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Case study: nonprofit or social enterprise?

Starting with some resources and a brilliant idea, three friends plan a social initiative. But does their concept fit more into a nonprofit or a social enterprise model?

Before you start with the exercise, recall the primary characteristics of social enterprises and elaborate on in which way they differentiate from the traditional notion of charity organizations.

Linda, Peter and Samira have known each other for years. They studied together at the ETH Zurich, one of the best universities in continental Europe, specialized in technical and natural sciences. Today, they are all working in senior management positions in different industries. When Linda inherited from her parents a large townhouse in Basel, called ‘The Plane Tree House’, three months ago, she asked her friends, what to do with it. On the one hand, the house is far too big and too expensive for private use. On the other hand, she does not want to just sell the house and all the memories connected to it. They discuss several options, such as an artist in resident project, a Kindergarden, or a community center. But Linda is not convinced, because she would like to do more than just rent the house to some organization.

Icon Idea

Finally, Samira comes up with another idea: ‘Why don’t we seed our knowledge and share it with other people? As we know, there are many professions where women are underrepresented, not because they are inapt, but because they do not get the chance to be trained. We can offer classes for basic knowledge in technical fields or IT-tasks, so that women have a chance to apply for jobs in these areas.’
Peter likes the idea very much and adds: ‘But we should not restrict the classes to pure knowledge transfer. If we address women with low school education or long unemployed status, we have to help them in their daily life, as well.’
‘To offer an attractive service,’ adds Linda, ‘we should include a child care, so that mothers can attend the classes.’

In the following weeks, they further develop their concept. As major aim they formulate to educate and enhance the skills and opportunities of women so they can pursue professions that are non-traditional or where women are underrepresented. They get the information from the department for education that courses for unemployed people are supported by subsidies. Additionally, a grant-making foundation indicates that it would fund the project in a starting phase of five years.

Samira sets up a budget and estimates the potential income through state subsidies and the foundation grants. ‘Overall, we are able to cover 70% of all costs through these income sources. How do we cover the other 30%?’
‘We ask for support of companies,’ says Peter, ‘so they can invest in future employees.’
‘No, we should collect donations,’ replies Linda, ‘then we remain independent.’
‘Have you ever thought of taking course fees?’ asks Samira. ‘It is a sign of commitment. If the women pay a share on their own, they will be more serious about their learning progress.’
‘But then we are a business and we have to own the company!’ replies Linda.
‘Well, it depends,’ answers Samira. ‘But we have to become clear about the basic configuration of our project. Do we want to be a nonprofit organization or a social enterprise? Both sides have their pros and cons.’

What do you think?

What would be your advice for the three friends? What are the decisive factors?

Please share your findings in the ‘comments’ section below. Remember: you can also ‘like’ and reply to other learners’ comments.

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This article is from the free online course:

Entrepreneurship in Nonprofits

University of Basel