Business Model Canvas for Social Enterprises

2015-02-06 09:01:44 -0500

Business model generation is difficult. Despite the startup renaissance currently going on, the battlefields of the marketplace are littered with seemed-great-at-the-time business ideas that were  not so great once they launched. The Lean Startup idea embraces this, teaching entrepreneurs to iterate quickly to find “product-market fit” before they run out of cash and need to get a job or go back to the coffers of their investors. In the Lean Startup school of thought, business models are sketched out on a Business Model Canvas (BMC) that is one page and can be filled out in half an hour or less. The engineer in me loves this idea. It embraces the Keep It Simple, Stupid ethos that underlies the most elegant engineering solutions.

The real world is not so simple, however. One wrinkle to the Lean Startup model I’ve been working on recently with a client is how to adapt it to a double bottom line business. A double-bottom line business is one where financial profit is not the sole goal of the owners. Talk about making an already difficult process more challenging! To solve this problem, I decided if we’re not going to Keep it Simple, let’s at least not make it too much more complex! I thought, how can I modify the traditional Lean Startup BMC to reflect a social enterprise with as little additional complexity as possible.

In some of the literature on social entrepreneurship and impact investing, there is the concept of a concessionary investment. A concessionary investment is, in effect, a grant because the investor is sacrificing a market-rate return in order to support some kind of social return on his investment. This could be providing a loan at a lower rate of interest, given the business’s credit risk, or it could be providing risk capital (equity) to a business that is far more financially risky that a traditional startup (which are risky enough!).

I like this approach to thinking of impact investing because is puts just one more constraint on a traditional business model: the fact that the business is capitalized by an investor who wants a financial return in addition to some kind of social return. This keeps the engineer in my happy, because as any good engineer knows, if you put too many constraints on a problem you will get no solution! This is how I decided to reflect the added complexity of a double bottom line business in the BMC.

I added two new boxes to the traditional BMC to capture this. The first is social good, which is non-financial value you are creating for your customers or society at large. The second is capitalization, which should describe how your impact investor (which could be yourself, if you are bootstrapping) will measure his social impact.

This canvas worked well for us, so I wanted to share it in case anyone else is working on a similar problem. If you’ve applied Lean Startup methodologies to a social enterprise, or if this was helpful to you, please let me know in the comments.

{% picture wp/uploads/2015/02/Business-Model-Sketch-Social-Enterprise.png %}

You can also access a version on Google Drive or a blank version (note: make a copy of the blank version to edit yourself).