or general public...

Combining Models

Social enterprises combine operational models to capture opportunities in both commercial markets and social sectors. Combining is a strategy to maximize social impact as well as diversify income by reaching new markets or creating new enterprises. In practice, most experienced social enterprises combine models--few social enterprise operational models exist in their pure form. Operational models are like building blocks that can be arranged to best achieve an organization’s financial and social objectives.

Model combinations occur within a social enterprise (Complex Model) or at the level of the parent organization (Mixed Model).

Enhancing Models

This section introduces methods that enhance existing social enterprise operational models.

The Franchise Model enhances social enterprises by addressing common nonprofit challenges of replication and scale. Technically, any social enterprise that can be reproduced may be applied to the franchise model. Reproduction requires a viable social enterprise model with clear business and social parameters, which is applicable in different markets or across geographical regions. For this reason embedded social enterprises usually work best with the franchise model. Franchising enhances social enterprises by helping them achieve economies of scale and with it viability or profit, as well as enabling mass replication, and thus, increased breath of scale--geographical coverage--or depth of scale--volume of clients--and social impact.

The Private-Sector Partnership Model represents a mutually beneficial relationship between a for-profit company and a nonprofit social enterprise. Relationships are forged on commercial grounds, whereby each partner is a contributor to the commercial success of the venture. The partnership adds value or enhances the nonprofit social enterprise by increasing its viability, and hence its social impact, either directly by reaching more clients through its business model, or indirectly by generating funding for social programs. The private partner also benefits vis-à-vis improving goodwill, increasing customer loyalty, penetrating new markets, attracting more socially conscious consumers, etc., which subsequently translates into higher sales and more profit.