Understanding the Difference Between Social & Business Entrepreneurship
Entrepreneurship is a term loosely assigned to all types of business people and their companies. To be an entrepreneur, you only have to be a few things:
- Actively developing and/or launching a business.
- Founding your business for the sake of making money (aka, not a non-profit.)
- Providing a “better” way of doing things through your products or services.
With these three things in mind, there are at least two different types of entrepreneurships: the business entrepreneurship and the social entrepreneurship. In today’s discussion, we’ll define these two types of business models. We’ll also go through three key differences between a social entrepreneurship and a business entrepreneurship.
Are you an entrepreneur? What industry are you in, and how do you define your style of entrepreneurship? Let us know in the comments section below or feel free to contact us. Enjoy the article!
What is Business Entrepreneurship?
To say “business” entrepreneurship is a little redundant. All entrepreneurs found a company, or that is to say, a business. Entrepreneurs launch companies that create change and profit through their product and/or service offerings. When you use business to solve a problem, make life more convenient, or do something better than it had been done before, you are an entrepreneur.
For the sake of this discussion, when we talk about business entrepreneurship, we’re talking about a specific type of entrepreneur. This entrepreneur wants to use their business to make money. They will develop, bootstrap and launch a company specifically for the sake of turning a profit. While they are looking to affect change through their company, there is no specified social mission attached to their business. The entrepreneur’s ideas about how the world should be are not intertwined with the actions of their company.
If you’re the type of entrepreneur whose desire to make the world a better place is on par with your desire to pilot a profitable company, then you’re probably a social entrepreneur.
What is Social Entrepreneurship?
Although a social entrepreneur follows the same path to success as a business entrepreneur, their goals are radically different. A social entrepreneurship looks to create positive changes in the world first-and-foremost. They must make a profit to do this — so they can spend those profits on charitable actions, and/or re-invest those profits in their companies operations.
The products and/or services offered by an entrepreneurship can clearly define the businesses intentions, and let you know whether or not it’s a social or business entrepreneurship. Here are a few examples of social entrepreneurships:
- Grameen Bank – This “bank of the poor” is a special type of creditor that offers micro-loans to impoverished people in developing countries. These small loans give people the means to be self-sufficient, and they’re almost always paid in full.
- TOMS – this stylish footwear company was formed after their founder, Blake Mycoskie, visited Africa and was shocked to find most people couldn’t afford a pair of shoes. For every pair of TOMS sold, the company donates one pair of shoes to people in need.
- Seventh Generation – along with producing cleaning and personal hygiene products that have a reduced harmful effect on the environment, this social entrepreneurship donates 10 percent of their pre-tax revenue to non-profits and other social entrepreneurships.
Three Differences Between Social and Business Entrepreneurship
Although these two forms of business can be similar, here are some key differences:
1. Who’s Investing in Your Entrepreneurship?
Many social entrepreneurships seek their first-phases of funding from philanthropists. Although these investors want to see a return-on-investment (ROI) they’re more likely involved in the business due to its social mission. A traditional, business entrepreneurship usually seeks capital from a venture capitalist firm — and they’re all about the ROI and nothing else
2. How Are Profits Used?
A business entrepreneurship uses their profits to grow the company and pay shareholders. You get involved in a business entrepreneurship for the sake of making money and increasing your personal wealth. Although social entrepreneurships engage in for-profit activities, their profits may be donated to charity or used for other philanthropic efforts. There may be no shareholders in a social entrepreneurship, and even the entrepreneur may not make much personal wealth from their business. Instead, it’s about the mission.
3. How Do You Define Wealth?
Both types of companies want to affect serious change, disrupt the existing market and make money by offering a better solution. A business entrepreneurship defines wealth as dollars made through these actions. Money is the goal of the business. A social entrepreneurship values wealth accumulation and the profits generated by their company. However, a social entrepreneur sees money as just a tool to affect real change throughout the world. It’s not their endgame.
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