Social Enterprise Meets Nonprofit Social Services: Caution Advised

Social-impact businesses—enterprises that combine a social cause in either a for-profit or nonprofit structure—are becoming a new vehicle for philanthropy in the US. According to Nigel Sharp, they also represent a $310 billion US industry sector that is expected to grow to $500 billion over the next 10 years.

While we are largely beyond the “pink cloud” phase of social enterprises as cash cows for nonprofits, one still sees experiments where one type of organization begins an effort that calls for a different sort of business planning and capitalization altogether. Underestimating the capital needs of the newer entity in a startup can sometimes cause one or both efforts to fail.

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