Social impact businesses- a new model for Nigeria?
It’s becoming more and more apparent that the traditional way of solving social problems isn’t working. Countries can no longer rely on their governments alone to tackle the myriad of issues they’re faced with—enter the social entrepreneur.
Globally, more and more entrepreneurs are leaning towards a business model that challenges the status quo approach of profit first; the social impact business. The idea behind the model is simple–entrepreneurs can provide creative solutions for society’s most pressing problems, by doing so they create value for citizens which leads to profit. Social impact businesses go beyond CSR, positive impact is an integral part of the business.
As well as the nice feeling of doing something good, the social impact business model can be very profitable.
Patagonia, an American clothing company committed to environmental impact boasted an annual revenue $600 million in 2013. While Better World Books an online bookseller committed to promoting literacy across the world made revenues close to $65 million.
Businesses built to solve social problems create a sense goodwill in society which not only leads to more patronage but enhances the company’s market reputation, which is key to sustainability. An additional bonus is that such businesses are an attractive option for investors who by and large have become more discerning about where they put their money.
Impact investment gives investors the chance to put their money where their values are, something Millennials and women are extremely in tune with according to a report by Morgan Stanley. Some venture capitalist firms have money set aside solely for social impact businesses while a growing number of foundations offering grants for such ventures continue to spring up.
But can a social impact business model work in Nigeria?
Nigeria has its fair share of problems and its fair share of entrepreneurs but the potential of social impact businesses has yet to be fully harnessed. The Global Investment Network’s report on Impact Investing in West Africa identified just two businesses that identify as social enterprises in Nigeria, so there is a lot of room for growth. Something Lagos Business School is keen to promote as it grooms Nigeria’s next set of business leaders.
In 2013 Dr Henrietta Onwuegbuzie who leads MBA students in entrepreneurship set her class a business challenge with three objectives: the first being to start a business with N5,000, the second, the business must make a social impact and the third, the business must make at least N5,000 a week.
“I had never thought of doing a social impact business before that class,” said Uka Osaigbovo CEO of Domestico.com an online furniture retailer. “I used to do a lot of businesses myself, everything from supplying diesel and all my business ideas were bad.”
Osaigbovo developed the idea for Domestico as part of the class assignment “I used to see a lot of people selling furniture [on the side of the road] and I thought now everyone is doing things online. So I built a website, because I used to build websites. I went to meet all those guys [who sell furniture] and propositioned them. I told them if you sell two chairs a week or even two chairs a day, I will help you double it.”
Domestico launched in December 2013 and made its first sale the following April. Osaigbovo started the business with approximately N4,000 (minus the cost of a camera), N1, 500 for a domain name and 2.500 for web hosting. Domestico now makes between N8-10 million a month, but profit aside he has changed the lives of the artisans who make furniture for him.
“Some of the furniture makers thought I was just going to take the pictures and go and make the furniture somewhere else,” he said. “They were surprised when I came back and started giving them jobs. There were three guys ID, Seyi and Ay, they were all apprentices. ID now has 20 guys working for him, Seyi has 4 guys working under him and Ay has three. They all have their own shops now.”
Stephanie Obi, another former MBA student, launched her online accessories school, as part of the class assignment. “I didn’t even know what it [social impact business] meant. It was during the MBA program that I learnt that businesses could do good and do well.”
Obi’s online accessories school attracted 3,000 customers from all over the country who later began asking for business advice, which led to the development of an online business school, Steph-B School. “To my amazement people were willing to pay to learn how to make accessories online. Steph B-School was set up to support entrepreneurs who are interested in impacting lives through an Online Business. Technology makes it very easy to impact people irrespective of where they live and to scale up the impact.”
Despite the benefits of the model Obi advises budding entrepreneurs to research carefully before making a decision. “”[Social impact businesses] are new [which can be a challenge]. In the beginning, you might have to spend some more time testing its viability. Once that phase is over, it’s a rewarding experience because you get to see how the work you do actually impacts lives. It’s working for my business so I can attest to it. To make it work, you just need to have an innovative business model.”
Osaigbovo agrees, urging entrepreneurs to consider the viability of any social impact business idea. Ï started a business with next to nothing, he said. “The idea was simple, but viable, I didn’t know anything about furniture, I just knew how to build websites, now I have sales from everywhere, and the guys, I think their lives have greatly improved by working with me.”
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