Social enterprise business models

Social enterprises adopt a variety of business models to sustain themselves. We’ve examined social enterprises globally, and have identified a few archetype models that social enterprises adopt.

1. Design for extreme affordability

Description These businesses are based on a technology or service that has been fundamentally redesigned so that it is affordable to the poor. These products or services tend to be solutions that are both less expensive and more locally responsive.
Real-life Example Baby incubators typically cost $20,000 and require electricity, conditions which cannot be met in many developing countries where 20 million premature babies are born each year. Embrace is a US-based company that has redesigned the incubator as a sleeping pouch that delivers constant heat for 4 hours using a removable heating element that can be warmed up by a fire. The new incubator costs $25 to manufacture.

2. Cross-subsidization

Description Cross-subsidization business models use revenue generated from one consumer tier to subsidize the cost for another consumer tier.
Real-Life Example Dial 1298 is an India-based ambulance service that serves groups at all income levels. The ambulance fee for patients who request to be delivered to private hospitals subsidizes the fee for patients who request to be delivered to government hospitals.

3. Buy-and-give

Description The revenue from a for-profit business finance not-for-profit initiatives.
Real-Life Example
All profits that One Water generates in selling vitamin water are used to fund humanitarian projects in developing countries, such as the installation of water pumps.

4. Microfranchising

Description Small franchise businesses that entrepreneurs can start up without a significant upfront investment. These enterprises are often combined with microfinance to help the entrepreneur pay off the franchise costs.
Real-Life Example
VisionSpring provides a “franchise-in-a-bag” for entrepreneurs that travel from village to village testing eyesight and selling low-cost reading glasses.

5. Inclusive Business

Description Business solutions that include the poor or underprivileged in the production or delivery process.
Real-Life Example Amul in India is the largest processor of raw milk in the world, originating milk in 10,000 villages covering 2.2. million farmers who collect a total of 6 million litres a day. The farmers are paid for quality (measured by volume and fat content) at collection points that take the milk to world-class processing units. Nestle replicated this model in Punjab, collecting and processing 1.5 million litres of milk a day from farmers.


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