Thinking about Starting a Business ‘For Good?’ Here Are 5 Essentials to Get Right
By Rod Claycomb, co-founder of All Good Ventures
Bill Gates was once a guest on David Letterman’s Netflix show, My Next Guest. One of the dialogues from that episode stuck with me. Letterman was trying to impress Bill Gates with his clever thoughts about what sort of businesses Bill should invest in. Needless to say, they were awful – albeit funny – ideas. After a few wild suggestions, Bill politely nods and says: “Having the idea is the easy part.”
Why did that stick with me? Probably because it’s so true. Over the years, I’ve often come up with interesting ideas. It’s usually met with an eye-roll from my wife and All Good Ventures co-founder, Heather.
But to my credit, some of my ideas have actually been good. In the mid-90s, after being frustrated with my car windscreen always being dusty, I thought that a ready-to-use window-cleaner wipe would be a good idea. Cue the eyeroll from Heather. Five years or so later, windscreen ready-to-use cleaning wipes hit the scene. Ten years ago, I commented that an automated writing software should be something Heather’s communications business should develop to streamline their team’s writing process. Cue her eyeroll. Of course, AI tools like Chat GPT are now revolutionising the way people search and write.
My point? The idea is the easy part. It takes a lot of time, effort, money and perseverance to deal with all of the setbacks that come along with actually creating a profitable, sustainable business out of a great idea.
Our family charity, All Good Ventures has just launched its fifth round of funding and support for social entrepreneurs. Every year, we have no shortage of good ideas. And many good ideas that, if successfully implemented, would benefit many deprived people in New Zealand around the world. The challenge for us, as an enabling organisation, is becoming clearer every year: How do we choose the entrepreneurs who will turn their idea into reality?
From our experience supporting 14 social entrepreneurs, across 7 countries to start new businesses for good, we’ve seen first-hand 5 critical attitudes and principles founders must adopt to be successful.
The idea’s the easy part
Yes, I’m going to bang on about that one first. Why? Because it is most important that you realise this upfront. The hard part is yet to begin. And it will get boring, and it will get tedious. And, as your lofty and gallant vision of using your idea to help people in need turns into a strategy and a five-year plan, you will eventually need to decide what you’re going to do for the next 12 weeks. And the next 12 weeks. And the next. And so on. Take a reality check right up front and decide, “Can I actually take my vision for social good and focus myself on execution?” If you burn out easily after ‘the easy part,’ this attitude is a red flag.
Your expectations for progress will always exceed reality
Kevin Costner had a great line in an old movie, Field of Dreams. “If I build it, they will come.” This translates into, “Just build the business or product and people will buy it.” My experience with business start-ups is that this rarely happens. For most of us, and especially those of you who haven’t built an enterprise before, there will be numerous unforeseen steps. There will be competition. You will need long-term sustainable profit to give you the flexibility to achieve your expectations. The process will be slower and more expensive than you ever thought. Are you ready for the challenge?
Social entrepreneurship cannot be a ‘side hustle’
This is related to my first two points. I will put it more bluntly. Can you work at least 30 hours a week in the business for two years without remuneration? Are you able to do this amongst all of the other obligations in your life? Can you focus your efforts firstly on getting to a stage where your business idea can actually pay you what you need? And can your business idea support you at the same time as it is supporting those ‘in need’ either through working in your business or being part of your supply chain?
Profit cannot be sacrificed
Since our inception, All Good Ventures has existed to support seed funding for social entrepreneurs just starting out. What we’ve seen over the first four years is that the profits in a social enterprise typically need to be higher than normal businesses. One-for-one models, giveaways, and catering to vulnerable communities all require higher margins to achieve your ‘higher’ goals. And don’t be fooled into selling your social goal as a competitive advantage – that benefit only goes so far. I’m going to be a bit controversial here, but a prevailing attitude we are seeing in the social enterprise sector is that the sole business focus should be on: ‘people not profit’ or ‘planet not profit.’ Alternatively, All Good Ventures preaches: ‘people by profit’ and ‘planet by’ Are you prepared to embrace profitability and strive like mad to achieve it? Because if you’re not, you’re basically setting yourself up for short stint in business, with the loser being the people you set out to help in the first place.
Grants are not part of the sustainable strategy
There is so much grant money sloshing around these days in the social enterprise space that it’s easy to get lulled into striving for the big checks to flood in. It is a trap. As soon as the grant money lands, the focus often shifts to the grant money running out! This in turn takes your focus and time away from building the business. Don’t get me wrong – grants can be a crucial part of building the foundation. But there are some caveats that we’ve seen derail entrepreneurs’ focus. Is a part of your idea driven by how much grant money or funding you can get for your idea? If so, I would suggest imagining a space where there is no grant money and asking if your idea can succeed without it.