At the National Institute for Social Impact, we love to teach social entrepreneurs how to create social impact businesses. There is a lot to learn about this new sector of the economy and a lot of mistakes that social entrepreneurs often make as they begin their new company or convert an existing business to a social impact company. Recently, one of our Professional Certification Strategies students asked what are the top five mistakes that social entrepreneurs make when ramping up a social impact model. Here is what we discussed:

1. They do not have a clear statement of need. Surprisingly many individuals just think giving money to a nonprofit organization is the clearest way to social impact. However, we recommend that any social impact organization has a clear purpose in terms of what issue they are trying to help solve whether it is social, environmental, or both. Telling consumers and employees what your overall social impact purpose is and linking that to an existing issue in the community can be a powerful tool. But people want to know more, like why you are donating money and if the money that you give to a cause actually works, what outcomes you are looking for, and how you define success.
    
2. A higher purpose statement is missing. Remember to start with your “why”. Often, new social entrepreneurs are just so excited to go out into the world and “do good” that they are not quite sure how they will do this or they pick 5 to 10 different ways to create impact. However, having a clear social impact message or higher purpose statement makes it clear to you, your employees, and your customers the true value and purpose of your company.  
    
3. Giving things away for free can have unintended consequences. Many social entrepreneurs look to nonprofits for inspiration on how to create impact by giving things away. They love the one-for-one model that Tom’s shoes created. While there can be benefits to giving things away for free, this is usually best done from a short-term perspective. Having this as a long-term solution can create dependency on the population they are trying to help and have negative economic consequences to a local economy as we saw with Tom’s shoes. The most powerful thing a social impact business can “give away” is a job or education and training. Be very cautious about giving things away for free and think about any unintended consequences your social impact business could create if it was to scale rapidly.
    
4. Success is not defined. Many new social entrepreneurs have done a lot of work at the front end of the process, like what their business is, how it will operate, and why it exists. They think about the good they will do, who they will partner with, and how they will grow and change the world. This is exciting and very motivating, yet knowing when you are successful can be hard to determine and even harder to measure. It is easy to start at the end and reverse engineer the process, but think about determining what success looks like and how to prove that your intervention has worked. How can you tell your stakeholders on a monthly, quarterly, and annual basis that the money you are spending is working? Defining success and messaging back to the community the difference you are making in the world will inspire more people to follow your company, buy from you, and work with you. Not defining success also tends to discourage strong tracking of any metrics that prove and highlight your successes.
    
5. Social Impact businesses will make mistakes. Be honest, not perfect. Many new social entrepreneurs think they must implement 100% of their vision and be perfect right out of the gate. Certainly you need to come as close to your higher purpose as possible, but most important, you need to be honest with yourself and your stakeholders about your impact and how you are working to achieve it. The world throws curveballs at business owners every day making it harder to predict what will happen, like when the next supply chain issue will arise. These changes will impact your business, so you need to stay sharp but also make sure you communicate any changes or issues to your stakeholder group. Being honest and authentic is extremely important during these uncertain times. If you do not fulfill 100% of your social impact, be transparent and let people know why. Explain to them how you will adjust and improve on what you have created to achieve your vision.