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Launching a social economy enterprise: Six key steps

Words of wisdom | October 22 2020

In Québec, we are currently witnessing a wave of enthusiasm for entrepreneurial projects that are part of the social economy. This refers to collective projects that have a social mission aimed at solving an existing problem and that succeed in combining economic viability and social equity. A social economy enterprise differs from a private enterprise in that its capital is social: it is collectively owned and cannot be sold between two individuals for purely lucrative purposes. The case of Mountain Equipment Coop illustrates this distinction, and stands out as an extraordinary and exceptional case!

Not all projects of this type develop in the same way, in a linear manner, but we can still identify common milestones that are important to their success, including the six listed below.

1. Defining the project

It may seem simple, but before you start, you must first have a clear business plan. It is important to remember that, when starting this type of business, the mission is twofold: proposing a social vocation and designing a viable offer that facilitates the sale of goods or services. Will people (cities, schools, parents, caregivers or others) buy your solution for the identified social need? This is the most important question to ask.

2. Building a team

Project sponsors must be chosen with great care in order to ensure the success of the venture. The founding group must essentially bring together four key competencies. First, the team needs a producer that is capable of producing the goods or services being offered. Second, there must be a promoter that has the expertise to sell what the company will offer. Third, the project requires an administrator with a meticulous profile that is not afraid of paperwork and is well organized. Finally, a diplomat who is skilled in interpersonal relations and conflict resolution is an essential asset.

3. Choosing a legal structure

It is important to must decide on the legal organization of the company from the outset. Will it be incorporated as a COOP, or as an NPO? There are many distinctions to be made between the two formats. For those who have difficulty deciding, the entrepreneurial compass is a very useful tool. The Réseau Coop offers workshops that can shed light on the question, and of course, the social economy experts at PME MTL can help to guide you in choosing your structure. Finally, double structures (a private company on one side to generate profits and an NPO on the other side to access subsidies) are to be avoided when accessing PME MTL financing.

4. Creating a network

Publicizing your project is a crucial step in its development. Toward this end, networking is essential. You must first seek support, form alliances and create associations with key players in your industry. In addition, the social economy ecosystem itself should not be neglected. Establishing relationships within this universe is a fundamental requirement for success. This can be followed by further development of more formal partnerships or sponsorships, avoiding the mistake of monetizing your mission without considering the risk to your reputation.

5. Structuring a governance framework

The project must be overseen by a competent board of directors. In the social economy, we work as a team and we want to make sure that the initial mission will be preserved at all cost. Lawyers, accountants and business people in general often have relevant profiles, but what we are looking for above all are experienced members who will be there to keep the company focused on its vocation, regardless of the circumstances.

6. Developing a business plan

In the end, the acid test is having a solid business plan that combines the company's social and economic missions. The project must be financially viable and generate market income. Donations from foundations and government grants can supplement funding on an ad hoc basis.

Once all of these steps have been completed, you can finally move on to the launch: the long-awaited moment when ideas move from paper to reality, and the adventure begins in earnest. We wish you all the best!

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