Owners of most commercial businesses draw dividends as a form of salary. A social business should not allow its owners to draw dividends, and instead reinvest their profits back into their organisation.The third principle of social business is that they are non-loss, non-dividend businesses. This is a description that Muhammad Yunus uses in his recent book.
Social businesses are not charities, and instead aim to make a profit, but a key difference is that they do not draw these profits as dividends, and reinvest them back into the organisation.
Reinvesting the profits allows this money to be used to extend product lines and focus on new markets and opportunities, which would have not been possible if the profits had been drawn as dividends.
Mike.
4 comments:
Referring to your comment on reducing donations in times of economic stress and the fact that social businesses rely on the sale of their goods – surely those sales are also affected during the downturn? I can see it wouldn’t have as great an effect on the running of their business, but how do they cope with that reduction in sales?
What would the benefit be to people who register on this site and what is the benefit to the author? Does the profile of the Blog increase on the internet when people sign? And do you get revenue this way?
Hi Jill
Thanks for your feedback.
The current state of the global economy is causing challenges for both commercial and non-profit organisations. With social businesses focusing on selling products & services to cover their costs they will also be effected by the economic climate; however they will have a lot more control over their income than charities who are reliant on grants & donations to survive.
This is due to those making the donations also being effected by the economic climate, and they will reduce their costs by stopping their donations. This is why Yunus and others believe that CSR (corporate social responsibility) is ultimately floored, since stakeholder wealth maximisation comes ahead of corporate donations.
So social businesses are in the same boat as other commercial organisations when it comes to a downturn in the economy, but the key is that they have significantly more control and influence over how they generate their income than charities and other non-profit organisations.
Mike.
Hi Jill
In response to your comment about registering on the site and revenue generation:
If you register then you will get sent an email each time a new blog posting is made on the site. This feature is quite common on many blog sites, which I find very useful to keep up to date with new blog posts, rather than having to return to the website each time.
A great feature that Google has is called Google Alerts, where they send you daily emails on a specific topic. For example I subscribe to the term "social business" and get daily updates from Google on all new news and blog postings across the web!
Coming back to the registration on my blog; the email addresses are not used for any purpose but automatic email alerts for new blog postings.
This blog has been set-up to share my knowledge and experiences on social businesses in South Africa, and not for any personal income. I will be adding some new features soon for my blog followers to assist in helping social entrepreneurs, but this won't be for my gain and instead for those communities that are most in need.
Mike.
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