Podcast

Episode: 461 |
Belinda Li:
Social Enterprise:
Episode
461

HOW TO THRIVE AS AN
INDEPENDENT PROFESSIONAL

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Belinda Li

Social Enterprise

Show Notes

Belinda Li was a senior advisor at McKinsey before she founded CiTTA, a company that focuses on promoting and facilitating the growth of the social enterprise business model and economy. Belinda has a passion for combining the power of business with the promise of social impact, and in today’s show, she talks about how her company helps foster growth in that direction. Visit the website to learn more about CiTTA or reach out to Belinda on LinkedIn.

Key points include:

  • 02:00: An overview of work with social enterprises
  • 07:49: ROI to shareholders
  • 17:41: A working example of a social enterprise
  • 24:29: Consulting skills for social enterprises

One weekly email with bonus materials and summaries of each new episode:

 

  1. Belinda Li

 

Will Bachman 00:01

Hello, and welcome to Unleashed the show that explores how to thrive as an independent professional. I’m your host will Bachman. And I’m here today with my good friend Belinda Lee, who runs the SciTech partnership. That’s C i TT a partnership. And Siddha is actually technically, I’m told it would be pronounced citta. And it’s a Sanskrit word. Belinda, welcome to the show. Tell me what citta means in Sanskrit.

 

Belinda Li 00:31

Hi, yah, thank you so much for having me. Well, I’m so excited to be here with you. So yeah, thank you for asking. So, Cheetah, or sitter, as I pronounced it usually is a Sanskrit word that means the mind is associated with the heart. So we picked that name, because sort of partnership really founded this firm. For purpose. Our goal is to help organizations purpose driven organizations really do do good, better. So the the word meaning the mind is associated with heart, because we want to bring all our intellect and experience and expertise, not all of ourselves into the project to help our clients but also bring pair that up with our hearts, our passion for social impact. So that’s where the money came from.

 

Will Bachman 01:19

And what a marvelous language to have a word that means the mind is associated with the heart. I mean, that’s a pretty cool language to have a word that means that, that thing. So Belinda, I wanted to really learn about learn from you about social enterprise. I know that your work works with a lot of nonprofits, and you also work with social enterprises and firms that are interested in developing a sustainable business model that helps them do good. Let’s talk let’s talk about your work some there. And we hopefully go into some case examples. But you’re just give us an overview of your work with social enterprises.

 

Belinda Li 02:00

Yeah, absolutely. So social enterprise is something I’m really passionate about. I think that’s, I’m hoping that’s the future of the mainstream economy. So I also serve on the Board of social enterprise Alliance, the National Board, I’m the vice chair. And we actually have a kind of hot off the press updated definition of social enterprise. So I share that with the with the audience. So we define it as a social enterprise is an organization created for impact. It uses a sustainable and earned income business model with a governing structure focused on stated social environmental goals. It invest a significant portion of its revenue, profit or assets into expanding the state of Michigan. So this definition really starts right off saying a social enterprise is an organization created for impact. And that’s really important because this distinguishes social enterprise as really, in their DNA. They exist to do good exists to solve for social or environmental issue. And the market base mechanism to generate an income is to really all all of that it’s about supporting that mission. So that’s the definition. So our work, we work with a range of different organizations, for a lot of them are nonprofits, that are either interested in the social enterprise model and income model, or have been doing it for a while and kind of want to explore that further into new directions. And social enterprises themselves. So it’s a range of kind of strategy project business modeling project feasibility studies, for those who are interested in exploring new ideas. Just arrange Yeah,

 

Will Bachman 03:51

great. Let’s, let’s spend a little bit more time on that definition, which I found very insightful. So it started with that statement of impact, and let’s kind of try to draw some distinctions. So how would you know, let’s say a pharmaceutical company might say, well, we exist to do good to help cure disease, right? Or to prevent chronic ailments? What sort of what do we mean by impact? And how would a social enterprise be different than a for profit company or just a regular old for profit company that is trying to do some good thing in the world, but would not be considered a social enterprise?

 

Belinda Li 04:40

Yeah, so I think it’s helpful to look at also the, ultimately why it exists. So, you know, you will probably agree that typically a pharmaceutical company, their their goal is to maximize the shareholders value. And and they do that by providing and producing and developing medicines, which is great. However, a social enterprise really needs to take into account not just a shareholders value, actually, it’s probably helpful to look at a even stricter definition, if you like, of social enterprise. So there are certification available internationally, and they’re trying to introduce that in the US as well, where they define not just that you have a social and environmental impact purpose, but also that you how you use that profit. So let me go to, for example, there’s a social enterprise. So society profits in the US that’s trying to do that certification process. And they require that, for example, at least 51% of your profits, that’s made by the business must be dedicated to that purpose. And then they even have a strict definition of you must distribute residual assets, once the organization if it’s ever dissolved into social environment, environmental aims, and you have to demonstrate that those social environmental objectives are being achieved. So looking at just that’s a stricter definition for certification purposes, but that’s the idea. The idea is that is, is you exist really to solve those impact questions. And really, that making that profits is to support that impact, and not the other way around.

 

Will Bachman 06:38

So are social enterprises and forgive my ignorance? Here? Are social enterprises typically structured as a nonprofit entity or as a just a regular LLC for profit entity, but they, how are they typically structured from tax purposes and, and legal setup?

 

Belinda Li 06:59

Yeah, so interestingly, it actually is agnostic to your legal structure. We have nonprofit based social enterprises, you have typical kind of for profit LLC, you also have kind of this new type of, or relatively new type of structure, like our three C’s benefit corporations. It can be any of the above, it’s really about just those are just tax structure. But whether your social enterprise or not, is about why you exist, and how you how you kind of feel those impact.

 

Will Bachman 07:31

Okay, if it’s a and how do they typically, how does social enterprises typically raise their initial capital? Since it sounds like the idea is that you’re not supposed to be returning a return on investment to the to the shareholders, right?

 

Belinda Li 07:49

Let me you can, you can also return some of that profit to shareholders, but that shouldn’t be your only aim, there should be a significant amount of that profit really return to that purpose. So it’s a combination is both purpose and profits? So typically, again, it also depends how they raised the initial capital. If it’s some of those social enterprises, actually subsidiary or, yeah, subsidiary affiliate out of a nonprofit, let’s see, then sometimes it is a initial injection of maybe grant funding, or some kind of other support to get it started until it can run itself, some some for profit businesses, then it’s just like any for profit business, they have to kind of find a way to raise that money, perhaps from savings from angel investors. No. So it just depends on how you get started.

 

Will Bachman 08:44

All right, great. Could you share some case examples, perhaps social enterprises that you’ve worked with, or not necessarily to, to give us some, you know, some color around? How a social enterprise, you know, set up and run and what the organization might look like, and what some of the earned income models are, what some of the types of impacts, you see them serving just help me learn more about this world?

 

Belinda Li 09:12

Yeah, so I can give you many examples, but I’ll pick one that’s actually and a client of ours that we actually helped them develop the model. So it was a pilot for them. And they tested it out. And they I think they’re expanding it now. And it’s interesting is a it’s an organization that’s technically a nonprofits or quasi government slash nonprofit that’s out of DC called NeighborWorks. America. And they’ve actually published case studies about this too. So if you’re comfortable sharing the name, so they they are a congressionally funded about $250 million organization out of DC that supports about 240 Community Raised nonprofits, independent nonprofits, that are all kind of striving towards stabilization of neighborhood creating thriving neighborhood, in across the country in us. And they, they started initiative really looking at right after the financial and housing crisis, where a lot of communities are caught up ended because of the crisis. And they realize that no relying on government and foundational funding is not sustainable, at least it’s very fluctuating. And there’s also a barrier to them scaling that impact. So what they decided to do is to explore the social enterprise model. And we were hired to be the subject matter experts on this topic and help them really build that model. So we worked with about 25, nonprofits across the country, different sizes, rural versus urban, but they they all have kind of similar type of programs under the homebuyer ship program. And so for example, the smaller programs are homebuyer education, first time homebuyer education, to more sophisticated ones, like lending and real even Realty Services. So So traditionally, they had been relying on grant funding and donations to support those services. They don’t they don’t charge their clients for those services. But it was a social enterprise model, we helped them think about how they could really start charging, but still very mission based. And so some examples is, let’s say, the homebuyer education program, they used to offer them free. And even they offer no pizzas for people who come to classes, and they have like 100 people showing up. But ultimately, maybe one person ended up buying any home. And, and that’s because they’re not really getting the right set of clients. And when we develop a model, and there’s not a lot of details behind the product, the pricing and all that, and they’re charging a modest price. And then suddenly, they the attendance drops to say a 12 people, but six of them would would go through the program and manage to buy a home that fits their needs and budgets. So that’s one example. With that. And then there’s also other examples of in that whole business model of expanding the client sets, the customer targets, for example, to a slightly high income level, but still not high enough for traditional realtor to be interested in serving. So that’s market gap there. And they expanded that service to them to, to get some commission, but still serving those really in need. And that’s all sets of all encompassing set of kind of business model that we developed for them from across different product lines. And so what happened was really, they are starting to see those results of efficiency and expanding market expanding partners, and generating income at the same time, and really helping the right people at the right time. And kind of working towards their scaling goal. So that’s one example.

 

Will Bachman 13:28

Yeah, no, that’s fascinating, you know, on the piece about the market gap. Tell me a little bit more about that. Because I would have guessed, you would think in sort of a, you know, free competitive market, that if it was possible to serve that market segment, you know, profitably at all, its someone would be would be doing it. So how did they manage to serve that, you know, underserved segment and, you know, make enough money to with the earned revenue to kind of fund themselves in doing it?

 

Belinda Li 14:04

Yeah, sure. So they’re traditionally who they served were mainly the those who are under 80%, area median income with families who make that amount of income. And that partly was dictated by public funding requirements. So public funding would dictate that you have to serve that level of income individuals, but as no property prices, increase incomes, limits, that incomes actually limit that volume served. So what they saw was there was a gap for the those between 100 and 120%. Ami families. So even if they are kind of mortgage ready those families, the traditional brokers just feel like well, there’s a lot of effort to serve those individuals so they don’t even bother as much because you know, those family probably will will purchase homes that are not very high value. And so the commission relatively speaking will be lower. And so they’re just not being served. And, and but they are actually mortgage ready. So by really expanding to that set, and helping them get the right mortgage, and really just doing that matching and making sure they can afford the home and not teaching them educating them on how to maintain that budget financially, they found that there is this just unserved whitespace of those families.

 

Will Bachman 15:33

Yeah. So if they’re serving those families, how are they able to do it if your ordinary for profit real estate agent was not willing to? Was it just that they were willing to earn less money, you know, just, you know, serve that segment and just not earn as much as a regular real estate agent would? Or were they, you know, getting some earn income, but also relying on some grant funding to be able to serve that segment? So like, if, if an ordinary person who’s a real estate agent can’t make money doing it? How did they manage to make enough to support themselves by serving that segment?

 

Belinda Li 16:11

Well, this Yeah. So one, one thing we did look at was kind of this incentive for the real estate agents that work for these organizations. So certainly with with the mission at the heart, they they do attract certain type of real estate brokers that are interested in doing this kind of work. And at the same time, we looked at kind of the, the compensation structure. So as opposed to purely commission based, how do we structure it so that there is a there’s a base salary and perhaps in some cases, because we’re working with 25 different nonprofits, the different nonprofits use different model, but some kind of decided is just the flat that rate as opposed to commission based and they’re not as incentivized to go out to serve the high income ones. Some are kind of a mix. So in terms of just attracting that talents, who are willing to do the work. And in terms of their overall nonprofit, certainly the this is not the only business so so there is a mix of other types of funding, too. So there’s, there’s a mix of kind of balance of looking at your social enterprise, and revenue streams, how much of that can sustain itself versus some supplemental? And that is case by case. And I can’t really speak to each of those nonprofits, how they ended up

 

Will Bachman 17:34

great. The shirt, let’s talk about another example.

 

Belinda Li 17:41

Okay, so this is actually another example. That’s, let me see. So trying to see which one to pick. So I can maybe talk about some for profit clients. So that there were a couple of clients that were in the for profit space, one of them was actually ended up really a traditional growth strategy project, but by nature of what they do and who they serve. As the employees, they are, I would say they are social enterprise, because they serve a particular population, in this case, is actually an indigenous population of America. And so they that one of the goals is to really provide employment to that population. And what they do is some kind of manufacturing, job, kind of factory jobs. And, and so we did just a traditional growth strategy, but for them to really think about how to how to grow within their sphere of businesses. But interesting thing was that they would ever thought of themselves as a social enterprise. And when I was there talking to them, and I mentioned this concept of social enterprise, and I described what it is, and they said, Oh, yeah, I guess we are a social enterprise, because they have that dual bottom line, they have this employment, often a population that’s under employed, but as well as kind of making profit to support that. So not a lot to say about this case study just as a traditional growth strategy. But But I just wanted to bring that up. That is interesting, how many companies don’t even think of themselves as social enterprise. And that’s something that would be interesting to kind of educate the world more about.

 

Will Bachman 19:40

So what’s the advantage to an organization that might be just thinking of themselves as a regular business, to kind of recast themselves as a social enterprise? Does it help attract talent, or are there other sorts of benefits from it? maybe trying to try to fit that full definition that you shared with us at the beginning of the call?

 

Belinda Li 20:08

Well, I would, I would hope that the, the companies organizations really look within first and making sure that they, they really want to do good, and really want to contribute to social impact and not not just think about, oh, I’m a company and how can I pivot, so that I can achieve x or y or z in terms of my profits? or what have you. Because that’s kind of defeat, the purpose of what social enterprise is, as I explained earlier, is really should be in the DNA of creating social impact. So, so having said that, if you are already a social enterprise, but you don’t just don’t realize it, I think, talking about you being a social enterprise, it certainly would help you clarify your direction, and attract the right people, right? Employees, rights, investors, perhaps, you know, right customers. So really, it’s not so much as a selling point, per se, but, but clarifying who you are, would drive that direction, in all sorts of way.

 

Will Bachman 21:26

So I suppose that you could, if you’re a non, if you’re if you’re not sort of set up as a nonprofit, then obviously, people can’t, you know, make tax free contributions to support your mission. But do Do or do some sort of social enterprises? Are any of them able to attract foundation funding, even though they’re not set up as a not for profit? If they’re, you know, trying to build a sustainable earned income model that does good. Do some foundations make those contributions to those sorts of organizations?

 

Belinda Li 22:02

Oh, yeah. Interesting. You ask that the one of the legal structures that I mentioned earlier, l three C, which stands for if the audience does know, is a low profit, limited liability company. So lllc, VC was originally set up partly with the hope that it would allow them to attract foundation investment dollar. And those are what we call program related investment prs. So foundations, as you may know, are required by the IRS to give out 5% of the asset every year. And, but it must be given to purposes to further purposes that aligned to their exempt purposes. So it makes it hard for well, by default, right, by design, we can have you heard the foundation to then invest in anybody, any for profit company, the LPC structure. It’s an eye on a lot, not a lawyer. So I’m not maybe not saying everything right, but but really it see define that organization as purpose first. And not just profits. So because of that redefinition, it’s more possible for foundations to then use that PRI instrument to invest in these companies. Because they are already defined as mission driven, and potentially get a return. However, in reality, it actually hasn’t happened much. There’s some, again, not a lawyer, so but there is apparently some a lot of tax complication and just other issues that has prevented foundations actually to take advantage of that.

 

Will Bachman 23:58

What are some of the particular skills that a consultant who wants to work with social enterprises should be bringing to the table that would be potentially different than just your standard run of the mill, you know, generalist management consultant who serves for profit enterprises, what you know, someone who serves for profit enterprises, what we do, what do we need to know, to successfully serve a social enterprise?

 

Belinda Li 24:29

For sure, all those skill sets that are like your, your, what you call run of the mill, consultants would bring so that a really good business acumen, it’s looking at the market, understanding all the business aspects, project management, all those kinds of things. I think I would say in addition is really this passion, this alignment for the social impact world and an understanding of The complexity that that entails. So, social enterprises are looking at both mission and margin, both. And that adds just so much more complexity, right. So for example, if you’re working for an employment Bay, or Employment, social enterprise, in other words, that social enterprise purpose is to create jobs for individuals who have challenges in finding job, let’s say, returning citizens, individuals with disabilities, and so forth. And, and not understanding that creating those jobs is one thing, but also the especially needs to be wraparound services to support those individuals as well. And in particular, if they are creating transitional jobs, some some social enterprise create permanent jobs, some crazy transitional jobs, basically, the goal is to just make sure those individual stable train and get really good support for a couple years, and then jumpstart to another career path. But imagine if that’s the goal sucks that goal success is defined as more more individuals that can transition to Korea, the better success they are, they have. But you know, as we all know, employee turnover is one of the biggest costs. So it’s very difficult to do. You’re you’re trying to define a success that’s costing you so much money that other companies are all trying to say, let’s keep the employees and not incur that turnover cost so much. So there’s that extra challenge. And then of course, with that whole kind of wraparound service, you’re also dealing with a lot of other systems. For example, perhaps you’re dealing with the criminal justice system, if they are, you know, returning citizens. And homeless, homeless individuals are dealing with kind of another support system. So that’s just more complexity around it. So understanding that would be important.

 

Will Bachman 27:13

And just to clarify, returning citizens, that’s a term for released prisoners.

 

Belinda Li 27:20

Correct? Yeah. In fact, it’s interesting, one of our clients asked us to, say, returning residents, because even Miller was citizen has also his baggage.

 

Will Bachman 27:31

You mentioned? Yeah, you mentioned that you’re on the board of a social enterprise Association Alliance. Tell us a little bit about what are some of the issues that you see kind of the national level related to social enterprises?

 

Belinda Li 27:47

Yeah, so social enterprise Alliance is a membership organization, we are members are either social enterprise practitioners, or the ecosystem of individuals and organizations that are supportive of this social enterprise movement, as I like to call it. And just can share with you also our kind of brand new, updated vision and mission like so our vision is to create a new equitable economic law norm by catalyzing social enterprises in the US to grow the revenue and the impact. And our mission is to empower social enterprises to become sustainable and expand the impact. And we support them by building awareness, advocating for change, and providing access to resources. And the last bit kind of get to some of those challenges, I guess, or things we would like to work on in the social enterprise seem Nash nationally, is one is to build awareness, really helping people understand, such as on this podcast, what is social enterprise? How is that different than other types of organizations? Are you actually a social enterprise? So just building the awareness, both from an organization’s point of view, but also from a consumers point of view? Consumers could be consumers, but also kind of b2b, other businesses who might buy from social enterprises? Just building that awareness of what is it and why is it important, and helping advocate for those change? For example? I think I mentioned at some point that there is certification efforts going on so how do we help companies that are trying to buy, buy good, if you like, buy from socially impactful organizations and suppliers? How do we help them make that decision? By helping them know, an organization or a supplier is actually a certified social enterprise? Just like certification, minority owned women owned? No things like that. We don’t currently have that. So that’s one way to advocate for that procurement piece. And that would really help scale I believe, social enterprise As movement here, and then just providing access to different resources, best practices, networks, support. And there’s a lot of great grassroots local efforts and individual efforts in really building that. How do we kind of bring them together as an alliance? Hence our name, social enterprise Alliance, to support each other and share across share?

 

Will Bachman 30:27

What are the industries where you tend to see social enterprises gathering? So, you know, education, manufacturing, healthcare, food, construction, retail, where do you tend to see of social enterprises clustering, what types of services and goods

 

Belinda Li 30:53

all of the above? Because social enterprise is not a one thing is it’s a it’s a model, if you like. It’s a method, but not an industry, per se. So, so, all of the above. There’s the bakery that’s moving and storage company lawn care, the childcare centers, there are also those like open restaurants or retail stores. There’s equal tours, are those organizations doing environmentally work? That’s just all sorts. So really, that’s, there’s no limit to what you can do.

 

Will Bachman 31:42

Fantastic. Belinda, if listeners wanted to follow up with you find out more about the work that your firm does. Where would you point them online? If you want to share a website or email address or, or Twitter account or any anything you’d like to us to include in the show notes?

 

Belinda Li 32:02

Sure. So our website is Citta partnership.com. So see it at a partnership.com I love connecting with people on LinkedIn as well. So my LinkedIn is linkedin.com/i n slash Belinda Lee. And yeah, love to connect and reach out.

 

Will Bachman 32:19

We will include those in the show notes, Belinda. It was great chatting with you today. Thanks for teaching me about social enterprise.

 

Belinda Li 32:27

Thank you, and happy holidays.

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