How pure am I? Designing a social enterprise from the ground up

I do my best thinking when I'm on a little journey somewhere. When I was a teenager, it was those endless trips in my parents' car or on the train; as an adult, it's my habit of going for a good wander. Sometimes, the wander is in the car, sometimes, it's on foot. (Occasionally, very occasionally, it's on skis). Once upon a time, when I was younger, it was running.

Sometimes the goal is to come up with a solution to a specific problem, either of content (what do I want to write?) or of form (how should I design that project so it works?) In that case, I use a special rule: on the trip out, I can whinge and carry on all I like about the problem, but when I get to the point of turning around to come back, I must begin the journey of solving it, and when I arrive back, I must have solved it. The journey then has its own in-built deadline.

At other times, the job is too creative to be forced, and needs to be coaxed out. For this, window shopping often works, particularly in old-fashioned shopping strips. Sometimes in art galleries or museums.

Today, I took the dog for a walk in the town where we are planning to relocate, about twenty minutes away. (She was really excited and wanted to sniff everything; she was in such a happy mood she didn't even really notice the small fluffy dogs walking past, which she would normally try to inhale).

The problem I was prodding at today was: so what kind of organisational (and financial) structure would work?

The point is, I have cracked upon a little bit of the problem of the business model. It needs to be able to serve the needs of the community in providing a safe haven at work for people who are vulnerable in the world of work. But at the same time, I'm not helping anyone if my family goes broke. So how to mix the two?

Key entrepreneurial question - who is the ultimate 'natural owner'?

The first key strategic question about any entrepreneurial effort is, who is the natural owner of the business, once it is established and stable? The answer is, the community.

So the next question is, how can that be manifest? The old-fashioned way of doing something like this would be to simply give it away - put it in the hands of a responsible trustee of some kind and hope for the best. But how could the social enterprise be designed so that it has built-in longevity? (And... grudgingly, the possibility of being replicated?)

What if I used the idea used by the Bendigo Bank in its Community Bank franchises? (For readers unfamiliar with this, it's a system of franchising bank branches to communities, who operate them and have a board and shareholders in that particular branch). What if the enterprise was designed so that individuals in the community, plus local institutions and service providers, could own shares in it in just the same way? If so, should this be a co-op or a company?

I am leaning towards a company, but one which has explicit values about re-investing any profits back into its operations, and pays dividends in the form of services rather than cash. Shareholders could come and go, trading their shares in if they moved out of the community, or buying some if they became a supporter/partner.

So where does that leave me and my family? How can I set it up so it provides this social good without creating an inherent conflict of interest built in to it?

What do I want out of it? Do I want to make a profit when I exit, so I can go and start something else? Do I explain to the initial board that, unlike the other shareholders, I need to take dividends in cash? How do we value the shares?

How pure am I?

Clearly, this blog has a way to go. Stay tuned.

Crowdsourcing, scale and sustainability

Crowdsourcing.When I look back on all the proposals I've done myself or helped other people with, all the bootstrap enterprise ideas and new product innovations upon which a whole franchise could be created, I just wish this kind of system was around ten years ago. But even if it had been, I don't think we had a base of young entrepreneurs (and their mini-investors) who would be flexible and laid back enough to use it.

There were so many small businesses - some which would scale and some which would not - that could have been conceived and grown on the back of crowd sourcing. For example, my idea for a website that only sells old-fashioned things that you can no longer buy in shops, such as woollen dressing gowns, designer handkerchiefs, attractive clock radios and teasmades. There are thousands of business ideas out there that could be started on the back of some crowdsourcing, a few credit cards and a good knowledge of the wonderful world of elance.com.

The AV Jennings/ Ikea principle

And yes, 99% of these would not scale. However... I want to activate what I call my 'AV Jennings/Ikea' principle here: you can rubbish the brands all you like for being unoriginal, for being non-master-built, for being of their times and for appealing to the mass market and the very muffled vagaries of its taste, but AV Jennings gave people who previously had very little available to them homes with decent doors, windows and storage, with bathrooms and kitchens that could be cleaned; Ikea gave people the option of cheerful furniture that looks smart whereas once they would have had to contend with grandma's cast-offs.

In the same way, there are many businesses which are not glamorous, not particularly sustainable and not scalable at all that would nonetheless provide an income for two or three families and a sense of pride and dignity and investment in their own lives that a crappy job at K Mart just cannot provide. For example, the doughnut and coffee stall at Chirnside Park shopping centre, with its three competitive advantages: consistent and rational undercutting of the Big Donut Franchise, its location in the foodcourt, and the unfailing friendliness of its staff couldn't be anywhere on any Tom McGaskill radar, but the two young guys who run it are not sitting at home all day playing World of Warcraft and eating cheese toasties and our community gets some genuine competition in the coffee-and-doughnuts market.

Sustainability

Growth has been the basic measurement of success for so long in business that it has been taken for granted. Even in businesses and industries where growth is no longer possible, the business world focusses of growth of market share. The idea of sustainability is that it is the driving force behind growth, as an enterprise that is not sustainable cannot last long enough to grow, and the longer it lasts, the logic goes the more it grows. In this view, 'loser' businesses are the ones that hit a certain size and then plateau, or even go backward for a while until settling into their 'ideal' size.

However, sustainability is also not necessarily the key to a successful business - it depends what you want in the first place. A business based on selling Sydney 2000 Olympics souvenirs would certainly not be sustainable but nobody would argue against its ability to make cash. The entire property development industry really depends upon project-based earnings rather than ongoing cashflow, yet few if these projects are designed to make money indefinitely.

Money for cash business

Crowdsourcing is not inherently suited to the long-term investment projects that attract venture capital. I don't know what proportion of crowdsourcing investors are professional or angel investors, but I assume (and this would bear some research) that 80% of it is someone having a bit of a crack at it, using their money as they would on the futures market or at the races. Having a bit of fun and having a story to tell at the pub, or having the power to invest in something they really believe in. (My father, a very conservative banker, bought Compass Airlines shares when it listed solely because he believed in  the competition it represented).

If most of the investors are having a crack, then they are not really in the market for a long-term, staged relationship with the company, and are therefore not necessarily interested in its prospects for sustainability or scalability. A few expertly marketed ventures might be able to establish relationships with their investors that make them long-term, but this would not be because they are locked in, it would be down to an inherent stickiness that the company had created. This far and away from the typical strategies and requirements of venture capitalists.

For Haverin Books? Crowdsourcing is going to be perfect. So watch this space,