31 Terms Every Social Entrepreneur Should Know – Part One
Our industry has a lot of jargon.
This is a guide to help you bluff your way through.
These aren’t definitive, but they give you an idea about what you know and where you have gaps. You probably recognise most of them, and you can research the ones that aren’t so familiar.
Scale – Making a business much larger, generally in a short space of time. This means it can’t be dependent on one person or one shopfront.
“We’re hoping to scale up the business, going from two store to twenty in the next three years”
Leverage – Finding a part of a business where a small improvement leads to a large boost in performance or results (like using a lever).
“We have a huge, active social media following, let’s leverage that to make the most of our marketing budget”
Impact – The important results created by your social enterprise at the end of the day.
“We raised lots of awareness for our cause, but the real impact came from the 35,000 trees we planted in the last three months”
Social Impact Measurement – How you will know you’ve made the world a better place. These are numbers that you track over time, to see if you’re enterprise is doing what you’d hoped it would.
“Yes the business made money, but we also track the number of people with disabilities we employ and the tonnes of waste we divert away from landfill”
Beneficiary – The person/people/cause that is better off because of what your enterprise does. These may not be people that you meet in person, but you need to know a lot about them.
“Our customers are people who work in affluent suburbs of Sydney, but they help us provide disaster relief to children in Haiti”
Customer – The person who pays you, or at least makes the decision to go with you. Sometimes they’re also the beneficiary, but not always.
“Our customers are shoppers looking for Kris Kringle gifts under $15, and their purchases help fund our orphanage in India”
Value Proposition – The underlying reason why people buy things or make decisions. People don’t buy products, they buy states of being.
“Our value proposition to teenage boys is that: by buying our reusable bags, women will find you irresistible”
Validation – Getting confirmation that your plans and assumptions (i.e. guesses) are in fact correct. Investors will ask you what validation you have that people will behave as you’ve predicted.
“How can we be sure that people are willing to buy loose leaf tea online? What’s the cheapest, quickest way to test and validate that?”
Theory of Change – A framework that gets you to explain exactly how your social impact is possible. It’s so vital to get this stuff right, so you want to be ultra-clear on how you make the world better.
“As you can see from our Theory of Change, by taking on asylum seekers as part time staff and running these programs, we can help them to….”
Grant – Money you receive on condition that you do something good with it. It’s not free as such, because you have to what you promised, but you don’t have to pay it back.
“We received a grant for $50,000 which is to be spent on trialling our new schools program”
Deductible Gift Recipient Status (DGR) – The government acknowledges that you’re doing good things for the world, therefore anyone who gives you a donation can get a tax deduction. DGR status is difficult to get, and is very lucrative.
If a wealthy person gives you $1,000 - they get back the tax they paid when they earned that money.
At a top tax rate of 45% in Australia, that means your donor gets $450 back from the government.
“We’re only donating to organisations with DGR status, because it’s much better for us”
“If we give to orgs with DGR, we can afford to give more money because of the tax we get back”
Investment – Money you receive to grow your business, that you may have to pay back. This can be used to buy capital items like machinery or tools, or spent on startup costs like leasing your premises.
“We’ve taken on $80,000 of investment, which allows us to order our first shipment of stock and can pay our first three months’ rent”
Investor – A person or organisation who gives you money with strings attached. Investors believe in you and want to help you do well, and then make a profit when you’re successful. They might loan you money that you repay (debt) or buy a piece of your business (equity)
“We have two investors, each of whom own 5% equity, so we need to keep them happy”
Capital Items –I might have lost you before with this one. Capital items are the things you own that help you run your business. For a café it’s the coffee machine, fridge cabinet and the fitout. For manufacturing it’s your machinery. These are long term items that last for years, as opposed to your wages or your daily expenses.
“Hey I told you that investment money was to buy capital items, not to take your team to Gold Class!”
Intermediary – An organisation who can help grow and improve your business. These groups are designed to identify and fix any issues that pop up, then help connect you with investors, allowing you scale up your enterprise.
“We’re currently choosing between intermediaries to help accelerate our growth, and cover our blind spots”
Debt/Equity Split – The decision between how much debt you want to take on, and how much of the business you want to sell to an investor. There are pros and cons to both, and it’s very dependent on your circumstances.
“We don’t want to sell too much equity, our loans have fixed interest repayments so they’re cheaper in the long run”
“We want to sell equity to investors who are with us for the long haul; when we do well, they do well”
This list grew really fast as I was writing it, Part Two drops shortly....