A social enterprise uses market-based strategies to achieve a social purpose. The main goal of these organizations is not maximizing shareholder value. Instead, they use retained earnings (profits) to further their social aims.
There are a variety of ways they can accomplish this. The generated profits can be applied to meeting the targeted social need. Alternatively, the commercial operation of the business may directly further the organization’s aims.
A key advantage of a social enterprise is that the owners are not allowed a financial return on their investments. For most commercial enterprises, the investors are looking for receiving up to 20% of the profits. By eliminating this cost of generating monetary shareholder value social enterprises can provide services at a price point that can meet otherwise unreachable social goals.
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