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 the way in which they differ 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, where they specialised in technical and natural sciences. Today, they all work in senior management positions in different industries.

When Linda inherited a large townhouse in Basel called ‘The Plane Tree House’ from her parents 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-residence project, a Kindergarten, or a community center. But Linda is not convinced, because she would like to do more than just rent the house to some organisation.

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 in which women are underrepresented, not because they are inept, 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-term unemployed status, we have to help them in their daily lives as well.’
‘To offer an attractive service,’ adds Linda, ‘we should include a child care possibility, so that mothers can attend the classes.’

In the following weeks, they further develop their concept. As a major aim, they envision enhancing the skills and opportunities of women through education, so that these women can pursue professions that are non-traditional, or work in fields 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 from 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 about 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 be clear about the basic configuration of our project. Do we want to be a nonprofit organisation 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?