A social enterprise business is a mission-based business started with the goal of solving a problem, improving communities, or creating opportunities for others. And operators of successful companies – both social and commercial enterprises – understand that taking calculated risks is the only way to grow.
CLEVELAND, Ohio - Six years ago, social impact advisor and investor Bill Leamon was convinced that the best way for a nonprofit organization to diversify its revenue stream was to start a business. But after working with so many nonprofits since then, he's changed his mind.
A social-enterprise business is a mission-based business started with a primary goal of solving a problem, improving communities, or creating opportunities for others. Conventional businesses generally focus on generating profits first and foremost. And operators of successful companies - both social and commercial enterprises - understand that taking calculated risks is the only way to grow.
Leamon now believes that if a nonprofit leader wants to create a social enterprise they must first ask themselves, and more importantly, their board of directors, this question: "How much money are we willing to lose and for how long?"
Bill Leamon, director of the Enterprise Development Center at Notre Dame College, talking to students about social enterprise businesses. "We came into the social-enterprise space with a traditional business mindset. We believed the answer to becoming financially self-sustainable was to start a business. We were a bit naive in our thinking and would try to talk nine out of 10 nonprofits into doing just that," said Leamon, the managing director of The Business of Good Foundation, a founding partner of SEA Change, a social-enterprise accelerator.
"Now we probably talk nine out of 10 nonprofits from going down that path, recognizing that many organizations don't have the capacity, capability or commitment required to succeed."
In the past six years, three of the 30 nonprofits and social-enterprise businesses he's worked with or funded in Northeast Ohio have gotten significant traction, while a dozen more continue to make progress. They are Edwin's Restaurant and Leadership Institute, Chateau Hough, an urban vineyard and winery, and Bloom Artisan Bakery & Cafe, which is expected to open in early 2016.
Leamon is also optimistic about growth at Hot Chicken Takeover in Columbus, another social-enterprise business funded by SEA Change. And businesses such as Central Kitchen and Metro Metal Works, run by Lutheran Metropolitan Ministries and Cornucopia (Nature's Bin), prove it can be done, he said.
Bloom Bakery, started by the nonprofit Towards Employment group, is expected to open in the Huntington Building at 200 Public Square in the first quarter of 2016. So far, the bakery has "borrowed" $525,000. With 90 percent of their funding in loans, it's a different model from a typical nonprofit program ... backed by philanthropy and grants.
Logan Fahey, general manager of Bloom Bakery, said it was a tough sell to get the Towards Employment board to allow the business to be run separately with a board that includes successful business owners. Towards Employment Executive Director Jill Rizika and Fahey were convinced the social-enterprise business had to focus on a market need and a self-sustaining business model that would be scalable.
"We decided to split off for the reason that we are a true business like everyone else in the marketplace. We have the same needs to meet. We don't have subsidies or philanthropic money to fall back on like a venture with a nonprofit would," Fahey said. "We're focused on building the business first, understanding that if the business is successful the mission will follow."
Fahey said they considered several other businesses and industries before deciding there was an opportunity for an artisan bakery in downtown Cleveland. Next, they hired internationally renowned bread consultant Maurice Chaplais to train the staff on how to bake. Chaplais will be with the staff the first few months the bakery, which has both a retail and production location nearby, is open.
"Bloom Bakery will distinguish itself by taking the time to perfect the art of baking," said Chaplais, who fine-tuned his baking skills at his acclaimed Flour Bag bakeries in the United Kingdom and Florida.
Fahey said it's taken a long time to get to the point of building out both locations, and some of the initial 12 employees will come from Towards Employment programs aimed to help those who are difficult to employ.
"A lot of social enterprises do great, but they never really become self-sustaining," Fahey said. "It's taken us a year to get this far. Social enterprise takes longer because there's a lot of buy in ... Now is the exciting time."
COLUMBUS
Joe DeLoss has built Hot Chicken Takeover restaurant in downtown Columbus to employ 40 workers in less than two years. About 60 percent of the workforce has been affected by homelessness or incarceration, he said, but guests don't come to support a social mission. They come for the spicy chicken and service, he said. The restaurant sells about 4,000 to 5,000 pounds of chicken every week - lunch only.
DeLoss, 30, who graduated Medina High School, said he's always been interested in the employment and workforce-development component of social enterprise businesses. He started his career as an investment bank analyst, before working with nonprofit organizations and starting various businesses.
"I studied business in school and had mentors in social enterprise. I always wanted to be in business for myself, which ultimately led me to Hot Chicken Takeover," he said. "I've been trying to be an entrepreneur for eight years - since college - and the most important lesson I've learned is to build an effective team.
"We've retained 60 percent of our workforce. They're loyal, committed and they work hard. It's not so much about an altruistic effort in what we do. It's part of our model," he explained.
"Our logo is a chicken with an asterisk. It's bigger than just chicken. It's about our community, customers and employees," DeLoss said. But don't expect him to talk about his mission soon after meeting him.
"We don't necessarily lead with our social-enterprise mission. Our intent is to focus on the service and food. We gain (customers') loyalty and commitment and excitement by sharing the mission later. It's more of a second or third date kind of conversation," he said.
DeLoss and his wife, Lisa, funded the business with private investors after bootstrapping it. "Our initial model was credit cards. We started out in our living room. We tried a lot of recipes for chicken until we got it right," he said.
Leamon, who is a founding partner of a collaboration of funders that provide the coaching and capital mission-based businesses needed to start and scale through a 12-week accelerator, said DeLoss has worked with SEA Change since its inception.
"As is the case with any successful social enterprise, good intentions alone doesn't make for a good business," said Leamon, who is also the director of the Enterprise Development Center at Notre Dame College.
"Hot Chicken Takeover's food is fantastic. The service is exceptional. And the long lines of loyal customers there every day proves it."