How three common pitfalls of social enterprises can be avoided

The social enterprise revolution of the last decade has been a success. Businesses have adopted the skills of entrepreneurship and found innovative, efficient, and effective solutions to social problems.But many businesses face challenges trying to balance for-profit endeavors with social objectives, and end up trapped by these familiar pitfalls:The one size fits all modelBusiness strategies that are proven successful in one community may not work in another.Development Alternatives Inc. (DAI) provides energy resource management, public health solutions and works with countries recovering from civil war. The firm advocates for government accountability and the creation of competitive business environments in the more than 150 countries in which it has worked.Although many of DAI’s projects have been successful, it has tripped a few times, like …

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The social enterprise revolution of the last decade has been a success. Businesses have adopted the skills of entrepreneurship and found innovative, efficient, and effective solutions to social problems.

But many businesses face challenges trying to balance for-profit endeavors with social objectives, and end up trapped by these familiar pitfalls:

The one size fits all model

Business strategies that are proven successful in one community may not work in another.

Development Alternatives Inc. (DAI) provides energy resource management, public health solutions and works with countries recovering from civil war. The firm advocates for government accountability and the creation of competitive business environments in the more than 150 countries in which it has worked.

Although many of DAI’s projects have been successful, it has tripped a few times, like all groups working to solve complex problems.

DAI attempted to establish an urban garden program in Ethiopia using a drip irrigation system that had been successful in other countries. But Ethiopia’s topography and shortage of water put the brakes on the project.

“Failure was about learning,” said Robert Salermo, a development specialist at DAI, in an interview with DevEx. “We failed, learned, adapted and moved on.”

The company turned failure into success by collaborating with local residents to design a watering system better suited for the region.

Non-profit and for-profit confusion

In pursuit of social change, some social enterprises attempt to follow a business model that’s better suited for a non-profit organization.

Generating a profit can be difficult for any business. But social enterprises face even tougher obstacles because they have goals and obligations that purely money-making enterprises do not.

Many social enterprise start-ups rely on fundraising, but this risky form of funding can’t sustain a business. The entrepreneurs then have to split their focus between competing for limited donor dollars and developing independent ways to support themselves and fuel a social benefit.

Saul Garlick founded ThinkImpact in 2002 to send U.S. students to South America and Africa to build relationships within communities and use existing resources to find solutions to local problems.

ThinkImpact grew. By 2010, more than 100 students had worked in South Africa and Kenya, creating services such as health workshops, seedling nurseries, and cleaner cookstoves with local participation.

However, Garlick needed to raise around $400,000 a year to finance the endeavor. The constant fund raising and providing the transparency that donors demanded exhausted the company’s employees, who made below-market wages.

“Nothing about that scenario was sustainable,” Garlick told The New York Times. “Scale depended solely on fundraising ability.”

Garlick eventually converted to a for-profit business model. Now universities pay ThinkImpact a fee to lead student trips to Africa. The payments cover operating costs and are ThinkImpact’s primary source of revenue.

“I think people make the mistake of distinguishing for-good vs. for-money,” said Garlick. “The notion that nonprofits are the right vehicle for doing good in the world is no longer true… Today ethical, well-run businesses with products that make life better are remarkable at improving lives at scale.”

Not building an effective, trustworthy team

Social entrepreneurs wear many hats within their company. They’re passionate about their vision and are personally invested in their company success. But that also can leave them bogged down by everyday decisions.

Hiring the right people in the right roles can free entrepreneurs of some duties and responsibilities, but first they must ask themselves questions such as What am I good at? What do I enjoy doing? What kind of people do I need around me?

When executives understand their strengths and priorities, they can create a leadership team comprised of people with complementary skills, such as problem solving, strategizing, financing and networking skills.

“If you have a lot of corporate refugees who know strategy and process, they can scale like champions, but you won’t have deep programs,” said John Wood, founder of Room to Read, to the Stanford Social Innovation Review. “Conversely, if you only have a lot of programmatic specialists with nonprofit backgrounds, your programs are incredible, but they don’t scale.”

Some tips for selecting the best team for a new social enterprise include hiring locally, investing in long-term training, and encouraging collaboration by setting up structured meetings.

Mistakes happen. DAI’s irrigation project in Kenya started out all wrong, and ThinkImpact didn’t initially figure in the time and energy demands of fundraising. Hiring the right team can make all the difference for a company.

Social entrepreneurs can take a powerful steps towards success by turning their mistakes–and the mistakes of others–into positive lessons. But only if they share them.

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West meets East: Bridging local artisans with Western markets

Hammered silver jewelry, handmade journals and woven bags are connecting people from all corners of the world.Three businesses are finding success by blending fashion with social enterprise, providing artisans with the security of a safe job, dependable income, health care and education.But styles and miles separate Western consumers from the Eastern artisans, so the companies also are developing ways to appeal to their target customers while integrating the artisans into the larger picture of the company.Raven + Lily, Yvel, and Yu Handcraft each developed its own approach to the challenge. In email interviews with Global Envision, they described how they learned to reach out to their artisans and create supportive partnerships.Developing the businessRaven + Lily sells high-fashion jewelry pieces, handmade journals, bags …

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Hammered silver jewelry, handmade journals and woven bags are connecting people from all corners of the world.

Three businesses are finding success by blending fashion with social enterprise, providing artisans with the security of a safe job, dependable income, health care and education.

But styles and miles separate Western consumers from the Eastern artisans, so the companies also are developing ways to appeal to their target customers while integrating the artisans into the larger picture of the company.

Raven + Lily, Yvel, and Yu Handcraft each developed its own approach to the challenge. In email interviews with Global Envision, they described how they learned to reach out to their artisans and create supportive partnerships.

Developing the business

Raven + Lily sells high-fashion jewelry pieces, handmade journals, bags and apparel crafted by at-risk women in Ethiopia, India, Cambodia, Kenya and the United States. The company initially found artisans through its earlier work with micro-enterprise programs in Africa and India that had trained women in design skills. Once Raven + Lily was established and successful, it was flooded by hopeful artisans. The company now keeps a wait list.

Jerusalem-based Yvel sells jewelry created by Ethiopian immigrants in Israel. The company also established a school, Megemeria, to teach students the art of jewelry making to help them gain skills for future employment. Yvel first found employees at temporary housing centers for new refugees. Like Raven + Lily’s experience, word of mouth quickly spread and Yvel soon had artisans knocking at its door.

“By the second year, the reputation of the school and its project had already spread, and we had to decline more than 200 people because we had room for only 21 of them,” said Isaac Levy, a co-founder of Yvel.

Three-month-old Yu Handcraft sells traditional mochila bags made by Wayuu women, from the La Guajira Peninsula of northern Colombia and northwest Venezuela. Co-founder Madeleine Furuvald started selling some of the women’s bags while she was traveling in the area in 2011. The response was so strong that Furuvald and two Colombian friends decided to start a company to buy, sell and promote the colorful bags.

Appealing to Western consumers

Raven + Lily co-founders Sophia Lin and Kirsten Dickerson have a background in fashion and design and wanted to create products that would both alleviate poverty and interest consumers.

“The goal was to create designs that had a modern aesthetic but also reflected the beauty and culture of the women,” Dickerson said.

To accomplish this, artists for the Austin, Texas-based company sketch out jewelry designs that artisans then follow, using their traditional jewelry-making techniques and natural, handmade, and eco-friendly materials.

Conversely, Yvel and Yu Handcraft maintain the style and craft of their independent artisans, and then market the products on consumer-friendly websites.

At Yvel's Megemeria jewelry school, students are taught how to make and sell their own jewelry designs. Students receive stipends, and profits go back to finance the school.

Yu Handcraft products are bought directly from artisans and then re-sold on the company’s website.

Communicating the broader image of the company

Without access to computers and Internet service, artisans would have no way of knowing how consumers respond to their handiwork. So Raven + Lily employees visit sites with lookbooks, videos, and printed materials that demonstrate the popularity and success of the company. Dickerson also uses maps to share stories about women in other countries with whom Raven + Lily partner.

“When the artisans in Cambodia heard the stories of hope about the women in India and Ethiopia, they felt connected to the women in our other partnerships and were amazed to know they have had similar struggles as them,” Dickerson said.

Yvel can communicate its mission and the image of its company to its artisan employees, Levy said, because they live in Israel and generally have access to the internet and other forms of media.

Yu Handcraft’s Furuvald admitted that sharing online products and feedback with artisans is still a challenge, since the company is so young.

“At this moment we haven’t promised much to them as we are a newly found company, and we are just trying to create a demand,” she said. “Once we are sure we can have the volume needed for empowering them, we will be able to share our thoughts.”

The three companies prove that blending fashion and social enterprise can work. They provide employment, income and independence to underrepresented communities, who have often never before profited from their traditional craft or art.

The artists who pound out the silver and weave the bags will never meet the Western shoppers who buy their handicrafts with the click of a mouse. But Raven + Lily, Yvel and Yu Handcraft are finding ways to bridge the distance between very different worlds, bonding artisans and consumers through the beauty of jewelry and the cultures it represents.

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Growing KFC: When exploiting markets may exploit farmers

Kentucky Fried Chicken has 1,000 restaurants in Africa and more on the way. African chicken farmers and those who grow chicken feed could benefit greatly from this huge new buyer. But earlier this month, independent news magazine Mother Jones cautioned that the aid organizations connecting farmers to KFC may actually be setting them up for disaster.The problem? KFC is easily the largest U.S. fast food chain in Africa and looking to source more of its ingredients locally, but their strong hand may not be in farmers’ favor.“Why would you want to be paying the cost of … shipping products, when you can actually source it locally?” said Keith Warren, managing director of KFC Africa in How We Made It In Africa. “Most of Africa …

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Kentucky Fried Chicken has 1,000 restaurants in Africa and more on the way. African chicken farmers and those who grow chicken feed could benefit greatly from this huge new buyer. But earlier this month, independent news magazine Mother Jones cautioned that the aid organizations connecting farmers to KFC may actually be setting them up for disaster.

The problem? KFC is easily the largest U.S. fast food chain in Africa and looking to source more of its ingredients locally, but their strong hand may not be in farmers' favor.

“Why would you want to be paying the cost of … shipping products, when you can actually source it locally?” said Keith Warren, managing director of KFC Africa in How We Made It In Africa. “Most of Africa is blessed with enormous agricultural wealth, so therefore it is a matter of unlocking that and developing the technology to meet our supply demands.”

But the fast food giant reports that the lack of high-quality local ingredients, especially chicken, hinders its expansion. To sell to KFC, commercial chicken producers in Africa need high-protein feed, especially soy, for chickens’ healthy growth and development.

Previously not a popular crop in Africa, soy is now in demand.

Recognizing a potential cash crop for local farmers who could sell to the chicken producers, USAID and the Gates Foundation decided to offer training in soy production and storage. They also connected farmers to major feed processing centers, in the hope of raising farmers’ incomes. The aid organizations are spending millions on these programs. The Gates Foundation is funding an $8 million project in Mozambique and Zambia. Also in Zambia, USAID is spending $24 million to introduce several new crops, including soy.

The programs are billed as a win-win solution, and the Gates Foundation reports that the incomes of participating farmers are rising.

Over time, however, KFC may benefit far more than the farmers themselves.

To produce for a fast food chain like KFC, farmers must commit their limited resources to meeting standardized measures of quality. Soy has few other buyers in Africa, so KFC will be able to set prices and control the buying market. As seen in the U.S., demand for single, standardized crops can put smallholder farmers out of business. The push for low prices and high and consistent output can lead to the consolidation of small parcels of land into big commercial farms.

Meanwhile, although farmers may earn more, it's unlikely they'll be able to afford the fried chicken they help produce. In sub-Saharan Africa, fast food like KFC is a status symbol. It's more expensive than local fare and not an affordable option for struggling farmers.

KFC’s effort to source more of its ingredients locally is great. But it illustrates the complexity of building new markets. Building a soy industry that provides stable income for African farmers, and a stable supply chain for multinationals, is not clear-cut.

Mother Jones’ critique puts aid organizations and donors in a double-bind: an underexploited market is a great opportunity for local farmers, but harnessing it may, in turn, exploit the farmers themselves.

So is there a better role aid organizations can play?

Ideally positioned to be facilitators, aid organizations can bring market players from across the supply chain–farm to restaurant–into the same room. They can provide a platform where farmers’ interests and voices are recognized and roadblocks in the market are resolved by the players themselves. This is essential to building a strong market that will benefit all long after the aid organization leaves the conversation.

For example, instead of injecting millions of aid money into training programs, an aid organization can encourage a major buyer like KFC to make the investment in farmers’ education, since the company will ultimately benefit from it. Likewise, farmers should have the opportunity to ask how long KFC plans to buy soy and negotiate fair prices. Will KFC stop buying after four years, for example, and leave farmers out in the cold?

While KFC and the emerging African soy industry is just one case study, KFC’s leading role in Africa’s growing fast food culture makes it a role model for how the global food industry develops relationships with smallholder farmers. Getting the relationship right would make KFC a true business leader and provide long-term financial growth for thousands of farming families.

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Trader Chat, January 31 – Business Insider

Joe Weisenthal, Business Insider Dave Lutz of Stifel, Nicolaus passes along the top topics about which traders are talking about today. Good Morning! US Futures are starting sharply in the red this AM, and while the talking heads are pointing to EM again, I think Japan is a big factor. The Yen is jumping, as Japan’s Inflation posts the fastest rise in 5 years, prompting people to pull back on bets for the BOJ to ease further. Today is month-end, and to put the performance of the S&P 500 in context, the full extent of its drop this month merely erased the gains seen during the last two weeks of 2013. WSJ highlights that since 1950, there have been 24 years in which the S&P 500 fell in January – …

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Dave Lutz of Stifel, Nicolaus passes along the top topics about which traders are talking about today. Good Morning! US Futures are starting sharply in the red this AM, and while the talking heads are pointing to EM again, …

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Trader Chatter, Jan. 24, 2014 – Business Insider

REUTERSTraders read a newspaper story about the 513 point loss yesterday at the New York Stock Exchange on September 1, 1998 Global financial markets are getting rocked. And everyone’s blaming the financial markets. Dave Lutz of Stifel Nicolaus has a roundup of what traders are chatting about ahead of the U.S. market open:Good Morning! Stress abounds this Friday Morning from FX and EM again for a multitude of reasons. EM continues under pressure on Argentina’s FX getting devalued, sparking fears of other countries following suit as the FX players challenge them. The other main headline is in China, where the ICBC Chair said no compensation to holders of a $500mln busted trust, sparking fears of a “Broken Credit System” in China —> While the Argentine Peso has …

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Dave Lutz of Stifel Nicolaus has a roundup of what traders are chatting about ahead of the U.S. market open: Good Morning! Stress abounds this Friday Morning from FX and EM again for a multitude of reasons. EM continues …

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Quotable: The Internet’s transformative potential in Africa

A new report from the McKinsey Global Institute highlights the economic power of the Internet in Africa: “By 2025, Africa’s iGDP (Internet contribution to overall GDP) should grow to at least 5 to 6 percent, matching that of leading economies such as Sweden, Taiwan, and the United Kingdom.” “If the Internet achieves the same kind of scale and impact as the spread of mobile phones in Africa, iGDP could account for as much as 10 percent, or $300 billion, of total GDP while producing a leap forward in economic and social development.” Read more about the McKinsey Global Institute’s findings about the Internet in Africa, or download the whole report, here.

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A new report from the McKinsey Global Institute highlights the economic power of the Internet in Africa:

“By 2025, Africa’s iGDP (Internet contribution to overall GDP) should grow to at least 5 to 6 percent, matching that of leading economies such as Sweden, Taiwan, and the United Kingdom.”

“If the Internet achieves the same kind of scale and impact as the spread of mobile phones in Africa, iGDP could account for as much as 10 percent, or $300 billion, of total GDP while producing a leap forward in economic and social development.”

Read more about the McKinsey Global Institute’s findings about the Internet in Africa, or download the whole report, here.

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How I Learned to Stop Worrying and Love to Bargain

Note: This article is from J.D. Roth, who founded Get Rich Slowly in 2006. J.D.’s non-financial writing can be found at More Than Money.“My family’s coming over for Thanksgiving,” I told Kim last week. “Really?” she said. “Where are they going to sit?” Good point.When I moved in, my condo was sparsely furnished. In the divorce, I took a handful of items that were clearly mine — a couch, a chair, a liquor cabinet — and let Kris keep the rest. During the year I lived alone in an apartment, I filled the gaps with inexpensive stuff. Now, in a larger home, there was lots of empty space. The dining room, for instance, was a sea of of emptiness …

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Note: This article is from J.D. Roth, who founded Get Rich Slowly in 2006. J.D.’s non-financial writing can be found at More Than Money .

“My family’s coming over for Thanksgiving,” I told Kim last week. “Really?” she said. “Where are they going to sit?” Good point.

When I moved in, my condo was sparsely furnished. In the divorce, I took a handful of items that were clearly mine — a couch, a chair, a liquor cabinet — and let Kris keep the rest. During the year I lived alone in an apartment, I filled the gaps with inexpensive stuff. Now, in a larger home, there was lots of empty space. The dining room, for instance, was a sea of of emptiness because my IKEA table was acting as a desk in the spare bedroom. Part of this was by design. I hoped that Kim would agree to merge households, so I intentionally left parts of the canvas blank.

Sure enough: In July, she moved in, bringing her own hodgepodge collection of furniture. This meant we could use the IKEA table for its intended purpose…but we never did. After being moved to the dining room, it sat there alone and unloved. It was too small to meet our needs. We both wanted to replace it with something that allowed us to host friends for dinner parties, but it hadn’t been a priority — until I volunteered to host Thanksgiving.

How we shop for furniture

Kim and I are both frugal folks. We don’t like to spend a lot of money, especially on furniture, which always seems overpriced anyhow. One way we save money on furniture is by buying used. Since I’ve known her, Kim has used Craigslist to purchase an office desk, an easy chair, and a couch. I always check there first when I need something, but haven’t had much luck recently. (But Kris and I purchased all sorts of home furnishings off Craigslist over the years.)

Kim and I also like a certain local consignment store. We discovered the place while shopping for her desk and have been back several times since. After I settled in my condo, I wanted a few small things to make the place more homey. At the consignment store, I found some great bar stools for cheap, as well as a bench and table for the entryway, a mirror, and a couple of other odds and ends. The store is also a great place to sell furniture. When Kim moved in with me, her couch became redundant.

After it didn’t sell on Craigslist, we took it to the consignment store. “You’ll get 60 percent of whatever it sells for,” they told her. She set a price and signed the papers. Another way we keep costs down on furniture is by bargaining. In fact, Kim negotiates all the time. During our 18 months together, I’ve watched her haggle on all sorts of stuff, from clothes to food (at the farmers market, not at the grocery store) to furniture. She’s good at it. “I believe in negotiating on almost everything,” Kim told me recently. She sees no downside and lots of upside.

Note: When my dishwasher died recently, I didn’t bargain like this when shopping for the replacement. I should have. It might not have worked (since the store already made some price concessions), but it wouldn’t have hurt to try.

Eagle Bargain Outlet

Last Friday, Kim and I spent a fun evening both bar hopping and table shopping. We’d stop for a beer and then move on to the next pocket of furniture stores. Most of what we saw was too expensive or wasn’t our style. We wanted a table to seat eight or 10, and we preferred something round or square in order to foster conversation. Dining tables tend to be long and narrow, so we didn’t find much that met our needs. When we did find something, it usually cost about $2,000, which was far outside our budget.

Eventually we found a likely candidate at Eagle Bargain Outlet, a store that sells overstocks from Costco. The table was “pub style,” meaning it was tall and square, with six chairs and a bench. Had it been in good shape, it would have been almost perfect. But it wasn’t in good shape. Both the table and chairs were beat up. There were small gouges here and there, and one of the corners on the table had been bashed, revealing the MDF beneath the polished surface.

“I kind of like it,” Kim said as we examined the dings and dents. “I do too,” I said. “But not at $700.” “Let’s offer $500,” she said.

We found the store owner and started bargaining. We worked as a team.

“I notice you still have that table,” I said. (We’d seen it the last time we visited the store in July.) “It’s been here for a couple of months. I can see why.” I pointed to the damaged corner.

“Yeah, it’s nice,” Kim said. “But I’m not sure I’d like to have it in our home when it’s that beat up.”

The owner nodded. “It’s not in the best shape,” he said. “Things get damaged around here. Sometimes customers are careless. I’ll tell you what. I’ll let you have it for $600.”

“That’s still too expensive,” Kim said. “I think we can find something better for less. Will you take $500?”

The owner shook his head. He pulled out a calculator and punched in some numbers. “I can’t take $500. Brand new, it’s a thousand-dollar table. But if you give me $550, you can have it.”

Kim and I exchanged a glance, which was all we needed. “That’s tempting,” I said. “How’s this? We’re about to leave for the weekend, but when we get back on Sunday, we’ll come by if we’re still interested.” We jotted down the owner’s name and the deal he’d promised.

“That table’s OK at $550,” Kim said as we drove home. “But I’d rather pay $500. I think we should keep looking.”

Let’s make a deal

On our way out of town the next morning, we stopped at the consignment store to check on Kim’s couch. It had sold, and there was a check waiting for her. While she did business, I checked the floor for dining tables. In a back corner, I found one I liked. It wasn’t round or square, but it still looked warm and inviting. It had a rustic finish and was very solid. Plus, the price was reasonable: only $650.

When Kim finished her paperwork, she came to see what I’d found. “Not bad,” she said. She looked at each of the two chairs and two benches. “Are these wobbly?” she asked, but the saleswoman showed us that the floor was just uneven. Kim found other flaws, which wasn’t hard. The table was well-used, so there were plenty of scars and scratches. (Because it was naturally rustic, these didn’t bother me, but I wasn’t going to say that aloud.)

Kim played the gender card. “I’m a typical gal,” she said, rubbing her hand over the most noticeable blemish. “This sort of thing bugs me. Appearances are important. When we have people over for dinner, I want things to look nice. I don’t want my guests sitting at a scuffed-up table.”

“We have a little room in that price,” the saleswoman said, “but not a lot. That table came in on Tuesday, so the owner won’t move much. But I’m certain I could sell it to you for $600.”

Kim and I conferred in whispers. “It would be great to be done with this process,” I said. “Plus, I really like that table.” “I like it too,” she said, “but $600 is too much. Let’s see if we can get it for less.”

She took the lead. “We can’t pay $600,” she said, “but we’d buy it today for $500. What’s the lowest price you can give us?”

The saleswoman frowned. She asked to be excused so she could call the seller. After a few minutes, she returned. “I’m authorized to sell it to you for $550,” she said. “But you have to buy it today, and you have to pay cash.”

“Done,” Kim said. We went to the bank to get the money, and then drove on to Hood River for a weekend of picking fruit and tasting wine.

Bargaining for beginners

Over the past eight years (!!!), I’ve shared several articles at Get Rich Slowly about how to haggle and negotiate, including:

• How to Haggle


• Negotiate Once, Save Thousands Every Year


• How One Reader Uses Haggling to Save Big Bucks


• You Can Negotiate Anything

I know that haggling is a valuable skill. All the same, it’s taken me a long time for negotiating to feel natural to me. I think part of the problem used to be low self-esteem. Seriously! I didn’t want others to think poorly of me, and I was afraid that bargaining would make them cranky. Things have changed. For one, I’ve learned that it doesn’t matter what other people think (especially strangers!). For another, I’ve done a lot of travel.

You see, in other countries, bargaining is common. If you don’t bargain, you can get ripped off. (Heck, even when you do bargain you can get ripped off.) During my first few trips abroad, I didn’t enjoy the bargaining process. When Kris and I went to southern Africa in 2011, the markets frustrated me. I wanted to buy stuff, but it seemed silly to haggle with folks who needed the money more than I did. My efforts were half-hearted.

In Peru, however, it became clear my hesitancy was only costing me money. When my friends and I would return to the hotel after a day of shopping, we’d compare our catches. We’d often purchased the same things, but some of us — including me — had paid two (or three or four) times what the best bargainers had paid. Toward the end of that trip, I stepped up my game. By the time I left, I’d even become bold enough to haggle on the price of soda pop!

Last month in Ecuador, it was fun to see how far I’d come. As always, my friends and I would compare what we’d paid for similar items. This time, I paid much less than everyone else.

Like anything, bargaining takes practice. You have to get comfortable with the give and take. Just remember that if you take a friendly, casual approach, you won’t upset the other person — not even in the U.S. Frequently, your courage will reward you with lower prices. And the worst the person will do is simply tell you no.

For more info: How I Learned to Stop Worrying and Love to Bargain

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