Nobel prize winner Muhammad Yunus proposed the idea of a “social business.” He defines social business as different from a traditional non-profit organization in that it is self-sustaining. A social business does not depend on donations for its continued existence. This means the social business is a profit making entity. However it is different from a normal business in that the promoters and investors do not get any distribution from the profit. The profit is retained for expansion of the business and only the initial investment of the promoters and/or investors is paid back without interest.
The goal of a social business is to meet a social need that would not be addressed ordinarily by a regular business. Unlike a non-profit, the social business would be self-sustaining and scalable thus able to address the needs of large sections of populations without a constant need for fund raising. The energy of the promoters is thus focused in meeting the social need rather than constant fund-raising effort.
In a social business the promoters and employees of the business get paid market wages. This means that though the promoters do not make a profit they can make a living wage for their effort they put into the social business.
The key idea is not to supplant non-profits or normal businesses but to complement. A non-profit will exist where a social business cannot. And a social business should find a niche where a normal for-profit business does not want to play.
Here are the seven principles of a social business:
- Business objective is to address a need of society that is currently not being addressed. Usually this is related to poverty alleviation, education, health, nutrition, environment, etc.
- Be financially sustainable. This means customers are charged for the service and the organization makes a profit and does not rely on donations to sustain operations.
- Investors get back initial investment amount only. No share of profit is paid to investors and/or promoters.
- After investors are paid back, profits are retained for expansion and improvement.
- The business is environmentally conscious and operates in a manner that limits impact on environment.
- Employees get the better of a market wage or a living wage so that their living conditions improve.
- …do it with joy!
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The question that normally comes up is as follows: Charging market price for a service from the poor is unfeasible, that is why no regular business operates in this segment anyway. So how would a social business operate and make money?
There are two ways to answer this:
- Cross subsidize: This requires having different products for different market segments so that the rich cross subsidize the poor. An example is a business for selling yogurt that is fortified with vitamins so that the flavored yogurt sold to the rich allows for the non-flavored yogurt to be sold to the poor at below cost.
- Reduce exorbitant charges to the poor: Normal businesses addressing the poor segments will usually charge exorbitant amount to the poor to compensate for high-risks, or poor distribution, or low volumes. The social business turns this around by reducing risks, improving distribution, or increasing volumes. This is now known as “bottom of the pyramid” marketing. Example for this is the local money lender who will charge very high interest rates to the poor. Micro-lending on the other hand reduces risks of default and can charge much less than the local money-lender.
Where does yoga come in all this?
- The health needs of the poor can be addressed by yoga and yoga therapy at much lower costs than traditional medicine.
- Yoga retreats and yoga teacher training can cross subsidize or even jump-start other social businesses. This can be micro lending or yoga for prisoners or any other.
The purpose of this article is to jump start a discussion and seed some ideas. Do you know of any businesses that use yoga in a social business context? If so let us know by e-mailing us at: info [at] mylifeyoga [dot] com.